UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2019

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-33368

Glu Mobile Inc.

(Exact name of registrant as specified in its charter)


Delaware	91-2143667
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification No.)

875 Howard Street, Suite 100	94103
San Francisco, California	(Zip Code)
(Address of Principal Executive Offices)

(415) 800-6100

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share	GLUU	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ◻

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 Regulation S-T (§ 232.405 of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☑		Accelerated filer ◻
Non-accelerated filer ◻		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing price of such stock on such date as reported by The Nasdaq Global Select Market, was approximately $879,331,800. Shares of common stock held by each executive officer and director of the registrant and by each person who owns 10% or more of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s common stock as of February 18, 2020 was 150,031,695.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for registrant’s 2020 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after registrant’s fiscal year ended December 31, 2019 are incorporated by reference into Part III of this Annual Report on Form 10-K.

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Forward-Looking Statements

The information in this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements. 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 or contribute to such differences include, but are not limited to, those discussed elsewhere in this report, particularly in the section titled “Risk Factors,” and the risks discussed in our other Securities and Exchange Commission, or SEC, filings. We undertake no obligation to update the forward-looking statements after the date of this report, except as required by law.

PART I

Item 1. Business

General

Glu Mobile develops, publishes and markets a portfolio of free-to-play mobile games designed to appeal to a broad cross section of users who download and make purchases within our games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store, and others. Free-to-play games are games that a player can download and play for free, but which allow players to access a variety of additional content and features for a fee and to engage with various advertisements and offers that generate revenue for us. We have a portfolio of compelling games based on our own intellectual property such as Cooking Dash, Covet Fashion, Deer Hunter, Design Home, Diner DASH Adventures and QuizUp, as well as games based on or significantly incorporating third party licensed brands including Kim Kardashian: Hollywood, MLB Tap Sports Baseball and Restaurant Dash with Gordon Ramsay. We are headquartered in San Francisco, California, with another U.S. office in Foster City, California, and international locations in Toronto, Canada and Hyderabad, India.

We were incorporated in Nevada in May 2001 as Cyent Studios, Inc. and changed our name to Sorrent, Inc. later that year. In November 2001, we incorporated a wholly owned subsidiary in California, and, in December 2001, we merged the Nevada corporation into this California subsidiary to form Sorrent, Inc., a California corporation. In May 2005, we changed our name to Glu Mobile Inc. In November 2006, Glu Mobile Inc. reincorporated in the state of Delaware. In March 2007, we completed our initial public offering and our common stock is traded on the Nasdaq Global Select Market under the symbol “GLUU.” Except where the context requires otherwise, in this Annual Report on Form 10-K, references to “Company,” “Glu,” “Glu Mobile,” “we,” “us” and “our” refer to Glu Mobile Inc., and where appropriate, its subsidiaries.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other reports, and amendments to these reports, required of public companies with the SEC. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We make available free of charge on the Investor Relations section of our corporate website all of the reports we file with the SEC as soon as reasonably practicable after they are filed. Our internet website is located at www.glu.com and our Investor Relations website is located at www.glu.com/investors. The information on our website is not incorporated into this report, unless otherwise expressly stated. Copies of our Annual Report on Form 10-K for the year ended December 31, 2019 may also be obtained, without charge, by contacting Investor Relations, Glu Mobile Inc., 875 Howard Street, Suite 100, San Francisco, California 94103 or by emailing IR@glu.com.

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Strategy and Business Developments

Our Strategy

Our goal is to become the leading developer and publisher of free-to-play mobile games. Our strategy for achieving this goal is comprised of three parts:

●

Building Growth Games and Maximizing the Value of Catalog Games;

●

Attracting and Fostering Creative Leaders, Including Potentially by Selective Acquisitions;; and

●

Cultivating Highly Creative Environments.

Building Growth Games and Maximizing the Value of Catalog Games

The first prong of our strategy is to build growth games for smartphones and tablets as well as maximize the value we derive from our catalog games. Growth games are titles that we continue to update with additional content and features and which we expect to grow revenue year over year. We believe a key component of driving revenue growth year over year from a growth game is the inclusion of community features which may involve users competing with each other, forming clubs or groups to cooperate in completing goals, or contributing their own original content to the game, as well as other live operations efforts such as running regular in-game events, offering virtual currency discounts and optimizing our merchandising strategies. Covet Fashion, Design Home and MLB Tap Sports Baseball are our existing growth games. We currently publish titles primarily in four genres: lifestyle, casual, mid-core, and sports and outdoors. We believe these are genres in which we have already established a leadership position, are otherwise aligned with our strengths or are conducive to the establishment of a strong growth game.

We continue to update some of our catalog titles with additional content and features, whereas on others we expend little to no investment in terms of updates and enhancements. Catalog games differ from growth games in that our focus is to reduce and potentially reverse their year over year revenue declines; to the extent that we succeed in our efforts to grow annual revenue from a catalog game and expect such title’s revenues to continue to grow on an annual basis, we would then consider such catalog game to be a growth game. Cooking Dash, Deer Hunter 2018, Kim Kardashian: Hollywood and Restaurant Dash with Gordon Ramsay are examples of our existing catalog games.

While we have generally designed our games to incorporate social features that enhance the user’s gameplay experience, as part of our product strategy we are emphasizing adding new social and community-based features, systems, and modes into our growth games. For example, Covet Fashion allows users to join “Fashion Houses” with other users and then borrow each others’ clothes, receive advice on their looks, chat and work together to unlock additional rewards in special style challenges, and our Tap Sports Baseball franchise allow players to challenge their friends to head-to-head matchups and to join clubs that compete in daily events against other clubs as well as includes an improved media-driven chat system. We intend to continue to innovate to further enhance the user experience in our growth games and potentially broaden their audience. For example, we plan to introduce e-commerce functionality to Design Home during 2020 which is designed to deepen the engagement level of our players with the game. In addition, we recently announced that we are exploring the extension of Design Home and Tap Sports Baseball to the browser.

We are continuing to emphasize developing new titles based on original intellectual property. Reflecting this strategy, revenue from games based on our own intellectual property increased from 65.7% of our total revenues in 2018 to 69.9% of our total revenues in 2019. However, we also seek to selectively license and utilize key brands within our titles if we believe this will maximize their consumer appeal and revenue potential. For example, in 2018, we added content from Major League Baseball, or MLB, for the first time in our Tap Sports Baseball franchise, and in 2018 and 2019 we added new and improved existing club events and released new legendary players, which helped us to meaningfully grow revenue from this franchise year over year. In addition, in 2020, we intend to publish Disney Sorcerer’s Arena in collaboration with Disney Consumer Products and Interactive Media. We also closely work with our celebrity and brand licensors to engage their social media audiences and build games that will resonate with their unique fan bases. In particular, Kim Kardashian: Hollywood utilizes transmedia storytelling, leveraging Ms. Kardashian West’s

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built-in social media fan base to drive installs and awareness of the game, and then attempts to surprise and delight those fans with real-world events and other game content based on her life. Our goal is for the game content to become entwined with Ms. Kardashian West’s persona and social media presence, and to otherwise enhance interaction with her fans. We also leverage the strength of well-known brands and licensors to provide users with more realistic experiences, such as the case with MLB Tap Sports Baseball 2019 which features all MLB clubs and uniforms and current and former MLB players; we intend to further enhance the authenticity of this title by including all 30 real major league stadiums in MLB Tap Sports Baseball 2020. We also work to build and nurture social communities in and around the games themselves, creating a new vehicle for strong, personal engagement with the brand or celebrity’s fan base. Continuing to drive installs and awareness of our games through our licensing efforts requires that we continue to partner with brands, celebrities and social influencers that resonate with potential players of our games. Partnering with desirable licensing partners and renewing our existing licenses with our most successful partners requires that we continue to develop successful games based on licensed content and are able to compete with other mobile gaming companies on financial and other terms in signing such partners. We also plan to continue introducing third-party licensed brands, properties and personalities into our games as additional licensed content, for cameo appearances or for limited time events in order to drive awareness and monetization.

For us to continue driving installs and awareness of our games and to improve monetization and retention of our players, we must ensure that each of our games has compelling gameplay and a deep meta game that motivates users to continue to play our games for months or even years. In addition, we must regularly update our games with compelling new content, deliver socio-competitive features like tournaments, contests, player-versus-player gameplay and live events, and build and nurture communities around our franchises both in-game and holistically via community features such as dedicated social channels. We have also made significant investments in our proprietary analytics and revenue technology infrastructure. With our enhanced analytics capabilities, we intend to devote resources towards segmenting and learning more about the players of each of our franchises and further monetizing our highest spending and most engaged players. We aim to connect our analytics and revenue technology infrastructure to multiple elements of our business – from marketing to merchandising – in order to improve player retention and monetization.

Attracting and Fostering Creative Leaders, Including Potentially by Selective Acquisitions

The second prong of our strategy is to attract, cultivate and retain proven creative leaders who will develop and update our growth and catalog games. Each creative leader is responsible for the long-term planning of his or her titles and to identify and invest in long-term opportunities and concepts that have the potential to become growth games. Our talent model is to attract the industry’s finest and provide them with world-class infrastructure, tools, funding and the support to create hit games. We have made, and plan to make, significant investment in our creative leaders.

We have worked with our creative leaders to instill financial discipline and operational excellence in our organization by revamping our prototyping and greenlight processes. Prior to developing a new game, a creative leader works with a small team to rapidly prototype new ideas that have the potential to become growth games. We expect our creative leaders to fail fast and to either continue to iterate on a game concept or to move on to rapidly prototyping a new concept. Once the creative leader and his or her team have sufficiently iterated on their concept and are satisfied that their game has the potential to be a growth game, the creative leader will submit a playable version of the game for greenlighting. If the game is greenlit, we then commit larger investments in terms of headcount and resources.

In addition, we recently announced that we intend to increase our focus on potentially acquiring companies or

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individual game teams in order to complement our existing portfolio and augment our roster of creative leaders.

Cultivating Highly Creative Environments

We believe a key part of building growth games and attracting and cultivating creative leaders is providing them with highly creative environments that are optimal for creating hit games. In December 2017, we moved into our new headquarters in San Francisco that were designed to foster collaboration among our game teams and focus the company around our core values and creative-led vision. Creative environments that support our creative leaders and other game development personnel are also needed to attract the level of talent that will support our growth and catalog games. We not only consolidated our studio footprint by moving into our creative center in San Francisco and relocating our Burlingame studio to our San Francisco headquarters, but have also significantly increased our investment in our low-cost, scaled center in Hyderabad, India which provides live operations for some of our catalog games, insourced art, quality assurance and low cost repeatable sales, marketing and general and administrative functions. As part of this consolidation, in the last several years, we closed or sold development studios in Beijing, China; Bellevue, Washington; Portland, Oregon; San Mateo and Long Beach, California; and Moscow, Russia.

Business Developments

Since January 1, 2019, we have taken the following actions to support our business:

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We continued to focus our efforts on developing and publishing games for smartphones and tablet devices. Our significant achievements related to these efforts include the following:

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We generated total revenue of $411.4 million for the year ended December 31, 2019, a 12.2% increase compared to total revenue of $366.6 million for the year ended December 31, 2018.

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In December 2019, we had approximately 2.9 million daily active users and 15.6 million monthly active users of our games on our primary distribution platforms, including Apple’s App Store and the Google Play Store.

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As of December 31, 2019, we had approximately 2.0 billion cumulative installs of our games on our primary distribution platforms, including approximately 20.7 million installs during the fourth quarter of 2019.

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We grew revenues on an annual basis from each of our growth games, as follows:

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Revenues from Design Home increased from $145.7 million in 2018 to $173.6 million in 2019;

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Revenues from Covet Fashion increased from $49.0 million in 2018 to $62.5 million in 2019; and

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Revenues from our Tap Sports Baseball franchise increased from $69.1 million in 2018 to $86.2 million in 2019.

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In March 2019, we announced that we had extended our existing agreements with MLB and Major League Baseball Players Association, or the MLBPA, through 2024.

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In August 2019, we acqui-hired a game development team in Orlando, Florida that is developing a fishing game that is currently in beta testing in the Philippines and which we expect to globally launch in 2021.

Across the globe our industry is experiencing a trend that hit titles generally remain higher in the top grossing charts for longer. We believe this is due to the continued specialization and investment of teams and companies in their hit titles, and the live, social nature of certain games. Our strategy and the measures we have implemented to support our business position us to take advantage of these trends, as evidenced by the continued strength and year-over-year growth of our Design Home and Covet Fashion titles and the Tap Sports Baseball franchise. We plan to continue to regularly

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update and otherwise support our growth games in order to ensure that those games monetize and retain users for even longer periods of time. In addition, we plan to continue to invest in our creative leaders and the creative environments in which they and their teams work to increase our likelihood of creating significant hit growth games in 2020 and beyond.

Our Products

We develop and publish a portfolio of mobile games designed to appeal to a broad cross section of the users of smartphones and tablet devices. Our portfolio of growth and catalog games is spread across the following genres:

o

Lifestyle

o

Design Home, which launched in November 2016 and was acquired as part of our acquisition of Crowdstar, has become our most successful growth game. Design Home allows users to participate in daily Design Challenges in which they style three dimensional spaces with real, high-end furniture and décor. We introduced key updates for Design Home in the last several years, including elite events for elder players, improved series challenges, language localization in German, French and Spanish, and meta game functionality. We are planning further updates for Design Home in 2020, including the introduction of e-commerce functionality.

o

Covet Fashion, which we acquired as part of our acquisition of Crowdstar, is a top grossing fashion title that was our third largest revenue contributor during 2019. Covet Fashion features continually changing content and daily Style Challenges to help drive engagement and monetization of its users. During 2019, we introduced our new prop shop feature, which provided additional opportunities for our users to express their creativity.

o

Casual

o

Diner DASH Adventures, launched in June 2019, is the latest title in our Dash franchise. Diner DASH Adventures offers world decoration, a deep story, and an innovative consolidation of different Dash time-management styles.

o

Kim Kardashian: Hollywood is a narrative role playing game featuring Kim Kardashian-West’s likeness, voice and creative influence as she guides players on their journey to success in Hollywood. We globally launched Kim Kardashian: Hollywood in June 2014.

o

Cooking Dash was launched in June 2015 and had its last significant content release in 2019. We utilized this release to help drive awareness and direct traffic to the launch of Diner DASH Adventures. While we are no longer developing new content for Cooking Dash, we have transitioned into a cadence of live operations that takes full advantage of the wealth of existing content and we believe will maintain the title’s position as one of our top catalog games into 2020.

o

Restaurant Dash with Gordon Ramsay, launched in June 2016, utilizes Gordon Ramsay’s personality to guide users to become a restaurateur in the image of Mr. Ramsay. We are no longer developing content updates for this title, but have streamlined our live operations in an effort to maximize revenue and reduce costs from this title.

oMid-core

o

Disney Sorcerer’s Arena is a strategy role playing game featuring dozens of characters from across the Disney and Pixar film franchises. Disney Sorcerer’s Arena is currently available in limited beta territories and we expect to launch the title worldwide in the first quarter of 2020.

o

Sports and Outdoors

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o

MLB Tap Sports Baseball 2019, which launched in March 2019, was the sixth installment in our popular Tap Sports Baseball franchise in which we partnered with the MLB, MLBPA and Major League Baseball Players Alumni Association, or the MLBPAA, to include real-world current and former baseball stars from each of the MLB’s 30 teams. The MLB Tap Sports franchise was our second largest revenue contributor and the highest ranked baseball title in the Apple App Store’s U.S. iPhone top grossing games rankings during 2019. We expect to launch MLB Tap Sports Baseball 2020 in March 2020 in more than 100 additional territories with significant new features, including all 30 real major league stadiums and a new home run derby mode.

o

Deer Hunter 2018, originally launched in September 2015 as Deer Hunter 2016, remained as one of our top action titles during 2019. We released a new Hunting Tournament feature in 2018 along with three major updates to this title in 2016 and 2017, which helped slow the annual revenue declines from this title.

o

WWE Universe was released in May 2019 and features hundreds of Raw, SmackDown, NXT, and classic WWE Superstars.

o

We expect to add to our portfolio of sports and action titles through the worldwide release of the next iteration of our Deer Hunter franchise in the second half of 2020 as well as a fishing title in 2021.

We believe that our games consistently have high production values, are visually appealing and have engaging core gameplay. These characteristics have typically helped to drive installs and awareness of our games and resulted in highly positive consumer reviews. The majority of our games have been featured on the Apple and Google storefronts when they were commercially released, which we believe is the result of us being a good partner of Apple and Google.

We have continued to improve monetization in our games, with our most popular games remaining successful for longer periods of time. The longevity of our most successful games derives from strong core gameplay, deep meta game features, regular content updates and social and community features, such as the ability to join clans or clubs, tournaments, player-versus-player gameplay and live events.

Our games historically have had “thick clients” due to their high production values and, in some cases, 3-D graphics. A thick client game means that our games have a large file size, often 200 megabytes or more, that resides on the player’s device. Because of limitations set by Apple, which at most only allow applications that are less than 200 megabytes, to be downloaded over a carrier’s wireless network, players must download our iOS games that exceed 200 megabytes via a wireless Internet (Wi-Fi) connection.

Our Revenue

We generate the majority of our revenue through in-application purchases (“in-app-purchases”), with the balance of our revenue primarily generated by offers and in-game advertising. When we incorporate licensed content into our games, we share a portion of our revenue with the licensors featured in these titles.

In-App Purchases

Although users can download and play our games free of charge, they can purchase virtual currency, virtual items, other virtual benefits like time and energy or subscriptions of any of these categories, to enhance their gameplay experience – we refer to these as “in-app purchases” or “micro-transactions.” Some of the benefits that players receive from their in-app purchases include:

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Play Longer Through Better Equipment – We generally design our games to become significantly more challenging as the player advances through the game. For a game like Dash Adventures, players can purchase higher-quality ingredients and various boosts that can help them complete increasingly difficult levels more easily.

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Play Longer Through Energy Replenishment – We design some of our games, such as Deer Hunter 2018 and Kim Kardashian: Hollywood, to have short playing sessions, the duration of which are limited by the energy available for each session. Players of Deer Hunter 2018 and Kim Kardashian: Hollywood can use their virtual currency to purchase items that will replenish their energy and enable them to extend their gameplay session.

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Accelerate Game Progress – Although some players are content to slowly “grind” their way through progressing in a game, others are willing to purchase items to accelerate their progression. For example, our Tap Sports Baseball titles enable players to spend their virtual currency to upgrade their roster of players and boost the effectiveness of such players, thus allowing the player to more quickly assemble a winning team.

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Customization – Our games generally enable players to express themselves by customizing their character, the world the character inhabits or a room. For example, Covet Fashion and Design Home each allow users to customize the look of their avatar or room, respectively, by purchasing clothing or home design elements. While in Covet Fashion users own a clothing or accessory item indefinitely after it is purchased and can use it in multiple events, Design Home limits the player to five uses of any purchased design element.

We sell virtual currency to consumers at various prices ranging from $0.99 to $299.99 depending on the available storefront pricing (adjusted for local currencies for sales to players in foreign countries) with the significant majority of player purchases occurring at the lower price points. The digital storefronts generally share with us 70% of the consumers’ payments for in-app purchases; we do not have any special agreement or arrangement with respect to pricing or terms with any of the digital storefronts. Consumers may also acquire virtual currency, other virtual items or virtual benefits through gameplay or by completing offers, as described below.

Offers and In-Game Advertising

In addition to in-app purchases of virtual currency, we also monetize our games through offers and in-game advertising. Optimizing advertising revenue within our games requires us to continue taking advantage of positive trends in the mobile advertising industry, particularly as brands continue to migrate budgets from web to mobile. Offers enable users to acquire virtual currency without paying cash but by instead taking specified actions, such as downloading another application, watching a short video, subscribing to a service or completing a survey. We work with third parties to provide these offers to players of our games, and we receive a payment from the third party offer provider based on consumer response to these offers. We also work with third party advertising aggregators who embed advertising, such as incented video ads, ads appearing within the game between content transitions and as pop-up ads; the aggregators typically pay us based on the number of impressions, which is the number of times an advertisement is shown to a player, or conversions, which is the number of times players complete an advertiser’s desired action. In addition, from time to time we work directly with other application developers to include advertising for their applications in our games, and the developers pay us based on either the number of impressions in our games or the number of users who download the developer’s application.

Licensed Content

Following the success of Kim Kardashian: Hollywood and games incorporating licensed third-party brands and properties, like our Tap Sports Baseball franchise, we increased our licensing efforts, both in terms of securing licenses to develop games based upon or significantly featuring celebrities and other third-party intellectual property and for cameo appearances or to otherwise incorporate third-party intellectual property into our games. However, we have more recently begun to emphasize developing new titles based on original intellectual property. In 2019, 2018, and 2017, games based on our own intellectual property accounted for approximately 69.9%, 65.7%, and 59.1% of our revenue, respectively. The increase in the percentage of revenues derived from original intellectual property from 2017 to 2019 was due primarily to the success of Design Home, Covet Fashion, and Diner DASH Adventures, as well as the continued strength of some of our catalog games. We expect to launch three new titles in 2020, Disney Sorcerer’s Arena, Originals and the next iteration of our Deer Hunter franchise, one of which will include third-party licensed content. We intend to continue to selectively license and utilize key brands within our titles if we believe this will maximize their consumer appeal and

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revenue potential.

For games based on or significantly incorporating licensed brands, properties or other content, we share a portion of our revenue with the respective licensors. The average royalty rate that we paid on games based on licensed content (such as Kim Kardashian: Hollywood and Restaurant Dash with Gordon Ramsay) or significantly incorporating licensed content (such as MLB Tap Sports Baseball 2019) was approximately 20.5% of gross revenue in 2019, 20.2% in 2018, and 18.2% in 2017. However, the individual royalty rates that we pay can be meaningfully above or below the average based on a variety of factors, such as the strength of the licensed brand, our development and porting obligations, and the platforms on which we are permitted to distribute the licensed content.

Sales, Marketing and Distribution

We market, sell and distribute our games primarily through direct-to-consumer digital storefronts, such as Apple’s App Store and the Google Play Store. In addition to publishing our smartphone games on direct-to-consumer digital storefronts, we also publish some of our titles on other platforms, such as the Mac App Store and Facebook. In addition, we recently announced that we are exploring the extension of Design Home and Tap Sports Baseball to the browser. The significant majority of our smartphone revenue has historically been derived from Apple’s iOS platform, which accounted for approximately 60.8%, 63.1%, and 63.0% of our total revenue in 2019, 2018, and 2017, respectively. We generated the majority of these iOS-related revenue from the Apple App Store, which represented 54.4%, 54.7%, and 54.2% of our total revenue in 2019, 2018, and 2017, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our iOS-related revenue from offers and advertisements in games distributed on the Apple App Store. In addition, we generated approximately 39.1%, 36.6%, and 36.0% of our total revenue in 2019, 2018, and 2017, respectively, from the Android platform. We generated the majority of our Android-related revenue through the Google Play Store, which represented 33.5%, 31.3%, and 30.3% of our total revenue in 2019, 2018, and 2017, respectively. We generated the balance of our Android-related revenue from other platforms that distribute apps that run the Android operating system (e.g., the Amazon App Store) and through offers and advertisements in games distributed through other Android platforms. No other customer or digital storefront accounted for more than 10% of our total revenue in 2019, 2018, and 2017.

As part of our efforts to successfully market our games on the direct-to-consumer digital storefronts, we attempt to educate the storefront owners about our title roadmap and seek to have our games featured or otherwise prominently placed within the storefront. We believe that the featuring or prominent placement of our games facilitates organic user discovery and is likely to result in our games achieving a greater degree of commercial success. We believe that a number of factors may influence the featuring or placement of a game, including:

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the perceived attractiveness and quality of the title, brand, or licensed intellectual property;

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the level of critical or commercial success of the game or of other games previously introduced by a publisher;

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incorporation of the storefront owner’s latest technology in the publisher’s title;

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how strong the consumer experience is on all of the devices that discover titles using any given digital storefront;

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the publisher’s relationship with the applicable storefront owner and future pipeline of quality titles for it; and

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the current market share of the publisher.

The majority of our games have been featured on the Apple and Google storefronts when they were commercially released, which we believe is in part due to our efforts to be a consistently good partner with Apple and Google. In addition to our efforts to secure prominent featuring or placement for our games, we have also undertaken a number of marketing initiatives designed to acquire players and increase downloads of our games and increase sales of

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virtual currency, including:

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using social networking websites, such as Facebook and Twitter, to build a base of fans and followers to whom we can quickly and easily provide information about our games;

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paying third parties, including advertising networks, social media channels and social influencers, to advertise or incentivize consumers to download our games through offers or recommendations;

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using “push” notifications to alert users of sales on virtual currency or items in our games; and

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cross-promoting our games through banner advertisements in our other games, as well as advertising our games in our competitors’ games;

In addition, certain of our games featuring celebrities or other licensed content like Kim Kardashian: Hollywood generate significant attention through word of mouth, particularly through social media channels. We look to leverage existing social media presences in order to increase the virality and commercial success of our games. Furthermore, social-based methods for promoting our games include in-game events where players compete with and against each other, in-game social promotions and regular content updates, including in-game content that leverages real world events, such as holiday promotions or current events in the life of our celebrity partners.

We have sought to deepen player engagement by fostering a sense of community in our games. As part of these efforts, we have organized player councils for certain of our games where we have invited some of our most dedicated players to special events to engage with the development teams and share their feedback about our games. For example, we held our second CovetCon event in Chicago in 2019 where 60 VIP players purchased tickets to attend a multi-day event focusing on Covet Fashion – bringing the best aspects of Covet to life, including creativity, fashion, and community.

Development Studios

Our creative leaders have primary responsibility for overseeing game development for our growth and catalog games. The internal studios that develop our games are located in San Francisco and Foster City, California; and Toronto, Canada. In addition, as part of our restructuring activities in 2016 and 2017 and the acquisition of QuizUp from Plain Vanilla in December 2016, we moved certain of our catalog games to our Hyderabad, India location to run live operations and produce content updates for these games.

Our studios are generally supported by central services personnel in our San Francisco, California headquarters who provide expertise with respect to areas such as user experience, software development kit (SDK) development, analytics and product marketing, with each studio leveraging these services to varying degrees.

Our game development process involves a significant amount of creativity, particularly with respect to developing original intellectual property franchises or games in which we license intellectual property from celebrities, Hollywood studios or other owners of brands, properties and other content. Creative and technical studio expertise is necessary to design games that appeal to players who typically play in short sessions and to develop games that work well on mobile phones and tablets with their inherent limitations, such as small screen sizes and control buttons. During 2020, we plan to hire additional game development personnel and invest in technical studio expertise to drive content and features in our growth games and to prototype ideas that we believe can become hit growth games.

Despite our efforts to reduce our geographical footprint and consolidate studios, our development personnel are located in four cities in three different countries, which results in certain inherent complexities. To address these issues, we instituted our Creative Leadership Summit program. The Creative Leadership Summit is designed to increase interaction among our studio teams, including having international studio team members regularly spend time in our U.S. studios. The goal of this program is to ensure that we increase the uniformity, quality and commercial success of our games. In addition, we believe that our strategy of focusing our development efforts on building and maintaining growth games will help ensure more efficient use of our talent and resources across our studios and further promote the sharing of

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expertise and best practices.

Product Development

Since the markets for our products are characterized by rapid technological change, particularly in the technical capabilities of mobile phones and tablets, and changing end-user preferences, continuous investment is required to innovate and publish new games, regularly update our games, and modify existing games for distribution on new platforms.

We have continued to utilize measures designed to ensure that we publish and launch games that have a greater likelihood of being commercially successful, while identifying earlier in the development process game concepts and designs that are unlikely to produce hits. Prior to developing a new game, a creative leader works with a small team to rapidly prototype new ideas that have the potential to become growth games. We expect our creative leaders to fail fast and to either continue to iterate on a game concept or to move on to rapidly prototyping a new concept. Once the creative leader and his or her team have sufficiently iterated on their concept and are satisfied that their game has the potential to be a growth game, the creative leader will submit a playable version of the game for greenlighting. If the game is greenlit, we then commit larger investments in terms of headcount and resources.

In addition, we plan to continue holding detailed post-mortems for all products to review and analyze the positive and negative results from each new game launch. These are in addition to our Glu University training sessions where we formally share best practices and learnings amongst the leadership of all functions of our global studios.

We use third-party development tools to create our games, including a game development engine licensed from Unity Technologies to create most of our newest games and our games in development. In addition, we rely on our own servers and third-party infrastructure to operate our games and to maintain and provide our analytics data. In particular, a significant portion of game traffic is hosted by Amazon Web Services (“AWS”), which provides us server redundancy by using multiple locations on various distinct power grids, and we expect to continue utilizing AWS for a significant portion of our hosting services for the foreseeable future.

Furthermore, we have made significant investments in building out a personalization and experimentation engine that seamlessly integrates with our proprietary analytics system, advertisement related activities, and game environment. We believe this new capability will greatly enhance our ability to segment and personalize our players’ in-game experience with a focus on further monetizing our highest spending and most engaged players. We aim to connect the data, insights and knowledge gained from our analytics and monetization techniques to every element of our business – from marketing to merchandising – in order to improve player retention and monetization.

Seasonality

Many new smartphones and tablets are released in, or shortly before, the fourth calendar quarter to coincide with the holiday shopping season. Because many players download our games soon after they purchase or receive their new devices, we generally experience seasonal sales increases based on the holiday selling period. Although we believe that the majority of this holiday impact occurs during the fourth quarter, some of this seasonality also occurs for us in our first calendar quarter due to some lag between device purchases and game purchases. However, the impact of this seasonality on our operating results is significantly affected by our title release schedule. For example, we have historically released each year’s new version of our Tap Sports Baseball franchise late in the first quarter, which has resulted in revenues from this title peaking in the second or third quarter, with declining revenues in the fourth quarter and the first quarter of the following year leading up to the launch of the next version of the title. In addition, companies’ advertising budgets are generally strongest during the fourth quarter and decline significantly in the first quarter of the following year, which affects the revenue we derive from advertisements and offers in our games. Conversely, our cost per install and cost per ad view also increase in the fourth quarter, since demand for marketing is higher during the holiday season.

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Competition

Developing, distributing and selling mobile games is a highly competitive business, characterized by frequent product introductions and rapidly emerging new platforms, technologies and storefronts. For players, we compete primarily on the basis of game quality, brand and customer reviews. We compete for space on user’s smartphones and tablet devices in terms of the number of applications on their device and the amount of storage consumed by such applications. We also compete more generally for the time, attention and discretionary spending of users of smartphones and tablet devices who are spending ever-increasing amounts of time on social media, messaging and music, movie and television streaming applications, personal computer and console games, sports and the Internet. We compete for promotional and digital storefront placement based on our relationship with the digital storefront owner, historical performance, game quality, perception of sales potential, customer reviews and relationships with licensors of brands and other content. For content licensors, we compete based on royalty and other economic terms, historical financial performance of prior licensed content titles, perceptions of development quality, speed of execution, distribution breadth and relationships with storefront owners. We also compete for experienced and talented employees.

We compete with a continually increasing number of companies, including Activision (the parent company of King Digital Entertainment), DeNA, Disney, Electronic Arts (EA Mobile), Gameloft, Gamevil, GREE, GungHo Online Entertainment, Netease, Netmarble, Nexon, Nintendo, Rovio, Warner Brothers, and Zynga and many well-funded private companies, including DoubleDown, Epic Games, Firecraft Studios, Jam City, Machine Zone, Miniclip, Niantic, Peak Games, Playrix, Pocket Gems, Scopely, Storm 8/Team Lava, and Supercell. In addition, hyper-casual games published by companies such as Ketchapp, Lion Studios, Playgendary and Voodoo account for a significant and growing percentage of mobile gaming downloads.

In addition, given the open nature of the development and distribution for smartphones and tablets and the relatively low barriers to entry, we also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for these devices using relatively limited resources and with relatively limited start-up time or expertise. As an example of the competition that we face, it has been estimated that more than 4.1 million applications, including more than 900,000 active games, were available on Apple’s U.S. App Store as of January 31, 2020. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players without substantially increasing our marketing expenses and development costs.

We also compete for downloads and time spent on mobile devices with companies that develop popular social media and messaging applications, such as Facebook (with its Facebook, Facebook Messenger, Instagram, WhatsApp and other applications), Pinterest, Reddit, Snapchat, Twitter, Vevo and YouTube, companies that develop streaming music, movie and television applications, such as Pandora, Spotify, Tidal, HBO Go, Netflix, Amazon Prime and Hulu, and with companies that create other non-gaming related software applications, such as Kim Kardashian West’s own personal media application.

Some of our competitors and our potential competitors have one or more advantages over us, either globally or in

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particular geographic markets, which include:

●significantly greater financial resources;

●the ability or willingness to spend significantly more than we do to acquire new players, which may be due to competitors having games with higher lifetime values than our games (i.e., the amount of money the average paying player spends in the competitor’s game over the player’s lifetime is greater than in our games) or where a competitor is willing to pay to acquire users in a manner that does not have a positive return on investment in an effort to increase its revenues and/or user base;

●greater experience with free-to-play games, building and maintaining growth games, and building social and community features into mobile games, as well as more effective game monetization;

●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;

●larger installed user bases from their existing mobile games;

●larger installed user bases from related platforms, such as console gaming or social networking websites, to which they can market and sell mobile games;

●more substantial intellectual property of their own from which they can develop games without having to pay royalties;

●lower labor and development costs and better overall economies of scale;

●greater platform-specific focus, experience and expertise;

●broader global distribution and presence; and

●

greater talent, both in overall headcount and in terms of experience in creating successful titles.

Intellectual Property

Our intellectual property is an essential element of our business. We use a combination of trademark, copyright, trade secret and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectual property. Our employees and independent contractors are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assigning to us any ownership that they may claim in those works. We also vigorously defend our intellectual property. Despite our precautions, it may be possible for third parties to obtain and use without our consent intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, including piracy, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business. In addition, some of our competitors have in the past released games that are nearly identical to successful games released by their competitors in an effort to confuse the market and divert users from the competitor’s game to the copycat game. To the extent that these tactics are employed with respect to any of our games, it could reduce our revenue.

Our trademarks that have been registered with the U.S. Patent and Trademark Office include Glu, Crowdstar, our 2-D ‘g’ character logo, our 3-D ‘g’ character logo and several of our game titles, including Blood & Glory, Contract Killer, Cooking Dash, Deer Hunter, Diner Dash, Eternity Warriors, Frontline Commando, Gun Bros, QuizUp, and Tap Sports. In addition, we have trademark applications pending with the U.S. Patent and Trademark Office for other of our game titles. For certain titles we do not yet have, and do not intend to seek, trademark registration. We also own, or have

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applied to own, one or more registered trademarks in certain foreign countries, depending on the relevance of each brand to other markets. Registrations of both U.S. and foreign trademarks are renewable every ten years.

We have thirteen patents issued by the U.S. Patent and Trademark Office and have five patent applications pending. In addition, we have one international patent pending with the Patent Cooperation Treaty (PCT), which corresponds to one of our issued U.S. patents. We also have a patent in Canada and Europe, as well as a patent application in China that correspond to one of our thirteen issued U.S. patents, and we also have a patent application pending in Canada that corresponds to another of our thirteen issued U.S. patents.

We also use third-party development tools to create many of our games, including a game development engine licensed from Unity Technologies to create most of our newest games.

From time to time, we encounter disputes over rights and obligations concerning intellectual property. If we do not prevail in these disputes, we may lose some or all of our intellectual property protection, be enjoined from further sales of our games or other applications determined to infringe the rights of others, and/or be forced to pay substantial royalties to a third party, any of which would have a material adverse effect on our business, financial condition and results of operations.

Government Regulation

We are subject to various federal, state and international laws and regulations that affect our business, including those relating to the privacy and security of customer and employee personal information and those relating to the Internet, behavioral tracking, mobile applications, advertising and marketing activities, sweepstakes and contests, and gambling. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our customers, and deliver products and services, or may significantly increase our compliance costs. As our business expands to include new uses or collection of data that are subject to privacy or security regulations, our compliance requirements and costs will increase and we may be subject to increased regulatory scrutiny.

Employees

As of December 31, 2019, we had 715 employees, of which 478 were based in the United States and Canada, and 237 were based in India. We have not experienced any employment-related work stoppages and consider relations with our employees to be good. We believe that our future success depends in part on our continued ability to hire, assimilate and retain qualified employees.

Executive Officers

The following table shows Glu’s executive officers as of February 28, 2020 and their areas of responsibility. Their biographies follow the table.



Name	Age	Position

Nick Earl	54	President and Chief Executive Officer
Eric R. Ludwig	50	Executive Vice President, Chief Operating Officer and Chief Financial Officer
Chris Akhavan	37	Senior Vice President, Business & Corporate Development
Becky Ann Hughes	39	Senior Vice President, Revenue
Scott J. Leichtner	49	Vice President, General Counsel and Corporate Secretary

Nick Earl has served as our President and Chief Executive officer since November 2016 and prior to that was our President of Global Studios from November 2015 to November 2016. Before joining us, from November 2014 to September 2015, Mr. Earl served as President of Worldwide Studios at Kabam. From September 2001 to October 2014, Mr. Earl served in several management positions at Electronic Arts, including most recently as Senior Vice President & General Manager of EA Mobile. From 1999 to 2001, Mr. Earl served as VP Product Development at Eidos. From April

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1993 to March 1999, Mr. Earl served as an executive producer / GM at The 3DO Company. Mr. Earl holds a B.A. in Economics from the University of California at Berkeley.

Eric R. Ludwig has served as our Chief Operating Officer since October 2014, as our Executive Vice President since October 2011, and as our Chief Financial Officer since August 2008. Mr. Ludwig previously held the position of Senior Vice President, Chief Financial Officer and Chief Administrative Officer from September 2010 to October 2011. Prior to becoming our Chief Financial Officer, Mr. Ludwig served as our Vice President, Finance, Interim Chief Financial Officer from May 2008 to August 2008, served as our Vice President, Finance from April 2005 to May 2008 and served as our Director of Finance from January 2005 to April 2005. In addition, Mr. Ludwig has served as our Assistant Secretary since July 2006. Prior to joining us, from January 1996 to January 2005, Mr. Ludwig held various positions at Instill Corporation, a software as a service company, most recently as Chief Financial Officer, Vice President, Finance and Corporate Secretary. Prior to Instill, Mr. Ludwig was Corporate Controller at Camstar Systems, Inc., an enterprise manufacturing execution and quality systems software company, from May 1994 to January 1996. He also worked at Price Waterhouse L.L.P. from May 1989 to May 1994. Mr. Ludwig holds a B.S. in Commerce from Santa Clara University and is a Certified Public Accountant (inactive).

Chris Akhavan has served as our Senior Vice President, Business & Corporate Development since December 2019. Prior to this, Mr. Akhavan served as our Chief Revenue Officer from May 2016 to December 2019 and as our President of Publishing from April 2013 to May 2016. Before joining us, from January 2010 to April 2013, Mr. Akhavan served in several management positions at Tapjoy, Inc., a provider of mobile advertising, most recently as Senior Vice President, Partnerships. From April 2009 to January 2010, Mr. Akhavan was a Manager, Publisher Network at RockYou!, a social gaming company, and from October 2007 to November 2008, he served as a Strategic Partner Manager at VideoEgg (now SAY Media), an advertising inventory and platform provider. Mr. Akhavan holds a B.A. in Economics from the University of California at Santa Cruz.

Becky Ann Hughes has served as our Senior Vice President, Revenue since December 2019. Prior to this, Ms. Hughes served as the head of our Glu Play game development studio since 2014, most recently in the position of Vice President and General Manager from September 2016 to December 2019. Prior to joining Glu, Ms. Hughes held various leadership roles in product marketing and product management at PlayFirst Inc., which was acquired by Glu in 2014. She holds a Bachelor of Science degree in Business Marketing from San Jose State University.

Scott J. Leichtner has served as our Vice President, General Counsel and Corporate Secretary since September 2010. Mr. Leichtner joined Glu in June 2009 as our Senior Corporate Counsel. Prior to joining us, Mr. Leichtner was a corporate attorney at Fenwick & West LLP, a law firm focused on serving technology clients, from October 1997 to May 2009. Mr. Leichtner holds an A.B. in Political Science from Duke University and a J.D. from the University of Michigan.

Item 1A. Risk Factors

Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or circumstances described below occurs, our business and financial performance could be harmed, our actual results could differ materially from our expectations and the market value of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may harm our business and financial performance. Because of the risks and uncertainties discussed below, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.

If we fail to develop and timely publish new high-quality, engaging games and continue to enhance our existing games, particularly our most successful games, our revenue would suffer.

Our business depends on developing and publishing mobile games that consumers will download and spend time and money playing. We must continue to invest significant resources in research and development, technology, analytics and marketing to introduce new games and continue to update our successful games, and we often must make decisions about these matters well in advance of a product’s release to timely implement them. Our success depends, in part, on

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unpredictable and volatile factors beyond our control, including consumer preferences and the number of applications they are willing to download to and maintain on their devices, competing gaming and non-gaming related applications, new mobile platforms and the availability of other entertainment activities. If our games do not meet consumer expectations, or they are not brought to market in a timely and effective manner, our business, operating results and financial condition would be harmed. It can be difficult for us to predict with certainty when we will launch a new game as games may require longer development schedules or beta testing periods to meet our quality standards and our players’ expectations. For example, we experienced delays in the development and commercial release of The Swift Life, and, following global launch, the title did not generate significant revenue and was sunset on February 1, 2019. In 2018, we also decided to delay the worldwide launch dates of WWE Universe and Diner DASH Adventures to May and June of 2019, respectively, in order to give the development teams additional time to work on these titles. In August 2019, we announced that we were delaying the expected worldwide launch date of Disney Sorcerer’s Arena to the first quarter of 2020 for similar reasons. While Diner DASH Adventures has been commercially successful, WWE Universe has performed significantly below our expectations, and it is possible that Disney Sorcerer’s Arena will not generate significant revenue despite the extra development time. Furthermore, our future game launches could also be delayed, or they may not be successful when and if launched, which would likely harm our business, operating results and financial condition.

Even if our games are successfully introduced in a timely fashion and initially adopted, a failure to continually update them with compelling content or a subsequent shift in the entertainment preferences of consumers could cause a decline in our games’ popularity that could materially reduce our revenue and harm our business, operating results and financial condition, which effect would be magnified for our most successful games and, in particular, Design Home. In connection with our product strategy, we have committed significant resources to updating, adding new features to and enhancing our existing titles as opposed to launching as many new titles as we have in prior years. However, we may not be successful in doing so, such as was the case with our update of Covet Fashion in the first quarter of 2017 or as may be the case with our plan to introduce e-commerce functionality into Design Home in 2020. It is difficult to predict when and how quickly the popularity and revenue of one of our games will decline, and if any of our key growth games experience any such unexpected declines, we may not meet our expectations or the expectations of securities analysts or investors for a given quarter. Furthermore, we compete for the discretionary spending of consumers, who face a vast array of entertainment choices, including social media and other non-gaming related apps, games played on personal computers and consoles, television, movies, sports and the Internet. If we are unable to sustain sufficient interest in our games compared to other forms of entertainment, our business and financial results would be seriously harmed.

In addition to the market factors noted above, our ability to successfully develop and launch games for mobile devices and their ability to achieve and maintain commercial success will depend on our ability to:

●

minimize launch delays and cost overruns on the development of new games and features;

●

successfully enhance and increase the revenue we generate from our existing growth games;

●

effectively market and monetize our games;

●

achieve a positive return on investment from our marketing and user acquisition efforts;

●

sustain sufficient interest in our games compared to other forms of entertainment for our players

●

adapt to new technologies and feature sets for mobile and other devices;

●

attract and retain experienced and talented employees

●

compete successfully against a large growing number of existing market participants;

●

minimize and quickly resolve bugs and outages; and

●

acquire and successfully integrate high quality mobile game assets, personnel or companies.

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These and other uncertainties make it difficult to know whether we will succeed in continuing to develop, launch and enhance successful mobile games in accordance with our operating plan. If we do not succeed in doing so, our business, financial condition, results of operations and reputation will suffer.

Successfully developing and monetizing free-to-play games is a challenging business model.

We face significant challenges in achieving our goal of becoming the leading developer and publisher of free-to-play mobile games. Successful free-to-play games tend to include competitive gameplay, deep meta game features, player versus player activities, regularly updated content and other complex technological and creative attributes. While we are working to include such features in our games, we may not successfully update our games to include these features or they may not be well received by our players. For example, the significant update to Racing Rivals that we released in the fourth quarter of 2016 was poorly received by players, led to a significant decline in revenue and ultimately contributed to our decision to sunset this title on April 1, 2019. If we are unable to successfully implement our product strategy, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected. Additionally, our existing games compete with our new offerings and the offerings of our competitors, and revenue from our existing catalog games has declined over time, a trend that we expect to continue.

Our efforts to develop new growth games and enhance our existing growth games may prove unsuccessful or, even if successful, it may take more time than we anticipate to achieve significant revenue because, among other reasons:

●

our strategy assumes that a large number of players will download our games because they are free and that we will then be able to effectively monetize the games; however, players may not widely download our games for a variety of reasons, including:

●

the increasing competition throughout the mobile gaming industry for downloads, not only with other mobile games but also with social media and other non-gaming related applications;

●

limits on the number of mobile applications players are willing to download to and maintain on their devices;

●

poor consumer reviews or other negative publicity;

●

ineffective or insufficient marketing efforts, particularly since we intend to test new user acquisition channels in 2020 which may be ineffective or whose return on investment may not be as directly measurable as our traditional user acquisition campaigns;

●

lack of sufficient social and community features;

●

lack of prominent storefront featuring;

●

failure to reach and maintain Top Free App Store rankings;

●

the relatively large file size of some of our games; in particular, our games often utilize a significant amount of the available memory on a user’s device and tend to consume additional space as players advance through our games, which may cause players to delete our games once the file size grows beyond the capacity of their devices’ storage limitations; and

●

the limitations set by Apple, which at most only allow applications that are less than 200 megabytes, to be downloaded over a carrier’s wireless network; as a result, players must download our iOS games that exceed 200 megabytes via a wireless Internet (Wi-Fi) connection;

●

even if our games are widely downloaded, we may fail to retain users or optimize the monetization of these games; this may occur for a variety of reasons, including poor game design or quality, lack of social and

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community features, gameplay issues such as game unavailability, long load times or an unexpected termination of the game due to data server or other technical issues, lack of differentiation from predecessor games or other competitive games, lack of innovative features that surprise and delight our players, differences in user demographics and purchasing power or our failure to effectively respond and adapt to changing user preferences through game updates;

●

future games that we release may fail to resonate with consumers and games that incorporate licensed property may not be financially successful due to the minimum guaranteed royalty payments to our licensors;

●

we intend to continue to develop games based upon our own intellectual property, in addition to well-known licensed brands and properties, and we may encounter difficulties in generating sufficient consumer interest in and downloads of our original intellectual property games;

●

many well-funded public and private companies have released, or plan to release, games in the same genres as our growth games or games incorporating the same licensed brands that we intend to use in our games (e.g., Disney/Pixar), and this competition will make it more difficult for us to differentiate our games and derive significant revenue from them;

●

we may have difficulty hiring the experienced monetization, live operations, server technology, data analyst, user experience, game designer, and product management personnel that we require to develop our new games and support our existing growth and catalog games, or may face difficulties in developing our technology platform and incorporating it into our products or developing unique gameplay;

●

we depend on the proper and continued functioning of our own servers and third-party infrastructure to operate our connected games that are delivered as a service; and

●

the impact of potential regulatory issues, including:

●

various jurisdictions are assessing the legality of “loot boxes” which are commonly used in some of our top games and the Federal Trade Commission, or the FTC, held a public workshop in August 2019 to examine consumer protection issues related to loot boxes; to the extent that the FTC or one or more jurisdictions determine that loot boxes constitute gambling or they otherwise elect to regulate the use of loot boxes, it could require us to stop utilizing loot boxes within our games that are distributed in such territories, which would negatively impact our revenues;

●

the Federal Trade Commission, or the FTC, has previously indicated that it intends to review issues related to in-app purchases, particularly with respect to games that are marketed primarily to minors, and the FTC might issue rules significantly restricting or even prohibiting in-app purchases or name us as a defendant in a future class-action lawsuit; and

●

various legislators, administrative bodies and courts, primarily in Europe, have taken actions (including imposing fines) or may be considering taking actions (including antitrust enforcement) against Apple and Google, which are our primary distribution platforms, and Facebook, which is our primary user acquisition channel.

If we do not achieve a sufficient return on our investment with respect to our free-to-play business model, it will negatively affect our operating results and may require us to formulate a new business strategy.

The markets in which we operate are highly competitive, many of our competitors have significantly greater resources than we do and our players may prefer our competitors’ products or competing forms of entertainment.

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primarily on the basis of game quality, brand and customer reviews. We compete for space on user’s smartphones and tablet devices in terms of the number of applications on their device and the amount of storage consumed by such applications. We also compete more generally for the time, attention and discretionary spending of users of smartphones and tablet devices who are spending ever-increasing amounts of time on social media, messaging and music, movie and television streaming applications, personal computer and console games, sports and the Internet. We compete for promotional and digital storefront placement based on our relationship with the digital storefront owner, historical performance, game quality, perception of sales potential, customer reviews and relationships with licensors of brands and other content. For content licensors, we compete based on royalty and other economic terms, historical financial performance of prior licensed content titles, perceptions of development quality, speed of execution, distribution breadth and relationships with storefront owners. We also compete for experienced and talented employees.

We also face competition from online game developers and distributors who are primarily focused on specific international markets. We could also face increased competition if those companies choose to compete more directly in the United States or the other markets that are significant to us or if large companies with significant online presences such as Apple, Google, Amazon, Facebook, Microsoft or Verizon, choose to enter or expand in the games space or develop competing games. For example, Apple recently launched its Apple Arcade subscription service in which users receive access to a curated selection of paid titles on the App Store, and Google recently launched its Stadia cloud gaming service in which users will be able to stream games to various devices as well and opened a new first-party gaming studio that will be creating exclusive games for Stadia. In addition, we also face competition from mobile applications and websites focused on the home design market, which may include games, e-commerce titles, design applications and others seeking to displace our Design Home title which is a leading title in the currently unsaturated home design application market. Competitors in this space include, or may include, established game developers, established real estate companies, interior design companies, e-commerce companies and other well-funded private companies looking to enter the home design market. Given the open nature of the development and distribution for smartphones and tablets and the relatively low barriers to entry, we also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for these devices using relatively limited resources and with relatively limited start-up time or expertise. As an example of the competition that we face, it has been estimated that more than 4.1 million applications, including more than 900,000 active games, were available on Apple’s U.S. App Store as of January 31, 2020. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players without substantially increasing our marketing expenses and development costs.

Some of our competitors and our potential competitors have one or more advantages over us, either globally or in particular geographic markets, which include:

●significantly greater financial resources;

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average paying player spends in the competitor’s game over the player’s lifetime is greater than in our games) or where a competitor is willing to pay to acquire users in a manner that does not have a positive return on investment in an effort to increase its revenues and/or user base;

●greater experience with free-to-play games, building and maintaining games, and building social and community features into mobile games, as well as more effective game monetization;

●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;

●larger installed user bases from their existing mobile games;

●larger installed user bases from related platforms, such as console gaming or social networking websites, to which they can market and sell mobile games;

●more substantial intellectual property of their own from which they can develop games without having to pay royalties;

●lower labor and development costs and better overall economies of scale;

●greater platform-specific focus, experience and expertise;

●broader global distribution and presence; and

●greater talent, both in overall headcount and in terms of experience in creating successful titles.

If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales could decline, our margins could decline and we could lose market share, any of which would materially harm our business, operating results and financial condition.

We rely on a very small portion of our total players for nearly all of our revenue that we derive from in-app purchases.

We rely on a very small portion of our total players for nearly all of our revenue derived from in-app purchases (as opposed to advertisements and incentivized offers) and installation rates and user-growth have declined for us with our most recent product launches. The percentage of unique paying players for our largest revenue-generating free-to-play games has typically been less than 5%, when measured as the number of unique paying users on a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than 5% for some of our games during specific, relatively short time periods, such as immediately following worldwide launch, during special events or following content updates or marketing campaigns. To significantly increase our revenue, we must increase the number of downloads of our games, increase the number of players who convert into paying players by making in-app purchases or enrolling in subscriptions, increase the amount that our paying players spend in our games and/or increase the length of time our players generally play our games. We might not succeed in our efforts to increase the monetization rates of our users, particularly if we do not increase the amount of social features in our games or otherwise improve our games though updates and live operations. If we are unable to convert non-paying players into paying players, or if we are unable to retain our paying players or if the average amount of revenue that we generate from our players does not increase or declines, our business may not grow, our financial results will suffer, and our stock price may decline.

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We have depended on a small number of growth games for a significant portion of our revenue in recent fiscal periods. If these games do not continue to grow or we do not release highly successful new games, our revenue would decline.

In the mobile gaming industry, new games are frequently introduced, but a relatively small number of games account for a significant portion of industry sales. Similarly, a significant portion of our revenue comes from a limited number of games, although the games in that group have shifted over time. Our top three titles for 2019, Design Home, the Tap Sports Baseball franchise, and Covet Fashion, each accounted for greater than 10% of our revenue in the period and collectively generated approximately 78.4% of our revenue during the period, while our top three titles for 2018, Design Home, the Tap Sports Baseball franchise, and Covet Fashion, each accounted for greater than 10% of our revenue in the period and collectively generated approximately 72.0% of our revenue during the period. We expect our dependency on a small number of games, and in particular Design Home, for a majority of our revenue will continue for the foreseeable future. We intend to globally launch at least three new titles in 2020, including Disney Sorcerer’s Arena, in the first quarter of 2020, and if one or more of these titles is unsuccessful, as was the case with our launch of WWE Universe in 2019, or if we are unable to grow bookings from Diner DASH Adventures so that it becomes a growth game, it could result in an overall decline in our revenues and cause us to continue to rely primarily on our existing growth games for a significant majority of revenues during 2020 and beyond.

We derive the majority of our revenue from Apple’s App Store and the Google Play Store, and if we are unable to maintain a good relationship with each of Apple and Google or if either of these storefronts were unavailable for any prolonged period of time, our business will suffer.

The majority of our smartphone revenue has historically been derived from Apple’s iOS platform, which accounted for 60.8% of our total revenue for 2019 compared with 63.1% and 63.0% of our total revenue for 2018 and 2017, respectively. We generated the majority of this iOS-related revenue from the Apple App Store, which represented 54.4%, 54.7%, and 54.2% of our total revenue for 2019, 2018 and 2017, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our iOS-related revenue from offers and advertisements in games distributed on the Apple App Store. In addition, we derived approximately 39.1%, 36.6%, and 36.0% of our total revenue for 2019, 2018 and 2017, respectively, from the Android platform. We generated the majority of our Android-related revenue from the Google Play Store, which represented 33.5%, 31.3%, and 30.3% of our total revenue for 2019, 2018 and 2017, respectively, with the significant majority of such revenue derived from in-app purchases. We believe that we have good relationships with each of Apple and Google, which have contributed to the majority of our games released in the last several years being featured on their respective storefronts upon worldwide commercial release. If we do not continue to receive prominent featuring, users may find it more difficult to discover our games and we may not generate significant revenue from them. We may also be required to spend significantly more on marketing campaigns to generate substantial revenue on these platforms. Additionally, our efforts to advertise through search advertisements in the Apple App Store may not be successful and may not result in additional users or monetization. In addition, currently neither Apple nor Google charge a publisher when it features one of their apps. If either Apple or Google were to charge publishers to feature an app, it could cause our marketing expenses to increase. Accordingly, any change or deterioration in our relationship with Apple or Google could materially harm our business and likely cause our stock price to decline.

We also rely on the continued functioning of the Apple App Store and the Google Play Store. In the past, these digital storefronts have been unavailable for short periods of time or experienced issues with their in-app purchasing functionality. If such events recur on a prolonged basis or other similar issues arise that impact our ability to generate revenue from these storefronts, it would have a material adverse effect on our revenue and operating results. In addition, if the storefront operators fail to provide high levels of service, our players’ ability to access our games may be interrupted or players may not receive the virtual currency or goods for which they have paid, which may adversely affect our brand, revenue and operating results.

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The operators of digital storefronts on which we publish our free-to-play games and the advertising channels through which we acquire some of our players in many cases have the unilateral ability to change and interpret the terms of our and others’ contracts with them.

We distribute our free-to-play games through direct-to-consumer digital storefronts, for which the distribution terms and conditions are often “click through” agreements that we are not able to negotiate with the storefront operator. For example, we are subject to each of Apple’s and Google’s standard click-through terms and conditions for application developers, which govern the promotion, distribution and operation of apps, including our games, on their storefronts. Each of Apple and Google can unilaterally change its standard terms and conditions, including platform commission fees, with no prior notice to us. In addition, the agreement terms can be vague and subject to changing interpretations by the storefront operator. Further, these storefront operators typically have the right to prohibit a developer from distributing its applications on its storefront if the developer violates its standard terms and conditions. For example, in April 2019, Apple enforced new guidelines relating to offerwalls which has negatively impacted our revenues from offers in our games; Apple enforced similar guidelines with respect to offerwalls in January 2018 relating to Design Home. In addition, in the fourth quarter of 2017, Apple updated its terms of service to require publishers to disclose a player’s odds of winning the various items contained within loot boxes, and in May 2019 Google updated its terms of service to require substantially similar disclosure. Glu utilizes loot boxes in many of its current games and the games it intends to release in the future, and it is possible that these disclosure requirements will negatively impact the monetization of these titles. If Apple or Google, or any other key storefront operator, determines that we or one of our key vendors are violating its standard terms and conditions, by a new interpretation or otherwise, or prohibits us from distributing our games on its storefront, it would materially harm our business and likely cause our stock price to significantly decline.

Furthermore, any changes to the advertising channels through which we acquire some of our players, including any changes by Facebook of its advertising platform, which we rely on for a majority of our user acquisition activities, could negatively impact our revenue or otherwise materially harm our business, and we may not receive significant or any advance warning of such changes.

It is becoming increasingly difficult and more expensive for us to acquire players for our games and we may not achieve a positive return on investment on our user acquisition efforts.

It is becoming increasingly difficult and more expensive for us to acquire players for our games for a variety of reasons, including the increasingly competitive nature of the mobile gaming industry and the significant amount of time and attention users are dedicating to competing entertainment options, including social media and other non-gaming applications. In addition, we believe that changes that Apple has implemented during the last several years to its platform, particularly the removal of the Top Grossing rankings and decreasing the prominence of the Top Free rankings, has negatively impacted the number of organic downloads of our games. These factors have contributed to an overall decline in our daily and monthly active users for our existing games as well as fewer players downloading our new games than in the past despite our substantially increased spending on user acquisition efforts. For example, our launch of Diner DASH Adventures in June 2019 resulted in significantly fewer downloads than prior versions of our Dash franchise such as Cooking Dash and Restaurant Dash with Gordon Ramsay. If the number of players who download our new title launches scheduled for 2020 does not meet our expectations, in particular for Disney Sorcerer’s Arena and the next iteration of our Deer Hunter franchise, our revenues and operating results will suffer. Our existing successful growth games are not immune to these trends, as we experienced significantly higher CPIs (costs per install) for Design Home and Covet Fashion during the first half of 2019 due to substantial increases in spending by several competitors, which negatively impacted the revenue and margins for these titles. Furthermore, our spending on user acquisition is designed so that we will achieve a positive return on investment – that is, we expect that the amount we spend to acquire users in our games will be less than the revenue we ultimately generate from such acquired users. In order to determine the expected revenue from acquired users who may play our games for multiple years, we often must make certain assumptions about their projected spending behavior, particularly for new games like Disney Sorcerer’s Arena for which we do not have similar games in our portfolio to aid us in our modeling efforts. To the extent that we do not achieve a positive return on investment on our user acquisition spending, it will negatively impact our margins and overall operating results.

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We have a history of net losses, may incur substantial net losses in the future and may not achieve and sustain profitability or growth in future periods.

We have incurred significant losses since inception, including a net loss of $13.2 million in 2018 and a net loss of $97.6 million in 2017. As of December 31, 2019, we had an accumulated deficit of $431.6 million. Although we generated net income of $8.9 million during the year ended December 31, 2019, we may not be able to sustain profitability on a long-term basis. While we conducted several restructurings and divested our Moscow game development studio during 2017, which measures were aimed at reducing our fixed costs and operating more efficiently, our costs may continue to rise as we implement additional initiatives designed to increase revenue, potentially including: investing more heavily in our existing growth games as part of our product strategy; increasing our spending on user acquisition efforts, particularly for our growth games and our new title launches; hiring additional staff in our San Francisco Bay Area and Hyderabad, India locations; developing new games with greater complexity, higher production values and deeper social features; running live operations on our games; and taking other steps to strengthen our company. We anticipate that the costs of acquiring new players and otherwise marketing our games will continue to rise, particularly since advertising costs in our industry have generally been rising and we have encountered increasing difficulties in generating downloads of our games as users spend more time on alternative software applications, such as social media, messaging, and streaming applications. We may also continue to incur significant costs to acquire rights to third party intellectual property, including incurring significant minimum guaranteed royalty payments. If our revenue does not increase at a rate sufficient to offset these additional expenses, if the launch dates for our games are delayed, if we do not realize a sufficient return on our user acquisition spending for our growth games, if we experience unexpected significant increases in operating expenses or if we are required to take additional charges related to impairments or restructurings, we will continue to incur losses. For example, during the fiscal years ended December 31, 2019, 2018 and 2017, we recorded impairments of $0.5 million, $0.7 million and $27.3 million, respectively, related to certain contractual minimum guarantee payments made to certain of our celebrity licensors and other prepaid royalties. Additionally, we have taken restructuring charges in the past, including $6.0 million during 2017 related to headcount reductions and other restructuring activities and a $2.7 million charge relating to impairment of acquired in process research and development during the third quarter of 2018. Furthermore, given the significant amount of time and attention users are dedicating to social media and other non-gaming applications, increasing revenue may be challenging.

Our financial results could vary significantly from quarter to quarter and are difficult to predict, which in turn could cause volatility in our stock price.

Our revenue and operating results could vary significantly from quarter to quarter due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition, we may not be able to accurately predict our future revenue or results of operations. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenue, and even a small shortfall in revenue could disproportionately and adversely affect financial results for that quarter.

In addition to other factors discussed in this section, factors that may contribute to the variability of our quarterly results and the volatility in our stock price include:

●our ability to increase the number of our paying players and the amount that each paying player spends in our games;

●the popularity and monetization rates of our new games released during the quarter and the ability of games released in prior periods to sustain their popularity and monetization rates;

●the number and timing of new games and significant updates released by us and our competitors, which timing can be impacted by internal development delays, longer than anticipated beta testing periods, shifts in product strategy and how quickly digital storefront operators review and approve our games for commercial release;

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●changes in the prominence of storefront featuring for our games and those of our competitors;

●the loss of, or changes to, one of our distribution platforms;

●changes to the Apple iOS platform or the Google Android platform to which we are not able to adapt our game offerings;

●fluctuations in the size and rate of growth of overall consumer demand for smartphones, tablets, games and related content;

●the amount and timing of charges related to any future impairments of goodwill, intangible assets, prepaid royalties and guarantees; for example, in 2019, 2018 and 2017, we impaired $0.5 million, $0.7 million and $27.3 million, respectively, related to contractual minimum guarantee royalty payments made to certain celebrity licensors and other prepaid royalties, and in future periods we may be required to impair our goodwill due to further declines in our business and/or stock price, or take additional large impairments related to contractual minimum guarantee commitments if the associated games we are developing are not successful;

●changes in the mix of revenue derived from games based on original intellectual property versus licensed intellectual property;

●changes in the mix of revenue derived from in-app purchases, advertisements and offers, which mix often depends on the nature of new titles launched during the quarter;

●changes in the amount of money we spend marketing our titles in a particular quarter, including the average amount we pay to acquire each new user, as well as changes in the timing of these marketing expenses within the quarter;

●decisions by us to incur additional expenses, such as increases in research and development, restructuring expenses, or unanticipated increases in vendor-related costs, such as hosting fees;

●the timing of successful mobile device launches;

●the seasonality of our industry;

●changes in accounting rules, such as those governing recognition of revenue, including the period of time over which we recognize revenue for in-app purchases of virtual currency and goods within some of our games, as well as estimates of average playing periods and player life;

●the activities, announcements and performance of our commercial partners: and

●macro-economic fluctuations in the United States and global economies, including those that impact discretionary consumer spending.

We may not, or may be unable to, renew our existing content licenses when they expire and may not choose to obtain additional licenses or be able to obtain new licenses on favorable terms, which could negatively impact our revenue if we fail to replace such revenue with revenue from games based on our own intellectual property.

In 2019, we generated 30.1% of our revenue from games that are based on or substantially incorporate third-party intellectual property, such as the Tap Sports Baseball franchise, Kim Kardashian: Hollywood, Restaurant Dash with Gordon Ramsay, and WWE Universe. We expect to continue to derive significant revenue from these titles in 2020, particularly the Tap Sports Baseball franchise, and expect to continue to develop new titles featuring third-party intellectual property, such as Disney Sorcerer’s Arena. Certain of our licenses expire at various times during the next

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several years, and we may be unable to renew these licenses on terms favorable to us or at all, and we may have difficulties obtaining licenses from new content owners on terms acceptable to us, if at all. In addition, these licensors could decide to license to our competitors or develop and publish their own mobile games, competing with us in the marketplace. We also license certain brands and their assets for our Covet Fashion and Design Home titles without the provision of a license fee or royalty. These licensors could decide to no longer license their assets under the current terms, and to instead charge a one-time payment, ongoing royalty or both, which may adversely affect the profitability of these titles. Failure to maintain or renew our existing licenses or to obtain additional licenses would prevent us from continuing to offer our current licensed games and introducing new mobile games based on such licensed content, which could harm our business, operating results and financial condition.

Securing license agreements to develop, publish and market games based on or significantly incorporating celebrities, third-party licensed brands, properties, and other content typically requires that we make minimum guaranteed royalty and other payments to such licensors, and to the extent such payments become impaired, our operating results would be harmed.

In connection with partnerships with celebrities and other licensors of third-party brands, properties and content, we have incurred and may continue to incur significant minimum guaranteed royalty and other payments. As a result, we may incur impairments on such payments if our forecasts for these games are lower than we anticipated at the time we entered into the agreements. For example, in 2019, 2018 and 2017, we impaired $0.5 million, $0.7 million and $27.3 million, respectively, related to contractual minimum guaranteed royalty payments made to certain of our celebrity licensors and other prepaid royalties. As of December 31, 2019, we had remaining prepaid royalty balances totaling $42.2 million. We expect to continue to selectively license third-party licensed brands, properties and other content and to pay minimum guaranteed royalty payments in connection with such deals. As a result, we may be required to take impairments in future periods if the games we are developing that have significant contractual minimum guarantee commitments associated with them are not successful.

If we do not successfully establish and maintain awareness of our brand and games, if we fail to develop high-quality, engaging games that are differentiated from our prior games, if we incur excessive expenses maintaining and promoting our brand or our games or if our games contain defects or objectionable content, our operating results and financial condition could be harmed.

We believe that establishing and maintaining our brand is critical to establishing, developing and maintaining favorable relationships with players, distributors, content licensors, platform providers, advertisers and key talent. Increasing awareness of our brand and recognition of our games is particularly important in connection with our strategic focus of developing games based on our own intellectual property. Our ability to promote the Glu brand and increase recognition of our games depends on our ability to develop high-quality, engaging games, including integrating the level of social and community features appropriate for a game’s target audience and partnering with brands with fan bases that can support successful mobile games. If consumers, digital storefront owners and branded content owners do not perceive our existing games as high-quality or if we introduce new games that are not favorably received by them, then we may not succeed in building brand recognition and brand loyalty in the marketplace. In addition, globalizing and extending our brand and recognition of our games is costly and involves extensive management time to execute successfully. Although we make significant sales and marketing expenditures in connection with the launch of our games, these efforts may not succeed in increasing awareness of our brand or the new games. If we fail to maintain and increase brand awareness and consumer recognition of our games, our potential revenue could be limited, our costs could increase and our business, operating results and financial condition could suffer.

In addition, if a game contains objectionable content, we could experience damage to our reputation and brand. Our games may contain violence or other content that some consumers may find objectionable, particularly in light of high-profile mass shootings. For example, many of our shooter games, including our Deer Hunter games, have a 17-and-older rating on the Apple App Store due to its violence. Despite these ratings, consumers may be offended by some of our game content and children to whom these games are not targeted may choose to play them without parental permission nonetheless. In addition, our employees or employees of outside developers could include hidden features in our games without our knowledge, which might contain profanity, graphic violence, sexually explicit or otherwise objectionable material. Users of our games, particularly games with social messaging features, may utilize these features for illegal

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purposes or target certain users through these features. If consumers believe that a game we published contains objectionable content or may expose them to nefarious individuals, it could harm our brand, consumers could refuse to download it or demand a refund for any in-app purchases and could pressure the digital storefront operators to no longer allow us to publish the game on their platforms. Similarly, if any of our games are introduced with defects, vulnerabilities or have playability issues, we may receive negative user reviews, our brand may be damaged and our operating results and revenue negatively affected. For example, our attempt to relaunch our Racing Rivals title, which had experienced playability and user interface issues in the past, in the second quarter of 2018 by introducing new features and resetting the economy of the game resulted in the game crashing and not being available to most users for several days. As a result, the daily active users of Racing Rivals and the revenue that we generated from this title significantly decreased from peak levels which contributed to our decision to shut down the game effective as of April 1, 2019. In addition, any issues relating to our games could be exacerbated if our customer service department does not timely and adequately address issues that our players have encountered with our games.

We rely on a combination of our own servers and technology and third party infrastructure to operate our games, and a significant portion of our game traffic is hosted by a single vendor. If we experience any system or network failures, unexpected technical problems, cyber attacks or any other interruption to our games, it could reduce our sales, increase costs, or result in a loss of revenue or loss of end users of our games.

We rely on our own servers and third-party infrastructure to operate our games, and we expect that our reliance on such third-party infrastructure and our technology platform will increase as we continue to add additional social features and functionality into our games. We do not control these third parties and replacing them might require significant time and expense. In particular, a significant portion of our game traffic is hosted by Amazon Web Services, which service provides server redundancy and uses multiple locations on various distinct power grids. Amazon may terminate its agreement with us upon 30 days’ notice. In addition, Amazon has experienced brief power outages on occasion during the past several years that have affected the availability of certain of our games during such outages. While none of these events adversely impacted our business, a similar outage of a longer duration could. Any technical problem with cyber-attack on, or loss of access to these third parties’ or our systems, servers or other technologies, including our technology platform, could result in the inability of end users to download or play our games, cause interruption to gameplay, prevent the completion of billing for a game or result in the loss of users’ virtual currency or other in-app purchases, interfere with access to some aspects of our games or result in the theft of end-user personal information. For example, in the second quarter of 2018, our efforts to relaunch Racing Rivals resulted in the game crashing and not being available to most users for several days. In addition, in the second quarter of 2017, we experienced technical issues with our Covet Fashion title that caused an extended outage and resulted in certain users receiving in-game currency erroneously. If users are unable to access and play our games for any period of time, if virtual assets are lost, or if users do not receive their purchased virtual currency, we may receive negative publicity and game ratings, we may lose players of our games, we may be required to issue refunds, and we may become subject to regulatory investigation or class action litigation, any of which would negatively affect our business. Any of these problems could require us to incur substantial repair costs, distract management from operating our business and result in a loss of revenue. Furthermore, our disaster recovery systems and those of third-parties with which we do business may not function as intended or may fail to adequately protect our critical business information in the event of a significant business interruption, which may cause interruption in service of our games, security breaches or the loss of data or functionality, which could negatively affect our business, financial condition or results of operations.

Cyber attacks, security breaches, and computer viruses could harm our business, reputation, brand and operating results.

Cyber-attacks, security breaches, and computer viruses have occurred on our systems in the past and may occur on our systems in the future. We store sensitive information, including personal information about our employees. In addition, our games involve the storage and transmission of players’ personal information in our facilities and on our equipment, networks and corporate systems run by us or managed by third-parties including Apple, Google, Facebook, Microsoft, and Amazon. Our player data, corporate systems, third-party systems and security measures may be breached due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our data, our employees’ data, our players’ data or any third party data we may possess. In addition, outside parties have in the past and may in the future attempt to fraudulently induce employees

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to disclose information in order to gain access to this data. Any such incidents, particularly of longer duration, could damage our brand and reputation and result in a material loss of revenue. Given the global nature of our business and the low cost, relative ease and proliferation of internet enabled devices, we may be at an increased risk for cyber-attacks and, specifically, denial of service attacks. In addition, the chat and other social features in our games could potentially be used by terrorist organizations or other criminals to communicate or for other nefarious purposes, which could severely damage our brand and reputation. If an actual or perceived security breach of our or a third-party system on which we rely occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose players and advertisers, and we could suffer significant legal and financial harm including loss of revenue due to such events or in connection with remediation efforts and costs, investigation costs or penalties, litigation, regulatory and enforcement actions, compliance with notification obligations, changed security and system protection measures. Any of these actions could have a material and adverse effect on our business, reputation and operating results.

We use a game development engine licensed from Unity Technologies to create many of our games. If we experience any prolonged technical issues with this engine or if we lose access to this engine for any reason, it could delay our game development efforts and cause our financial results to fall below expectations for a quarterly or annual period, which would likely cause our stock price to decline.

We use a game development engine licensed from Unity Technologies to create many of our games, and we expect to continue to use this engine for the foreseeable future. Because we do not own this engine, we do not control its operation or maintenance, nor do we control how the engine is updated or upgraded. As a result, any prolonged technical issues with this engine might not be resolved quickly, despite the fact that we have contractual service level commitments from Unity. In addition, to the extent that we require any functionality that is not offered by Unity we are dependent on Unity to update or upgrade its engine to offer such functionality. Furthermore, although Unity cannot terminate our agreement absent an uncured material breach of the agreement by us, we could lose access to this engine under certain circumstances, such as a natural disaster that impacts Unity or a bankruptcy event. If we experience any prolonged issues with the operation of the Unity game development engine, if the Unity game development engine does not offer the functionality we require or if we lose access to this engine for any reason, it could delay our game development efforts and cause us to not meet revenue expectations for a quarterly or annual period, which would likely cause our stock price to decline. Further, if one of our competitors acquired Unity, the acquiring company would be less likely to renew our agreement, which could impact our game development efforts in the future, particularly with respect to sequels to games that were created on the Unity engine.

We derive a significant portion of our revenue from advertisements and offers that are incorporated into our free-to-play games through relationships with third parties. If we lose the ability to provide these advertisements and offers for any reason, if we become victim to advertising fraud or if any events occur that negatively impact the revenue we receive from these sources, it would negatively impact our operating results.

In addition to in-app purchases, we derive revenue from our free-to-play games through advertisements and offers. We incorporate advertisements and offers into our games by implementing third parties’ software development kits. We rely on these third parties to provide us with a sufficient inventory of advertisements and offers to meet the demand of our user base. If we exhaust the available inventory of these third parties, it will negatively impact our revenue. If our relationship with any of these third parties terminates for any reason, or if the commercial terms of our relationships do not continue to be renewed on favorable terms, we would need to locate and implement other third party solutions, which could negatively impact our revenue, at least in the short term. In addition, we may be susceptible to various types of advertising fraud, which could reduce the effectiveness of our advertising campaigns or cause us to pay money to advertising firms for installations that were wrongly attributed to such firms. While we have implemented measures to detect and prevent advertising fraud, such measures may not prove effective, which would harm our user acquisition efforts and could harm our revenues. Furthermore, the revenue that we derive from advertisements and offers is subject to seasonality, as companies’ advertising budgets are generally highest during the fourth quarter and decline significantly in the first quarter of the following year, which negatively impacts our revenue in the first quarter.

The actions of the storefront operators can also negatively impact the revenue that we generate from advertisements and offers. For example, in April 2019, Apple enforced new guidelines relating to offerwalls which has negatively impacted our revenues from offers in our games; Apple enforced similar guidelines with respect to offerwalls in January

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2018 relating to Design Home. Any similar changes in the future that impact our revenue that we generate from advertisements and offers could materially harm our business.

We rely on assumptions and estimates to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

Certain of our key metrics, including the number of our daily and monthly active users, our average revenue per daily user and the average useful life of our paying players, is calculated using internal company data from multiple analytics systems that have not been independently verified. The calculation of these metrics is described in detail under the heading titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics.” While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring these metrics across our large user base around the world. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy, but these efforts may not prove successful and we may discover material inaccuracies. In addition, our methodology for calculating these metrics may differ from the methodology used by other companies to calculate similar metrics. For example, we currently treat an individual who plays two different Glu games on the same day or who plays the same game on two different devices during the same day (e.g., iPhone and an iPad) as two active users for each such day when we average or aggregate active users over time. As such, the calculations of our active users may not precisely reflect the actual number of people using our titles. We may also discover unexpected errors in our internal data that resulted from technical or other errors. Furthermore, our Crowdstar studio utilizes a separate analytics system from the rest of our company, which could result in internal inconsistencies or errors. If we determine that any of our metrics are not accurate, we may be required to revise or cease reporting such metrics and it may harm our reputation and business.

Our business and growth may suffer if we are unable to hire and retain key personnel.

Our future success will depend, to a significant extent, on our ability to attract, retain and motivate our key personnel, namely our management team, creative leaders and experienced game development personnel. In particular, Nick Earl, our President and Chief Executive Officer, is critical to our vision, strategic direction, products and technology, and the continued retention of the other members of our senior management team is important to our continued success. In addition, to grow our business, execute on our business strategy and replace departing employees, we must identify, hire and retain qualified personnel, particularly experienced monetization, live operations, server technology, data analyst, user experience, game designer, and product management personnel to develop and support our growth games. Attracting and retaining key personnel and other staff is difficult in a competitive hiring market, particularly in the San Francisco Bay Area where we are headquartered, and we may not succeed in doing so. The gaming and technology industries are also traditionally male dominated, so it may be difficult for us to recruit and retain talented female personnel who may be needed to help us optimize our games that are targeted to a more female-focused audience, including our games in the lifestyle and casual genres. Volatility of our stock price, changes in our compensation structure for our executive officers that significantly relies on performance linked stock awards, and previous headcount reductions may make it more difficult for us to attract and retain top talent. In particular, should our stock price decline it might be difficult for us to attract and retain qualified personnel, since individuals may elect to seek employment with other companies that they believe have better long-term prospects or that present better opportunities for earning equity-based compensation. Competitors have in the past and may in the future attempt to recruit our employees, and our management and key employees are not bound by agreements that could prevent them from terminating their employment at any time. In addition, we do not maintain a key-person life insurance policy on any of our officers. Our business and growth may suffer if we are unable to hire and retain key personnel.

Any restructuring actions and cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.

During the last several years we have implemented restructuring actions and cost reduction initiatives to streamline operations and improve cost efficiencies. Some of our previous restructurings included reductions in personnel in Bellevue, Washington; San Francisco, California; Long Beach, California; Portland, Oregon; and Beijing, China, as well as the divestiture of our Moscow, Russia game development studio. Any future restructurings or divestitures could result in disruptions to our operations and adversely affect our business. For example, in connection with the divestiture of our

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Moscow studio, we transitioned certain titles that were developed or operated by the Moscow studio, including Deer Hunter 2018, to our Hyderabad, India studio. We have seen a decline in revenues from Deer Hunter 2018, which may in part be related to this transition. In addition, we cannot be sure that any cost reduction and streamlining initiatives will be as successful in reducing our overall expenses as we expect or that additional costs will not offset any such reductions or streamlining. If our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, our operating results will suffer.

We may not realize the benefits expected through our strategic relationship with Tencent and other aspects of the relationship could have adverse effects on our business.

In April 2015, we entered into a strategic relationship with Tencent, a leading Internet company in China and arguably the world’s largest gaming company. Tencent, through a controlled affiliate, agreed to invest $126.0 million in exchange for approximately 16.3% of our total outstanding common stock on a post-transaction basis. In November 2015, we entered into an agreement with an affiliate of Tencent to license and publish its game, WeFire, in the United States and international markets outside of Asia under the name Rival Fire, which we launched in July 2016. In light of the poor performance of the title in terms of monetization and downloads, and the related contractual prepaid royalty commitments and license fees under our agreement with the affiliate of Tencent, we impaired $14.5 million in the third quarter of 2016. We may not succeed in entering into any other agreements or operating partnerships with Tencent in the future. Even if we do enter into any operational partnerships, it could take months to years to fully realize the benefits of such partnerships or they may not be successful as was the case with WeFire, and, to the extent such agreements involve publishing our games in China, some of our platform partners in China and other parts of Asia may view such a partnership negatively.

Tencent, through its controlled affiliates, held approximately 14.2% of the aggregate voting power of our common stock as of December 31, 2019, and could acquire up to 25.0% of the voting power through open-market purchases of our common stock. While Tencent has agreed to cause these shares to be voted with the majority recommendation of the independent members of our board of directors on most matters, Tencent could have considerable influence over matters such as approving a potential acquisition of us. Tencent was also granted the right to designate a member of our board of directors, and currently Ben Feder, Tencent’s President of International Partnerships (North America), is Tencent’s representative on our board of directors. Mr. Feder or any future Tencent designee could have an actual or apparent conflict of interest in such matters. Tencent’s investment in and position with us could also discourage others from pursuing any potential acquisition of us, which could have the effect of depriving the holders of our common stock of the opportunity to sell their shares at a premium over the prevailing market price.

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.

Our reported financial results are impacted by the accounting policies promulgated by the SEC and accounting standards bodies and the methods, estimates and judgments that we use in applying our accounting policies. The frequency of accounting policy changes may accelerate, including conversion to unified international accounting standards. Policies affecting revenue recognition have affected, and could further significantly affect, the way we account for revenue. For example, the accounting for revenue derived from free-to-play games, particularly with regard to revenue generated from online digital storefronts, is still evolving and, in some cases, uncertain. While we believe that we are correctly accounting for our revenues, this is an area that continues to involve significant discussion among accounting professionals and the future changes to the standard may cause our operating results to fluctuate. In addition, we currently defer revenue related to virtual goods and currency over the average playing period of paying users, which approximates the estimated weighted average useful life of the transaction. While we believe our estimates are reasonable based on available game player information, we may revise such estimates in the future in the event the average playing period of our paying users changes. Any adjustments arising from changes in the estimates of the lives of these virtual items would be applied to the current quarter and prospectively on the basis that such changes are caused by new information indicating a change in the game player behavior patterns of our paying users. Any changes in our estimates of useful lives of these virtual items may result in our revenue being recognized on a basis different from prior periods’ and may cause our operating results to fluctuate. As we enhance, expand and diversify our business and product offerings, the application

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of existing or future financial accounting standards could have a significant adverse effect on our reported results although not necessarily on our cash flows.

If we are unable to maintain effective internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements. If we are unable to maintain such internal controls, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls as required pursuant to the Sarbanes-Oxley Act, it could result in a material misstatement of our financial statements that would require a restatement, and investor confidence in the accuracy and timeliness of our financial reports and the market price of our common stock could be negatively impacted.

Conversion of key internal systems and processes, particularly our ERP system, and problems with the design or implementation of these systems and processes could interfere with, and therefore harm, our business and operations.

We underwent a multi-phase project that began in 2016 to convert certain key internal business systems and processes, including our enterprise resource planning, or ERP, system to a cloud based system. In connection with the transition to our new ERP system, we shutdown certain of our legacy ERP systems in the third quarter of 2016, which affected certain of our processes in the second half of 2016 and may continue to impact our processes. While we have transitioned to our new ERP system, we may need to resolve issues that arise in connection with this transition. We have invested, and will continue to invest, significant capital and human resources in the design and implementation of these business systems and processes. Any problems in the functioning of the new systems or processes, particularly any that impact our operations, could adversely affect our ability to process payments, record and transfer information in a timely and accurate manner, recognize revenue, file SEC reports in a timely manner, or otherwise run our business. Even if we encounter these adverse effects, as noted above, the design and implementation of these new systems and processes may be more time consuming than we anticipated and could negatively impact our business, financial condition, and results of operations.

Our business will suffer if our acquisition and strategic investment activities are unsuccessful or disrupt our ongoing business, which may involve increased expenses and may present risks not contemplated at the time of the transactions.

We have acquired and invested in, and intend to continue to acquire and invest in, companies, products and technologies that complement our strategic direction. Acquisitions and investments involve significant risks and uncertainties, including:

●diversion of management’s time and a shift of focus from operating the business to issues related to negotiation of acquisition or investment terms, integration and administration;

●our ability to successfully integrate acquired technologies and operations into our business and maintain uniform standards, controls, policies and procedures;

●potential employee morale and retention issues resulting from any reductions in compensation, or changes in management, reporting relationships, or future prospects;

●potential product development delays resulting from any changes and disruptions that may follow the acquisition;

●significant competition from other acquirers and investors as the gaming industry consolidates and challenges in offering attractive consideration given the volatility of our stock price and potential difficulties in obtaining alternative financing;

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●challenges retaining the key employees, customers and other business partners of the acquired or investee business;

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our ability to realize synergies expected to result from an acquisition or strategic investment;

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an impairment of acquired goodwill and other intangible assets or investments in future periods would result in a charge to earnings in the period in which the write-down occurs, such as the case with the impairment charge for acquired in-process research and development recorded in the third quarter of 2018;

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the internal control environment of an acquired or investee entity may not be consistent with our standards and may require significant time and resources to improve;

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in the case of foreign acquisitions or strategic investments, 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;

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liability for activities of the acquired or investee companies before the acquisition or investment, including violations of laws, rules and regulations, commercial disputes, tax liabilities, intellectual property and other litigation claims or disputes, accounting standards and other known and unknown liabilities;

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harm to our brand and reputation; and

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harm to our existing business relationships with business partners and advertisers as a result of the acquisition.

In particular, we acquired Crowdstar in the fourth quarter of 2016 in a multi-step transaction that did not involve the cooperation of Crowdstar’s management, where the former Chief Executive Officer of Crowdstar did not continue with the company post-acquisition and where we did not receive customary representations, warranties or indemnities from the acquired company. While we successfully integrated Crowdstar into our company and Crowdstar’s top titles, Covet Fashion and Design Home, are generating significant revenue, we still face risks and uncertainties in connection with this acquisition. For example, we may not be able to retain key Crowdstar employees for a variety of reasons, including the fact that we relocated the Crowdstar team from Burlingame, California to our new San Francisco headquarters during the fourth quarter of 2018, and the loss of key Crowdstar employees could affect revenue derived from Covet Fashion and Design Home.

In addition, if we issue equity securities as consideration in an acquisition or strategic investment, as we did for our acquisitions of Griptonite, Inc., Blammo Games Inc., GameSpy Industries, Inc., PlayFirst, Inc. and Cie Games, Inc., our current stockholders’ percentage ownership and earnings per share would be diluted. We may also need to raise additional capital in the event we use a significant amount of cash as consideration in an acquisition. Because acquisitions and strategic investments are inherently risky, our transactions may not be successful and may, in some cases, harm our operating results or financial condition.

Changes in foreign exchange rates and limitations on the convertibility of foreign currencies could adversely affect our business and operating results.

We currently transact business in more than 100 countries and in dozens of different currencies, with the Canadian Dollar and Indian Rupee being the primary international currencies in which we transact business. Conducting business in currencies other than U.S. Dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported operating results. We experienced significant fluctuations in currency exchange rates in the past and expect to experience continued significant fluctuations in the future. We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency, and an increasing percentage of our international revenue is from customers who pay us in currencies other than the U.S. Dollar. Fluctuations in the exchange rates between the U.S. Dollar and those other currencies could result in the U.S. Dollar equivalent of these expenses being

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higher and/or the U.S. Dollar equivalent of the foreign-denominated revenue being lower than would be the case if exchange rates were stable. This could negatively impact our operating results. To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeable future.

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 adversely affect our operating results.

International sales represented approximately 22.1%, 23.5%, and 24.5% of our revenue during 2019, 2018 and 2017, respectively. To target international markets, we develop games that are customized for consumers in those markets. We have international offices located in Canada and India. We expect to increase our international presence, as we intend to increase the number of our employees in our Hyderabad, India office. Risks affecting our international operations include:

●our ability to develop games that appeal to the tastes and preferences of consumers in international markets;

●difficulties developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;

●multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;

●our ability to develop, customize and localize games that appeal to the tastes and preferences of consumers in international markets;

●competition from local game developers that have significant market share in certain foreign markets and a better understanding of local consumer preferences;

●potential violations of the Foreign Corrupt Practices Act and local laws prohibiting improper payments to government officials or representatives of commercial partners;

●regulations that could potentially affect the content of our products and their distribution, such as in China where multiple governmental bodies must review and approve of any gaming application before it may be published;

●foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;

●potential adverse foreign tax consequences, since due to our international operations, we must pay income tax in numerous foreign jurisdictions with complex and evolving tax laws;

●political, economic and social instability in some regions of the world;

●health epidemics or contagious diseases, such as the novel coronavirus, that negatively impact our customers or supply chain;

●restrictions on the export or import of technology;

●trade and tariff restrictions and variations in tariffs, quotas, taxes and other market barriers; and

●difficulties in enforcing intellectual property rights in certain countries.

These risks could harm our international operations, which, in turn, could materially and adversely affect our business, operating results and financial condition. We may also liquidate or cease operating some of our foreign

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subsidiaries in the future which may raise additional risks, including related to taxes and obtaining governmental approvals.

If the mobile games market is disrupted by new technologies and we are not able to appropriately adapt our business, our business will suffer.

The mobile games market could be disrupted by new technologies that could impact our business. For example, the introduction of 5G wireless networking will offer technological advancements like faster download speeds and lower latency. While these technological advancements will provide opportunities for our business, it may also create risks if we do not adapt to these new technologies in a quick and timely manner. For example, 5G technology may result in the proliferation of game streaming services. Multiple instances of new cloud gaming services are already commercially available and new entrants like Google and Microsoft have or will announce their ability to stream games to mobile devices. Some of these new streaming entrants will also choose to publish first-party content on their platforms. Streaming technology could potentially disrupt the mobile gaming industry by enabling companies to publish cross-platform games that users can play across multiple platforms and devices. This could result in consumers choosing to play these cross-platform games rather than our games which are currently only available on mobile devices. If we do not appropriately adapt our business to new technologies, our business will suffer.

If we fail to deliver our games at the same time as new mobile devices are commercially introduced, our revenue may suffer.

Our business depends, in part, on the commercial introduction of new mobile devices with enhanced features, including larger, higher resolution color screens, improved audio quality, and greater processing power, memory, battery life and storage. For example, the introduction of new and more powerful versions of Apple’s iPhone and iPad and devices based on Google’s Android operating system, have helped drive the growth of the mobile games market. We do not control the timing of these device launches. Some manufacturers give us access to their new devices prior to commercial release. If one or more major manufacturers were to stop providing us access to new device models prior to commercial release, we might be unable to introduce games that are compatible with the new device when the device is first commercially released, and we might be unable to make compatible games for a substantial period following the device release. If we do not adequately build into our title plan the demand for games for a particular mobile device, experience game launch delays, or miss the opportunity to sell games when new mobile devices are shipped or our end users upgrade to a new mobile device, our revenue would likely decline and our business, operating results and financial condition would likely suffer.

If the mobile gaming market does not continue to grow, our business could be adversely affected.

Our future success is substantially dependent upon the continued growth of the mobile gaming market. The mobile gaming market has experienced significant revenue growth during the last several years despite an overall flattening of downloads of games on the appstores. The mobile gaming industry may not continue to grow at historical rates which could negatively impact our business. In addition, new and emerging technologies could make the mobile devices on which our games are currently released obsolete, requiring us to transition our business model to develop games for other next-generation platforms.

Changes to digital platforms’ rules relating to “loot boxes,” or the potential adoption of regulations or legislation impacting loot boxes, could require us to make changes to some of our games’ economies or design, which could negatively impact the monetization of these games and harm our revenues.

In December 2017, Apple updated its terms of service to require publishers of applications that include “loot boxes” to disclose the odds of receiving each type of item within the loot box to customers prior to purchase, and Google similarly updated its terms of service in May 2019. Loot boxes are a commonly used monetization technique in free-to-play mobile games in which a player can acquire a virtual loot box, typically through game play or by using virtual currency, but the player does not know which virtual item(s) he or she will receive (which may be a common, rare or extremely rare item, and may be a duplicate of an item the player already has in his or her inventory) until the loot box is opened. The player will always receive one or more virtual items when he or she opens the loot box, but the player does

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not know exactly which item(s) until the loot box is opened. We utilize loot boxes in some of our top games including our Tap Sports Baseball franchise and Kim Kardashian: Hollywood, and we intend to use loot boxes in our upcoming Disney Sorcerer’s Arena title. We have updated our applicable games to comply with Apple’s and Google’s rules relating to loot boxes and do not believe that this has had a material impact on the monetization of our games that utilize loot boxes. However, in the event that Apple or Google changes its terms of service to include more onerous requirements or if Apple or Google were to prohibit the use of loot boxes in games distributed on its digital platform, it would require us to redesign the economies of the affected games and would likely cause our revenues generated from these games to decline. In April 2018, each of the Belgian Gaming Commission and the Dutch Gambling Authority declared that loot boxes as implemented in certain of the games that they reviewed constituted illegal gambling under its respective laws. While neither of these bodies reviewed any of our games, we may be required to modify the implementation of loot boxes to continue utilizing loot boxes in these jurisdictions, remove loot boxes from our games published in these jurisdictions or cease publishing games containing loot boxes in these jurisdictions. In addition, the FTC held a public workshop in August 2019 to examine consumer protection issues related to loot boxes, and various other jurisdictions, including Australia, the United Kingdom, and the states of California, Hawaii, Minnesota and Washington, are reviewing or have indicated that they intend to review the legality of loot boxes and whether they constitute gambling. Furthermore, in May 2019, U.S. Senators Josh Hawley, Ed Markey and Richard Blumenthal introduced a bill to the Senate that would prohibit loot boxes and pay-to-win micro-transactions in “minor oriented” games. To the extent that a federal law, the FTC or other jurisdictions determine that loot boxes constitute gambling or they otherwise elect to regulate the use of loot boxes, it could require us to stop utilizing loot boxes within our games that are distributed in such territories, which would negatively impact our revenues.

Our business is subject to increasing governmental regulation. If we do not successfully respond to these regulations, our business may suffer.

We are subject to a number of domestic and foreign laws and regulations that affect our business. Not only are these laws constantly evolving, which could result in their being interpreted in ways that could harm our business, but legislation is also continually being introduced that may affect both the content of our products and their distribution. In the United States, for example, numerous federal and state laws have been introduced which attempt to restrict the content or distribution of games. Legislation has been adopted in several states, and proposed at the federal level, that prohibits the sale of certain games to minors. If such legislation is adopted, it could harm our business by limiting the games we are able to offer to our customers or by limiting the size of the potential market for our games. In addition, there have been calls from the President of the United States and other U.S. government officials to examine violence in video games in light of recent mass shootings. We may also be required to modify certain games or alter our marketing strategies to comply with new and possibly inconsistent regulations, which could be costly or delay the release of our games, for example to comply with labeling requirements for our free-to-play games. Additionally, if the FTC or any other significant regulatory body issues rules significantly restricting or even prohibiting in-app purchases or any other key aspect of our business, it would significantly impact our business strategy. In addition, two self-regulatory bodies in the United States (the Entertainment Software Rating Board) and in the European Union (Pan European Game Information (PEGI)) provide consumers with rating information on various products such as entertainment software similar to our products based on the content (for example, violence, sexually explicit content, language). Furthermore, the Chinese government has adopted measures designed to eliminate violent or obscene content in games, along with regulations that may require us to obtain approval from certain government agencies in China, including the Ministry of Culture and General Administration of Press and Publication, in order to continue to publish any of our games in China. Any one or more of these factors could harm our business by limiting the products we are able to offer to our customers, by limiting the size of the potential market for our products, or by requiring costly additional differentiation between products for different territories to address varying regulations.

Furthermore, the growth and development of free-to-play gaming and the sale of virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours. We anticipate that scrutiny and regulation of our industry will increase and that we will be required to devote legal and other resources to addressing such regulation. For example, existing laws or new laws regarding the regulation of currency and banking institutions may be interpreted to cover virtual currency or goods. If that were to occur we may be required to seek licenses, authorizations or approvals from relevant regulators, the granting of which may depend on us meeting certain capital and other requirements and we may be subject to additional regulation and oversight, all of which could

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significantly increase our operating costs. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding these activities may dampen the growth of free-to-play gaming and impair our business.

We sometimes offer our players various types of sweepstakes, giveaways and promotional opportunities, and have allowed players to compete against each other in tournaments for cash prizes. We are subject to laws in a number of jurisdictions concerning the operation and offering of such activities and games, many of which are still evolving and could be interpreted in ways that could harm our business. For example, a March 2018 ruling from the 9^th Circuit found that the mobile social casino game Big Fish Casino constituted gambling under Washington state law. Any future court ruling or other governmental action that imposes liability on providers of online services could result in criminal or civil liability and could harm our business.

In addition, because our services are available worldwide, certain foreign jurisdictions and others may claim that we are required to comply with their laws, including in jurisdictions where we have no local entity, employees or infrastructure.

The laws and regulations concerning data privacy and data security are continually evolving, and our actual or perceived failure to comply with these laws and regulations could harm our business.

We are subject to federal, state and foreign laws regarding privacy and the protection of the information that we collect regarding our users, which laws are currently in a state of flux and likely to remain so for the foreseeable future. The U.S. government, including the FTC and the Department of Commerce, is continuing to review the need for greater regulation over collecting information concerning consumer behavior on the Internet and on mobile devices. The European Union’s General Data Protection Regulation, which became effective in May 2018, the California Consumer Privacy Act of 2018, which became effective in January 2020, and other laws, like the Brazilian Personal Data Protection Bill of Law, create new individual privacy rights and impose worldwide obligations on companies handling personal data, which has resulted, or will result, in a greater compliance burden for us and other companies and could result in us incurring substantial monetary penalties if we are found to be in violation of these laws and regulations. Various U.S. state and federal regulators have also continued to expand the scope of data elements worthy of, and subject to, privacy protections, creating a multi-layered regulation regime that may be applicable to our business and will require time and resources to address. Additionally, the Children’s Online Privacy Protection Act requires companies to obtain parental consent before collecting personal information from children under the age of 13. If we do not follow existing laws and regulations, as well as the rules of the smartphone platform operators, with respect to privacy-related matters, or if consumers raise any concerns about our privacy practices, even if unfounded, it could damage our reputation and operating results. Furthermore, new or the interpretation of existing laws, policies, or industry codes could prevent us from offering, or make it costlier or more difficult to offer services in certain jurisdiction.

All of our games are subject to our privacy policy and our terms of service located on our corporate website. If we fail to comply with our posted privacy policy, terms of service or privacy-related laws and regulations, including with respect to the information we collect from users of our games, it could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, interpreting and applying data protection laws to the mobile gaming industry is often unclear. These laws may be interpreted and applied in conflicting ways from state to state, country to country, or region to region, and in a manner, that is not consistent with our current data protection practices. Complying with these varying requirements could cause us to incur additional costs and change our business practices. Additionally, a violation of applicable data privacy or data security laws by third parties we work with might also have an adverse effect on our business, financial condition or results of operations. Further, if we fail to adequately protect our users’ privacy and data, it could result in a loss of player confidence in our services and ultimately in a loss of users, which could adversely affect our business.

In the area of information security and data protection, many states and foreign jurisdictions have passed laws requiring notification to users when there is a security breach for personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement. Costs to comply with these laws may increase as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant liabilities. The security measures we have in place to protect our data and the personal

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information of our employees, customers and partners could be breached due to cyber-attacks initiated by third party hackers, employee error or malfeasance, fraudulent inducement of our employees to disclose sensitive information or otherwise. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any breach or unauthorized access could materially interfere with our operations or our ability to offer our services or result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our data, which could have an adverse effect on our business and operating results.

“Cheating” programs, scam offers, black-markets and other offerings or actions by unrelated third parties that seek to exploit our games and players affect the game-playing experience and may lead players to stop playing our games or divert revenue to unrelated third parties.

Unrelated third parties have developed, and may continue to develop, “cheating” programs, scam offers, black-markets and other offerings that may decrease our revenue generated from our virtual economies, divert our players from our games or otherwise harm us. Cheating programs enable players to exploit vulnerabilities in our games to obtain virtual currency or other items that would otherwise generate in-app purchases for us, play the games in automated ways or obtain unfair advantages over other players who do play fairly. Unrelated third parties attempt to scam our players with fake offers for virtual goods or other game benefits. In addition, we recently announced that we intend to explore the extension of Design Home and Tap Sports Baseball to the browser, and a browser-enabled version of these titles may contain vulnerabilities that we don’t anticipate which could significantly impact our top two revenue generating titles. We devote resources to discover and disable these programs and activities, but if we are unable to do so in a prompt and timely manner, our operations may be disrupted, our reputation damaged and players may play our games less frequently or stop playing our games altogether. This may lead to lost revenue from paying players, increased cost of developing technological measures to combat these programs and activities, legal claims, and increased customer service costs needed to respond to disgruntled players.

Some of our players may make sales or purchases of virtual goods used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue.

Virtual goods in our games have no monetary value outside of our games. Nonetheless, some of our players may make sales and/or purchases of our virtual goods, such as virtual currency for our Tap Sports Baseball games, through unauthorized third-party sellers in exchange for real currency. These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual goods offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with fake offers for virtual goods or other game benefits, or from credit card fraud. We do not generate any revenue from these transactions. These unauthorized purchases and sales from third-party sellers could reduce our revenues by, among other things:

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decreasing revenue from authorized transactions;

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creating downward pressure on the prices we charge players for our virtual currency;

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increasing chargebacks from unauthorized credit card transactions;

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causing us to lose revenue from dissatisfied players who stop playing a particular game;

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increasing costs we incur to develop technological measures to curtail unauthorized transactions;

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resulting in negative publicity or harm our reputation with players and partners; and

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increasing customer support costs to respond to dissatisfied players.

To discourage unauthorized purchases and sales of our virtual goods, we state in our terms of service that the buying or selling of virtual currency and virtual goods from unauthorized third party sellers may result in bans from our games or legal action. We have banned players as a result of such activities. We have also employed technological measures to help detect unauthorized transactions and continue to develop additional methods and processes by which we can identify unauthorized transactions and block such transactions. However, there can be no assurance that our efforts to prevent or minimize these unauthorized or fraudulent transactions will be successful.

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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 business and operating results may be harmed.

Our intellectual property is essential to our business. We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws and contractual restrictions on disclosure to protect our intellectual property rights. To date, we have only thirteen issued U.S. patents and five U.S. patent applications currently outstanding, including two that we inherited through acquisitions, so we will not be able to protect the majority of our technologies from independent invention by third parties. In addition, we have filed foreign patent applications on two of the issued U.S. patents.

Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology and games, and some parties have distributed “jail broken” versions of our games where all of the content has been unlocked and made available for free. Further, some of our competitors have released games that are nearly identical to successful games released by their competitors in an effort to confuse the market and divert users from the competitor’s game to the copycat game. To the extent third parties copy our games, it could reduce the amount of revenue we are able to generate from any infringed games. Monitoring unauthorized use of our games is difficult and costly, and we cannot be certain that the steps we have taken will prevent piracy and other unauthorized distribution and use of our technology and games, particularly in certain international jurisdictions, such as China, where the laws may not protect our intellectual property rights as fully as in the United States. We may institute litigation to enforce our intellectual property rights, which could result in substantial costs and divert our management’s attention and our resources.

In addition, although we require our third-party developers to sign agreements not to disclose or improperly use our trade secrets, to acknowledge that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property and to assign to us any ownership they may have in those works, it may still be possible for third parties to obtain and improperly use our intellectual properties without our consent. This could harm our brand, business, operating results and financial condition.

We are, and in the future may become, involved in intellectual property disputes, which may disrupt our business, require us to pay significant damage awards and could limit our ability to use certain technologies in the future.

Third parties may sue us for intellectual property infringement, or initiate proceedings to invalidate our intellectual property, which, if successful, could disrupt our business, cause us to pay significant damage awards or require us to pay licensing fees. For example, in July 2018, SwiftLife, Inc. filed a complaint in the U.S. District Court for the Eastern District of New York against us, our wholly owned subsidiary Glu Games Inc., and Taylor Swift, Taylor Swift Productions, Inc. and TAS Rights Management, LLC. The complaint alleged eight causes of action, including that Glu and the other defendants infringe the plaintiff’s federally registered trademark, SwiftLife. While we were able to successfully resolve this matter without paying any amounts to the plaintiff, the outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors. In addition, any claims brought against us in the future could result in our being enjoined from using our intellectual property or licensed intellectual property, and we might incur significant licensing fees and could be forced to develop alternative technologies. We may also be required to pay penalties, judgments, royalties or significant settlement costs. If we fail or are unable to develop non-infringing technology or games or to license the infringed or similar technology or games on a timely basis, we may be forced to withdraw games from the market or be prevented from introducing new games. We might also incur substantial expenses in defending against third-party claims, regardless of their merit.

In addition, we use open source software in some of our games and expect to continue to use open source software in the future. We may face claims from companies that incorporate open source software into their products, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our games, any of which would have a negative effect on our business and operating results.

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We are, and in the future may become a party to litigation and regulatory inquiries, which could result in an unfavorable outcome and have an adverse effect on our business, financial condition, results of operation and cash flows.

We are, and may become in the future, subject to various legal proceedings, claims and regulatory inquiries that arise out of the ordinary conduct of our business. The outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors. In addition, events may occur that give rise to a potential risk of litigation. The number and significance of regulatory inquiries have increased as our business has grown and evolved. Any proceedings, claims or inquiries initiated by or against us, whether successful or not, may be time consuming; result in costly litigation, damage awards, consent decrees, injunctive relief or increased costs of doing business, require us to change our business practices or products, require significant amounts of management time, result in diversion of significant operations resources or otherwise harm our business and future financial results.

Unanticipated changes in our income tax rates or exposure to additional tax liabilities may affect our future financial results.

Our future effective income tax rates may be favorably or unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or their interpretation. Determining our worldwide provision for income taxes requires significant judgments. The estimation process and applicable laws are inherently uncertain, and our estimates are not binding on tax authorities. Our effective tax rate could also be adversely affected by a variety of factors, many of which are beyond our control. Recent and contemplated changes to U.S. tax laws, including limitations on a taxpayer’s ability to claim and utilize foreign tax credits and defer certain tax deductions until earnings outside of the United States are repatriated to the United States, could impact the tax treatment of our foreign earnings. Further, the taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our business is not consistent with the manner in which we report our income to the jurisdictions, which could increase our worldwide effective tax rate and unfavorably impact our financial position and results of operations. Foreign tax authorities may also interpret or change tax regulations such that we may be subject to tax liabilities upon closure or liquidation of a foreign subsidiary. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and state and foreign tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine if our provision for income taxes is adequate. These continuous examinations may result in unforeseen tax-related liabilities, which may unfavorably impact our future financial results.

We must charge, collect and/or pay taxes other than income taxes, such as payroll, value-added, sales and use, net worth, property and goods and services taxes, in both the United States and foreign jurisdiction. If tax authorities assert that we have taxable nexus in a jurisdiction, they may seek to impose past as well as future tax liability and/or penalties. Any such impositions could also cause significant administrative burdens and decrease our future sales. Moreover, state and federal legislatures have been considering various initiatives that could change our tax position regarding sales and use taxes.

Finally, as we change our international operations, adopt new products and new distribution models, implement changes to our operating structure or undertake intercompany transactions in light of changing tax laws, our tax expense could increase.

Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake or other natural disaster could damage our facilities and equipment, which could require us to curtail or cease operations.

Our principal offices are located in the San Francisco Bay Area, an area known for earthquakes. We are also vulnerable to damage from other types of disasters, including power loss, fires, explosions, floods, communications failures, terrorist attacks and similar events. If any natural or other disaster were to occur, our ability to operate our business could be impaired.

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Our stock price has fluctuated and may continue to do so. Our stock price may be affected by third party data regarding our games.

The trading price of our common stock has fluctuated in the past and may continue to fluctuate in the future, as a result of a number of factors, many of which are outside our control, such as changes in the operating performance and stock market valuations of other technology companies generally, or those in our industry in particular, such as Activision, Electronic Arts, and Zynga. We also experience stock price volatility as security analysts and investors base their views and monitor the performance of our games on third party data, like App Annie, AppData, Apptopia, comScore, or SensorTower. Third parties publish daily data about us and other mobile gaming companies with respect to downloads of our games, daily and monthly active users and estimated revenue generated by our games. These metrics can be volatile, particularly for specific games, and in many cases do not accurately reflect the actual levels of usage of our games across all platforms or the revenue generated by our games.

In addition, The Nasdaq Global Select Market on which our common stock is listed has in the past experienced extreme price and volume fluctuations that have affected the market prices of many companies, some of which appear to be unrelated or disproportionate to their operating performance. These broad market fluctuations could adversely affect the market price of our common stock. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. Securities class action litigation against us could result in substantial costs and divert our management’s attention and resources.

If securities or industry analysts do not publish research about our business, or publish negative or misinformed reports about our business, our share price and trading volume could decline and/or become more volatile.

The trading market for our common stock is affected by the research and reports that securities or industry analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. In addition, our share price and the volatility of our shares can be affected by misinformed or mistaken research reports on our business.

Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain and may dilute existing stockholders’ voting power and ownership interest in us.

The market price of shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors and their affiliates, executive officers, employees and significant stockholders, under our current shelf registration statements, through a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares. For example, Tencent is free to sell the 21,000,000 shares it acquired from us in the second quarter of 2015 on the open-market, subject only to our black-out periods and other limitations under our insider trading policy.

Some provisions in our certificate of incorporation and bylaws, as well as Delaware law, may deter third parties from seeking to acquire us.

Our certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including the following:

●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;

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●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.

In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder, although our board of directors waived this provision with respect to Tencent’s potential acquisition of greater than 15% of our shares in connection with the transaction in which we initially sold shares of our common stock to an affiliate of Tencent.

We have no plans to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our common stock and do not have any plans to pay cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease our San Francisco, California corporate headquarters, an office building of approximately 61,400 square feet. The San Francisco facility currently accommodates our principal executive, marketing, business development, human resources, finance, legal, information technology and administrative activities, two of our development studios, and other development activities.

We lease additional domestic office space in Foster City and Burlingame, California. We lease offices for our foreign operations in: Toronto, Canada and Hyderabad, India. These additional domestic and international facilities primarily accommodate development studios, and customer care activities, and total approximately 74,600 square feet.

We believe our space is adequate for our current needs and that suitable additional or substitute space will be available to accommodate the foreseeable expansion of our operations. See Note 9 of the Notes to Consolidated Financial Statements in Item 8 of this report for more information about our lease commitments.

Item 3. Legal Proceedings

From time to time, we are subject to various claims, complaints and legal actions in the normal course of business. We are not currently party to any pending litigation, the outcome of which will have a material adverse effect on our operations, financial position or liquidity. However, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock has been listed on The Nasdaq Global Select Market under the symbol “GLUU” since our initial public offering in March 2007.

Stock Price Performance Graph

The following graph shows a comparison from December 31, 2014 through December 31, 2019 of the cumulative total return for an investment of $100 (and the reinvestment of dividends) in our common stock, the Nasdaq Composite Index, S&P 500 Index, and RDG Technology Composite Index. Such returns are based on historical results and are not intended to suggest future performance.

The information under the heading “Stock Price Performance Graph” shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act of 1934, and shall not be incorporated by reference into any registration statement or other document filed by us with the SEC, whether made before or after the date of this report, regardless of any general incorporation language in such filing, except as expressly set forth by specific reference in such filing.

Stockholders

As of February 18, 2020, we had approximately 48 record holders of our common stock and thousands of additional beneficial holders.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors.

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Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 8, “Financial Statements and Supplementary Data,” and other financial data included elsewhere in this report. Our historical results of operations are not necessarily indicative of results of operations to be expected for any future period.


		Year Ended December 31,
	2019		2018		2017		2016		2015
		(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue	$	411,381	$	366,561	$	286,827	$	200,581	$	249,900
Cost of revenue:
Platform commissions, royalties and other		140,655		128,445		103,499		75,239		95,682
Impairment of prepaid royalties and minimum guarantees		457		711		27,323		30,107		2,502
Impairment and amortization of intangible assets		4,387		9,119		10,331		14,792		9,553
Total cost of revenue		145,499		138,275		141,153		120,138		107,737
Gross profit		265,882		228,286		145,674		80,443		142,163
Operating expenses (1):
Research and development		95,127		94,934		92,420		81,879		72,856
Sales and marketing		140,298		113,860		104,356		48,050		48,240
General and administrative		23,216		31,667		34,425		30,225		26,092
Amortization of intangible assets		—		—		—		—		201
Restructuring charge		—		240		6,019		2,279		1,075
Total operating expenses		258,641		240,701		237,220		162,433		148,464
Income/(Loss) from operations		7,241		(12,415)		(91,546)		(81,990)		(6,301)
Interest and other income/(expense), net		2,101		(235)		(6,850)		(5,751)		(743)
Income/(Loss) before income taxes		9,342		(12,650)		(98,396)		(87,741)		(7,044)
Income tax benefit (provision)		(471)		(549)		826		301		(141)
Net income/(loss)		8,871		(13,199)		(97,570)		(87,440)		(7,185)
Net income/(loss) per share:
Basic	$	0.06	$	(0.09)	$	(0.72)	$	(0.66)	$	(0.06)
Diluted	$	0.06	$	(0.09)	$	(0.72)	$	(0.66)	$	(0.06)
Weighted average common shares outstanding:
Basic		145,838		141,402		135,715		131,804		118,775
Diluted		157,383		141,402		135,715		131,804		118,775
_________
(1) Includes stock-based compensation expense as follows:
Research and development	$	10,466	$	12,807	$	6,460	$	4,567	$	3,563
Sales and marketing		1,700		2,795		1,289		1,091		1,082
General and administrative		5,217		8,990		7,314		7,605		7,041


		As of December 31,
	2019		2018		2017		2016		2015
		(In thousands)
Cash and cash equivalents and short-term investments	$	127,053	$	97,834	$	63,764	$	102,102	$	180,542
Total assets		418,049		314,433		299,298		339,504		402,986
Total long-term liabilities		64,208		7,191		12,534		22,350		25,932
Total stockholder's equity	$	203,087	$	177,313	$	153,860	$	232,814	$	306,428

Please see Note 1, Note 3 and Note 10 of our Notes to Consolidated Financial Statements for a discussion of factors such as impairment of prepaid royalties and guarantees, divestiture, and any material uncertainties that may materially affect the comparability of the information reflected in selected financial data, described in Item 6 of this report.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included in Item 8, “Financial Statements and Supplementary Data” of this report. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results and the timing of certain events could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in Item 1A, “Risk Factors.”

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections:

●

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 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.

This MD&A section generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Overview

This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for 2019, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report, including our consolidated financial statements and accompanying notes.

Financial Results and Trends

Revenue for 2019 was $411.4 million, a 12.2% increase compared to 2018, in which we reported revenue of $366.6 million. The increase in total revenue was primarily related to a $44.4 million increase in our revenue from micro-transactions (in-app purchases) and a $607,000 increase in our revenue from advertisements and offers. The increase was primarily related to an increase in revenue from Design Home, Covet Fashion, and the Tap Sports Baseball franchise and the worldwide launch of Diner DASH Adventures and WWE Universe during 2019. These increases were partially offset by declining revenue from catalog games such as Kim Kardashian: Hollywood, Restaurant Dash with Gordon Ramsay, Cooking Dash, Deer Hunter 2018 (originally launched as Deer Hunter 2016), Deer Hunter Classic, Kendall & Kylie and Racing Rivals.

We have concentrated our product development efforts towards developing games for smartphone and tablet devices. We generate the majority of our revenue from Apple’s iOS platform, which accounted for 60.8% and 63.1% of our total revenue for the years ended December 31, 2019 and 2018, respectively. The majority of this iOS-related revenue was generated through the Apple App Store, which represented 54.4% and 54.7% of our total revenue for the years ended

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December 31, 2019 and 2018, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our iOS-related revenue from offers and advertisements in games distributed on the Apple App Store. In addition, we generated approximately 39.1% and 36.6% of our total revenue for the years ended December 31, 2019 and 2018, respectively, from the Android platform. The majority of our Android-related revenue was generated through the Google Play Store, which represented 33.5% and 31.3% of our total revenue for the years ended December 31, 2019 and 2018, respectively, with the significant majority of such revenue derived from in-app purchases. We generated the balance of our Android-related revenue from other platforms that distribute apps that run the Android operating system (e.g., the Amazon App Store) and through offers and advertisements in games distributed through the Google Play Store and other Android platforms.

We currently publish titles primarily in four genres: lifestyle, casual, mid-core, and sports and outdoors. We believe these are genres in which we have already established a leadership position, are otherwise aligned with our strengths or are conducive to the establishment of a strong growth game. Across genres, we view our titles as either growth games or catalog games. Growth games are titles that we continue to update with additional content and features and which we expect to grow revenue year over year. We continue to update some of our catalog titles with additional content and features, whereas on others we expend little to no investment in terms of updates and enhancements.

We established our leadership position in the lifestyle genre through our acquisition of Crowdstar Inc. (“Crowdstar”) in November 2016 and its successful Covet Fashion title, and extended our leadership with our global release of Design Home in November 2016. We introduced key updates for Design Home in 2018 and 2019, including elite events for elder players, improved series challenges, language localization in German, French and Spanish, and meta game functionality, and are planning key further updates for this title, including the introduction of e-commerce functionality. The casual genre includes our Kim Kardashian: Hollywood title and our Cooking Dash and Diner DASH franchises, and our leadership position in this genre was bolstered by our worldwide launch of Diner DASH Adventures in June 2019. The mid-core genre will include our Disney Sorcerer’s Arena title that is currently available in limited beta territories and which we expect to launch worldwide in the first quarter of 2020. Our leadership in the sports and outdoors category remains strong with our Tap Sports Baseball and Deer Hunter franchises, and we furthered our leadership with the launch of MLB Tap Sports Baseball 2019 in March 2019, which includes licensed content from Major League Baseball, or MLB, together with current and former MLB players pursuant to our continuing agreements with the Major League Baseball Players Association, and Major League Baseball Players Alumni Association. We will be releasing MLB Tap Sports Baseball 2020 in March 2019 in more than 100 additional countries (prior versions of the Tap Sports Baseball franchise were only available in the United States, Canada, United Kingdom, Germany and Australia) with new features and content, including authentic major league stadiums, a home run derby mode and a new cover athlete. In 2020, we expect to add to our portfolio of sports and outdoor titles through the worldwide release of the next iteration of our Deer Hunter franchise in the second half of 2020 and potentially by globally launching a fishing game that is currently in beta testing.

We believe that our games consistently have high production values, are visually appealing and have engaging core gameplay. These characteristics have typically helped to drive installs and awareness of our games and resulted in highly positive consumer reviews. The majority of our games have been featured on Apple and Google storefronts when they were commercially released, which we believe is the result of us being a good partner of Apple and Google.

We work closely with our celebrity and brand licensors to engage their social media audiences and build games that will resonate with their unique fan bases. For example, our Kim Kardashian: Hollywood title utilizes transmedia storytelling, leveraging Ms. Kardashian West’s built-in social media fan base to drive installs and awareness of the game, and then attempting to surprise and delight those fans with real-world events and other game content based on her life. Our goal is for the game content to become entwined with Ms. Kardashian West’s persona and social media presence, and to otherwise enhance interaction with her fans. We also leverage the strength of well-known brands and licensors to provide users with more realistic experiences, such as the case with MLB Tap Sports Baseball 2019 which features all MLB clubs and uniforms and current and former MLB players; we intend to further augment the game’s authenticity by adding each of the 30 real MLB stadiums in MLB Tap Sports Baseball 2020. We also work to build and nurture social communities in and around the games themselves, creating a new vehicle for strong, personal engagement with the brand or celebrity’s fan base.

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We also plan to continue monitoring the successful aspects of our games to drive downloads and enhance monetization and retention as part of our product strategy, whether by optimizing advertising revenue within each title, securing additional compelling licensing arrangements, building enhanced and more complex core gameplay, adding deep meta game features and additional social features, tournaments and events, offering subscriptions for in game virtual items or otherwise. Optimizing advertising revenue within our games requires us to continue taking advantage of positive trends in the mobile advertising space, particularly as brands continue to migrate budgets from web to mobile. Continuing to drive installs and awareness of our games through licensing efforts requires that we continue to partner with brands, celebrities and social influencers that resonate with potential players of our games. Partnering with desirable licensing partners and renewing our existing licenses with our most successful partners requires that we continue to develop successful games based on licensed content and are able to compete with other mobile gaming companies on financial and other terms in signing such partners. We also plan to continue introducing third-party licensed brands, properties and personalities into our games as additional licensed content, for cameo appearances or for limited time events in order to drive awareness and monetization.

Across the globe, our industry is evidencing that hit titles generally remain higher in the top grossing charts for longer. We believe this is due to the continued specialization and investment of teams and companies in their hit titles, and the live, social nature of certain games. Our strategy and the measures we have implemented to support our business positions us to take advantage of these trends, as evidenced by the continued strength and year over year growth of Design Home, Covet Fashion, and the Tap Sports Baseball franchise. We plan to continue to regularly update and otherwise support our growth games in order to ensure that those games monetize and retain users for even longer periods of time. In addition, we plan to continue to invest in our creative leaders and the creative environments in which they and their teams work to increase our likelihood of creating significant hit growth games.

Our net income in the year ended December 31, 2019 was $8.9 million versus a net loss of $13.2 million in the year ended December 31, 2018. This change was primarily due to an increase in revenue of $44.8 million, a decrease in general and administrative expense of $8.5 million and an increase in interest/other income of $2.3 million. These changes were partially offset by an increase in sales and marketing expense of $26.4 million and an increase in cost of sales of $7.2 million. Our operating results were also affected by fluctuations in foreign currency exchange rates of the currencies in which we incurred meaningful operating expenses (principally the Canadian Dollar, and Indian Rupee), and our customers’ reporting currencies.

Our ability to sustain and increase profitability depends not only on our ability to grow our revenue, but also on our ability to manage our operating expenses. We significantly increased our sales and marketing expenditures during 2019 compared to 2018, which was primarily related to higher marketing spend for our growth games and higher user acquisition expenditures related to the global launches of Diner DASH Adventures and WWE Universe partially offset by lower marketing expense for some of our catalog titles. We expect our sales and marketing expenses to increase in 2020 primarily due to higher user acquisition expenditures, including related to the launch of our new titles, including Disney Sorcerer’s Arena, Originals: Interactive Story Series and the next iteration of our Deer Hunter franchise. Additionally, the largest component of our recurring expenses is personnel costs, which consist of salaries, benefits and incentive compensation, including bonuses and stock-based compensation. In 2020, we intend to continue to focus on reducing our operating costs where appropriate to be more efficient. These efforts may be partially offset by our plans to continue hiring additional development personnel in the San Francisco Bay Area and in Hyderabad, India.

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Cash and cash equivalents at December 31, 2019 totaled $127.1 million, an increase of $29.3 million from the $97.8 million balance at December 31, 2018. This increase was primarily related to $35.2 million of cash generated from operations, which was partially offset by $5.4 million of cash used in investing activities and $0.4 million of cash used in financing activities.

Key Operating Metrics

We manage our business by tracking various non-financial operating metrics that give us insight into user behavior in our games. The three metrics that we use most frequently are Daily Active Users (DAU), Monthly Active Users (MAU), and Average Revenue Per Daily Active User (ARPDAU). Our methodology for calculating DAU, MAU, and ARPDAU may differ from the methodology used by other companies to calculate similar metrics.

DAU is the number of individuals who played a particular smartphone game on a particular day. An individual who plays two different games on the same day is counted as two active users for that day when we aggregate DAU across games. In addition, an individual who plays the same game on two different devices during the same day (e.g., an iPhone and an iPad) is also counted as two active users for each such day when we average or aggregate DAU over time. Average DAU for a particular period is the average of the DAUs for each day during that period. We use DAU as a measure of player engagement with the titles that our players have downloaded.

MAU is the number of individuals who played a particular smartphone game in the month for which we are calculating the metric. An individual who plays two different games in the same month is counted as two active users for that month when we aggregate MAU across games. In addition, an individual who plays the same game on two different devices during the same month (e.g., an iPhone and an iPad) is also counted as two active users for each such month when we average or aggregate MAU over time. Average MAU for a particular period is the average of the MAUs for each month during that period. We use the ratio between DAU and MAU as a measure of player retention.

ARPDAU is total free-to-play smartphone revenue – consisting of micro-transactions, advertisements and offers – for the measurement period divided by the number of days in the measurement period divided by the DAU for the measurement period. ARPDAU reflects game monetization. Under our revenue recognition policy, we recognize this revenue over the estimated average playing period of a user, but our methodology for calculating our DAU does not align with our revenue recognition policy for micro-transactions and offers, under which we defer revenue. For example, if a title is introduced in the last month of a quarter, we defer a substantial portion of the micro-transaction and offer revenue to future months, but the entire DAU for the newly released title is included in the month of launch.

We calculate DAU, MAU and ARPDAU for only our primary distribution platforms, Apple’s App Store, the Google Play Store and Amazon’s Appstore, as well as from Facebook for certain titles; we are not able to calculate these metrics across all of our distribution channels. In addition, the platforms that we include for purposes of this calculation have changed over time, and we expect that they will continue to change as our business evolves, but we do not expect that we will adjust prior metrics to take any such additions or deletions of distribution platforms into account. We believe that calculating these metrics for only our primary distribution platforms at a given period is generally representative of the metrics for all of our distribution platforms. Moreover, we rely on the data analytics software that we incorporate into our games to calculate and report the DAU, MAU and ARPDAU of our games, and we make certain adjustments to the analytics data to address inconsistencies between the information as reported and our DAU and MAU calculation methodology.

We have estimated the DAU and MAU for certain older titles because the analytics tools incorporated into those titles are incompatible with newer device operating systems (e.g., iOS 13), preventing us from collecting complete data. For these titles, we estimate DAU and MAU by extrapolating from each affected title’s historical data using a fixed decay rate in light of the behavior of similar titles for which we had complete data.

As of January 1, 2019, we began calculating DAU and MAU using the average of each month during the period rather than our historical practice of calculating these metrics based on the last month of the period. For example, DAU for the three months ended December 31, 2019 is calculated as an average of aggregate daily DAU for the months of October 2019, November 2019 and December 2019 calculated for all active smartphone free-to-play titles during those

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months across the distribution platforms for which we calculate the metric. We adopted this new methodology because we believe that it provides a more accurate representation of overall DAU and MAU for the applicable period and more closely aligns with the methodology used by other companies in the gaming industry to calculate similar metrics.


		Metrics calculated using the new methodology
		Three Months Ended,
		2019								2018
		Dec 31		Sep 30		Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
Aggregate DAU		2,903		3,288		3,230		3,150		3,179		3,630		3,716		3,659
Aggregate MAU		15,599		18,675		19,065		19,118		19,618		22,048		23,166		25,181
Aggregate ARPDAU	$	0.42	$	0.35	$	0.33	$	0.34	$	0.33	$	0.30	$	0.27	$	0.25

		Metrics calculated using the old methodology
		Three Months Ended,
		2019								2018
		Dec 31		Sep 30		Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
Aggregate DAU		2,857		3,112		3,267		3,016		3,214		3,408		3,627		3,585
Aggregate MAU		15,686		16,373		19,819		18,620		21,113		19,415		22,817		24,787
Aggregate ARPDAU	$	0.43	$	0.37	$	0.32	$	0.35	$	0.32	$	0.32	$	0.27	$	0.25

The decrease in aggregate DAU and MAU for the three months ended December 31, 2019 as compared to the same period of the prior year was primarily related to fewer downloads across our portfolio of games.

Our aggregate ARPDAU increased for the three months ended December 31, 2019 as compared to the same period of the prior year, as we improved monetization on certain titles, particularly through increased content updates and use of social features in those games. Future increases in our aggregate DAU, MAU and ARPDAU will depend on our ability to retain current players, attract new paying players, launch new games and expand into new markets and distribution platforms.

We rely on a very small portion of our total users for nearly all of our revenue derived from in-app purchases. Since the launch of our first free-to-play titles in the fourth quarter of 2010, the percentage of unique paying users for our largest revenue-generating free-to-play games has typically been less than 5%, when measured as the number of unique paying users on a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than 5% for certain of our games during specific, relatively short time periods, such as immediately following worldwide launch or the week following content updates, marketing campaigns or certain other events.

Significant Transactions

Divestiture of Moscow Studio

On December 31, 2017, we entered into the following agreements related to the divestiture of our Moscow-based game development studio (the “Moscow Studio”) through the sale of our wholly-owned UK subsidiary Glu Mobile (Russia) Limited (“GMRL”):

●

Share Purchase Agreement (the “SPA”) between Glu and Saber Interactive (“Saber”);

●

Transitional Services Agreement (the “TSA”) among Glu, Saber and MGL. My.com (Cyprus) Limited (“MGL”); and

●

Asset Purchase and License Agreement (the “APLA”) between Glu and MGL.

Pursuant to the SPA, Saber purchased all the issued and outstanding share capital of GMRL. Saber also assumed all obligations under the office lease for the Moscow Studio.

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Under the TSA, Saber agreed to transition certain legacy titles from the Moscow Studio to our Hyderabad studio. Upon successful completion of the transition (i) Saber paid the employees of the Moscow Studio and GMRL bonus payments of $500,000 in the aggregate and reduced the cash consideration by the amount of the bonus, and (ii) certain employees of the Moscow Studio and GMRL had the vesting of an aggregate of approximately 147,000 shares subject to equity awards accelerated.

Pursuant to the APLA, we sold four mobile games (and related intellectual property and other rights) developed by the Moscow Studio: (i) Last Day Alive, (ii) Heroes of Destiny, (iii) a game that was in development featuring a male celebrity, and (iv) Furiosa. We transferred all of our rights and obligations under certain contracts related to the game featuring a male celebrity, including, but not limited to, the obligation to pay the remaining approximately $1.5 million in minimum guarantee and other payments under these contracts. We also agreed to provide MGL with a non-exclusive, perpetual, worldwide, irrevocable, non-transferrable, royalty-free license to certain development tools and technology necessary to use, develop, publish, exploit and sell the purchased games and that MGL and/or its affiliates may use for the development of other of its products.

The total cash consideration under the SPA and APLA was $3.2 million, of which we received $1.7 million in January 2018. The remaining $1.5 million, net of a transition bonus payment of $500,000, was received in April 2018 upon completion of the transition of the legacy titles from the Moscow Studio to our Hyderabad studio.

In connection with the divestiture, we recorded a loss of $6.5 million in the year ended December 31, 2017, which is included in other expense on the consolidated statement of operations. This was primarily comprised of a $10.0 million charge related to the assignment of one of the contracts related to the male celebrity, a $1.2 million charge related to the write-off of goodwill associated with the Moscow Studio and a $0.5 million charge related to the write-off of net assets associated with the Moscow Studio. These charges were partially offset by $3.2 million in cash paid by Saber and MGL, $1.5 million related to the assumption of obligations by MGL under the contract related to the male celebrity, and $0.5 million related to the transition services provided by Saber.

In connection with the activities related to the transition under the TSA that occurred in 2018, we recorded the following expenses in the year ended December 31, 2018:

●

$500,000 related to bonuses that became due to the employees of the Moscow Studio and GMRL;

●

$514,000 related to the vesting of 147,000 shares subject to equity awards held by certain employees of the Moscow Studio and GMRL; and

●

$515,000 related to the amortization of transition services assets that were capitalized as part of the transaction consideration.

Our divestiture of the Moscow studio was part of our efforts to consolidate our studio locations, focusing on a new scaled creative center in San Francisco and a low cost, repeatable location in Hyderabad, India. This divestiture was not presented as discontinued operations in the consolidated statements of operations, because it did not represent a strategic shift in our business and is not expected to have a significant effect on our operations or financial results, as we continued operating similar businesses after the divestiture.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles, or GAAP. These accounting principles require us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the dates of the consolidated financial statements, the disclosure of contingencies as of the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the periods presented. Although we believe that our estimates and judgments are reasonable under the circumstances existing at the time these estimates and judgments are made, actual results may differ from those estimates, which could affect our consolidated financial statements.

We believe the following to be critical accounting policies because they are important to the portrayal of our financial condition or results of operations and they require critical management estimates and judgments about matters

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that are uncertain:

●

revenue recognition;

●

prepaid or guaranteed licensor royalties; and

●

stock-based compensation.

Revenue Recognition

We generate revenue through in-application purchases (“in-app purchases”) within our games on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile devices utilizing Google’s Android operating system. Users can download our free-to-play games through Digital Storefronts. We also have relationships with certain advertising service providers for advertisements within smartphone games and revenue from these advertising providers is generated through impressions, clickthroughs, banner ads and offers.

We adopted Accounting Standard Codification 606, Revenue from Contracts with Customers, (“ASC 606”) and its related amendments effective January 1, 2018 using a modified retrospective method. The reported results for the year ended December 31, 2018 reflect the application of ASC 606 guidance while the reported results for the year ended December 31, 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance". The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our services and will provide financial statement readers with enhanced disclosures.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration we expect to receive in exchange for these services. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

In-App Purchases

Users can download our free-to-play games within the Digital Storefronts and pay to acquire virtual currency, which can be redeemed in the game for virtual goods, or virtual goods directly (together, defined as “virtual items”) to enhance their game-playing experience. We sell both consumable and durable virtual items and receive reports from the Digital Storefronts, which breakdown the various purchases made from our games over a given time period. We review these reports and determine on a per-item basis whether the purchase was a consumable virtual item or a durable virtual item. Consumable virtual items are items that are consumed at a predetermined time or otherwise have limitations on repeated use. Durable virtual items are items, such as furniture, clothes, etc. that are accessible to the player over an extended period of time and that remain in the game for as long as the player continues to play.

The initial download of the mobile game from the Digital Storefront does not create a contract under ASC 606 because of the lack of commercial substance; however, the separate election by the player to make an in-application purchase satisfies the criteria thus creating a contract under ASC 606. We have identified the following performance obligations in these contracts:

(1)

Ongoing game related services such as hosting of game play, storage of customer content, when and if available content updates, maintaining the virtual currency management engine, tracking gameplay statistics, matchmaking as it relates to multiple player gameplay, etc.

(2)

Obligation to the paying player to continue displaying and providing access to the virtual items within the game.

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Neither of these obligations are considered distinct since the actual mobile game and the related ongoing services are both required to purchase and benefit from the related virtual items. As such, our performance obligations represent a single combined performance obligation which is to make the game and the ongoing game related services available to the players. The transaction price, which is the amount paid for the virtual items by the player, is allocated entirely to the single combined performance obligation. We recognize revenue for durable virtual items over the estimated average playing period of paying users on a per title basis. Our revenue from consumable virtual items has been insignificant. Based on our analysis, the estimated weighted average useful life of a paying user ranges from four to eight months.

Advertisements and Offers

We have relationships with certain advertising service providers for advertisements within our mobile games. Revenue from these advertising service providers is generated through impressions, clickthroughs, offers and banner ads. Offers are the type of advertisements where the players are rewarded with virtual currency for completing specified actions, such as downloading another application, watching a short video, subscribing to a service or completing a survey. We have determined the advertising buyer to be our customer and displaying the advertisements within the mobile games is identified as the single performance obligation. Revenue from advertisements and offers are recognized at the point-in-time the advertisements are displayed in the game or the offer has been completed by the user as the customer simultaneously receives and consumes the benefits provided from these services.

Other Estimates and Judgments

We compute our estimated average playing period of paying users at least twice each year. We have examined the playing patterns of paying users across a representative sample of our games across various genres.

We use the “survival analysis” model to estimate the average playing period for paying users. This model provides for a singular approach to estimating the average playing period of paying users on a title by title basis for our diverse portfolio of games. It is a statistical model that analyzes time duration until one or more events happens and is commonly used in various industries for estimating lifespans. We believe this is an appropriate model to estimate the average playing period of paying users for our titles as this model statistically estimates the average playing period of each title by analyzing the historical behavior patterns of paying users.

This model requires the stratification of user data into active and inactive paying users on a per title basis. Active users are those who are active in the game for the past 30 days as of the evaluation date. The remaining users are considered inactive and deemed to have churned from the game. These users are treated mathematically differently in the model than those who are still active. A distribution curve is then fit to the user data to estimate the average playing period of paying users on a per title basis.

We have selected a threshold of 120 days from the commercial launch of a title as the minimum number of days of data required for this model. This threshold was deemed to be appropriate as we tested the model using lower thresholds which resulted in inconsistencies in the estimate of the average playing period of paying users. For new titles with less than 120 days of data that share similar attributes with an existing title and/or prequel titles, the average playing period is determined based on the average playing period of that existing title or prequel title, as applicable. For all other titles with less than 120 days of data, the average playing period is determined based on the average playing period of all other remaining existing titles.

While we believe our estimates to be reasonable based on available game player information, we may revise such estimates in the future if a titles’ user characteristics change. Any adjustments arising from changes in the estimates of the average playing period for paying users would be applied to the current quarter and prospectively on the basis that such changes are caused by new information that indicates a change in user behavior patterns compared to historical titles. Any changes in our estimates of the useful life of virtual items in a certain title may result in revenue being recognized on a basis different from prior periods’ and may cause our operating results to fluctuate.

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Principal Agent Considerations

We evaluated our Digital Storefront and advertising service provider agreements under ASC 606 in order to determine if we are acting as the principal or as an agent when selling virtual items or advertisements within our games. We primarily use Digital Storefronts for distributing our smartphone games and for enabling players to purchase virtual items and advertising service providers to serve advertisements within our games. We evaluated the following factors to assess whether we control each specified good or service before that good or service is transferred to the customer:

●

the party responsible for the fulfillment of the virtual items, game related services, or serving of advertisements;

●

the party having the discretion to set pricing with the end-users; and

●

the party having inventory risk before the specified good or service have been transferred to a customer.

Based on the evaluation of the above indicators, we determined that we have control of the services before they are transferred to the end-user. Thus, we are generally acting as a principal and are the primary obligor to end-users for games distributed through Digital Storefronts and advertisements served through our advertising service providers. Therefore, we recognize revenue related to these arrangements on a gross basis, when the necessary information about the gross amounts or platform fees charged, before any adjustments, are made available by the Digital Storefronts and advertising service providers. In situations where the price paid by the end-user of the advertising service provider is not known, we account for these transactions on a net basis.

Deferred Platform Commissions and Royalties

Digital Storefronts retain platform commissions and fees on each purchase made by the paying players through the Digital Storefront. We are also obligated to pay ongoing licensing fees in the form of royalties related to the games developed based on or significantly incorporating licensed brands, properties or other content, and our plans to incorporate additional licensed content in some of its own originally branded games. As revenue from sales to paying players through Digital Storefronts are deferred, the related direct and incremental platform commissions and fees as well as third-party royalties are also deferred on the consolidated balance sheets. The deferred platform commissions and royalties are recognized in the consolidated statements of operations in “Cost of revenue” in the period in which the related sales are recognized as revenue.

Prepaid or Guaranteed Licensor Royalties

Our royalty expenses consist of fees that we pay to content owners for the use of their brands, properties and other licensed content, including trademarks and copyrights, in the development of our games. Royalty-based obligations are either paid in advance and capitalized on the balance sheet as prepaid royalties or accrued as incurred and subsequently paid. These royalty-based obligations are expensed to cost of revenue at the greater of the revenue derived from the relevant game multiplied by the applicable contractual rate or an effective royalty rate based on expected net product sales.

Our contracts with certain licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate volume of sales to end users, in accordance with ASC 440-10, Commitments, or ASC 440. When no significant performance remains with the licensor, we initially record each of these guarantees as an asset and as a liability at the contractual amount. We believe that the contractual amount represents the fair value of the liability. When significant performance remains with the licensor, we record royalty payments as an asset when actually paid and as a liability when incurred, rather than upon execution of the contract. The classification of minimum royalty payment obligations between long-term and short-term is determined based on the expected timing of recoupment of earned royalties calculated on projected revenue for the games that include content licensed from third parties.

Each quarter, we evaluate the realization of our prepaid and guaranteed royalties as well as any unrecognized guarantees not yet paid to determine amounts that we deem unlikely to be realized through product sales. We use estimates of undiscounted revenue and net margins to evaluate the future realization of prepaid royalties, license fees, and guarantees. This evaluation is performed at the title level and considers multiple factors, such as, the term of the agreement, forecasted demand, game life cycle status, game development plans, level of social media activity, and current

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and anticipated sales levels, as well as other qualitative factors such as the success of similar games and similar genres on mobile devices published by us and our competitors and/or other game platforms (e.g., consoles and personal computers) utilizing the intellectual property. To the extent that this evaluation indicates that the remaining prepaid and guaranteed royalty payments are not recoverable, we record an impairment charge to cost of revenue in the period that impairment is indicated.

Stock-Based Compensation

We apply the fair value provisions of ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options, restricted stock units (“RSUs”), performance-based stock units (“PSUs”), and performance-based stock options (“PSOs”). The number of PSUs and PSOs earned and eligible to vest will be determined based on achievement of specified financial performance measures. ASC 718 requires companies to estimate the fair value of stock-option awards on the grant date using an option pricing model. The fair value of stock options and PSOs and stock purchase rights granted pursuant to our equity incentive plans and 2007 Employee Stock Purchase Plan (“ESPP”), respectively, is determined using the Black-Scholes valuation model. The determination of fair value is affected by the stock price, as well as assumptions regarding subjective variables such as expected employee exercise behavior and expected stock price volatility over the expected term of the award. Generally, these assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes.

Effective January 1, 2017 we no longer estimate forfeitures but account for them as and when they occur. Changes to the assumptions used in the Black-Scholes option valuation calculation, as well as future equity granted or assumed through acquisitions could significantly impact the compensation expense we recognize. The cost of RSUs and PSUs is determined using the fair value of the common stock based on the quoted closing price of our common stock on the date of grant. Compensation cost for stock options and RSUs is amortized ratably over the requisite service period. For performance-based awards that have multiple vesting dates, the compensation cost is recognized ratably over the requisite service period for each tranche, whereby each vesting tranche is treated as a separate award for determining the requisite service period. The compensation cost for performance-based awards may be adjusted over the vesting period based on interim estimates of performance against the pre-set financial performance measures.

Results of Operations

The following sections discuss and analyze the changes in the significant line items in our statements of operations for the comparison periods identified.

Comparison of the Years Ended December 31, 2019 and 2018

Revenue


	Year Ended December 31,
	2019		2018
Revenue by Type		(In thousands)
In-App Purchases	$	360,598	$	316,157
Advertisements and Offers		50,728		50,121
Other		55		283
Total revenue	$	411,381	$	366,561

Our revenue increased $44.8 million, or 12.2%, from $366.6 million for the year ended December 31, 2018 to $411.4 million for the year ended December 31, 2019, which was primarily related to a $44.4 million increase in our revenue from in-app purchases (micro-transactions) and a $607,000 increase in our revenues from advertisements and offers. The increase in revenue was primarily related to our three growth games, Design Home, the Tap Sports Baseball franchise and Covet Fashion, as well as the launch of new titles Diner DASH Adventures and WWE Universe in 2019. Revenue from our three growth games increased by $58.4 million during the year ended December 31, 2019 compared to the year ended December 31, 2018. Revenue from the new titles launched in 2019 was $23.8 million during the year ended December 31, 2019. These increases were partially offset by a $37.4 million aggregate decline in revenue from

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catalog titles such as Kim Kardashian: Hollywood, Restaurant Dash with Gordon Ramsay, Cooking Dash, Racing Rivals, Deer Hunter 2018 (originally launched as Deer Hunter 2016), Deer Hunter Classic, and Kendall & Kylie, etc.

In 2019, Design Home, the Tap Sports Baseball franchise and Covet Fashion were our top three revenue-generating games and comprised 42.2%, 21.0% and 15.2%, respectively, of our revenue for the period. In 2018, Design Home, the Tap Sports Baseball franchise, and Covet Fashion were our top three revenue-generating games and comprised 39.7%, 18.9% and 13.4%, respectively, of our revenue for the period. No other game generated more than 10% of revenue during either period.

International revenue (defined as revenue generated from distributors and advertising service providers whose principal operations are located outside the United States or, in the case of the Digital Storefronts, the revenue generated from end-user purchases made outside of the United States) increased by $4.7 million, from $86.3 million in the year ended December 31, 2018 to $91.0 million in the year ended December 31, 2019. This was primarily related to a $4.1 million increase in our EMEA revenue, and a $3.3 million increase in our revenue from Americas, excluding the United States, partially offset by a $2.7 million decrease in our APAC revenue. These increases were primarily related to increased revenue from our growth games.

Cost of Revenue




	Year Ended December 31,
	2019			2018
	(In thousands)
Cost of revenue:
Platform commissions, royalties and other	$	140,655		$	128,445
Impairment of prepaid royalties and minimum guarantees		457			711
Amortization and impairment of intangible assets		4,387			9,119
Total cost of revenue	$	145,499		$	138,275
Revenue	$	411,381		$	366,561
Gross margin		64.6	%		62.3	%

Our cost of revenue increased by $7.2 million, or 5.2%, from $138.3 million in the year ended December 31, 2018 to $145.5 million in the year ended December 31, 2019. This increase was primarily due to a $12.8 million increase in platform commission fees due to a higher volume of revenue transactions through the Digital Storefronts and a $511,000 increase in hosting costs. These increases were partially offset by a $5.0 million decrease in amortization and impairment of intangible assets and prepaid royalties and a $1.0 million decrease in expense related to warrants issued to certain celebrities.

The royalties we paid to licensors decreased by less than $100,000, or 0.1%, from $25.4 million in the year ended December 31, 2018 to $25.3 million in the year ended December 31, 2019. This slight decrease was due to a larger percentage of our revenue being attributable to original intellectual property titles that are not royalty burdened, such as Design Home and Covet Fashion. We expect our cost of revenue to increase in 2020 primarily due to higher royalty payments and hosting fees.

Research and Development Expenses



	Year Ended December 31,
	2019			2018
	(In thousands)
Research and development expenses	$	95,127		$	94,934
Percentage of revenue		23.1	%		25.9	%

Our research and development expenses increased $193,000, or 0.2%, from $94.9 million in the year ended December 31, 2018 to $95.1 million in the year ended December 31, 2019. This was primarily attributable to a $3.5 million increase in payroll related costs mainly due to increase in headcount, salary bonuses, and certain employee benefit costs and a $3.3 million increase in allocated charges for equipment, facilities and depreciation. These increases were partially offset by a $3.3 million decrease in outside services primarily related to lower external development costs, a $2.3

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million decrease in stock compensation expense mainly related to the decrease in vesting probability of certain performance-based equity awards, and a $947,000 decrease in tax expense due to a tax credit related to one of the foreign jurisdictions in which we do business. As a percentage of revenue, research and development expenses decreased from 25.9% in the year ended December 31, 2018 to 23.1% in the year ended December 31, 2019. We expect our research and development expenditures to increase in absolute dollars in 2020 primarily due to an increase in headcount.

Sales and Marketing Expenses


	Year Ended December 31,
	2019			2018
	(In thousands)
Sales and marketing expenses	$	140,298		$	113,860
Percentage of revenue		34.1	%		31.1	%

Our sales and marketing expenses increased $26.4 million, or 23.2%, from $113.9 million in the year ended December 31, 2018 to $140.3 million in the year ended December 31, 2019. This was primarily attributable to an increase of $22.9 million in user acquisition and other marketing expenditures primarily related to a significant investment in user acquisition for our three growth games and Diner DASH Adventures following its global launch in June 2019, partially offset by a decrease in user acquisition expenditures on our catalog titles, a $1.7 million increase in professional costs due to increased use of consultants for customer care activities, a $1.4 million increase in payroll related costs mainly due to the increase in headcount and related employee benefit costs, and a $768,000 increase in allocated charges for equipment, facilities and depreciation. These increases were partially offset by a decrease in stock compensation expense of $1.1 million mainly related to the decrease in vesting probability of certain performance-based equity awards. As a percentage of revenue, sales and marketing expenses increased from 31.1% in the year ended December 31, 2018 to 34.1% in the year ended December 31, 2019. We expect our sales and marketing expenses to increase in absolute dollars in 2020 primarily due to higher user acquisition expenditures related to expected launch of new titles such as Disney Sorcerer’s Arena, MLB Tap Sports Baseball 2020 and the next iteration of Deer Hunter during 2020.

General and Administrative Expenses



	Year Ended December 31,
	2019			2018
	(In thousands)
General and administrative expenses	$	23,216		$	31,667
Percentage of revenue		5.6	%		8.6	%

Our general and administrative expenses decreased $8.5 million, or 26.7%, from $31.7 million in the year ended December 31, 2018 to $23.2 million in the year ended December 31, 2019. This was primarily attributable to a $3.8 million decrease in stock-based compensation expense mainly related to the decrease in vesting probability of certain performance-based equity awards, a $2.7 million decrease in professional fees mainly due to lower accounting and consulting costs, a $2.6 million decrease in allocated charges for equipment, facilities and depreciation, a $741,000 decrease in indirect tax related expenses, and a $710,000 decrease in legal expenses due to the settlement of the lawsuit filed against us related to our acquisition of Crowdstar. These decreases were partially offset by an increase of $1.4 million in payroll related costs and a $544,000 increase in other operating expenses. As a percentage of revenue, general and administrative expenses decreased from 8.6% in the year ended December 31, 2018 to 5.6% in the year ended December 31, 2019. We expect our general and administrative expenses to increase slightly in absolute dollars in 2020 as compared to 2019 primarily due to increase in headcount.

Restructuring Charges

During the year ended December 31, 2019, no restructuring charges were recorded. During the year ended December 31, 2018, we recorded $240,000 of restructuring charges related to employee termination and lease termination costs for our Long Beach, California office.

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Interest and Other Income/(Expense), Net

Interest and other income/(expense), net, changed from a net expense of $235,000 in the year ended December 31, 2018 to a net income of $2.1 million in the year ended December 31, 2019. Interest and other income, net during the year ended December 31, 2019 was primarily attributable to $2.3 million in interest income on money market funds and other investments, partially offset by $159,000 in foreign translation losses. In the year ended December 31, 2018, interest and other expense, net was attributable to $581,000 of currency losses for the revaluation of certain account balances, $160,000 related to certain transition expenses, offset by $505,000 of interest income from our money market investment accounts.

Income Tax Provision

Our income tax expense decreased from $549,000 in 2018 to $471,000 in 2019. The income tax expense in 2019 was mainly attributable to changes in pre-tax income in the United States and certain foreign entities reduced by a benefit as a result of releasing the tax reserves in relation to closing a foreign subsidiary. The provision for income taxes differs from the amount computed by applying the statutory U.S. federal rate principally due to the effect of our non-U.S. operations, non-deductible stock-based compensation expense, and change in foreign withholding taxes.

Our effective income tax rates for future periods will depend on a variety of factors, including changes in the deferred tax valuation allowance, as well as changes in our business such as intercompany transactions, any acquisitions, any changes in our international structure, any changes in the geographic location of our business functions or assets, changes in the geographic mix of our income, any changes in or termination of our agreements with tax authorities, changes in applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in our annual pre-tax income or loss. We incur certain tax expenses that do not decline proportionately with declines in our pre-tax consolidated income or loss. As a result, in absolute dollar terms, our tax expense will have a greater influence on our effective tax rate at lower levels of pre-tax income or loss than at higher levels. In addition, at lower levels of pre-tax income or loss, our effective tax rate will be more volatile.

Liquidity and Capital Resources


	Year Ended December 31,
		2019	2018
	(In thousands)
Consolidated Statement of Cash Flows Data:
Cash flows generated from operating activities		35,181		32,286
Cash flows used in investing activities		(5,438)		(636)
Cash flows (used in) / generated from financing activities		(443)		2,181

Since our inception, we have generally incurred recurring losses and negative annual cash flows from operating activities. We recorded a net income of $8.9 million in the year ended December 31, 2019. As of December 31, 2019, we had an accumulated deficit of $431.6 million.

Operating Activities

In 2019, net cash generated from operating activities was $35.2 million, which was primarily due to an increase in deferred revenue of $11.9 million mainly attributable to an increase in revenue from titles with longer useful lives, net income of $8.9 million, an increase in accounts payable and accrued liabilities of $3.1 million mainly due to the timing of payments to our vendors, and other assets and adjustments for non-cash items including stock based compensation expense of $17.4 million, amortization and impairment of intangible assets of $4.4 million, depreciation of $4.2 million and non-cash lease expense of $3.3 million. These changes were partially offset by a $6.6 million decrease in accrued compensation due to lower variable compensation expense, a $3.4 million increase in deferred platform commission fees attributable to higher bookings, a decrease of $3.0 million in lease liability, a $2.0 million increase in accounts receivable due to the timing of payments from our customers, and a $2.0 million increase in other prepaid expenses.

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In 2018, net cash generated from operating activities was $32.3 million, which was primarily due to an increase in deferred revenue of $17.9 million mainly attributable to an increase in revenue from titles with longer useful lives, a $7.0 million decrease in accounts receivable due to the timing of payments from our customers, a $1.3 million decrease in other prepaid expenses, and adjustments for non-cash items including stock based compensation expense of $24.6 million, amortization and impairment of intangible assets of $9.1 million, depreciation of $3.9 million and warrant expense of $1.0 million. These changes were partially offset by $13.2 million of net loss, a $10.2 million decrease in accounts payable and other accrued liabilities mainly due to the timing of payments to our vendors, a $5.4 million increase in deferred platform commission fees attributable to higher bookings, a $2.7 million decrease in accrued compensation, a $1.8 million increase in prepaid and deferred royalties and a $947,000 decrease in accrued royalties.

Investing Activities

Our primary investing activities have consisted of acquisition/divestiture of mobile gaming companies and purchases of property and equipment and leasehold improvements for our offices.

In 2019, we used $5.4 million of cash for investing activities primarily related to property and equipment purchases.

In 2018, we used a net cash of $636,000 for investing activities primarily related to property and equipment purchases of $3.4 million partially offset by proceeds of $2.7 million from the divestiture of our Moscow studio.

Financing Activities

In 2019, net cash used from financing activities was $443,000 which was primarily due to $8.4 million of taxes paid related to net share settlement of RSUs. These cash outflows were partially offset by $8.0 million in proceeds received from option exercises and purchases under our employee stock purchase plan.

In 2018, net cash generated from financing activities was $2.2 million which was primarily due to $9.3 million in proceeds received from option exercises and purchases under our employee stock purchase plan. These cash inflows were partially offset by $7.1 million of taxes paid related to net share settlement of RSUs.

Sufficiency of Current Cash and Cash Equivalents

Our cash and cash equivalents were $127.1 million as of December 31, 2019. Cash and cash equivalents held outside of the U.S. in various foreign subsidiaries were $2.5 million as of December 31, 2019, most of which were held by our Canadian and Indian subsidiaries. Under current tax laws and regulations, if cash and cash equivalents held outside the U.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes. We have not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries, because their earnings are intended to be reinvested indefinitely. However, if any such balances were to be repatriated, additional U.S. federal income tax payments could result. Computation of the potential deferred tax liabilities associated with unremitted earnings deemed to be indefinitely reinvested is not practicable.

We expect to fund our operations, grow our business and satisfy our contractual obligations during the next 12 months primarily through our cash and cash equivalents and cash generated by our operations. We believe our cash and cash equivalents and cash generated by our operations will be sufficient to meet our anticipated cash needs for at least the next 12 months from the date of this report; however, our cash requirements for the next 12 months may be greater than we anticipate due to, among other reasons, revenue that is lower than we currently anticipate, greater than expected operating expenses, particularly with respect to our research and development and sales and marketing initiatives, use of cash to pay minimum guaranteed royalties, use of cash to fund our foreign operations and the impact of foreign currency rate changes, unanticipated limitations or timing restrictions on our ability to access funds that are held in our non-U.S. subsidiaries or any investments or acquisitions that we may decide to pursue. We expect to continue to use cash to fund minimum guaranteed royalty payments during 2020 as milestone payments become due on games we publish and/or develop that incorporate licensed property, as well as to fund the purchase price of any acquisitions. If the games we develop based on such licensing arrangements fail to perform in accordance with our expectations, we may not fully recoup these minimum guaranteed royalty payments.

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If our cash sources are insufficient to satisfy our cash requirements, we may seek to raise additional capital. However, we may be unable to do so on terms that are favorable to us or at all.

Contractual Obligations

The following table is a summary of our contractual obligations as of December 31, 2019:


	Payments Due by Period from December 31, 2019
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(In thousands)
Operating lease obligations (1), (2)	$	53,057	$	4,500	$	13,926	$	14,138	$	20,493
Guaranteed royalties (3)		40,150		11,540		22,460		6,150		—
Total contractual obligations	$	93,207	$	16,040	$	36,386	$	20,288	$	20,493

(1)	We have entered into a sub-lease agreement for one of our U.S. offices. The future obligation amounts are net of the sub-lease payments.

(2)	The amount of tenant improvement allowance expected to be received in the first quarter of 2020 for one of our office leases is netted off against the future obligations amount.

(3)

We have entered into license and publishing agreements with various celebrities and other owners of brands, properties and other content to develop and publish games and other software applications for mobile devices. These agreements typically require us to make non-refundable, but recoupable payments of minimum guaranteed royalties or license fees as up-front payments or over the term of the agreement.

Off-Balance Sheet Arrangements

At December 31, 2019, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that are not already disclosed in this report.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we might not be able to fully offset these higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements and ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2016-02 and the subsequent modifications are identified as “ASC 842”. ASC 842 requires lessees to recognize most leases as assets and liabilities on the balance sheet. We adopted ASC 842 and its related amendments effective on January 1, 2019 using the modified retrospective transition approach. See Note 9 “Leases” for the required disclosures related to the impact of adopting this standard and a discussion of our updated policies related to leases.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

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In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard provides financial statement preparers with an option to reclassify stranded tax effects within Accumulated Other Comprehensive Loss to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The guidance is effective for us beginning in fiscal 2019, including interim periods within that fiscal year. We adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The guidance simplifies the accounting for share-based payments made to non-employees so the accounting for such payments is substantially the same as those made to employees. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (“ASC”). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and are effective upon issuance of the guidance. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. We adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, though early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance clarifies the accounting treatment for implementation costs for cloud computing arrangements (hosting arrangements) that are service contracts. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated

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group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate and Credit Risk

Our exposure to interest rate risk relates primarily to our investment portfolio and the potential losses arising from changes in interest rates.

We are potentially exposed to the impact of changes in interest rates as they affect interest earned on our investment portfolio. As of December 31, 2019, $127.1 million of our cash and cash equivalents was held in operating bank accounts and money market funds earning nominal interest. Accordingly, we do not believe that a 10% change in interest rates would have a significant impact on our interest income, operating results or liquidity related to these amounts.

The primary objectives of our investment activities are, in order of importance, to preserve principal, provide liquidity and maximize income without significantly increasing risk. We do not currently use or plan to use derivative financial instruments in our investment portfolio.

As of December 31, 2019, our cash and cash equivalents were primarily maintained by financial institutions in the United States, Canada, India and Hong Kong, and our current deposits are likely in excess of insurance limits.

Our accounts receivable primarily relate to revenue earned from Digital Storefront operators and advertising platforms. We perform ongoing credit evaluations of our customers’ and the Digital Storefronts’ financial condition but generally require no collateral from them. At December 31, 2019, Apple Inc., or Apple, accounted for 47.2%, Google Inc., or Google, accounted for 28.5% and Tapjoy Inc., or Tapjoy accounted for 17.8% of total accounts receivable. At December 31, 2018, Apple accounted for 40.8%, Google accounted for 30.3% and Tapjoy accounted for 21.1% of total accounts receivable. No other customer or Digital Storefront represented more than 10% of our total accounts receivable as of these dates.

Foreign Currency Exchange Risk

We transact business in more than 100 countries in more than 30 different currencies, and in 2019 and 2018, some of these currencies fluctuated significantly. Our operations outside of the United States are maintained in their local currency, with the significant operating currencies consisting of the Indian Rupee and Canadian Dollar. Although recording operating expenses in the local currency of our foreign operations mitigates some of the exposure of foreign currency fluctuations, variances among the currencies of our customers and our foreign operations relative to the United States Dollar, or USD, could have and have had a material impact on our results of operations.

Our foreign currency exchange gains and losses have been generated primarily from fluctuations the Indian Rupee versus the USD and the Canadian Dollar versus the USD. At month-end, non-functional currency-denominated accounts receivable and intercompany balances are marked to market and unrealized gains and losses are included in interest and other income/(expense), net. Translation adjustments arising from the use of differing exchange rates are included in accumulated other comprehensive income/(loss) in stockholders’ equity. We have in the past experienced, and in the future expect to experience, foreign currency exchange gains and losses on our accounts receivable and intercompany receivables and payables. Foreign currency exchange gains and losses could have a material adverse effect on our business, operating results and financial condition.

To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeable future.

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Item 8. Financial Statements and Supplementary Data

GLU MOBILE INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page
Glu Mobile Inc. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		62
Consolidated Balance Sheets		65
Consolidated Statements of Operations		66
Consolidated Statements of Comprehensive Income/(Loss)		67
Consolidated Statements of Stockholders’ Equity		68
Consolidated Statements of Cash Flows		69
Notes to Consolidated Financial Statements		70

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Glu Mobile Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Glu Mobile Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income/(loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of the Average Playing Period of Paying Users Associated with Durable Virtual Items

As described in Notes 1 and 5 to the consolidated financial statements, the Company generates revenue through in-application purchases within its games. The Company sells both consumable and durable virtual items. The Company’s revenue from consumable virtual items has been insignificant. Durable virtual items are items that are accessible to the player over an extended period of time and that remain in the game for as long as the player continues to play. Revenue from durable virtual items amounted to $361 million for the year ended December 31, 2019. The Company’s performance obligations represent a single combined performance obligation, which is to make the game and the ongoing game-related services available to the players. The Company recognizes revenue from durable virtual items over the estimated average playing period of paying users on a per title basis. Management uses the “survival analysis” model to estimate the average playing period for paying users, which statistically estimates the average playing period of each title by analyzing the historical behavior patterns of paying users. This model requires stratification of user data into active and inactive paying users on a per title basis, in which management considers that active users are those who are active in the game for the past 30 days as of the evaluation date, and the remaining users are considered inactive.

The principal considerations for our determination that performing procedures relating to the estimation of the average playing period of paying users associated with durable virtual items is a critical audit matter are (i) there was significant judgment by management in the application of the “survival analysis” model; (ii) there was a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s estimate, including the significant assumption used to determine active and inactive paying users; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing procedures and evaluating audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included (i) testing the effectiveness of controls relating to the estimation of the average playing period of paying users associated with durable virtual items,

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including controls over the development of the significant assumption used to determine active and inactive paying users in the “survival analysis” model; (ii) testing management’s process for estimating the average playing period of paying users associated with durable virtual items, including testing management’s method of obtaining and analyzing the data, the significant assumption relating to the stratification of user data into active and inactive paying users, and the completeness and accuracy of the user data; and (iii) using professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the model, the reasonableness of the significant assumption relating to the stratification of user data into active and inactive paying users on a per title basis.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 28, 2020

We have served as the Company’s auditor since 2003, which includes periods before the Company became subject to SEC reporting requirements.

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GLU MOBILE INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	December 31,		December 31,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	127,053	$	97,834
Accounts receivable, net		29,304		27,325
Prepaid royalties		15,347		8,520
Deferred royalties		5,067		4,410
Deferred platform commission fees		29,239		25,862
Restricted cash		—		110
Prepaid expenses and other assets		8,629		6,940
Total current assets		214,639		171,001
Property and equipment, net		17,643		13,888
Operating lease right of use assets		35,170		—
Long-term prepaid royalties		26,879		1,667
Other long-term assets		2,733		2,505
Intangible assets, net		4,758		9,145
Goodwill		116,227		116,227
Total assets	$	418,049	$	314,433

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,892	$	10,480
Accrued liabilities		643		1,384
Accrued compensation		11,260		17,896
Accrued royalties		20,802		14,139
Accrued restructuring		—		294
Short-term operating lease liabilities		3,528		—
Deferred revenue		97,629		85,736
Total current liabilities		150,754		129,929
Long-term accrued royalties		26,842		1,649
Long-term operating lease liabilities		37,351		—
Other long-term liabilities		15		5,542
Total liabilities		214,962		137,120

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized at December 31, 2019 and December 31, 2018; no shares issued and outstanding at December 31, 2019 and December 31, 2018		—		—
Common stock, $0.0001 par value; 250,000 shares authorized at December 31, 2019 and December 31, 2018; 147,778 and 143,870 shares issued and outstanding at December 31, 2019 and December 31, 2018		15		14
Additional paid-in capital		634,721		617,781
Accumulated other comprehensive (loss)/income		(37)		1
Accumulated deficit		(431,612)		(440,483)
Total stockholders’ equity		203,087		177,313
Total liabilities and stockholders’ equity	$	418,049	$	314,433

The accompanying notes are an integral part of these consolidated financial statements.

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GLU MOBILE INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


	Year Ended December 31,
	2019		2018		2017
Revenue	$	411,381	$	366,561	$	286,827
Cost of revenue:
Platform commissions, royalties and other		140,655		128,445		103,499
Impairment of prepaid royalties and minimum guarantees		457		711		27,323
Impairment and amortization of intangible assets		4,387		9,119		10,331
Total cost of revenue		145,499		138,275		141,153
Gross profit		265,882		228,286		145,674
Operating expenses:
Research and development		95,127		94,934		92,420
Sales and marketing		140,298		113,860		104,356
General and administrative		23,216		31,667		34,425
Restructuring charge		—		240		6,019
Total operating expenses		258,641		240,701		237,220
Income/(loss) from operations		7,241		(12,415)		(91,546)
Interest and other income/(expense), net		2,101		(235)		(6,850)
Income/(loss) before income taxes		9,342		(12,650)		(98,396)
Income tax (provision)/benefit		(471)		(549)		826
Net income/(loss)	$	8,871	$	(13,199)	$	(97,570)

Net income/(loss) per common share - basic	$	0.06	$	(0.09)	$	(0.72)
Net income/(loss) per common share - diluted	$	0.06	$	(0.09)	$	(0.72)

Weighted average common shares outstanding:
Basic		145,838		141,402		135,715
Diluted		157,383		141,402		135,715

The accompanying notes are an integral part of these consolidated financial statements.

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GLU MOBILE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(in thousands)



	Year Ended December 31,
	2019		2018		2017
Net income/(loss)	$	8,871	$	(13,199)	$	(97,570)
Other comprehensive income/(loss):
Foreign currency translation adjustments		(38)		7		(252)	(1)
Other comprehensive income/(loss)		(38)		7		(252)
Comprehensive income/(loss)	$	8,833	$	(13,192)	$	(97,822)

(1)Includes release of cumulative translation adjustment upon substantial liquidation / winding down of the Company’s foreign subsidiaries which is recognized in interest and other expense, net in the Company’s consolidated statement of operations for the year ended December 31, 2017.

The accompanying notes are an integral part of these consolidated financial statements.

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GLU MOBILE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)


						Accumulated
						Other
						Compre-
				Additional		hensive				Total
	Common Stock			Paid-In		Income		Accumulated		Stockholders'
	Shares	Amount		Capital		(loss)		Deficit		Equity
Balances at December 31, 2016	134,001	$	13	$	571,243	$	246	$	(338,688)	$	232,814
Net loss	-		-		-		-		(97,570)		(97,570)
Stock-based compensation expense	-		-		14,845		-		-		14,845
Issuance of common stock upon exercise of stock options	1,083		-		2,564		-		-		2,564
Issuance of common stock upon exercise of warrants	1,000		-		3,000		-		-		3,000
Taxes paid related to net share settlement of equity awards	1,767		1		(3,369)		-		-		(3,368)
Issuance of common stock pursuant to Employee Stock Purchase Plan	894		-		1,567		-		-		1,567
Non-cash warrant expense	-		-		260		-		-		260
Cumulative effect adjustment from adoption of ASU 2016-09	-		-		(148)		-		148		-
Other comprehensive loss	-		-		-		(252)		-		(252)
Balances at December 31, 2017	138,745	$	14	$	589,962	$	(6)	$	(436,110)	$	153,860
Net loss	-		-				-		(13,199)		(13,199)
Stock-based compensation expense	-		-		24,592		-		-		24,592
Issuance of common stock upon exercise of stock options	2,721		-		6,922		-		-		6,922
Taxes paid related to net share settlement of equity awards	1,634		-		(7,097)		-		-		(7,097)
Issuance of common stock pursuant to Employee Stock Purchase Plan	770		-		2,356		-		-		2,356
Non-cash warrant expense	-		-		1,046		-		-		1,046
Cumulative effect adjustment from adoption of ASU 2014-09	-		-		-		-		8,826		8,826
Other comprehensive income	-		-		-		7		-		7
Balances at December 31, 2018	143,870	$	14	$	617,781	$	1	$	(440,483)	$	177,313
Net income	-		-				-		8,871		8,871
Stock-based compensation expense	-		-		17,383		-		-		17,383
Issuance of common stock upon exercise of stock options	1,723		1		4,553		-		-		4,554
Taxes paid related to net share settlement of equity awards	1,457		-		(8,408)		-		-		(8,408)
Issuance of common stock pursuant to Employee Stock Purchase Plan	728		-		3,412		-		-		3,412
Other comprehensive loss	-		-		-		(38)		-		(38)
Balances at December 31, 2019	147,778	$	15	$	634,721	$	(37)	$	(431,612)	$	203,087

The accompanying notes are an integral part of these consolidated financial statements.

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GLU MOBILE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Cash flows from operating activities:
Net income/(loss)	$	8,871	$	(13,199)	$	(97,570)
Adjustments to reconcile net income/(loss) to net cash generated/(used in) operating activities:
Depreciation		4,225		3,855		3,195
Impairment and amortization of intangible assets		4,387		9,119		10,331
Stock-based compensation		17,383		24,592		15,063
Warrant expense		—		1,046		631
Net loss from the sale of a foreign subsidiary		—		—		6,468
Other non-cash adjustments		156		1,095		(1,577)
Impairment of prepaid royalties and minimum guarantees		457		711		27,323
Non-cash lease expense		3,348		—		—
Changes in operating assets and liabilities:
Accounts receivable		(1,975)		7,028		(13,061)
Prepaid royalties		389		(947)		(18,868)
Deferred royalties		(657)		(835)		(1,088)
Deferred platform commission fees		(3,377)		(5,416)		(8,876)
Prepaid expenses and other assets		(1,957)		1,345		(4,151)
Accounts payable, accrued restructuring, and other accrued liabilities		3,090		(10,709)		5,223
Accrued compensation		(6,636)		(2,707)		8,094
Accrued royalties		(1,029)		(947)		4,125
Deferred revenue		11,893		17,947		32,539
Other long-term liabilities		(365)		308		3,963
Operating lease liabilities		(3,022)		—		—
Net cash generated from/(used in) operating activities		35,181		32,286		(28,236)

Cash flows from investing activities:
Purchase of property and equipment		(5,283)		(3,362)		(11,344)
Proceeds from divestiture of Moscow studio		—		2,726		—
Net cash paid for acquisitions		—		—		(1,659)
Other investing activities		(155)		—		(1,410)
Net cash used in investing activities		(5,438)		(636)		(14,413)

Cash flows from financing activities:
Proceeds from exercise of stock options and purchases under the ESPP		7,965		9,278		4,131
Taxes paid related to net share settlement of equity awards		(8,408)		(7,097)		(3,368)
Proceeds from exercise of stock warrants and issuance of common stock		—		—		3,000
Net cash (used in)/generated from financing activities		(443)		2,181		3,763

Effect of exchange rate changes on cash		(191)		(253)		(162)
Net increase/(decrease) in cash, cash equivalents and restricted cash		29,109		33,578		(39,048)
Cash, cash equivalents and restricted cash at beginning of period		97,944		64,366		103,414
Cash, cash equivalents and restricted cash at end of period	$	127,053	$	97,944	$	64,366

Supplemental disclosures of cash flow information
Purchases of property and equipment included in accounts payable and accrued liabilities and other current liabilities	$	3,633	$	1,101	$	1,350
Income taxes paid	$	723	$	382	$	365

The accompanying notes are an integral part of these consolidated financial statements.

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GLU MOBILE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in thousands, except per share data)

NOTE 1 — THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Glu Mobile Inc. (the “Company” or “Glu”) was incorporated in Nevada in May 2001 and reincorporated in the state of Delaware in March 2007. The Company develops, publishes, and markets a portfolio of games designed for users of smartphones and tablet devices who download and make purchases within its games through direct-to-consumer digital storefronts, such as the Apple App Store, Google Play Store, and others (“Digital Storefronts”). The Company creates games based on its own original brands, as well as third-party licensed brands, properties and other content.

Basis of Presentation

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated on consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates and assumptions reflected in the financial statements include, but are not limited to, estimation of the average playing period of paying users associated with durable virtual items, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, valuation and realizability of deferred tax assets and uncertain tax positions, fair value of stock awards issued, fair value of warrants issued, accounting for business combinations, evaluating goodwill, long-lived assets for impairment, and realization of prepaid royalties and fair value of investments. Actual results may differ from these estimates and these differences may be material.

Revenue Recognition

The Company generates revenue through in-application purchases (“in-app purchases”) within its games on smartphones and tablet devices, such as Apple’s iPhone and iPad, and mobile devices utilizing Google’s Android operating system. Users can download the Company’s free-to-play games through Digital Storefronts. The Company also has relationships with certain advertising service providers for advertisements within smartphone games and revenue from these advertising providers is generated through impressions, clickthroughs, banner ads, and offers.

The Company adopted Accounting Standard Codification Topic 606, Revenue with Contracts with Customers (“ASC 606”) and its related amendments effective January 1, 2018 using a modified retrospective method. The reported results for the year ended December 31, 2018 reflect the application of ASC 606 guidance while the reported results for the year ended December 31, 2017 were prepared under the guidance of Accounting Standard Codification 605 (“ASC 605”), Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance".

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The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures.

In accordance with ASC 606, revenue is recognized when or as a customer obtains control of promised services. The amount of revenue recognized reflects the consideration which the Company expects to receive in exchange for these services. A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

ASC 606 requires an entity to disclose the revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for example, due to changes in transaction price). Revenue recognized relating to performance obligations satisfied in prior periods was $0 for the year ended December 31, 2019 and December 31, 2018, respectively.

The Company elects to use the practical expedient under 606-10-50-14 which states an entity need not disclose the information in paragraph 606-10-50-13 for a performance obligation if the following criteria are met:

the performance obligation is part of a contract that has an original expected duration of one year or less; and

the entity recognizes revenue from the satisfaction of the performance obligation in accordance with paragraph 606-10-55-18 (right to invoice).

Since all of the Company’s contracts have an original expected duration of one year or less, the Company elects to use this practical expedient and does not disclose the aggregate transaction price allocated to unsatisfied or partially satisfied performance obligations.

In-App Purchases

Users can download the Company’s free-to-play games within the Digital Storefronts and pay to acquire virtual currency, which can be redeemed in the game for virtual goods, or virtual goods directly (together, defined as “virtual items”) to enhance their game-playing experience. The Company sells both consumable and durable virtual items and receives reports from the Digital Storefronts, which breakdown the various purchases made from the Company’s games over a given time period. The Company reviews these reports and determines on a per-item basis whether the purchase was a consumable virtual item or a durable virtual item. Consumable virtual items are items that are consumed at a predetermined time or otherwise have limitations on repeated use. Durable virtual items are items, such as furniture, clothes, etc. that are accessible to the player over an extended period of time and that remain in the game for as long as the player continues to play.

The initial download of the mobile game from the Digital Storefront does not create a contract under ASC 606 because of the lack of commercial substance; however, the separate election by the player to make an in-application purchase satisfies the criterion thus creating a contract under ASC 606. The Company has identified the following performance obligations in these contracts:

Obligation to the paying player to continue displaying and providing access to the virtual items within the game.

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available to the players. The transaction price, which is the amount paid for the virtual items by the player, is allocated entirely to the single combined performance obligation. The Company recognizes revenue for durable virtual items over the estimated average playing period of paying users on a per title basis. The Company’s revenue from consumable virtual items has been insignificant over the previous three years. The Company has estimated the useful life of a paying user between four and eight months.

Advertisements and Offers

The Company has relationships with certain advertising service providers for advertisements within its mobile games. Revenue from these advertising service providers is generated through impressions, clickthroughs, offers and banner ads. Offers are the type of advertisements where the players are rewarded with virtual currency for completing specified actions, such as downloading another application, watching a short video, subscribing to a service or completing a survey. The Company has determined the advertising buyer to be its customer and displaying the advertisements within the mobile games is identified as the single performance obligation. Revenue from advertisements and offers are recognized at the point-in-time the advertisements are displayed in the game or the offer has been completed by the user as the customer simultaneously receives and consumes the benefits provided from these services.

Other Estimates and Judgments

The Company computes its estimated average playing period of paying users at least twice each year. It has examined the playing patterns of paying users across a representative sample of its games across various genres.

The Company uses the “survival analysis” model to estimate the average playing period for paying users. This model provides for a singular approach to estimating the average playing period of paying users on a title by title basis for the Company’s diverse portfolio of games. It is a statistical model that analyzes time duration until one or more events happens and is commonly used in various industries for estimating lifespans. The Company believes this is an appropriate model to estimate the average playing period of paying users for its titles as this model statistically estimates the average playing period of each title by analyzing the historical behavior patterns of paying users.

The Company has selected a threshold of 120 days from the commercial launch of a title as the minimum number of days of data required for this model. This threshold was deemed to be appropriate as the Company tested the model using lower thresholds which resulted in inconsistencies in the estimate of the average playing period of paying users. For new titles with less than 120 days of data that share similar attributes with an existing title and/or prequel titles, the average playing period is determined based on the average playing period of that existing title or prequel title, as applicable. For all other titles with less than 120 days of data, the average playing period is determined based on the average playing period of all other remaining existing titles.

While the Company believes its estimates to be reasonable based on available game player information, it may revise such estimates in the future if a titles’ user characteristics change. Any adjustments arising from changes in the estimates of the average playing period for paying users would be applied to the current quarter and prospectively on the basis that such changes are caused by new information that indicates a change in user behavior patterns compared to historical titles. Any changes in the Company’s estimates of the useful life of virtual items in a certain title may result in revenue being recognized on a basis different from prior periods’ and may cause its operating results to fluctuate.

Principal Agent Considerations

The Company evaluated its Digital Storefront and advertising service provider agreements under ASC 606 in order to determine if it is acting as the principal or as an agent when selling virtual items or advertisements within its games. The

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Company primarily uses Digital Storefronts for distributing its smartphone games and for enabling players to purchase virtual items and advertising service providers to serve advertisements within its games. The Company evaluated the following factors to assess whether it controls each specified good or service before that good or service is transferred to the customer:

●

the party responsible for the fulfillment of the virtual items, game related services, or serving of advertisements;

●

the party having the discretion to set pricing with the end-users; and

●

the party having inventory risk before the specified good or service have been transferred to a customer.

Based on the evaluation of the above indicators, the Company determined that it has control of the services before they are transferred to the end-user. Thus, the Company is generally acting as a principal and is the primary obligor to end-users for games distributed through Digital Storefronts and advertisements served through its advertising service providers. Therefore, the Company recognizes revenue related to these arrangements on a gross basis, when the necessary information about the gross amounts or platform fees charged, before any adjustments, are made available by the Digital Storefronts and advertising service providers. In situations where the price paid by the end-user of the advertising service provider is not known, the Company accounts for these transactions on a net basis.

Deferred Platform Commissions and Royalties

Digital Storefronts retain platform commissions and fees on each purchase made by the paying players through the Digital Storefront. The Company is also obligated to pay ongoing licensing fees in the form of royalties related to the games developed based on or significantly incorporating licensed brands, properties or other content, and the Company plans to incorporate additional licensed content in some of its own originally branded games. As revenue from sales to paying players through Digital Storefronts are deferred, the related direct and incremental platform commissions and fees as well as third-party royalties are also deferred on the consolidated balance sheets. The deferred platform commissions and royalties are recognized in the consolidated statements of operations in “Cost of revenue” in the period in which the related sales are recognized as revenue.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and money market funds. The Company considers all investments purchased with original maturities of three months or less from the date of purchase to be cash equivalents. The Company deposits cash and cash equivalents with financial institutions that management believes are of high credit quality. Deposits held with financial institutions often exceed the amount of insurance on these deposits.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and accounts receivable.

The Company derives its accounts receivable from revenue earned from customers located worldwide. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company writes off accounts receivable balances against the allowance when it determines that the amount will not be recovered.

The following table summarizes the revenue from customers or aggregate purchases through Digital Storefronts in excess of 10% of the Company’s revenue:



	Year Ended December 31,
	2019		2018		2017
Apple	54.4	%	54.7	%	54.2	%
Google	33.5	%	31.3	%	30.3	%

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At December 31, 2019, Apple Inc. (“Apple”), Google Inc. (“Google”), and Tapjoy Inc. (“Tapjoy”) accounted for 47.2%, 28.5%, and 17.8%, respectively, of total accounts receivable. At December 31, 2018, Apple, Google and Tapjoy accounted for 40.8%, 30.3%, and 21.1%, respectively, of total accounts receivable. No other customer represented more than 10% of the Company’s total accounts receivable as of these dates.

Fair Value

The Company accounts for fair value in accordance with Accounting Standard Codification 820, Fair Value Measurements and Disclosures (“ASC 820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Foreign Currencies

The functional currency of each of the Company’s wholly owned subsidiaries is either the applicable local currency or the U.S. dollar. In preparing its consolidated financial statements, the Company translates the financial statements of its foreign subsidiaries from their functional currencies, the local currency, into U.S. Dollars. The translation of foreign currencies into U.S. dollars is performed for assets and liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenues and expense accounts using average foreign currency exchange rates during the period. Capital accounts are translated at historical foreign currency exchange rates. Translation gains and losses are included as a component of accumulated other comprehensive income/(loss) within stockholders’ equity. However, if adjustments arise from foreign currency exchange rate changes on transactions denominated in a currency other than the functional currency, any gain or loss associated with the translation of these financial statements would be included in interest and other income/(expense), net within the Company’s consolidated statements of operations. The foreign currency translation adjustments were not material for the year ended December 31, 2019.

Cumulative foreign currency translation adjustments include any gain or loss associated with the translation of a subsidiary’s financial statements when the functional currency of a subsidiary is the local currency. If the Company disposes of any of its subsidiaries, any cumulative translation gains or losses would be realized and recorded in other income (expense) within the Company’s consolidated statement of operations in the period during which the disposal occurs. If the Company determines that there has been a change in the functional currency of a subsidiary from a local currency to the U.S. Dollar, any translation gains or losses arising after the date of change would be included in interest and other income/(expense), net within the Company’s consolidated statement of operations.

Prepaid or Guaranteed Licensor Royalties

The Company’s royalty expenses consist of fees that it pays to content owners for the use of their brands, properties and other licensed content, including trademarks and copyrights, in the development of the Company’s games. Royalty-based obligations are either paid in advance and capitalized on the balance sheet as prepaid royalties or accrued as incurred and subsequently paid. These royalty-based obligations are expensed to cost of revenue at the greater of the revenue derived from the relevant game multiplied by the applicable contractual rate or an effective royalty rate based on expected net product sales.

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The Company’s contracts with some licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate revenue generated from end users. In accordance with Accounting Standard Codification 440-10, Commitments (“ASC 440-10”), the Company recorded a minimum guaranteed royalty liability of $40,150 and $7,304 as of December 31, 2019 and 2018, respectively. The balance is included in accrued royalties and long-term accrued royalties on the Company’s consolidated balance sheet. When no significant performance remains with the licensor, the Company initially records each of these guarantees as an asset and as a liability at the contractual amount. When significant performance remains with the licensor, the Company records royalty payments as an asset when actually paid and as a liability when incurred, rather than upon execution of the contract. The classification of minimum royalty payment obligations between long-term and short-term is determined based on the expected timing of recoupment of earned royalties calculated on projected revenue for the licensed IP games.

Each quarter, the Company evaluates the realization of its prepaid royalties as well as any recognized guarantees not yet paid to determine amounts that it deems unlikely to be realized through product sales. The Company uses estimates of revenue, cash flows and net margins to evaluate the future realization of prepaid royalties, license fees, and guarantees. This evaluation considers multiple factors such as the term of the agreement, forecasted demand, game life cycle status, game development plans, and current and anticipated sales levels, as well as other qualitative factors such as the success of similar games and similar genres on mobile devices published by the Company and its competitors and/or other game platforms (e.g., consoles and personal computers) utilizing the intellectual property. To the extent that this evaluation indicates that the remaining prepaid and guaranteed royalty payments are not recoverable, the Company records an impairment charge to cost of revenue in the period in which impairment is indicated. The Company recorded impairment charges to cost of revenue of $457, $711, and $27,323 related to prepaid guaranteed royalties for certain of its celebrity license agreements, and certain other prepaid royalties during the years ended December 31, 2019, 2018, and 2017, respectively.

Goodwill and Intangible Assets

In accordance with Accounting Standard Codification 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company performs its annual impairment test as of September 30^th each year, at the reporting unit level, which is at the company level as a whole, since it operates in a single reporting segment. The impairment review involves a multiple-step process as follows:

Step — 0 The Company evaluates qualitative factors and overall financial performance to determine whether it is necessary to perform the first step of the two-step goodwill test. This step is referred to as “Step 0.” Step 0 involves, among other qualitative factors, weighing the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. After assessing those various factors, if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity will need to proceed to the first step of the two-step goodwill impairment test.

Step — 1 The Company compares the fair value of each of its reporting units to the carrying value including goodwill of that unit. For each reporting unit where the carrying value, including goodwill, exceeds the unit’s fair value, the Company moves on to step 2. If a unit’s fair value exceeds the carrying value, no further work is performed and no impairment charge is necessary.

Step — 2 The Company performs an allocation of the fair value of the reporting unit to its identifiable tangible and intangible assets (other than goodwill) and liabilities. This allows the Company to derive an implied fair value for the unit’s goodwill. The Company then compares the implied fair value of the reporting unit’s goodwill with the carrying value of the unit’s goodwill. If the carrying amount of the unit’s goodwill is greater than the implied fair value of its goodwill, an impairment charge would be recognized for the excess.

In 2019, 2018, and 2017, the Company did not record any goodwill impairment charges as it was determined that it was more likely than not that the fair values of the reporting units exceeded their respective carrying values.

Purchased intangible assets with finite lives are amortized using the straight-line method over their useful lives

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ranging from three to seven years and are reviewed for impairment in accordance with Accounting Standard Codification 360, Property, Plant and Equipment (“ASC 360”).

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Factors considered important that could result in an impairment review include significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of use of acquired assets, significant negative industry or economic trends, and a significant decline in the Company’s stock price for a sustained period of time. Impairment exists if the carrying amounts of such assets exceed the estimates of future undiscounted cash flows expected to be generated by such assets. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over expected discounted future cash flows, or if applicable, the quoted market price from those assets. The Company has not recorded any such impairment charge during the years presented.

Property and Equipment

The Company states property and equipment at cost less accumulated depreciation and amortization. The Company computes depreciation or amortization using the straight-line method over the estimated useful lives of the respective assets or, in the case of leasehold improvements, the lease term of the respective assets, whichever is shorter. Cost of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

The depreciation and amortization periods for the Company’s property and equipment are as follows:


Computer equipment	Three years
Computer software	Two to Three years
Furniture and fixtures	Three years
Leasehold improvements	Shorter of the estimated useful life or remaining term of lease

Internal Use Software

The Company capitalizes internal use software development costs in accordance with Accounting Standard Codification 350-40, Intangibles-Goodwill and Other-Internal Use Software (“ASC 350-40”) and Accounting Standards Update 2015-05, Cloud Computing Arrangements (“ASU 2015-05”). The Company capitalizes software development costs, including costs incurred to purchase third-party software, beginning when it determines certain factors are present including, among others, that technology exists to achieve the performance requirements and/or buy versus internal development decisions, which the Company equates to the application development stage. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software once it is ready for its intended use. The Company believes the straight-line recognition method best approximates the manner in which the expected benefit will be derived. The Company capitalized certain internal use software costs totaling approximately $1,216, $65, and $924 during the years ended December 31, 2019, 2018, and 2017, respectively. The estimated useful life of costs capitalized is generally three years. During the years ended December 31, 2019, 2018 and 2017, the amortization of capitalized software costs totaled approximately $809, $896, and $1,031, respectively. Capitalized internal use software development costs are included in property and equipment, net.

Research and Development Costs

The Company charges costs related to research, design and development of products to research and development expense as incurred. The types of costs included in research and development expenses include personnel-related expenses such as salaries and benefits related to product development employees, third party development cost, contractor fees, and allocated facilities costs.

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Software Development Costs

The Company applies the principles of Accounting Standard Codification 985-20, Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development for software to be sold, leased or otherwise marketed be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The Company has adopted the “tested working model” approach to establishing technological feasibility for its games. Under this approach, the Company does not consider a game in development to have passed the technological feasibility milestone until the Company has completed a model of the game that contains essentially all the functionality and features of the final game and has tested the model to ensure that it works as expected. To date, the Company has not incurred significant costs between the establishment of technological feasibility and the release of a game for sale; thus, the Company has expensed all software development costs as incurred.

Stock-Based Compensation

The Company applies the fair value provisions of Accounting Standard Codification 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), performance stock options (“PSOs”), and employee stock purchase plan (“ESPP”). The number of PSUs and PSOs earned and eligible to vest is determined based on achievement of specified financial performance measures. The fair value of stock options and PSOs and stock purchase rights granted pursuant to the Company’s equity incentive plans and 2007 Employee Stock Purchase Plan, respectively, is determined using the Black-Scholes valuation model. The determination of fair value is affected by the stock price, as well as assumptions regarding subjective variables such as expected employee exercise behavior and expected stock price volatility over the expected term of the award. Generally, these assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes.

The cost of RSUs and PSUs is determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. Compensation cost for stock options, RSUs and performance-based awards with a single vesting date is amortized ratably over the requisite service period. For performance-based awards that have multiple vesting dates, the compensation cost is recognized ratably over the requisite service period for each tranche, whereby each vesting tranche is treated as a separate award for determining the requisite service period. The compensation cost for performance-based awards may be adjusted over the vesting period based on interim estimates of performance against the pre-set financial performance measures.

Advertising Expenses

The Company expenses the production costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense was $117,979, $95,037, and $88,775 in the years ended December 31, 2019, 2018, and 2017, respectively.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standard Codification 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740, the Company determines deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which it expects the differences to reverse. The Company establishes valuation allowances when necessary to reduce deferred tax assets to the amount it expects to realize.

The Company accounts for uncertain tax positions in accordance with ASC 740, which requires companies to adjust their financial statements to reflect only those tax positions that are more-likely-than-not to be sustained. ASC 740

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prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

Restructuring

The Company accounts for costs associated with employee terminations and other exit activities in accordance with Accounting Standard Codification 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company records employee termination benefits as an operating expense when it communicates the benefit arrangement to the employee and it requires no significant future services, other than a minimum retention period, from the employee to earn the termination benefits.

Comprehensive Income/(Loss)

Comprehensive income/(loss) consists of two components, net income/(loss) and other comprehensive income/(loss). Other comprehensive income/(loss) refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of stockholders’ equity but are excluded from net income/(loss). The Company’s other comprehensive income/(loss) included foreign currency translation adjustments from those subsidiaries not using the U.S. Dollar as their functional currency, and a reclassification to net income/(loss) from the write-off of cumulative translation adjustment.

Business Combinations

The Company applies the accounting standard related to business combinations, Accounting Standard Codification 805, Business Combinations (“ASC 805”). The standard requires:

●

recognition of assets acquired, liabilities assumed, and contingent consideration at their fair value on the acquisition date with subsequent changes recognized in earnings;

●

acquisition-related expenses and restructuring costs to be recognized separately from the business combination and expensed as incurred;

●

in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset until completion or abandonment; and

●

that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes.

The Company accounts for acquisitions of entities or assets that include inputs and processes and have the ability to create outputs as business combinations. The purchase price of the acquisition is allocated to tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, these estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, the Company records adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in its operating results in the period in which the adjustments were determined.

Operating Leases

The Company determines if an arrangement is a lease at inception. Its operating lease agreements are primarily for real estate space and are included within operating lease right of use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets.

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ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, determined as the rate it would have incurred to borrow based on its credit quality at the inception of the lease over a similar term and in the economic environment where the leased asset is located, to calculate the present value of lease payments. ROU assets also exclude lease incentives. Many of the Company’s lease agreements include options to extend the lease, which the Company does not include in the minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

The Company adopted Accounting Standard Codification 842, Leases (“ASC 842”) effective January 1, 2019 using the modified retrospective transition approach and chose to account for the impact of the adoption as of the effective date. The reported results for 2019 reflect the application of ASC 842 guidance while the reported results for 2018 were prepared under the guidance of Accounting Standard Codification 840, Leases (“ASC 840”), which is also referred to herein as "legacy GAAP" or the "previous guidance".

The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company to not reassess under the new standard for prior conclusions about lease identification, lease classification, and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption, and for those leases that qualified, the Company did not recognize ROU assets or lease liabilities, and this included not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for all of its leases.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements and ASU 2018-10, Codification Improvements to Topic 842, Leases. ASU 2016-02 and the subsequent modifications are identified as “ASC 842”. ASC 842 requires lessees to recognize most leases as assets and liabilities on the balance sheet. The Company adopted ASC 842 and its related amendments effective on January 1, 2019 using the modified retrospective transition approach. See Note 9 “Leases” for the required disclosures related to the impact of adopting this standard and a discussion of the Company’s updated policies related to leases.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard provides financial statement preparers with an option to reclassify stranded tax effects within Accumulated Other Comprehensive Loss to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The Company adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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those fiscal years. The Company adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (ASC). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and are effective upon issuance of the guidance. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company adopted this new standard on January 1, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, though early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This guidance adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This guidance clarifies the accounting treatment for implementation, set-up, and other upfront costs incurred in computing arrangements (hosting arrangements) that are service contracts. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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NOTE 2 — NET INCOME/(LOSS) PER SHARE

The Company computes basic net income/(loss) per share by dividing its net income/(loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted net income per share is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, including potential dilutive common stock instruments.



	Year Ended December 31,
	2019		2018		2017
Net income/(loss)	$	8,871	$	(13,199)	$	(97,570)
Shares used to compute net income/(loss) per share:
Weighted average shares used to compute basic net income/(loss) per share		145,838		141,402		135,715
Dilutive potential common shares		11,545		—		—
Weighted average shares used to compute diluted net income/(loss) per share		157,383		141,402		135,715

Basic net income/(loss) per share	$	0.06	$	(0.09)	$	(0.72)
Diluted net income/(loss) per share	$	0.06	$	(0.09)	$	(0.72)

The following equity awards outstanding at the end of each period presented have been excluded from the computation of net income/(loss) per share of common stock for the periods presented because including them would have had an anti-dilutive effect:



	Year Ended December 31,
	2019		2018		2017
Warrants to purchase common stock		1,292		1,600		3,267
Options to purchase common stock		2,303		18,491		16,932
RSUs		659		3,021		5,812
PSOs		2,369		3,512		—
PSUs		38		711		—
ESPP		369		283		376
Total		7,030		27,618		26,387

NOTE 3 — BUSINESS COMBINATIONS / DIVESTITURE

Divestiture of Moscow Studio

On December 31, 2017, the Company entered into the following agreements related to the divestiture of its Moscow-based game development studio (the “Moscow Studio”) through the sale of its wholly-owned UK subsidiary Glu Mobile (Russia) Limited (“GMRL”):

●

Share Purchase Agreement (the “SPA”) between the Company and Saber Interactive (“Saber”);

●

Transitional Services Agreement (the “TSA”) among the Company, Saber and MGL My.com (Cyprus) Limited (“MGL”); and

●

Asset Purchase and License Agreement (the “APLA”) between the Company and MGL.

Pursuant to the SPA, Saber purchased all the issued and outstanding share capital of GMRL. Saber also assumed all obligations under the office lease for the Moscow Studio.

Under the TSA, Saber agreed to transition certain legacy titles from the Moscow Studio to the Company’s Hyderabad studio. Upon successful completion of the transition (i) Saber paid the employees of the Moscow Studio and GMRL bonus payments of $500 in the aggregate and reduced the cash consideration by the amount of the bonus, and (ii) certain employees of the Moscow studio and GMRL had the vesting of an aggregate of approximately 150 shares subject to equity awards accelerated.

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Pursuant to the APLA, the Company sold four mobile games (and related intellectual property and other rights) developed by the Moscow Studio: (i) Last Day Alive, (ii) Heroes of Destiny, (iii) a game that was in development featuring a male celebrity, and (iv) Furiosa. The Company transferred all rights and obligations under certain contracts related to the game featuring a male celebrity, including, but not limited to, the obligation to pay the remaining approximately $1,500 in minimum guarantee and other payments under these contracts. The Company also agreed to provide MGL with a non-exclusive, perpetual, worldwide, irrevocable, non-transferrable, royalty-free license to certain development tools and technology necessary to use, develop, publish, exploit and sell the purchased games and that MGL and/or its affiliates may use for the development of other of its products.

The total cash consideration under the SPA and APLA was $3,226, of which $1,726 was received in January 2018. The remaining $1,500, net of a transition bonus payment of $500, was received in April 2018 upon completion of the transition of the legacy titles from the Moscow Studio to the Company’s Hyderabad studio.

In connection with the divestiture, the Company recorded a loss of $6,459 in the year ended December 31, 2017, which is included in other expense on the consolidated statement of operations. This was primarily comprised of a $10,000 charge related to the assignment of one of the contracts related to the male celebrity, a $1,220 charge related to the write-off of goodwill associated with the Moscow studio and a $479 charge related to the write-off of net assets associated with the Moscow studio. These charges were partially offset by $3,226 in cash paid by Saber and MGL, $1,500 related to the assumption of obligations by MGL under the contract related to the male celebrity, and $514 related to the transition services provided by Saber.

In connection with the activities related to the transition under the TSA, the Company recorded the following expenses in the year ended December 31, 2018:

●

$500 related to bonuses that became due to the employees of the Moscow Studio and GMRL;

●

$514 related to the vesting of 147 shares subject to equity awards held by certain employees of the Moscow Studio and GMRL; and

●

$515 related to the amortization of transition services assets that were capitalized as part of the transaction consideration.

The Company’s divestiture of the Moscow Studio was part of the Company’s efforts to consolidate its studio locations, focusing on a new scaled creative center in San Francisco and a low cost, repeatable location in Hyderabad, India. This divestiture was not presented in discontinued operations in the consolidated statement of operations, because it did not represent a strategic shift in the Company’s business and is not expected to have a significant effect on the Company’s operations or financial results, as the Company continued operating similar businesses after the divestiture.

Dairy Free Games, Inc.

On August 1, 2017 (the “Merger Date”), the Company completed the acquisition of Dairy Free Games, Inc. (“Dairy Free”) by acquiring 100% of its equity pursuant to an Agreement and Plan of Merger (the “Dairy Free Merger Agreement”) by and among the Company, Winterfell Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company, and Dairy Free. Dairy Free, which was based in California, was building a mobile real-time strategy game. The Company acquired Dairy Free in order to expand its game offerings on smartphones and tablets.

Pursuant to the terms of the Dairy Free Merger Agreement, the Company paid $2,000 in cash for the outstanding common stock of Dairy Free. The Company had previously acquired from Dairy Free shares of its series A preferred stock (“Series A Preferred Stock”), as further described below, for $2,000. The fair value of the Series A Preferred Stock as of the Merger Date was determined to be equal to the original investment amount of $2,000. The transaction was accounted for as a business combination under the acquisition method of accounting.

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The Company allocated the purchase price to the individually identifiable assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The excess of the purchase price over those fair values was recorded as goodwill. The determination of these fair values was based on estimates and assumptions requiring significant judgments. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition:


Assets acquired:
Cash and cash equivalents	$	341
Intangible assets:
In-process research and development		2,700
Other current assets		32
Goodwill		573
Total assets		3,646

Liabilities assumed:
Deferred tax liability		(294)
Other accrued liabilities		(2)
Total liabilities assumed		(296)
Net acquired assets	$	3,350

In-process research and development included in the table above was related to a game that Dairy Free was in process of developing as of the valuation date. During the year ended December 31, 2018, the Company decided not to proceed with further development of that game and recorded an impairment charge of $2,700 for the related in-process research and development in Impairment and amortization of intangible assets expense in its consolidated statements of operations. Pursuant to ASC 805, the Company incurred and expensed a total of $611 in acquisition and transitional costs associated with the acquisition of Dairy Free during the year ended December 31, 2017. These costs consisted of $269 of research and development expense and $342 of general and administrative expense.

The Company allocated the residual value of $573 to goodwill. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Dairy Free. Goodwill will not be amortized but will be tested for impairment at least annually. Goodwill created as a result of the Dairy Free acquisition is not deductible for tax purposes.

Valuation Methodology

The fair value of the in-process research and development acquired from Dairy Free was determined using the replacement cost method under the cost approach. The replacement cost was estimated based on the historical research and development expenses incurred, adjusted for an estimated developer’s profit and rate of return in accordance with accepted valuation methodologies.

Pro Forma Financial Information

The results of operations for Dairy Free and the estimated fair market values of the assets acquired and liabilities assumed have been included in the Company’s consolidated financial statements since the date of acquisition. For the year ended December 31, 2017 and since the date of its acquisition, Dairy Free had no impact on the Company’s gross revenue and increased the Company’s net losses by $1,081. The unaudited pro forma financial information below includes the business combination accounting effects of the acquisition, including amortization charges from acquired intangible assets. The pro forma financial information presented below is for informational purposes only, and is subject to a number of estimates, assumptions and other uncertainties.

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		Year ended December 31,
		(unaudited)
		2017
Total pro forma revenue	$	286,827
Pro forma net loss		(98,450)
Pro forma net loss per share - basic		(0.73)
Pro forma net loss per share - diluted		(0.73)

NOTE 4 — FAIR VALUE MEASUREMENTS

As of December 31, 2019, the Company’s financial assets and financial liabilities are presented below at fair value and were classified within the fair value hierarchy as follows:


	Level 1		Level 2		Level 3		December 31, 2019
Financial Assets
Cash and cash equivalents	$	127,053	$	—	$	—	$	127,053
Other investments		—		—		1,565		1,565
Total financial assets	$	127,053	$	—	$	1,565	$	128,618

As of December 31, 2018, the Company’s financial assets and financial liabilities are presented below at fair value and were classified within the fair value hierarchy as follows:


	Level 1		Level 2		Level 3		December 31, 2018
Financial Assets
Cash and cash equivalents	$	97,834	$	—	$	—	$	97,834
Restricted cash		110		—		—		110
Other investments		—		—		1,410		1,410
Total financial assets	$	97,944	$	—	$	1,410	$	99,354

The Company’s cash and cash equivalents, which were held in operating bank accounts and money market funds, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. In addition, the Company’s restricted cash is classified within Level 1 of the fair value hierarchy. The carrying value of accounts receivable and payables approximates fair value due to the short time to expected payment or receipt of cash. The carrying value of other investments approximates fair value, as there have been no events or changes in circumstances that would have had a significant effect on the fair value of these investments at December 31, 2019.

NOTE 5 – REVENUE FROM CONTRACTS WITH CUSTOMERS

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts not yet substantially completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting policies and practices. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an $8,826 adjustment to accumulated deficit as of the adoption date.

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Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the year ended December 31, 2019:


	Year Ended
	December 31,
	2019		2018		2017
In-App Purchases (over-time revenue recognition)	$	360,598	$	316,157	$	244,314
Advertisements and offers (point-in-time revenue recognition)		50,728		50,121		41,154
Other (point-in-time revenue recognition)		55		283		1,359
Total revenue	$	411,381	$	366,561	$	286,827

The Company reports as a single segment – mobile games. In the disaggregation above, the Company categorizes revenue by type, and by over-time or point-in-time recognition.

Contract Balances

The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers:


	December 31,
	2019		2018
Receivables, which are included in accounts receivable, net	$	29,304	$	27,325
Contract liabilities, which are included in deferred revenue	$	97,629	$	85,736

The Company receives payments from customers based on billing terms established in the Company’s contracts. Contract asset relates to the Company’s right to consideration for its completed performance under the contract. At December 31, 2019 and December 31, 2018, there were no contract assets recorded in the Company’s consolidated balance sheet. Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as the Company performs under the contract. The Company had $85,736 in deferred revenue as of December 31, 2018, which was all earned in the year ended December 31, 2019. The Company had $67,788 in deferred revenue as of December 31, 2017, which was all earned in the year ended December 31, 2018.

NOTE 6 — BALANCE SHEET COMPONENTS

Accounts Receivable, Net


	December 31,
	2019		2018
Accounts receivable	$	29,304	$	27,325
Less: Allowance for doubtful accounts		—		—
Accounts receivable, net	$	29,304	$	27,325

Accounts receivable include amounts billed and unbilled as of the respective balance sheet dates, but net of platform commissions to the Company’s Digital Storefronts.

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Changes in the Company’s allowance for doubtful accounts were as follows:



	Balance at						Balance at
	Beginning of						End of
Description	Year		Additions		Release of Allowance		Year
Year ended December 31, 2019	$	-	$	-	$	-	$	-
Year ended December 31, 2018	$	837	$	-	$	(837)	$	-
Year ended December 31, 2017	$	837	$	-	$	-	$	837

The Company had no significant write-offs or recoveries during the years ended December 31, 2019, 2018, and 2017.

Property and Equipment, Net


	December 31,
	2019		2018
Computer equipment	$	9,079	$	7,281
Furniture and fixtures		2,201		2,076
Software		3,612		3,394
Leasehold improvements		16,121		11,230
Total		31,013		23,981
Less: Accumulated depreciation and amortization		(13,370)		(10,093)
Property and equipment, net	$	17,643	$	13,888

Depreciation for the years ended December 31, 2019, 2018, and 2017 was $4,225, $3,855, and $3,195, respectively.

NOTE 7 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows:


	Year Ended December 31,
	2019		2018		2017
Cash and cash equivalents at beginning of period	$	97,834	$	63,764	$	102,102
Restricted cash at beginning of the period		110		602		1,312
Cash, cash equivalents and restricted cash at beginning of period	$	97,944	$	64,366	$	103,414
Cash and cash equivalents at end of period		127,053		97,834		63,764
Restricted cash at end of the period		—		110		602
Cash, cash equivalents and restricted cash at end of period	$	127,053	$	97,944	$	64,366

The Company did not have restricted cash as of December 31, 2019. The Company’s restricted cash is included in current assets as of December 31, 2018, and 2017, respectively.

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NOTE 8 — GOODWILL AND INTANGIBLE ASSETS

Intangible Assets

The Company’s intangible assets were acquired primarily in various acquisitions as well as in connection with the purchase of certain trademarks, brand assets and licensed content. The carrying amounts and accumulated amortization expense of the acquired intangible assets at December 31, 2019 and December 31, 2018 were as follows:


		December 31, 2019						December 31, 2018
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful	Carrying		Amortization		Carrying		Carrying		Amortization		Carrying
	Life	Value		Expense		Value		Value		Expense		Value
Intangible assets amortized to cost of revenue:
Titles, content and technology	3 - 5 yrs	$	21,117	$	(16,359)	$	4,758	$	21,117	$	(12,203)	$	8,914
Customer contracts and related relationships	5 yrs		700		(700)		—		700		(648)		52
Trademarks	7 yrs		5,000		(5,000)		—		5,000		(4,821)		179
		$	26,817	$	(22,059)	$	4,758	$	26,817	$	(17,672)	$	9,145

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximate the pattern in which the economic benefits of the intangible assets are realized. The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenue.

During the year ended December 31, 2018, the Company decided not to proceed with further development of one of its games and recorded an impairment charge of $2,700 for the related in-process research and development in Impairment and amortization of intangible assets expense in its consolidated statement of operations.

During the years ended December 31, 2019, 2018 and 2017, the Company recorded amortization and impairment expense in the amounts of $4,387, $9,119 and $10,331, respectively, in cost of revenue. No amortization expense was recorded in operating expenses for the years ended December 31, 2019, 2018, and 2017.

As of December 31, 2019, the total expected future amortization related to intangible assets was as follows:


	Amortization
	to Be Included in
	Cost of
Year Ending December 31,	Revenue
2020	$	3,258
2021		1,500
Total intangible assets	$	4,758

Goodwill

The Company had $116,227 in goodwill as of December 31, 2019 and December 31, 2018, respectively.

During the third quarters of fiscal 2019 and 2018, the Company performed a “Step 0” qualitative assessment for its reporting unit. Based on the assessment, the Company concluded that it was more likely than not that the fair value of the reporting unit was greater than its carrying amount, and as a result, did not proceed to further impairment testing. Accordingly, the Company did not recognize an impairment of goodwill during the years ended December 31, 2019 and December 31, 2018.

NOTE 9 — LEASES

The Company currently leases real estate space under non-cancelable operating lease agreements for its corporate headquarters in San Francisco, California and its operations in Toronto, Canada, Hyderabad, India, Foster City, California, and Burlingame, California. Additionally, the Company leases office space in Long Beach, California which it

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has sub-leased as it no longer has business operations in that location. These operating leases have remaining lease terms ranging from 3 months to 7.92 years, some of which include the option to extend the lease, with the longest extension option being 6 years.

Certain of the Company’s lease agreements contain lease components (for example, fixed payments such as rent) and non-lease components such as common-area maintenance costs. Both of these types of provisions are accounted for as a single lease component. For such arrangements, there may be a variability in future lease payments as the amount of the non-lease components is typically revised from one period to the next. These variable lease payments, which are primarily comprised of common-area maintenance, utilities, and real estate taxes that are passed on from the lessor in proportion to the space leased by the Company within the entire building or building complex, are recognized in the period in which the obligation for those payments is incurred.

The Company does not include any of its renewal options when calculating its lease liability as the Company is not reasonably certain whether it will exercise these renewal options at this time. The weighted-average remaining non-cancelable lease term for the Company’s operating leases was 7.55 years for the year ended December 31, 2019. The weighted-average discount rate was 6.7% for the year ended December 31, 2019. Rent expense for the year ended December 31, 2019, 2018, and 2017 was $5,311, $5,759, and $4,472, respectively.

Adoption of the lease standard had a material impact on the Company’s consolidated balance sheets. See the table below for the impact of adoption of the lease standard on the Company’s consolidated balance sheet as of January 1, 2019:


	As Previously Reported December 31, 2018		New Lease Standard Adjustment		As Adjusted January 1, 2019
Operating lease right of use assets	$	—		28,345	$	28,345
Short-term operating lease liabilities		—		3,732		3,732
Long-term operating lease liabilities		—		30,197		30,197
Deferred rent payable*	$	5,284		(5,284)	$	—

* As of December 31, 2018, $122 and $5,162 of Deferred rent payable is included within the Accounts payable and Other long-term liabilities line items on the consolidated balance sheet, respectively.

The future minimum lease payments to be paid under noncancelable leases in effect at December 31, 2019, are as follows:


	Operating
Year Ending December 31,	Leases
2020		4,587
2021		6,999
2022		6,927
2023		6,964
2024 and thereafter		27,667
Total lease payments	$	53,144
Less: imputed interest		(12,265)
Total	$	40,879

Supplemental information related to the Company’s leases for the year ended December 31, 2019 is as follows:


	Year Ended
	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,832


	Year Ended
	December 31, 2019
Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	11,231

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NOTE 10 — COMMITMENTS AND CONTINGENCIES

Minimum Guaranteed Royalties and Developer Commitments

The Company has entered into license and publishing agreements with various celebrities, athletes, sports and entertainment organizations, and other well-known brands and properties to develop and publish games for mobile devices. Pursuant to some of these agreements, the Company is required to make minimum guaranteed royalty payments regardless of revenue generated by the applicable game, which may not be dependent on any deliverables. The significant majority of these minimum guaranteed royalty payments are recoupable against future royalty obligations that would otherwise become payable, or in certain circumstances, where not recoupable, are capitalized and amortized over the lesser of (1) the estimated life of the title incorporating licensed content or (2) the term of the license agreement.

At December 31, 2019, future unpaid minimum guaranteed royalty commitments were as follows:



	Future
	Minimum
	Guarantee
	Commitments
2020	$	11,540
2021		10,160
2022		6,150
2023		6,150
2024		6,150
	$	40,150

The amounts represented in the table above reflect the Company’s minimum cash obligations for the respective calendar years, but do not necessarily represent the periods in which they will be expensed in the Company’s consolidated financial statements.

Licensor commitments include $40,150 of commitments due to licensors that have been recorded in current and long-term liabilities and a corresponding amount in current and long-term assets because payment is not contingent upon performance by the licensor. The classification of commitments between long-term and short-term is determined based on the timing of recoupment of earned royalties calculated on projected revenue for the licensed intellectual property games.

Income Taxes

As of December 31, 2019, unrecognized tax benefits have been netted against deferred tax assets and potential interest and penalties are classified within “other long-term liabilities” on the Company’s consolidated balance sheets.

Indemnification Arrangements

The Company has entered into agreements under which it indemnifies each of its officers and directors during his or her lifetime for certain events or occurrences while the officer or director is or was serving at the Company’s request in that capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. Accordingly, the Company had recorded no liabilities for these agreements as of December 31, 2019, and 2018.

In the ordinary course of its business, the Company includes standard indemnification provisions in most of its commercial agreements with Digital Storefronts and licensors. Pursuant to these provisions, the Company generally indemnifies these parties for losses suffered or incurred in connection with its games, including as a result of intellectual

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property infringement, viruses, worms and other malicious software, and legal or regulatory violations. The term of these indemnity provisions is generally perpetual after execution of the corresponding license agreement, and the maximum potential amount of future payments the Company could be required to make under these provisions is often unlimited. To date, the Company has not incurred costs to defend lawsuits or settle indemnified claims of these types. As a result, the Company believes the estimated fair value of these indemnity provisions is minimal. Accordingly, the Company had recorded no liabilities for these provisions as of December 31, 2019 and 2018.

Contingencies

From time to time, the Company is subject to various claims, complaints and legal actions in the normal course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company’s estimate of losses is developed in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed reasonably probable and the amount can be reasonably estimated. The Company further determines whether an estimated loss from a contingency should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosure will include an estimate of the additional loss or range of loss or will state that an estimate cannot be made.

On March 14, 2018, Jeffrey Tseng, the former Chief Executive Officer of Crowdstar, filed a complaint in the Superior Court of the State of California for the County of Santa Clara against Time Warner Inc., Rachel Lam, Intel Capital Corporation, Middlefield Ventures Inc. and Jose Blanc (collectively, the “Non-Glu Defendants”), the Company and additional yet-to-be-named defendants. The complaint alleged (i) breach of fiduciary duty by the Non-Glu Defendants, (ii) aiding and abetting breach of fiduciary duty by the Company and (iii) intentional interference with contract, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage and unfair competition by each of the defendants, in each case relating to circumstances arising from the Company’s acquisition of Crowdstar and the events leading up to the acquisition. Mr. Tseng was seeking compensatory damages and exemplary damages, each in an amount to be determined at trial, along with costs of suit, reasonable attorneys’ fees and such other relief as the Court may deem proper. The Company and the Non-Glu Defendants filed demurrers in response to Mr. Tseng’s complaint on August 17, 2018, Mr. Tseng filed responses to these demurrers on September 17, 2018, and the Company and the Non-Glu Defendants filed reply briefs in support of their demurrers on October 15, 2018. A hearing with respect to the demurrers was held on November 30, 2018. On January 24, 2019, the judge issued an order sustaining the demurrers on all six claims and gave Mr. Tseng 10 days’ leave to amend his complaint. On March 4, 2019, the Company, the Non-Glu Defendants and Mr. Tseng entered into a settlement agreement pursuant to which Mr. Tseng, on one hand, and the Company and the Non-Glu Defendants, on the other hand, provided mutual releases of claims related to the subject matter of Mr. Tseng’s lawsuit and Mr. Tseng agreed to dismiss his lawsuit with prejudice. The Company did not pay any amounts to Mr. Tseng in settlement of this matter. Mr. Tseng dismissed his lawsuit with prejudice on March 6, 2019 and, accordingly, the Company considers this matter to be resolved.

The Company does not believe it is party to any currently pending litigation, the outcome of which is reasonably possible to have a material adverse effect on its operations, financial position or liquidity. However, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, potential negative publicity, diversion of management resources and other factors.

NOTE 11 — STOCKHOLDERS’ EQUITY

Common Stock

At December 31, 2019, the Company was authorized to issue 250,000 shares of common stock. As of December 31, 2019, the Company had reserved 39,468 shares for future issuance under its stock plans and outstanding warrants.

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Preferred Stock

At December 31, 2019, the Company was authorized to issue 5,000 shares of preferred stock.

Warrants to Purchase Common Stock

Celebrity Warrants

During 2014 and 2015, the Company issued warrants to celebrity licensors, and entities affiliated with one of the celebrity licensors, to purchase up to an aggregate of 1,600 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 vested 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 from September 2017. With respect to warrants covering 500 shares issued in 2014, such warrants vested in equal monthly installments over 60 months term of the license agreement with the applicable celebrity, subject to full acceleration of vesting under specified circumstances, as stipulated in such license agreement. One of the acceleration conditions for these warrants was satisfied in April 2017 which resulted in full vesting of the remaining warrants. With respect to the remaining Celebrity Warrants covering 100 shares issued in 2015, such warrants vest in equal monthly installments over 60 months term of the license agreement with the applicable celebrity, subject to full acceleration of vesting under specified circumstances, as stipulated in such license agreement. The warrants were fully vested as one of the acceleration conditions for these warrants had been satisfied.

As of December 31, 2019, Celebrity Warrants covering 1,600 shares of the Company’s common stock were outstanding. These warrants have a weighted average exercise price of $4.61 per share and an average contractual term of 5.44 years.

During the years ended December 31, 2019, 2018 and 2017, the Company recorded $0, $1,046 and $569, respectively, of non-cash warrant related expense in cost of revenue as the mobile games featuring these celebrities licensors were not expected to generate meaningful revenue over their 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,
	2019		2018		2017

Dividend yield	—	%	—	%	—	%
Risk-free interest rate	—	%	2.53	%	1.65	%
Expected volatility	—	%	56.73	%	51.81	%
Expected term (in years)	—		3.51		3.52

During the years ended December 31, 2019, and 2018, warrant holders did not exercise warrants to purchase shares of the Company’s stock. During the year ended December 31, 2017, warrant holders exercised warrants to purchase 1,000 shares of the Company’s common stock, and the Company received gross proceeds of $3,000 in connection with these exercises.

NOTE 12 — STOCK OPTION AND OTHER BENEFIT PLANS

2007 Equity Incentive Plan

In 2007, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan permits the Company to grant stock options, RSUs, PSUs, PSOs and other stock-based awards to employees, non-employee directors and consultants.

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In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved, the Third Amended and Restated 2007 Equity Incentive Plan (the “Third Amended 2007 Plan”). The Third Amended 2007 Plan includes an increase of 8,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan. It also includes (i) a minimum vesting requirement, pursuant to which each share that is subject to a stock-based award may not vest prior to the first anniversary of the date of grant of such stock-based award (subject to a carve-out of 5% of the shares reserved for issuance under the plan) and (ii) a limitation on the value of stock-based awards that may be granted to any non-employee director in any calendar year.

In April 2018, the Company’s Board of Directors approved, and in June 2018, the Company’s stockholders approved, the Fourth Amended and Restated 2007 Equity Incentive Plan (the “Fourth Amended 2007 Plan”). The Fourth Amended 2007 Plan includes an increase of 10,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan. It also removed the limitation on the number of shares that can be issued in any calendar year to a participant.

In April 2019, the Company’s Board of Directors approved, and in June 2019, the Company’s stockholders approved, the fifth Amended and Restated 2007 Equity Incentive Plan (the “Fifth Amended 2007 Plan”). The Fifth Amended 2007 Plan includes an increase of 4,600 shares in the aggregate number of shares of common stock authorized for issuance under the plan.

The Company may grant options under the 2007 Plan at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by its Board of Directors, provided, however, that (i) the exercise price of an incentive stock option (“ISO”) or non-qualified stock options (“NSO”) may not be less than 100% or 85%, respectively, of the estimated fair value of the underlying shares of common stock on the grant date, and (ii) the exercise price of an ISO or NSO granted to a 10% stockholder may not be less than 110% of the estimated fair value of the shares on the grant date. The fair value of the Company’s common stock is determined by the last sale price of such stock on the Nasdaq Global Select Market on the date of determination. The stock options granted to employees generally vest with respect to 25% of the underlying shares one year from the vesting commencement date and with respect to an additional 1/48 of the underlying shares per month thereafter. Stock options granted during 2007 before October 25, 2007 and after June 4, 2015 have a contractual term of ten years and stock options granted on or after October 25, 2007 and before June 4, 2015 have a contractual term of six years.

As of December 31, 2019, 2,686 shares were available for future grants under the Fifth Amended 2007 Plan.

Performance-based equity awards

In 2017, the Company revised its executive compensation program to emphasize a pay-for-performance culture by (1) eliminating annual cash bonus plans for the Company’s C-suite executives and corporate vice presidents and eliminating 50% of the annual cash bonus opportunity for the Company’s creative leaders for 2018 and replacing these executives’ respective annual cash bonus opportunity with PSOs and (2) having a significant portion of each of these executives’ annual equity award be comprised of either PSOs and PSUs in addition to standard time vesting stock options.

In 2018, the Company determined to continue to emphasize a pay-for-performance culture by (1) eliminating cash bonuses for C-Suite members for 2019 and replacing their cash bonus opportunity with PSOs and eliminating 50% of the annual cash bonus opportunity for the Company’s creative leaders and replacing their cash bonus opportunity with PSUs; (2) having a significant portion of C-Suite members’ annual equity award be comprised of PSOs in addition to standard time vesting stock options; (3) having a significant portion of corporate vice presidents’ annual equity award be comprised of PSUs in addition to standard time vesting stock options; and (4) having each creative leader’s annual equity award be comprised solely of PSUs.

In 2019, the Company again determined to continue to emphasize a pay-for-performance culture by (1) eliminating cash bonuses for C-Suite members and certain other executives for 2020 and replacing their cash bonus opportunity with

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PSUs and (2) having a significant portion of each executive’s annual equity award be comprised of PSUs in addition to standard time vesting RSUs.

In addition to the performance-based equity awards described above, the Company also awarded PSUs in 2019 to certain key non-executive employees in the Company. These performance-based awards are subject to the achievement of specified annual performance goals. They become eligible to vest only if the applicable performance goals are achieved and will vest only if the grantee remains employed with the Company through each applicable vesting date. The fair value of these awards is estimated on the date of grant. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized and any previously recognized expense is reversed. The expected cost is based on the awards that are probable to vest and is recognized over the service period.

The performance-based awards issued in lieu of cash bonuses in 2017, 2018 and 2019 will vest, if the applicable performance goals are achieved, on February 15, 2019, February 15, 2020 and February 15, 2021, respectively. The performance-based awards issued as part of annual equity awards in 2017, 2018 and 2019 will vest, if the applicable performance goals are achieved, ratably in three annual tranches starting from February 15, 2019 and February 15, 2020 and February 15, 2021 respectively. The number of shares that may vest under these programs ranges from 0% to 200% of the target amounts and will be determined based on the achievement of specified annual performance goals. The PSUs awarded to certain key non-executive employees in 2019 will vest in June 2020 and December 2020 based on the achievement of specified annual performance goals.

The awards under these programs were granted under the 2007 Plan.

2007 Employee Stock Purchase Plan

In 2007, the Company’s Board of Directors adopted and the Company’s stockholders approved, the 2007 Employee Stock Purchase Plan (the “2007 Purchase Plan”). The Company initially reserved 667 shares of its common stock for issuance under the 2007 Purchase Plan. On each January 1 for the first eight calendar years after the first offering date, the aggregate number of shares of the Company’s common stock reserved for issuance under the 2007 Purchase Plan was increased automatically by the number of shares equal to 1% of the total number of outstanding shares of the Company’s common stock on the immediately preceding December 31, provided that the Board of Directors had the power to reduce the amount of the increase in any particular year and provided further that the aggregate number of shares issued over the term of this plan may not exceed 5,333. The 2007 Purchase Plan permits eligible employees, including employees of certain of the Company’s subsidiaries, to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period or after a purchase period ends.

In January 2009, the 2007 Purchase Plan was amended to provide that the Compensation Committee of the Company’s Board of Directors may fix a maximum number of shares that may be purchased in the aggregate by all participants during any single offering period (the “Maximum Offering Period Share Amount”). The Compensation Committee may raise or lower the Maximum Offering Period Share Amount. The Compensation Committee established the Maximum Offering Period Share Amount of 500 shares for the offering period that commenced on February 15, 2009 and ended on August 14, 2009, and a Maximum Offering Period Share Amount of 200 shares for each offering period thereafter. In February 2016, the Committee increased the Maximum Offering Period Share Amount for the offering period that started on February 22, 2016 and for each subsequent offering period to 450 shares.

In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved the Amended and Restated 2007 Employee Stock Purchase Plan (the “Amended 2007 Purchase Plan”). The Amended 2007 Purchase Plan includes an increase of 4,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan and removal of the expiration date of the plan.

As of December 31, 2019, 2,787 shares were available for issuance under the 2007 Purchase Plan.

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2018 Equity Inducement Plan

In April 2018, the Compensation Committee of the Company’s Board of Directors adopted the 2018 Equity Inducement Plan (the “2018 Plan”) to replace the Inducement Plan. The Company did not seek stockholder approval for the 2018 Plan. As such, awards under the Inducement Plan will be granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company may grant NSOs under the Inducement Plan at prices less than 100% of the fair value of the shares on the date of grant, at the discretion of its Board of Directors. The fair value of the Company’s common stock is determined by the last sale price of such stock on the Nasdaq Global Select Market on the date of determination. The Company initially reserved 400 shares of common stock for issuance under the 2018 Plan.

As of December 31, 2019, 156 shares were reserved for future grants under the 2018 Inducement Plan.

RSU Activity

A summary of the Company’s RSU activity is as follows:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2016	8,224	$	3.33
Granted	2,360	$	2.31
Vested	(2,863)	$	3.45
Forfeited	(1,909)	$	3.01
Awarded and unvested, December 31, 2017	5,812	$	2.96
Granted	278	$	5.90
Vested	(2,648)	$	3.24
Forfeited	(421)	$	2.71
Awarded and unvested, December 31, 2018	3,021	$	3.01
Granted	2,936	$	6.84
Vested	(1,688)	$	3.27
Forfeited	(318)	$	4.17
Awarded and unvested, December 31, 2019	3,951	$	5.66	1.51	$	23,905

PSU Activity

The following table summarizes the Company’s PSU activity:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2016	-	$	-
Granted	661	$	3.59
Awarded and unvested, December 31, 2017	661	$	3.59
Granted	2,909	$	5.85
Forfeited	(40)	$	4.03
Awarded and unvested, December 31, 2018	3,530	$	5.45
Granted	2,780	$	6.46
Vested	(700)	$	4.59
Forfeited	(193)	$	6.14
Awarded and unvested, December 31, 2019	5,417	$	6.06	1.32	$	32,769

PSUs expected to vest at December 31, 2019	276	$	3.61	0.13	$	1,667

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PSO Activity

The following table summarizes the Company’s PSO activity:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Shares	Exercise		Contractual		Intrinsic
	Outstanding	Price		Term (Years)		Value
Balance as of December 31, 2016	-	$	-
Granted	4,246	$	3.60
Forfeited	(76)	$	3.97
Balance as of December 31, 2017	4,170	$	3.59
Granted	2,737	$	5.87
Forfeited	(151)	$	3.59
Balance as of December 31, 2018	6,756	$	4.51
Exercised	(173)	$	3.59
Balance as of December 31, 2019	6,583	$	4.54	8.15	$	10,765

PSOs expected to vest at December 31, 2019	409	$	3.60	7.85	$	1,002
PSO exercisable at December 31, 2019	3,339	$	3.60	7.80	$	8,188

Stock Option Activity

The following table summarizes the Company’s stock option activity:


	Options Outstanding
		Weighted		Weighted
	Number	Average		Average Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value
Balances at December 31, 2016	15,813	$	2.74
Options granted	5,346	$	3.10
Options canceled	(2,716)	$	3.16
Options exercised	(1,511)	$	2.73
Balances at December 31, 2017	16,932	$	2.78
Options granted	6,092	$	4.82
Options canceled	(1,213)	$	3.54
Options exercised	(3,320)	$	2.88
Balances at December 31, 2018	18,491	$	3.39
Options granted	815	$	7.58
Options canceled	(1,219)	$	4.73
Options exercised	(1,799)	$	2.81
Balances at December 31, 2019	16,288	$	3.56	7.08	$	42,165

Options exercisable at December 31, 2019	9,846	$	3.21	6.67	$	28,331

The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on the difference between the original exercise price of the options and the fair value of the Company’s common stock of $6.05 per share at December 31, 2019. The total intrinsic value of awards exercised during the years ended December 31, 2019, 2018 and 2017 was $7,806, $10,957, and $1,732, respectively.

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Stock-Based Compensation

The Company recognizes stock-based compensation expense in accordance with ASC 718, and has estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following tables.


Performance Stock Options

	Year Ended December 31,
	2019		2018		2017
Dividend yield	—	%	—	%	—	%
Risk-free interest rate	—	%	2.89	%	2.07	%
Expected volatility	—	%	60.2	%	63.3	%
Expected term (years)	—		5.98		5.81

Stock Options

	Year Ended December 31,
	2019		2018		2017
Dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.88	%	2.63	%	1.76	%
Expected volatility	57.2	%	57.9	%	57.8	%
Expected term (years)	4.00		4.00		4.00

The expected term of stock options gave consideration to early exercises, post-vesting cancellations and the options’ contractual term ranging from 6 to 10 years. The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for the PSOs as the Company has not granted such awards in the past. As a result, the Company used the simplified method to calculate the expected term estimate based on the vesting and contractual terms of the PSOs. Under the simplified method, the expected term is equal to the average of the stock-based awards vesting period and their contractual term. The PSOs have a contractual term of 10 years. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury Constant Maturity Rate as of the date of grant. The Company based its expected volatility on its own historical volatility for the year ended December 31, 2019, 2018, and 2017, respectively. The weighted-average fair value of stock options granted during the year ended December 31, 2019, 2018 and 2017 was $3.44, $2.25 and $1.42 per share, respectively. The Company did not grant any PSOs in the year ended December 31, 2019. The weighted average fair value of the PSOs granted during the year ended December 31, 2018 and 2017 was $3.38 and $2.09, respectively.

The cost of RSUs and PSUs are determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost for RSUs is amortized on a straight-line basis over the requisite service period. Compensation cost for PSUs is amortized on an accelerated attribution basis over the requisite service period of the award.

The following table summarizes the consolidated stock-based compensation expense by line items in the consolidated statement of operations:



	Year Ended December 31,
	2019		2018		2017
Research and development	$	10,466	$	12,807	$	6,460
Sales and marketing		1,700		2,795		1,289
General and administrative		5,217		8,990		7,314
Total stock-based compensation expense	$	17,383	$	24,592	$	15,063

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The following table summarizes total compensation expense related to unvested awards not yet recognized as of December 31, 2019:


	Unrecognized Compensation
	Expense for Unvested
	Awards
Stock options	$	11,214
RSUs		19,947
PSUs (1)		7,609
PSOs (1)		99
Total unrecognized compensation expense	$	38,869

(1)	The unrecognized compensation expense for PSOs and PSUs vesting in FY2022 and FY2023 is not included in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

The unrecognized compensation expense related to stock options and RSUs will be recognized over a weighted average period of 1.80 years and 1.51 years, respectively. The unrecognized stock compensation expense related to unvested PSUs and PSOs will be recognized over a weighted average period of 0.95 and 0.13 years, respectively.

Stock-based compensation expense in the year ended December 31, 2019, was approximately $17,383 (comprising approximately $7,043 related to stock options, $2,421 related to performance-based awards, $6,559 related to RSUs and $1,360 related to the 2007 Purchase Plan).

Stock-based compensation expense in the year ended December 31, 2018, was approximately $24,592 (comprising approximately $6,386 related to stock options, $9,195 related to performance-based awards, $8,084 related to RSUs and $927 related to the 2007 Purchase Plan).

Stock-based compensation expense in the year ended December 31, 2017, was approximately $15,063 (comprising approximately $3,585 related to stock options, $790 related to performance-based awards, $10,127 related to RSUs and $561 related to the 2007 Purchase Plan).

Cash proceeds, net of taxes, from option exercises were $3,305, $5,643 and $2,564 for the years ended December 31, 2019, 2018 and 2017, respectively. The Company realized no significant income tax benefit from stock option exercises during the year ended December 31, 2019, 2018 and 2017. As permitted by ASC 718, the Company has deferred the recognition of its excess tax benefit from non-qualified stock option exercises.

401(k) Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan covering certain eligible employees. In 2019, the Company started matching a portion of the contribution made by participants who met certain employment criteria. The matching contributions made by the Company to date were not material. The Company did not match the contributions made by its employees for the years ended December 31, 2018 and 2017, respectively.

NOTE 13 — INCOME TAXES

The components of income (loss) before income taxes by tax jurisdiction were as follows:


	Year Ended December 31,
	2019		2018		2017
United States	$	7,047	$	(12,396)	$	(97,503)
Foreign		2,295		(254)		(893)
Income (loss) before income taxes	$	9,342	$	(12,650)	$	(98,396)

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The components of income tax benefit/(provision) were as follows:


	Year Ended December 31,
Current:	2019		2018		2017
Federal	$	373	$	(96)	$	947
State		(10)		(8)		(10)
Foreign		(590)		(500)		(521)
		(227)		(604)		416

Deferred:
Federal		—		—		294
Foreign		(244)		55		116
		(244)		55		410

Total:
Federal		373		(96)		1,241
State		(10)		(8)		(10)
Foreign		(834)		(445)		(405)
	$	(471)	$	(549)	$	826

The difference between the actual rate and the federal statutory rate was as follows:


	Year Ended December 31,
	2019		2018		2017
Tax at federal statutory rate	21.0	%	21.0	%	34.0	%
Meals and entertainment	3.1		(2.0)		(0.1)
Research and development credit	(41.0)		21.3		2.5
Stock-based compensation	(29.0)		17.9		(2.0)
Revenue from contracts with customers	—		(14.6)		—
Others	(0.6)		(3.1)		0.6
Global intangible low-taxed income	4.2		(1.7)		—
Valuation allowance	17.5		(35.3)		(33.8)
Executive compensation	6.1		—		—
Foreign tax credit	23.7		(7.8)		(0.4)
Effective tax rate	5.0	%	(4.3)	%	0.8	%

Deferred tax assets and liabilities consist of the following:


	December 31, 2019						December 31, 2018
	US		Foreign		Total		US		Foreign		Total
Deferred tax assets:
Fixed assets	$	209	$	71	$	280	$	—	$	35	$	35
Net operating loss carryforwards		48,968		25		48,993		50,119		97		50,216
Accruals, reserves and other		5,202		134		5,336		10,853		172		11,025
Foreign tax credit		2,905		—		2,905		5,118		128		5,246
Stock-based compensation		5,882		—		5,882		4,787		—		4,787
Research and development credit		22,630		—		22,630		17,945		—		17,945
Capitalized research and development		7,189		—		7,189		2,835		—		2,835
Intangible assets		355		—		355		—		—		—
Other		2,951		—		2,951		2,888		—		2,888
Total deferred tax assets	$	96,291	$	230	$	96,521	$	94,545	$	432	$	94,977
Deferred tax liabilities:
Fixed assets	$	—	$	(40)	$	(40)	$	(54)	$	(19)	$	(73)
Intangible assets		—		—		—		(513)		—		(513)
Net deferred tax assets		96,291		190		96,481		93,978		413		94,391
Less valuation allowance		(96,291)		(25)		(96,316)		(93,978)		(4)		(93,982)
Net deferred tax assets	$	—	$	165	$	165	$	—	$	409	$	409

The Company has not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries, because their earnings are intended to be reinvested indefinitely. No deferred tax asset was recognized, except for India and Canada, since the Company does not believe the deferred tax asset will be realized in the foreseeable future. The amount of accumulated foreign earnings of the Company’s foreign subsidiaries totaled $2,953 as of December 31, 2019. If the Company's foreign earnings were repatriated, additional tax expense might result. The Company determined that the

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calculation of the amount of unrecognized deferred tax liability related to these cumulative unremitted earnings attributable to foreign subsidiaries is not practicable.

The Company recorded a release of its valuation allowance of $0, $0, and $294 during 2019, 2018, and 2017, respectively. The 2017 release was associated with the acquisitions of Dairy Free in August 2017. Pursuant to ASC 805-740, changes in the Company’s valuation allowance that stem from a business combination should be recognized as an element of the Company’s deferred income tax expense or benefit. The Company previously recognized a valuation allowance against its net operating loss carryforwards and determined that it should be able to utilize the benefit of those net operating losses against the deferred tax liabilities of Dairy Free; therefore, it has partially released its pre-existing valuation allowance.

In accordance with ASC 740 and based on all available evidence on a jurisdictional basis, the Company believes that it is more likely than not that its deferred tax assets will not be utilized and has recorded a full valuation allowance against its net deferred tax assets in each of its jurisdictions except for entities in Canada and India. The Company assesses on a periodic basis the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income or losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If it is not more likely than not that the Company expects to recover its deferred tax assets, the Company will increase its provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. The available negative evidence at December 31, 2019 and 2018 included historical and projected future operating losses. As a result, the Company concluded that an additional valuation allowance of $2,334 and $4,471 was required to reflect the change in its deferred tax assets prior to valuation allowance during 2019 and 2018, respectively. As of December 31, 2019 and 2018, the Company considered it more likely than not that its deferred tax assets would not be realized within their respective carryforward periods.

At December 31, 2019, the Company had net operating loss carryforwards of approximately $211,330 and $91,722 for federal and state tax purposes, respectively. If not utilized, these carryforwards will expire at various times between 2023 and 2037. In addition, the Company has research and development tax credit carryforwards of approximately $14,327 for federal income tax purposes and $23,406 for California tax purposes. If not utilized, the federal research and development tax credit carryforwards will begin to expire in 2023. The California state research credit will carry forward indefinitely. The Company has approximately $2,895 of foreign tax credits that will begin to expire in 2020. The Company’s ability to use its net operating loss carryforwards and federal and state tax credit carryforwards to offset future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions that result in changes in ownership as defined by Internal Revenue Code Section 382.

A reconciliation of the total amounts of unrecognized tax benefits was as follows:


	Year Ended December 31,
	2019		2018
Beginning balance	$	20,718	$	13,391
Reductions of tax positions taken during previous years		(8,226)		(59)
Additions based on uncertain tax positions related to the current period		2,598		3,996
Additions based on uncertain tax positions related to prior periods		—		3,400
Cumulative translation adjustment		(6)		(10)
Ending balance	$	15,084	$	20,718

The total unrecognized tax benefits as of December 31, 2019 and 2018 included approximately $15,084 and $20,548, respectively, of unrecognized tax benefits that have been netted against deferred tax assets. As of December 31, 2019, the Company does not expect the unrecognized tax benefits, if recognized, to have a material impact on its financial statements.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $0 of interest and penalties on uncertain tax positions as of December 31, 2019, as compared to $150 as of December 31, 2018. Approximately $23, $27, and $96 of accrued interest and penalty expense related to estimated obligations for unrecognized tax benefits was recognized during 2019, 2018 and 2017, respectively.

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The Company is subject to taxation in the United States and various foreign jurisdictions. The material jurisdictions subject to examination by tax authorities are primarily the State of California, the United States, Canada and India. The Company’s federal tax returns are open by statute for tax years 1998 and California tax returns are open by statute for tax years 2003 and forward and could be subject to examination by the tax authorities.

The Tax Cuts and Jobs Act (“The Act”) enacted on December 22, 2017 subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. The Company has elected to account for GILTI as a period cost in the year the tax is incurred.

Prior to the enactment of The Act, the Company had asserted indefinite reinvestment on all of its undistributed earnings from foreign subsidiaries. As a result of the enactment of The Act, the Company has reevaluated its historic assertion and continue to assert these earnings to be indefinitely reinvested.

Based on its review of The Act, the Company expects that this legislation will not have a material impact on its future operational results as long as the Company maintains a full valuation allowance. It is the Company’s policy to record valuation allowances when necessary to reduce deferred tax assets to the amount that it expects to realize. Currently, the Company maintains a full valuation allowance for its deferred tax assets in the U.S. and Hong Kong.

NOTE 14 — SEGMENT INFORMATION AND OPERATIONS BY GEOGRAPHIC AREA

ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting information about operating segments. It defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer, who is also chief operating decision maker, makes decisions and manages the Company’s operations as one operating segment. The financial information reviewed by him is included within one operating segment for purposes of allocating resources and evaluating financial performance.

The following tables set forth revenue and long-lived assets based on geography:

Revenue

Revenue by geography is primarily based on the geographic location of the Company’s payers. International revenue is revenue generated from distributors and advertising service providers whose principal operations are located outside the United States or, in the case of the Digital Storefronts, the revenue generated from end-user purchases made outside of the United States.



	Year Ended December 31,
	2019		2018		2017
United States of America	$	320,343	$	280,264	$	216,468
Americas, excluding the United States		25,240		21,903		15,976
EMEA		45,700		41,585		33,180
APAC		20,098		22,809		21,203
Total revenue	$	411,381	$	366,561	$	286,827

Long-Lived Assets

The Company attributes its long-lived assets, which primarily consist of property and equipment, to a country primarily based on the physical location of the assets. Property and equipment, net of accumulated depreciation and

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amortization, summarized by geographic location was as follows:


	December 31,
	2019		2018
United States of America	$	16,738	$	12,653
Rest of the World		905		1,235
Total	$	17,643	$	13,888

NOTE 15 — RESTRUCTURING

During the year ended December 31, 2017, the Company recorded $6,019 of restructuring charge related to employee and lease termination costs in the Company’s Bellevue, Washington; Long Beach, California; San Francisco, California; Portland, Oregon; and Beijing, China offices. During the year ended December 31, 2018, the Company recorded $240 of restructuring charges related to employee and lease termination costs in the Company’s Long Beach, California office. No restructuring charges related to employee and lease termination costs were recorded during the year ended December 31, 2019.



	Restructuring		Restructuring		Restructuring
	Workforce		Facility		Total
Balance as of December 31, 2016	$	-	$	271	$	271
Charges to operations		4,319		1,700		6,019
Non-cash charges/adjustments		146		44		190
Charges settled in cash		(4,322)		(1,399)		(5,721)
Balance as of December 31, 2017	$	143	$	616	$	759
Charges to operations		160		80		240
Charges settled in cash		(303)		(402)		(705)
Balance as of December 31, 2018	$	-	$	294	$	294
Non-cash adjustments ⁽¹⁾		-		(294)		(294)
Balance as of December 31, 2019	$	-	$	-	$	-

(1)

Reflects reclassification of restructuring accrual to operating lease right of use assets.

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NOTE 16 – QUARTERLY FINANCIAL DATA (unaudited)

The following table sets forth unaudited quarterly consolidated statements of operations data for 2019 and 2018. The Company derived this information from its unaudited consolidated financial statements, which it prepared on the same basis as its audited consolidated financial statements contained in this report. These unaudited statements include all adjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair statement of that information for the periods presented.


	For the Three Months Ended
	2019									2018
	March 31,			June 30,		September 30,		December 31,		March 31,			June 30,		September 30,			December 31,

Revenue	$	95,885		$	95,540	$	107,077	$	112,879	$	81,443		$	90,193	$	99,285		$	95,640
Cost of revenue:
Platform commissions, royalties and other		32,813			32,806		36,758		38,278		29,167			32,386		34,384			32,508
Impairment of prepaid royalties and minimum guarantees		457	(b)		—		—		—		99	(b)		—		—			612
Impairment and amortization of intangible assets		1,252			1,056		1,040		1,039		1,467			1,468		4,167			2,017
Total cost of revenue		34,522			33,862		37,798		39,317		30,733			33,854		38,551			35,137
Gross profit		61,363			61,678		69,279		73,562		50,710			56,339		60,734			60,503
Operating expenses:
Research and development		26,546			19,736		22,968		25,877		22,710			22,832		23,839			25,553
Sales and marketing		28,105			35,040		46,140		31,013		26,810			29,741		28,874			28,435
General and administrative		6,635			4,951		5,879		5,751		7,890			7,608		8,095			8,074
Restructuring charge		—			—		—		—		80	(a)		—		160	(a)		—
Total operating expenses		61,286			59,727		74,987		62,641		57,490			60,181		60,968			62,062
Income/(loss) from operations		77			1,951		(5,708)		10,921		(6,780)			(3,842)		(234)			(1,559)
Interest and other income/(expense), net		764			556		271		510		(251)			(366)		96			286

Income/(loss) before income taxes		841			2,507		(5,437)		11,431		(7,031)			(4,208)		(138)			(1,273)
Income tax (provision)/benefit		(178)			—		348		(641)		(175)			(207)		(118)			(49)
Net income/(loss)	$	663		$	2,507	$	(5,089)	$	10,790	$	(7,206)		$	(4,415)	$	(256)		$	(1,322)

Net income/(loss) per share
Basic	$	0.00		$	0.02	$	(0.03)	$	0.07	$	(0.05)		$	(0.03)	$	(0.00)		$	(0.01)
Diluted	$	0.00		$	0.02	$	(0.03)	$	0.07	$	(0.05)		$	(0.03)	$	(0.00)		$	(0.01)

(a)	Includes restructuring charges relating to employee termination costs in the Company’s Long Beach office.

(b)	These charges are related to impairment of prepaid guaranteed royalties for certain celebrity license agreements, and certain other prepaid royalties.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controls and procedures are designed to provide reasonable assurance and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the guidelines established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on page 64.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2020 Annual Meeting of Stockholders. For information with respect to our executive officers, see “Executive Officers” at the end of Part I, Item 1 of this report.

We maintain a Code of Business Conduct and Ethics that applies to all employees, officers and directors. Our Code of Business Conduct and Ethics is published on our website at www.glu.com/investors. We disclose on our website amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions granted to executive officers and directors.

Item 11. Executive Compensation

The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2020 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information set forth in the section titled “Security Ownership of Certain Beneficial Owners and Management”

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contained in our Proxy Statement to be filed for our 2020 Annual Meeting of Stockholders is incorporated herein by reference.

Equity Compensation Plan Information

The following table sets forth certain information, as of December 31, 2019, concerning securities authorized for issuance under all of our equity compensation plans: our 2007 Equity Incentive Plan (the “2007 Plan”), 2007 Employee Stock Purchase Plan (the “ESPP”), 2008 Equity Inducement Plan (the “2008 Inducement Plan”), and 2018 Equity Inducement Plan (the “2018 Inducement Plan”).


	Number of
	Securities to be			Weighted		Number of Securities
	Issued Upon			Average		Remaining Available for
	Exercise of Outstanding			Exercise Price of		Future Issuance Under
	Options,			Outstanding Options,		(Excluding Securities
	Warrants and Rights			Warrants and Rights (1)		Reflected in Column (a))
		(a)			(b)		(c)

Equity compensation plans approved by security holders		28,916,074		$	4.00		5,473,466	(2)
Equity compensation plans not approved by security holders		3,321,904	(3)	$	2.77		156,108	(4)
Total		32,237,978					5,629,574

(1)	The weighted average exercise price does not take into account the shares subject to outstanding RSUs and PSUs, which have no exercise price.

(2)	Represents 2,686,329 shares available for issuance under the 2007 Plan, which plan permits the grant of incentive and non-qualified stock options (including PSOs), stock appreciation rights, restricted stock, stock awards and RSUs; and 2,787,137 shares available for issuance under the ESPP.

(3)	Represents outstanding options and RSUs under the 2008 Inducement Plan and 2018 Inducement Plan.

(4)	Represents shares available for issuance under the 2018 Inducement Plan, under which we may only grant non-qualified stock options and RSUs.

The Compensation Committee of our Board of Directors adopted the 2008 Inducement Plan in March 2008 to augment the shares available under our 2007 Plan, and in April 2018, the Compensation Committee adopted the 2018 Inducement Plan to replace the 2008 Inducement Plan which expired by its terms in March 2018. We have not sought stockholder approval for either the 2008 Inducement Plan or the 2018 Inducement Plan. As such, awards under these plans have been granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously an employee or director, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with us. As of December 31, 2019, we had reserved a total of 400,000 shares under the 2018 Inducement Plan, of which 240,913 shares were subject to outstanding stock options and RSUs, 156,108 shares remained available for issuance, and 2,979 shares had been exercised. In addition, as of December 31, 2019, 3,080,991 shares issued from our 2008 Inducement Plan remained subject to outstanding stock options and RSUs.

We may grant non-qualified stock options under the 2018 Inducement Plan at prices less than 100% of the fair value of the shares on the date of grant, at the discretion of our Board of Directors. The fair value of our common stock is determined by the last sale price of our stock on The Nasdaq Global Select Market on the date of determination. If any option or RSU granted under the 2018 Inducement Plan expires or terminates for any reason without being exercised in full, are used to satisfy tax withholding obligations with respect to the award, or otherwise terminate without the underlying shares being issued, such unexercised, tax-settled, or otherwise terminated shares will be available for grant under the 2018 Inducement Plan. All outstanding awards are subject to adjustment for any future stock dividends, splits, combinations, or other changes in capitalization as described in the 2018 Inducement Plan. If we were acquired and the acquiring corporation did not assume or replace the awards granted under the 2018 Inducement Plan, or if we were to liquidate or dissolve, all outstanding awards will expire on such terms as our Board of Directors determines.

For more information regarding the 2018 Inducement Plan, see Note 12 of Notes to Consolidated Financial Statements in Item 8 of this report.

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2020 Annual Meeting of Stockholders.

Item 14. Principal Accounting Fees and Services.

The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2020 Annual Meeting of Stockholders.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements: The financial statements filed as part of this report are listed on the index to financial statements on page 62.

(2) Financial Schedules: All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included.

(b) Exhibits. The exhibits listed on the Exhibit Index are included, or incorporated by reference, in this report.

Item 16. Form 10-K Summary

None.

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		Incorporated by Reference
Exhibit					Filing	Filed
Number	Exhibit Description	Form	File No.	Exhibit	Date	Herewith

32.01	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(a)/15d-14(a).*					X

32.02	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(a)/15d-14(a). *					X

101.INS	Inline XBRL Report Instance Document					X

101.SCH	Inline XBRL Taxonomy Extension Schema Document					X

101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document					X

101.LAB	Inline XBRL Taxonomy Label Linkbase Document					X

101.PRE	Inline XBRL Presentation Linkbase Document					X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					X

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

#	Indicates a management compensatory plan or arrangement.

+	Certain portions of this exhibit have been omitted and have been filed separately with the SEC pursuant to an order granting confidential treatment issued by the SEC under Rule 24b-2 as promulgated under the Exchange Act.

++	Certain portions of this exhibit have been omitted as permitted under Item 601(b)(10) of Regulation S-K.

* This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, 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 Act of 1934, except to the extent that Glu Mobile Inc. specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GLU MOBILE INC.


Date: February 28, 2020	By:	/s/ Nick Earl
		Nick Earl, President and Chief Executive Officer

Date: February 28, 2020	By:	/s/ Eric R. Ludwig
		Eric R. Ludwig, Executive Vice President, Chief Operating Officer and Chief Financial Officer

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POWER OF ATTORNEY

By signing this Annual Report on Form 10-K below, I hereby appoint each of Nick Earl, Eric R. Ludwig and Scott J. Leichtner as my attorney-in-fact to sign all amendments to this Form 10-K on my behalf, and to file this Form 10-K (including all exhibits and other documents related to the Form 10-K) with the Securities and Exchange Commission. I authorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact for himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention and purpose of this Power of Attorney. I ratify and confirm all lawful actions taken directly or indirectly by my attorneys-in-fact and by any properly appointed substitute attorneys-in-fact.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.


Signature	Title	Date

/s/ Nick Earl	President, Chief Executive Officer	February 28, 2020
Nick Earl	and Director
	(Principal Executive Officer)

/s/ Eric R. Ludwig	EVP, Chief Operating Officer and Chief Financial Officer	February 28, 2020
Eric R. Ludwig	(Principal Financial Officer)

/s/ Puneet Kedia	Vice President of Accounting	February 28, 2020
Puneet Kedia	(Principal Accounting Officer)

/s/ Niccolo de Masi	Executive Chairman	February 28, 2020
Niccolo de Masi

	Lead Director
Benjamin T. Smith IV

/s/ Darla Anderson	Director	February 28, 2020
Darla Anderson

/s/ Eric R. Ball	Director	February 28, 2020
Eric R. Ball

/s/ Greg Brandeau	Director	February 28, 2020
Greg Brandeau

/s/ Ben Feder	Director	February 28, 2020
Ben Feder

/s/ Ann Mather	Director	February 28, 2020
Ann Mather

/s/ Hany M. Nada	Director	February 28, 2020
Hany M. Nada

/s/ Gabrielle Toledano	Director	February 28, 2020
Gabrielle Toledano

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Exhibit 4.02

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES

EXCHANGE ACT OF 1934

As of December 31, 2019, Glu Mobile, Inc. (the “Company,” “we” or “our”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934: our common stock.

Description of Capital Stock

The following summary of the terms of our capital stock is based upon our restated certificate of incorporation and our amended and restated bylaws. The summary is not complete, and is qualified by reference to our restated certificate of incorporation and our amended and restated bylaws, which are filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our restated certificate of incorporation, our amended and restated bylaws and the applicable provisions of the Delaware General Corporation Law, or DGCL, for additional information.

General

We have authorized capital stock consisting of 250,000,000 shares of common stock, $0.0001 par value per share, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

Common Stock

Dividend rights

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine.

Voting rights

Each holder of our common stock is entitled to one vote for each share of common stock held on all matters properly submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in our restated certificate of incorporation, which means that the holders of a majority of our shares of common stock voted can elect all of the directors then standing for election. Our restated certificate of incorporation establishes a classified board of directors that is divided into three classes with staggered three-year terms. Only one class of

directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.

No preemptive or similar rights

Our common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

Right to receive liquidation distributions

Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding shares of our preferred stock and payment of other claims of creditors.

Preferred Stock

Our board of directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding. The number of authorized shares of preferred stock may be increased or decreased, but not below the number of shares of preferred stock then outstanding, by the affirmative vote of the holders of a majority of our capital stock entitled to vote, or such other vote as may be required by the certificate of designation establishing the series. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in our control and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of our preferred stock.

Anti-Takeover Provisions

The provisions of Delaware law, our restated certificate of incorporation, and our amended and restated bylaws could have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids.

Delaware Law

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, DGCL Section 203 prohibits a publicly held Delaware corporation from

engaging in a business combination with an interested stockholder for a period of three years following the date on which the person became an interested stockholder unless:

 prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

 the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock that is not owned by the interested stockholder.

Generally, a business combination includes a merger, asset or stock sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that DGCL Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Restated Certificate of Incorporation and Amended and Restated Bylaws Provisions

Our restated certificate of incorporation and our amended and restated bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our management team, including the following:

 Board of Directors Vacancies. Our restated certificate of incorporation and amended and restated bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.

 Classified Board. Our restated certificate of incorporation provides that our board of directors is classified into three classes of directors. The existence of a classified board of directors could discourage a third-party from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors.

 Directors Removed Only for Cause. Our restated certificate of incorporation provides that stockholders may remove directors only for cause.

 Supermajority Requirements for Amendments of Our Amended and Restated Bylaws. Our amended and restated bylaws provide that the affirmative vote of holders of at least two-thirds of the voting power of the Corporation’s outstanding voting stock then entitled to vote at an election of directors is required to amend certain provisions of our amended and restated bylaws, including provisions relating to stockholder proposals at annual and special meetings of the stockholders, the size of the board, removal of directors and the Delaware forum selection provision of our amended and restated bylaws.

 Stockholder Action; Special Meeting of Stockholders. Our restated certificate of incorporation and our amended and restated bylaws provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of our board of directors, our lead independent director, our chief executive officer, or our president, thus prohibiting a stockholder from calling a special meeting. Our restated certificate of incorporation further provides that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our amended and restated bylaws or remove directors without a meeting of our stockholders called in accordance with our restated certificate of incorporation. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.

 Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

 No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting.

 Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but

unissued shares of preferred stock enables our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or other means.

 Choice of Forum. Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.

Exchange Listing

Our common stock is listed on The Nasdaq Global Select Market under the symbol “GLUU.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.

Exhibit 10.18

GLU MOBILE INC.

SUMMARY OF COMPENSATION TERMS

BECKY ANN HUGHES

The following is a summary of the compensation terms for Becky Ann Hughes, our Senior Vice President of Revenue:

On December 17, 2019, the Compensation Committee of Glu’s Board of Directors approved an increase of Ms. Hughes’ annual base salary to $360,000 in connection with her promotion to Senior Vice President of Revenue.

In addition, the Compensation Committee approved for Ms. Hughes a target annual bonus of 90% of her annual base salary and a maximum annual bonus for 180% of her annual base salary. For 2020, Ms. Hughes’ maximum bonus opportunity was converted into a performance-based restricted stock unit (a “PSU”) covering 117,000 shares that was issued on December 17, 2019. Ms. Hughes will fully earn this PSU only if Glu both (1) achieves a minimum Adjusted EBITDA goal for 2020 (the “Adjusted EBITDA Threshold”) and (2) generates bookings for 2020 that equal or exceed a specified maximum level of performance (the “Maximum Bookings Goal”). If Glu does not achieve the Maximum Bookings Goal, Ms. Hughes can earn (1) 50% of the maximum amount of PSUs if Glu achieves the Adjusted EBITDA Threshold in 2020 and generates 2020 bookings that are approximately 4% below the Maximum Bookings Goal (the “Target Bookings Goal”) and (2) 15% of the maximum amount of PSUs if Glu achieves the Adjusted EBITDA Threshold in 2020 and generates 2020 bookings that are approximately 12% below the Maximum Bookings Goal (the “Minimum Bookings Goal”). Each of the Maximum Bookings Goal, Target Bookings Goal and the Minimum Bookings Goal represents a significant increase over Glu’s 2019 bookings. To the extent that Glu achieves the Adjusted EBITDA Threshold in 2020 and generates bookings between two of the goals, the number of PSUs earned by Ms. Hughes will be calculated on a linear basis. Glu will determine its 2020 Adjusted EBITDA and bookings in early 2021, and to the extent that Ms. Hughes earn any PSUs based on Glu’s 2020 bookings and Adjusted EBITDA, such PSUs will fully vest in February 2021 (consistent with the timing of when Glu historically paid cash bonuses to its executives).

Exhibit 10.20

GLU MOBILE INC.

SUMMARY OF INDEPENDENT NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM

(Effective as of April 25, 2019)

On April 25, 2019, the Board of Directors (the “Board”) of Glu Mobile Inc. (“Glu,” “our,” “we” or similar terms) approved the following program with respect to the compensation of our independent non-employee directors effective immediately:

Cash Compensation



Annual Retainer Fee:	$	40,000
Lead Director or Chairman of the Board Fee:	$	25,000
Annual Committee Fees:
Audit Committee Chair	$	20,000
Audit Committee Member (other than Chair)	$	10,000
Compensation Committee Chair	$	15,000
Compensation Committee Member (other than Chair)	$	7,500
Nominating and Governance Committee Chair	$	10,000
Nominating and Governance Committee Member (other than Chair)	$	5,000
Strategy Committee Chair	$	20,000
Strategy Committee Member (other than Chair)	$	5,000

All cash compensation will be paid in quarterly installments based upon continuing service. We will also reimburse our directors for reasonable expenses in connection with attendance at Board and committee meetings.

Equity Compensation

Each year immediately following our annual meeting of stockholders, each Glu independent non-employee director will receive an additional equity award of the lesser in value of (1) stock options and restricted stock units (“RSUs”) awards having an aggregate grant date fair value of $235,000, with the number of stock options and RSUs allocated to provide an equal value of each equity instrument, or (2) the aggregate grant date fair value of (a) an RSU covering 25,000 shares of our common stock and (b) a stock option to purchase 50,000 shares of our common stock. Both the stock option and RSU awards will vest on the earlier to occur of (a) the first anniversary of the grant date and (b) the date of our next annual meeting of stockholders that follows the grant date.

At the time he or she joins the Board, each new independent non-employee director will receive the lesser in value of (1) stock options and RSUs having an aggregate grant date fair value of $352,500, with the number of stock options and RSUs allocated to provide an equal value of each equity instrument, or (2) the aggregate grant date fair value of (a) an RSU covering 37,500 shares of our common stock and (b) a stock option to purchase 75,000 shares of our common stock. The RSU will vest as to 33⅓% of the total number of shares subject to the RSUs on the first anniversary of the grant date and thereafter vest in equal quarterly installments over the next two years following the first vesting date on the same day of each third month. The stock option will vest as to 33⅓% of the underlying shares on the first anniversary of the grant date and thereafter vest pro rata monthly over the next 24 months.

Exhibit 10.21(B)

FIRST AMENDMENT TO OFFICE LEASE

This FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered into as of October 18, 2018 (the "First Amendment Effective Date"), by and between HOWARD STREET ASSOCIATES LLC, a Delaware limited liability company ("Landlord") and GLU MOBILE INC., a Delaware corporation ("Tenant").

RECITALS

A. Landlord and Tenant are parties to that certain Standard Office Lease dated May 9, 2017 (the "Existing Lease"), whereby Tenant leases approximately 57,074 rentable square feet (the "Premises") commonly known as Suites 100 and 200 of that certain office building located at 875 Howard Street, San Francisco, California (the "Building").

B. Tenant desires to install, at Tenant's sole cost and expense, one (1) condenser unit (the "Condenser Unit"), the specifications for which are attached hereto as Exhibit A, on a portion of the Building roof, as depicted on Exhibit B attached hereto, and three (3) refrigerant lines (the "Refrigerant Lines") to run from the Condenser Unit through Building common area to the Premises. Landlord and Tenant desire to amend the Existing Lease accordingly, on the terms and conditions set forth in this First Amendment.

C. All capitalized terms used herein but not specifically defined in this First Amendment shall have the meanings ascribed to such terms in the Existing Lease. The term "Lease" where used in this First Amendment shall hereafter refer to the Existing Lease, as amended by this First Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Installation of Equipment. Landlord hereby approves of the installation by Tenant of the Condenser Unit and the Refrigerant Lines described in those certain specifications attached hereto as Exhibit A (collectively, the "Equipment"), and the connection of said Equipment to, and performance of related work in a portion of the Building mechanical room located on each floor of the Building (collectively, the "Mechanical Plant Area"), in all cases pursuant to the installation guidelines attached hereto as Exhibit C (the "Installation Guidelines") and in accordance with the manufacturer's specifications, and otherwise subject to the terms of this First Amendment. Upon at least forty-eight (48) hours prior written notice, Landlord or a representative of Landlord shall accompany Tenant (i) during ingress and egress of the premises of another tenant on the sixth (6th) floor of the Building in order to provide access to the roof and Mechanical Plant Area, and through the duration of the installation thereto, during normal business hours as may be necessary in order to so install the Equipment.

2. Operation and Maintenance of Equipment. In no event shall Tenant permit the Equipment to interfere with normal and customary use or operation of the Building by Landlord or other tenants and/or occupants (including, without limitation, by means of noise or odor). Tenant shall be responsible, at Tenant's sole cost and expense, for all maintenance and repairs and compliance with legal obligations with respect to the Equipment, and Tenant acknowledges and that Landlord shall have no responsibility in connection with the Equipment, and that Landlord shall not be liable for any damage that may occur with respect to the Equipment, except and to the extent such damage is caused solely by the gross negligence or willful misconduct of Landlord or the Landlord Parties (as that term is defined in the Lease). All matters (including all plans and specifications) relating to the use, maintenance, repair, modification, compliance with laws, and removal of the Equipment (including, without limitation, with respect to the manner and means of Tenant's connection of the Equipment to any Building Systems) shall be subject to the prior approval of Landlord, which approval shall not be unreasonably withheld or delayed and may be conditioned on Tenant complying with such reasonable requirements imposed by Landlord, based on the advice of Landlord's engineers, so that the Building Systems or other components of the Building and the occupants of the Building are not adversely affected by the operation of the Equipment, and/or based upon other reasonable factors as determined by Landlord. The Equipment and the Mechanical Plant Area shall be deemed to be a part of the Premises for purposes of the insurance provisions of the Lease, and, in addition, Tenant shall maintain, at Tenant's cost, industry standard insurance coverage with respect thereto.

3. Use of Equipment. Tenant shall be solely responsible, at Tenant's sole cost and expense, for (i) monitoring, operating, repairing, replacing and removing (subject to the terms of Section 6 below) the Equipment, (ii) obtaining all required permits and governmental or quasi-governmental approvals to install and operate the Equipment, (iii) complying with all applicable governmental and quasi-governmental laws, regulations and building codes in connection with the Equipment and the Mechanical Plant Area, (iv) using the Equipment in accordance with the manufacturer's specifications, and (v) maintaining the Equipment in good condition throughout the Lease Term, in accordance with the manufacturer's specifications. In addition, Tenant shall (x) on an annual basis, procure an inspection report from a certified professional with respect to the Refrigerant Lines, and (y) regularly, in accordance with commercially reasonable standards, generate and maintain preventative maintenance records relating to the Equipment (such annual inspection reports and other maintenance records shall be referred to herein, collectively, as the "Preventative Maintenance Records"), and deliver copies of such Preventative Maintenance Records to Landlord. All vendors performing work on the Equipment and/or in the Mechanical Plant Area shall be subject to Landlord's standard access and entry procedures for the Building. In no event shall any of the Equipment interfere with any Building systems or Landlord's operation of the Building.

4. Use of the Mechanical Plant Area. Tenant shall not store any materials in the Mechanical Plant Area. Tenant shall use the Mechanical Plant Area solely for the operation of the Equipment and not for any other purposes. In no event shall Tenant's use of the Mechanical Plant Area interfere with any Building Systems or Landlord's operation of the Building.

5. Landlord Costs. Tenant shall be responsible for any and all reasonable costs incurred by Landlord as a result of or in connection with Tenant's operation, modification, use

and/or removal of the Equipment. Any reimbursements owing by Tenant to Landlord pursuant to this Section 5 shall be payable by Tenant within thirty (30) days of Tenant's receipt of an invoice therefor.

6. Removal of Equipment. At the expiration or earlier termination of the Lease, the Equipment shall become Landlord's property and shall remain at the Premises; provided that, at Landlord's option, Landlord may, by written notice to Tenant not less than thirty (30) days prior to the end of the Lease Term, or given promptly following any earlier termination of this Lease, require Tenant, at Tenant's expense, to remove the Equipment and all related facilities and equipment and return the affected portions of the Building roof and the Mechanical Plant Area to the condition the Building roof and Mechanical Plant Area would have been in had no such Equipment been installed (reasonable wear and tear excepted). Additionally, if Landlord performs any repairs or replacements of the roof of the Building (whether pursuant to Landlord's obligations under the Lease or as may be otherwise determined to be necessary in Landlord's reasonable discretion), Tenant shall be solely responsible, at Tenant's sole cost and expense, for the prompt removal of the Equipment as may be reasonably necessary for Landlord to perform such work, and for any and all costs incurred in connection with re-installing the Equipment upon Landlord's completion of such work. If Tenant fails to complete any required removal and/or to repair any damage caused by the removal of the Equipment, and return the affected portion of the Building roof or the Mechanical Plant Area to the required condition, Landlord may do so and may charge the cost thereof to Tenant, which cost shall be paid by Tenant pursuant to Section 5 above. The foregoing obligations of Tenant shall survive the expiration or earlier termination of the Lease.

7. Landlord Liability. Notwithstanding anything to the contrary set forth in this First Amendment, and notwithstanding Landlord's review and approval of the method by which the Equipment is installed, secured to the Building roof, maintained, or repaired, Tenant shall remain solely liable for any liability arising from Tenant's placement of the Equipment on the Building roof, and Landlord shall have no liability in connection therewith (except to the extent attributable to the negligence or willful misconduct of or violation of this Lease by Landlord or its employees), in all cases subject to the terms of the Lease (including, without limitation, Article 13 of the Existing Lease).

8. Invalidity of Provisions. If any provision of this First Amendment is found to be invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of any such provision shall not affect the validity and enforceability of the remaining provisions hereof.

9. Further Assurances. In addition to the obligations required to be performed under the Lease, Landlord and Tenant shall each perform such other acts, and shall execute, acknowledge and/or deliver such other instruments, documents and other materials, as may be reasonably required in order to accomplish the intent and purpose of the Lease.

10. Brokers. Landlord and Tenant each hereby warrant and represent to the other that it has had no dealings with any real estate broker or agent in connection with the negotiation of this First Amendment, and that it knows of no other person or entity who is or might be entitled to a commission, finder's fee or other like payment in connection herewith, and does hereby

indemnify and agree to hold the other party, and its agents, members, partners, representatives, officers, affiliates, shareholders, employees, successors and assigns harmless from and against any and all loss, liability and expenses that such party may incur should such warranty and representation prove incorrect, inaccurate or false. The terms of this Section 10 shall survive the expiration or earlier termination of the Lease.

11. Authority. Each of the parties hereto represents and warrants to the other as follows: (a) it has the legal power, right and authority to enter into this First Amendment; (b) all requisite action (corporate, trust, partnership or otherwise) has been taken by it in connection with the entering into of this First Amendment and no further consent of any partner, shareholder, creditor, investor, judicial or administrative body, governmental authority or other party is required, including without limitation, any lender, or if any such consent is required, such consent has been obtained; (c) the individuals executing this First Amendment have the legal power, right, and actual authority to bind it to the terms of this First Amendment; and (d) it understands that the other party is relying on the foregoing representations in entering into this First Amendment, and that the other party would not enter into this First Amendment without such representations.

12. Governing Law. This First Amendment shall be governed by and construed and enforced in accordance with the laws of the State of California.

13. Lease in Full Force. Except for those provisions which have been modified by this First Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Existing Lease are hereby ratified and shall remain unmodified and in full force and effect.

14. Digital Image. The parties agree to accept a digital image of this First Amendment, as executed, as a true and correct original and admissible as best evidence to the extent permitted by a court with proper jurisdiction.

15. Counterparts. This First Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

[remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, this First Amendment has been executed as of the First Amendment Effective Date.



LANDLORD:	HOWARD STREET ASSOCIATES LLC,
	a Delaware limited liability company

	By:	Hudson Pacific Properties, L.P.,
		a Maryland limited partnership,
	Its:	Sole Member

		By:	Hudson Pacific Properties, Inc.,
			a Maryland corporation
		Its:	General Partner

			By:	/s/ Joshua A. Hatfield
			Name:	Joshua A. Hatfield
			Its:	Executive Vice President


TENANT:	GLU MOBILE INC.,
	a Delaware corporation

	By:	/s/ Scott J. Leichtner
	Name:	Scott J. Leichtner
	Its:	VP and General Counsel

EXHIBIT A

CONDENSER UNIT SPECIFICATIONS

EXHIBIT B

LOCATION OF CONDENSER UNIT ON BUILDING ROOF

EXHIBIT C

INSTALLATION GUIDELINES

Exhibit 10.26(B)

AMENDMENT # 1 TO

UNITY SOFTWARE LICENSE & SUPPORT AGREEMENT

This amendment to the Unity Software License Agreement (“Amendment #1”) is made as of the date last signed below (the “Amendment Effective Date”), by and between Unity Technologies ApS, a Danish corporation with its principal place of business at Niels Hemmingsens Gade 24, 1153 Copenhagen, Denmark (“Unity”) and Glu Mobile Inc., a Delaware corporation with its principal place of business at 875 Howard Street, Suite 100, San Francisco, CA 94103 (“CUSTOMER”).

RECITALS

WHEREAS, the parties entered into a Unity Software License Agreement effective October 29, 2017 (the “Agreement”), pursuant to which CUSTOMER purchased subscription to Unity Products, Unity Source Code and services for a term of two (2) years.

WHEREAS, the parties wish to modify the Agreement to renew the Term, update the products and pricing, and otherwise as set forth herein.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. First Renewal Term. The parties mutually agree to renew the Agreement for an additional, consecutive two (2) years, unless earlier terminated as set forth in the Agreement (the “First Renewal Term”). Accordingly, the definition of “Term” in the Agreement is revised to mean the period of time beginning on the Effective Date (as such term is defined in the Agreement) until the end of the First Renewal Term.

2. First Renewal Term Fee. Upon execution of this Amendment, CUSTOMER shall make a non-refundable payment of

(the “First Renewal Term Fee”) in accordance with the payment schedule set forth in Exhibit B as amended. This makes up the whole of CUSTOMER’s payment obligations for the First Renewal Term. Failure to pay as set forth in Exhibit B is considered a material breach of this Agreement, and Unity may suspend all Unity Products, Unity Source Code, and services until payments have been duly made.

3. Definitions. Section 1 of the Agreement is amended by adding the following definitions in the appropriate alphabetical order:

a. Unity Enterprise for Games” (or “Unity Enterprise”) means the “Unity” engine and editor that provide an authorizing environment with a series of integrated tools, modules and components that are: (a) designed to enable the creation of interactive content, and (b) provide for asset management, project revision and tracking, and team-based production. Unity Enterprise for Games provides the ability to publish on the desktop and mobile platforms specified in the System Requirements.

4. Exhibit B. Exhibit B to the Agreement is amended and replaced in its entirety with Exhibit B attached hereto.

5. Exhibit C. Exhibit C to the Agreement is amended and replaced in its entirety with Exhibit C attached hereto.

6. General. Except as explicitly modified herein, all terms and conditions and provisions of the Agreement continue in full force and effect. In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms conditions and provisions of this Amendment shall govern and control. All initially capitalized terms used and not otherwise defined herein have the meaning ascribed to them in the Agreement. This Amendment may be executed in one or more counterparts and transmitted by facsimile or email as a PDF, TIFF or other image files, each transmission of which is deemed an original, and all of which, when taken together, constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Amendment to be signed as of the Amendment Effective Date by their duly authorized representatives.

UNITY TECHNOLOGIES APS			GLU MOBILE INC.

By:			By:

Name:			Name:

Title:			Title:

Date:			Date:

Exhibit B

Summary of Products, Services and Fees


Unity Product Subscription Seats*	List Price Per Seat at Effecrive Date	CUSTOMER Price per Seat (10% Discount
Unity Enterprise for Games
Unity Build Machine
* Prices are per month, per developer for all remaining months in the Term. Subscription seats are paid annually in advance. Additional subscription seats purchased during the Term will be initially invoiced on a pro rata basis through the end of the then-current year of the Term. Thereafter, if applicable, Customer's total number of subscription seats will be invoiced for a full year in advance. Subscription seats include all Updates commercially available during the Term.

Source Code Subscriptions*
Full Access - all Desktop, Mobile and Console# Platforms
Price is for an annual subscription to access the Unity Source Code. Unity Enterprise seats must be purchased separately for each developer. No use of Unity Source Code after the designated Term. Integrated Success Services is required for each year of Unity Source Code access. Please note that Customer's access to and use of the PhysX SDK (as modified for incorporation into the Unity Products) requires agreeing to and complying with the NVIDIA GameWorks EULA terms (currently found here: https:lldevelo per.nvidia.comlcontentla pptv-access-nvidia physx-source-code;accessing these terms requires joining the GameWorks NVIDIA Developer Program). UTECH will not deliver the PhysX SDK unless requested by Customer.
#Customer must register its Project(s) in Sony's DevNet system and receive the PlayStation console add-ons from Sony prior to licensing the applicable Unity Source Code. Customer must register with ID@Xbox and receive the Xbox console add-ons from Microsoft or UTECH prior to licensing the applicable Unity Source Code. All Nintendo console add-ons, including the Unity Source Code therefor, are licensed directly from Nintendo. Customer must register its Project(s) with the Google Stadia developer program and receive the Stadia add-ons from Google or UTECH prior to licensing the applicable Unity Source Code.

Annual Services
Integrated Success Services - Level II*
*Price for Unity Integrated Success Services - Level II is . Unity Enterprise seats must be purchased separately for each developer. No use of Unity Source Code after the designated subscription term. The terms and conditions for the Unity Integrated Success Services – Level II offering is attached hereto as Exhibit C and incorporated by this reference. Unity Integrated Success Services – Level II includes Project Reviews pursuant to the terms and conditions in Appendix 1 to Exhibit C. Additional Project Reviews may be purchased for the price outlined in Appendix 3 to Exhibit C. Unity Integrated Success Services – Level II Onsite Training Workshop pursuant to the terms and conditions in Appendix 2 to Exhibit B. Additional Onsite Training Workshops or customization of a workshop may be purchased at an additional cost, subject to a separate Statement of Work. In addition to Unity Integrated Success Services - Level II pursuant to Exhibit C. Customer may elect to purchase additional optional service modules as outlined in Appendix 3 to Exhibit C.

INITIAL ORDER

Customer hereby places the following order and agrees to pay UTECH

. Customer agrees to pay within thirty (30) days upon receipt of a valid invoice in accordance with the Agreement. The second annual payment may increase if Customer purchases additional subscription seats.


Unity Product	Units	Term	Unit Price	Total
Unity Enterprise for Games Subscription		24 months
Unity Build Machine Subscription		24 months
Integrated Success Services - Level II		2 years
Total

EXHIBIT C

Unity Integrated Success Services – Level II

This Exhibit C is designated for a Customer with active, valid Unity Product subscription seats, for a maximum of Support Requests.

1. Definitions. These definitions apply to this Exhibit C. Any capitalized terms not defined herein have the meaning set forth in the Agreement.

“Business Hours” means the hours between Pacific Time, Monday through Friday.

“Customer-Generated Error” means problems in the operation or performance of the Unity Products to the extent that UTECH can show that such problems are caused by any of the following: (a) third party software or hardware products, or use of the Unity Products in conjunction therewith, or (b) Customer’s use of the Unity Products other than as authorized in its subscription agreement with UTECH.

“Customer Personnel” means the designated, named individual members of Customer’s team designated by Customer to be direct contacts for UTECH’s Services Personnel.

“DRM” means Customer’s designated “Developer Relations Manager” provided by UTECH.

“Services” means those Integrated Success Services provided by UTECH as outlined in this Exhibit A.

“Service Level Agreement” or “SLA” means the agreed upon response time to newly submitted Support Requests as set forth in Section 3 of this Exhibit C.

“Support Portal” means the online Support communication method provided to Customer by UTECH. “Support Request” means a question, issue or concern posted to the Support Portal in the English language.

2. Services Terms.

Subject to payment of the applicable fees, and subject to the terms and conditions of the Agreement, UTECH will provide Customer the following Services:

Management Services:

a) UTECH will assign a DRM to Customer, who will be responsible for the following services:

a) Coordinating and facilitating UTECH technical resources as needed to enable a holistic approach to solution deployment and management, effective and timely communication between UTECH and the Customer, proactive identification and resolution of emerging issues, and effective prioritization of efforts by considering business impact and Integrated Success Service priorities.

b) Maintaining an understanding and awareness of technical use of the Unity Products and engagement within the account and act as a liaison between Customer and other UTECH technical departments as required.

c) Escalation management for Priority 1 (Emergency) Requests (as further referred to in the section below).

d) Proactive communication on Updates.

e) Project Reviews by Support Personnel during a 12-month period on mutually agreeable dates. Each of the Project Reviews will be at least one (1) month apart. Customer acknowledges and agrees that Project Reviews cannot be carried over to subsequent one (1) year periods. Additional Project Reviews can be purchased for a fee as set forth in Appendix C of Exhibit C (where applicable), or pursuant to a separate written agreement.

b) UTECH will conduct a quarterly review of your Services usage.

Support Services:

a) Customer will have unlimited access to UTECH’s on-line support resources at http://unity3d.com/learn/.

b) UTECH will provide service responses for Priority 1 (Emergency) issues affecting eligible Unity Products and provide service responses during regular Business Hours for Priority 2-4 (non-emergency) issues affecting eligible Unity Products.

c) UTECH will respond to properly submitted Support Requests concerning installation, activation, seat migration, configuration, troubleshooting and/or any other issues that may arise in connection with the Unity Products or Project (s) in accordance with the response times specified in the Agreement. Responses will be provided by Services Personnel.

d) UTECH will undertake commercially reasonable efforts, at UTECH's discretion, either to provide work-arounds or to correct faults in the Unity Products.

e) UTECH will prioritize the backport of fixes to the current supported version(s) of the Unity Products for Unity Supported Platforms applicable to Customer’s use of the Unity Products.

3. Service Level Agreement.

The priority given to a Support Request will determine the response times as specified in the below table:


Priority	Severity	Initial Response Time

1	Emergency

2	High

3	Normal

4	Low

a) EMERGENCY (“Priority 1”): The problem results in extremely serious interruptions to the development or deployment of Projects. It is affecting the entire Customer team or causes serious impairment of essential operations for deployed Projects. For instance, data integrity is compromised or the issue is at risk of causing missed critical project deadlines or deliverables. Customer shall contact its DRM for all Priority 1 issues.

b) HIGH PRIORITY (“Priority 2”). The problem results in serious interruptions to the development or deployment of Projects. Portions of the Customer team cannot perform important tasks, but the error does not impair essential operations. Major Project components cannot operate correctly due to issues with the Unity Products or APIs or performance issues are apparent.

c) NORMAL PRIORITY (“Priority 3”). The problem causes interruptions in the development or deployment of Projects. It does not prevent the operation of a Project.

d) LOW PRIORITY (“Priority 4”). The problem results in minimal or no interruptions to the development or deployment of Projects (no business impact). The issue consists of "how to" questions including issues related to APIs and integration, installation and configuration inquiries, enhancement requests, or documentation questions.

Services Personnel's Business Hours are between Pacific Time, Monday through Friday.

For Priority 1 (Emergency) Support Requests, Customer will:

a) File a Support Request via the Support Portal, which Support Request must include an accurate and complete description of the problem and issues.

b) Contact UTECH via the emergency escalation method provided by UTECH. For clarity, a Priority 1 Support Request will not be acknowledged by UTECH as an emergency without this notification method.

c) Provide UTECH with a designated Customer contact during the remedy period, either onsite or by pager, to assist with data gathering, troubleshooting, testing and applying the proposed solution.

In response to a properly submitted Priority 1 Support Request, UTECH will:

a) Contact the appropriate Senior-Level Contact (as defined below) via phone or other real-time means

b) Assign a dedicated issue-owner within the UTECH services and support team to manage communications between UTECH and Customer.

c) Engage in regular communication with Senior-Level Contacts for the duration of the engagement.

For all properly submitted Support Requests (Priorities 1-4), UTECH will undertake reasonable efforts to: (a) acknowledge receipt of a Support Request from a technical Support contact within the time allotted (“Initial Response Time”); (b) provide a short status report to Customer within a reasonable time; (c) address the Support Request by providing a remedy that could take the form of eliminating the defect in order to bring the Unity Products into substantial conformity with its applicable documentation, providing updates, or demonstrating how to avoid the effects of the defect with reasonable commercial effort. Where Customer has a subscription to access and use the Unity Source Code, remedy may also include error corrections, patches, bug fixes, workarounds (i.e. temporary solutions used to complete a task that would not otherwise be possible due to a problem or limitation in the affected Unity Products), replacement deliveries or any other type of software or documentation corrections or modifications. Each party acknowledges that despite a party's reasonable efforts, not all problems may be solvable. Where on-going investigation is required, Customer will receive regular updates to their Support Request. Additionally, such updates may increase or lower the severity of the issue, in which case the frequency of updates will change accordingly.

If UTECH, in its sole and reasonable discretion, determines that remote troubleshooting and investigation techniques employed by UTECH have been unsuccessful and that on-site services is the most effective way to resolve a Support Request, UTECH may offer to provide such limited on-site service, subject to Customer’s acceptance. If Customer accepts this offer, Customer will not be charged for such on-site services but will be charged for travel and living expenses.

UTECH may at its reasonable discretion subcontract provision of Services to third parties provided that UTECH will continue to remain primarily responsible under the terms of the Agreement and will ensure that such third party service provider provides all agreed services in accordance with the terms herein and in accordance with best industry standards. In all instances UTECH will use suitably qualified Services Personnel.

4. Customer Obligations.

Customer shall:

a) Use suitably qualified engineers and artists to develop using the Unity Products.

b) Provide accurate and complete descriptions of problems and issues by submitting a Support Request via the Support Portal.

c) Cooperate with Services Personnel where elaboration of an issue is required.

d) Provide self-contained reproductions of issues or steps to reproduce the issue when possible.

e) Provide script, artwork or project folders where needed by Services Personnel.

f) Provide development timetables including milestones and deliverables, subject to CUSTOMER confidentiality restrictions as necessary to enable UTECH to provide timely and efficient services.

g) Recognize that Services is often a collaborative and iterative process.

h) Assign each problem a priority level as described above.

i) Close Support Requests when the issue or problem has been resolved.

j) Designate a selection of English-speaking, senior-level Customer contacts (“Senior-Level Contacts”) (ideally one (1) or but no more than three (3) Senior-Level Contacts per Project), and provide contact details (in particular e-mail address and telephone number) by means of which the Services Personnel and DRM can contact the Senior-Level Contacts at any time in response to Priority 1 (Emergency) or 2 (High) Support Requests. Each Senior-Level Contact will be an authorized representative empowered to make necessary decisions for Customer or bring about such decisions without undue delay. Where necessary, UTECH will rely on the single senior-most Senior-Level Contact to determine, among other things, the priority and alignment of any concurrent tickets and resolution paths.

k) Share Support Request responses provided by Services Personnel between members of the Customer team.

l) Assess Support Request responses for suitability to the Customer and respond in a timely fashion when the response is not suitable.

In the event Customer does not fulfill its obligations, and continues to fail to fulfill its obligations following notice from UTECH, UTECH, in its sole reasonable discretion, may downgrade the priority level of the Support Request.

5. Limitations.

UTECH's obligation to provide Services shall extend only to the current supported version(s) of the Unity Products for the Unity Supported Platforms applicable to Customer’s use of the Unity Products, unless Customer has purchased Extended Long Term Support (“LTS”) pursuant to Appendix 1 of this Exhibit C.

UTECH’s obligation to provide Services shall extend only to Customer teams that have active, valid Unity Product subscriptions throughout the Term.

UTECH and Services Personnel will provide Services for up to a maximum of Support Requests from Customer. Additional Support Requests can be submitted at any time, but UTECH and Services Personnel will queue such additional Support Requests and only commence services when one of the active Support Requests has been resolved and closed. Customer can adjust the order of the submitted Support Requests by setting priority levels via written notice to UTECH or through mutual negotiations.

Support Requests sent to UTECH using methods other than the Support Portal (or as otherwise directed by UTECH) will be handled in a manner of UTECH's choosing and will not qualify for the initial response times set out above.

Where it is necessary for Customer to send the project files of its Project to UTECH in connection with a Support Request, Customer must send a version of the project files in which unnecessary assets have been removed, and which is ready to be loaded onto a UTECH machine without external server connections or special setup requests.

All members of Customer teams with access to the Support Portal will be able to view the full contents of all Support Requests submitted on behalf of Customer. Customer acknowledges that no provision will be made for restricted- access Support Requests.

UTECH shall neither provide Services to end users of Customer's Project (s), nor to sub-contractors working for Customer.

UTECH will have no obligation to provide Services of any kind for problems in the operation or performance of the Unity Products to the extent caused by a Customer-Generated Error. If UTECH determines that it is necessary to perform Services for a problem in the operation or performance of the Unity Products that is caused by a Customer-Generated Error, then UTECH will notify Customer thereof as soon as UTECH is aware of such Customer-Generated Error, and UTECH may offer specialized Professional Services to address such Customer-Generated Error. If Customer accepts this offer, UTECH may invoice Customer at UTECH's then-current time and materials rates for all such services performed by UTECH. Customer will pay UTECH within thirty (30) days of the date of such invoices.

Where Customer has a subscription to access and use the Unity Source Code and created Customer Modifications (as those terms are defined in the relevant agreement between UTECH and Customer), UTECH will make a reasonable effort to accommodate any Support Requests in connection therewith. If UTECH determines in its sole and reasonable discretion that it is unable to provide Integrated Success Services for the Customer Modifications, for reasons including but not limited to the nature of such Customer Modifications and/or UTECH’s lack of access to the Customer Modifications, UTECH may offer to perform specialized Professional Services. If Customer accepts this offer, UTECH may invoice Customer at UTECH's then-current time and materials rates for all such services performed by UTECH. Customer shall pay UTECH within of the date of such invoices.

Where resolution to a problem requires extended time in to provide the final response, UTECH will provide regular updates to Customer.

To the maximum extent permitted by applicable law, UTECH does not warrant or guarantee that the claimed or actual defects or malfunctions in the Unity Products will in fact be corrected.

Appendix 1 to Exhibit C

Unity Project Review Service

1. Definitions. These definitions apply to this Appendix 1 to Exhibit C. Any capitalized terms not defined herein have the meaning set forth in the Agreement.

“Project Review” means an in-depth investigation into , wherein UTECH will provide Customer with a support engineer to analyze the complete Project and look for opportunities to apply best practices in the areas of system design, optimization, stability and team workflow to enhance the performance, stability and maintainability of your project.

2. Services. UTECH’s Project Review service consists of the following:

 UTECH will arrange phone call between Customer’s named contact and a UTECH senior support engineer;

 A Project Review conducted on-site at Customer’s premises (an “On-Site Review”) will be performed over business days; a Project Review conducted remotely from UTECH’s offices (a “Remote Review”) will be conducted over such period as such support engineer may reasonably require, but in no event less than consecutive business days.

 UTECH will issue a final report to Customer concerning a Project Review within business days of the completion of such Project Review. Such final report will summarize the key findings and advice delivered by UTECH during the Project Review, as well as detail follow-up answers to unattended/unanswered questions.

 All travel and living expenses associated with an On-Site Review will be paid for by UTECH.

Customer acknowledges and agrees that Project Reviews may only be used during the applicable contract year and cannot be carried over to subsequent contract years or after the Term.

3. Customer Obligations. To ensure the success of Customer’s Project Review, Customer will:

 Provide UTECH with contact information for assigned Customer contact who will run lead on behalf of Customer for the duration of the On-Site Visit;

 Provide UTECH with the office address, directions, access instructions and office hours for each On-Site Visit day;

 Provide UTECH’s support engineer(s) with desk space and a preconfigured machine; and

 Ensure the availability of Customer’s technical leadership for the duration of the On-Site Visit.

Customer acknowledges and agrees that: (a) it is Customer’s responsibility to contact UTECH to schedule each Project Review; (b) Customer must contact UTECH at least days prior to the date on which it would like to schedule each Project Review; and (c) any unused Project Reviews not scheduled during the applicable contract year will be forfeited. Accordingly, if Customer does not contact UTECH to schedule a Project Review at least days before the end of a contract year, Customer will forfeit such Project Review for that year.

Customer shall notify UTECH in writing of any cancellation or intent to reschedule a previously scheduled Project Review. In the event Customer notifies UTECH of its intent to cancel or reschedule a Project Review, UTECH may invoice and Customer will pay all non-refundable travel and living expenses associated with the previously scheduled On-Site Review incurred before receiving written notice of cancellation. In the event Customer notifies UTECH of its intent to cancel or reschedule a Project Review less than calendar days prior to the date the Project Review is scheduled to begin, Customer will forfeit such Project Review for that year.

4. Ownership of Materials. Customer acknowledges that a Project Review is a collaborative process that will add to UTECH’s knowledge and understanding of how customers use the Unity Products. Accordingly, Customer and each of its Affiliates hereby authorize UTECH to internally use information relating to the Unity Products, at the exclusion of any and all information related to the Project and any Confidential Information of Customer, that UTECH obtains from a Project Review solely to improve the Unity Products and/or any other UTECH products and services.

Further, the parties acknowledge and agree that: (i) UTECH will retain all rights in and to UTECH’s Intellectual Property Rights, (ii) any and all materials used during UTECH’s performance of the Project Review will remain UTECH’s Intellectual Property Rights, and (iii) UTECH shall grant to Customer a non-exclusive, royalty-free license to use such materials, only to the extent necessary to enable Customer to exercise all of the rights granted to Customer in connection with the services.

Appendix 2 to Exhibit C

Unity Onsite Training Workshops

1. Definitions. These definitions apply to this Appendix 2 of Exhibit C. Any capitalized terms not defined herein have the meaning set forth in the Agreement.

“Fulfillment Partner(s)” means any one or more of UTECH’s third-party licensors, partners or providers of the Learning Services, including operators of the Platforms described herein and hosts of Materials.

“Materials” means the documentation and materials, inclusive of video content and other content owned by or licensed to UTECH, provided by UTECH or its licensors in electronic or physical form. Materials are subject to additional terms between UTECH and the individual end users (as referenced elsewhere in this Exhibit).

“Platform(s)” means any UTECH or third-party owned software, systems or platforms on which Materials are hosted and delivered or through which any Learning Services are performed.

“UTECH Personnel” means any UTECH employee, any agent or other third party authorized by UTECH to provide an Onsite Training Workshop (UTECH Personnel may be different from Services Personnel).

2. Onsite Training Workshops. “Onsite Training Workshops” are in-person, instructor-led training sessions with UTECH Personnel and include services and Materials delivered via UTECH-designated Platforms. Current Platforms utilized for Training Workshops include MyLiveBook (https://portal.knowledgepoint.co.uk/Login.aspx) and the UTECH Asset Store (https://www.assetstore.unity3d.com). Where additional Platforms are utilized in connection with the Training Workshop services and materials. UTECH will notify the individual participants and provide access to any applicable user terms prior to the start of a scheduled Training Workshop. When a training participant registers on any Training Workshop Platform, the individual may be prompted to create an account and to agree to terms of service presented via such Platform.

On dates to be mutually agreed between the parties, UTECH will send UTECH Personnel to Customer’s location to provide Onsite Training Workshops selected by Customer. Customer must contact UTECH at least thirty

(30) days prior to the date on which Customer desires to schedule any Training Workshop. If Customer does not contact UTECH to schedule a Training Workshop at least thirty (30) days before the end of the then-current contract year, UTECH may be unable to schedule the Training Workshop. All Onsite Training Workshops are structured for up to attendees. Customer may be able to add additional attendees for an additional fee.

Customer may allocate its Onsite Training Workshop days to of the following Onsite Training Workshops:

 Profiling and Optimization in Unity– This workshop is designed to provide a more well-rounded understanding of how to optimize Unity Projects. While focusing on in-Unity approaches to optimization, participants will complete several optimization mini-challenges and analyze and optimize a large-scale scene.

 Platform-Specific Profiling– In this workshop, participants will be guided through a series of complex

optimization challenges specific to common issues on the Customer’s target platform. By exploring the best practices for using platform-specific profiling tools, participants will learn to both identify and solve problems that can arise during the development process.

 Optimizing in UI in Unity– In this workshop, participants will explore the best practices for creating efficient and functional User Interfaces in Unity. Participants will implement specific techniques to reduce overdraw and Canvas dirtying to create a well-architectured User Interface in a production-ready format.

 Best Practices for Memory and Asset Management– This workshop serves as a deep-dive on how to optimize memory usage in Unity applications. Using the Memory Profiler to benchmark progress, participants will explore unique solutions for memory optimization such as dynamic loading from the Resources folder, using best practices for import settings, and controlled usage of Garbage Collection.

 Asset Bundles: Best Practices– In this workshop, participants will explore the best practices for using the Addressable Asset System to manage loading and unloading of application content at runtime. Utilizing specific techniques to optimize Addressable Assets such as Grouping and Labeling, you’ll create a content- rich application with a small install-size footprint.

 Tour of Unity Source Code– This workshop is designed to serve as an introduction to the Unity Source Code provided with each Enterprise Support agreement. Through the exploration of various technical aspects and crucial areas of the source code, teams that go through this training will leave with a better understanding of how the Unity Engine functions on a fundamental level and be able to apply these insights in their day-to-day work.

Onsite Training Workshops can be customized for a Custom Development Fee and subject to a separate Statement of Work.

3. Customer Obligations. Customer will be responsible for delivering Materials (if any) it receives from UTECH to the Onsite Training Workshop participants. It is Customer’s or its designated individual participants’ responsibility to possess computers with operating systems and software that are able to access the Platforms and view Materials presented. The latest version of the Unity Products must be installed on attendee computers. Customer will be responsible for providing facilities and/or equipment to be used by participants and/or UTECH Personnel in conjunction with Onsite Training Workshops.

4. Ownership of Materials. Customer acknowledges and agrees that UTECH and its Fulfillment Partners will retain all rights in and to their respective Intellectual Property Rights, and any and all Materials, where applicable, used during performance of the Onsite Training Workshops will remain Intellectual Property Rights of UTECH or the Fulfillment Partner.

UTECH hereby grants to Customer a non-exclusive, royalty-free license to access Platforms and use Materials, only to the extent necessary to enable Customer to exercise all of the rights granted to it under the Agreement and this Appendix 2 of Exhibit C or any Statement of Work. Any additional license grants in respect of the Onsite Training Workshops and related Platforms and Materials will be as between UTECH (or its Fulfillment Partner) and the individual Onsite Training Workshop participant.

Appendix 3 to EXHIBIT B

Optional Service Modules

Subject to the purchase of Integrated Success Services and the fees set forth below, Customer may elect to purchase the following optional service modules:

Additional Concurrent Tickets.

Provided Customer provides UTECH with advance written notice, Customer may elect to increase the allowed number of concurrent Support Requests for which Services Personnel shall provide Services. Upon such notice to UTECH, UTECH shall invoice, and customer shall pay an additional Four Thousand Twenty Dollars (US$4000) per ticket, per year.

Project Review.

Provided Customer provides UTECH with advance written notice, Customer may elect to purchase an additional 2-day, on-site Project Review subject to the additional terms and conditions set forth in Appendix 2 to Exhibit C. Upon such notice to UTECH, UTECH shall invoice, and customer shall pay and additional plus reasonable out-of-pocket, travel, lodging, and related expenses for services provided on-site. Project reviews will be subject to availability and must be requested with no less than thirty (30) days prior notice for each such request.

Co-located Hardware.

Provided Customer provides UTECH with advance written notice, Customer may elect to purchase co-located hardware. Upon such notice to UTECH, UTECH will install development hardware owned and maintained by UTECH onto the Customer network to be used for reproduction of issues and access to otherwise restricted development environments. UTECH shall invoice, and customer shall pay a one-time fee of .

Engineering Services.

Provided Customer provides UTECH with advance written notice, and subject to a Statement of Work, Customer may elect to extend the Customer Team receiving Services with a UTECH-trained engineer who is proficient in Unity Product best practices specific to Customer’s Project for a period of twelve (12) months. Subject to acceptance by UTECH, Customer may elect to have engineering services delivered remotely (a “Dedicated Engineer”). UTECH shall invoice, and customer shall pay a fee of per engineer per year.

On-site Event Support

Provided Customer provides UTECH with advance written notice, Customer may elect to purchase on-site event support. On a date to be mutually agreed between the parties, UTECH will provide Customer with up to two (2) days of UTECH-trained support personnel onsite to a Customer event or conference to support the Customer team during the event. On-site event support is subject to availability and must be requested with no less than thirty (30) days prior notice for each such request. UTECH shall invoice, and customer shall pay a one-time fee of plus reasonable out-of-pocket, travel, lodging, and related expenses for services provided on-site.

Custom Branch.

Provided Customer provides UTECH with advance written notice, Customer may elect to maintain a secure Unity source repository that is a clone version of the Unity Editor Product defined by Customer (a “Custom Branch”).

To maintain a Custom Branch, UTECH shall: (a) backport bug fixes and optimizations to the Private Branch at Customer request so long as there are no technical limitations preventing the backport, (b) in the event that a requested backport or optimization is not technically possible, use due diligence in assisting Customer to find alternative viable technical implementations, (c) assist Customer in merging Customer authored source modifications into the Private Branch source repository as applicable, and (d) manage and run the complete set of Unity automated tests against each modification made to Customer’s Private Branch with the goal of ensuring the correct operation of the Customer’s Unity editor application as well as Customer’s runtime application.

Upon such notice to UTECH, UTECH shall invoice, and customer shall pay an additional Three Hundred Thousand Dollars (US$300,000) per branch, per year.

Extended Long Term Support.

Provided Customer provides UTECH with advance written notice, Customer may elect to purchase extended support for an LTS version of the Unity Product. “LTS” means the last version release of each year for which UTECH continues to provide support through bug fixes and updates for a period of two (2) years after release. Subject to payment of the fees outlined below, Customer may elect to continue to receive support for an elected LTS version for additional one year terms. Upon such notice to UTECH, UTECH shall invoice and customer shall pay an additional per year.

Exhibit 21.01

GLU MOBILE INC.

Subsidiaries as of February 28, 2019


		State or Other
		Jurisdiction of
		Incorporation or
Name of Subsidiary		Organization
Cie Games LLC		Delaware, USA
Crowdstar Inc		Delaware, USA
Dairy Free Games Inc.		Delaware, USA
Glu Games Inc.		Delaware, USA
Glu Mobile Limited		Hong Kong
Glu Toronto Inc. (f/k/a Blammo Games Inc.)		Ontario, Canada
Griptonite Games India Private Limited		India

We have omitted certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of December 31, 2018.

Exhibit 23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-141487, 333-149996, 333-157959, 333-165813, 333-172983, 333-176318, 333-180110, 333-187311, 333-190544, 333-194604, 333-206230, 333-211208, 333-219754, 333-226704, and 333-233144) and Form S-3 (Nos. 333-169131, 333-176325, 333-176327, 333-190545, 333-195590, and 333-198816) of Glu Mobile Inc. of our report dated February 28, 2020 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 28, 2020

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nick Earl, certify that:

I have reviewed this Annual Report on Form 10-K of Glu Mobile Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 28, 2020	/s/ Nick Earl
	Nick Earl
	President and Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE

SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric R. Ludwig, certify that:

I have reviewed this Annual Report on Form 10-K of Glu Mobile Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 28, 2020	/s/ Eric R. Ludwig
	Eric R. Ludwig
	Executive Vice President, Chief Operating Officer and Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. §1350

The undersigned, Nick Earl, the President and Chief Executive Officer of Glu Mobile Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(i) the Annual Report on Form 10-K for the year ended December 31, 2019 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: February 28, 2020	By:	/s/ Nick Earl
		Nick Earl
		President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO §18 U.S.C. SECTION 1350

The undersigned, Eric R. Ludwig, the Executive Vice President, Chief Operating Officer and Chief Financial Officer of Glu Mobile Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: February 28, 2020	By:	/s/ Eric R. Ludwig
		Eric R. Ludwig
		Executive Vice President, Chief Operating Officer and Chief Financial Officer
		(Principal Financial Officer)

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Internal Use Software (Details) - USD ($)
$ in Thousands

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Estimates and Judgments (Details)

STOCKHOLDERS EQUITY - Common and Preferred Stock (Details) - shares
shares in Thousands

GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($)
$ in Thousands

LEASES - Future Minimum Lease Payments under Noncancelable Leases (Details)
$ in Thousands

QUARTERLY FINANCIAL DATA (unaudited)

(a)	Includes restructuring charges relating to employee termination costs in the Company’s Long Beach office.

(b)	These charges are related to impairment of prepaid guaranteed royalties for certain celebrity license agreements, and certain other prepaid royalties.

BUSINESS COMBINATIONS / DIVESTITURE (Tables)

STOCK OPTION AND OTHER BENEFIT PLANS

(1)	The unrecognized compensation expense for PSOs and PSUs vesting in FY2022 and FY2023 is not included in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

401(k) Defined Contribution Plan

FAIR VALUE MEASUREMENTS

GOODWILL AND INTANGIBLE ASSETS

STOCK OPTION AND OTHER BENEFIT PLANS (Tables)

(1)	The unrecognized compensation expense for PSOs and PSUs vesting in FY2022 and FY2023 is not included in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

GOODWILL AND INTANGIBLE ASSETS (Tables)

FAIR VALUE MEASUREMENTS (Details) - USD ($)
$ in Thousands

BALANCE SHEET COMPONENTS - Accounts Receivable (Details) - USD ($)
$ in Thousands

NET INCOME/(LOSS) PER SHARE

INCOME TAXES - Unrecognized tax benefits (Details) - USD ($)
$ in Thousands

STOCK OPTION AND OTHER BENEFIT PLANS - RSU, PSU and PSO Activity (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands

STOCKHOLDERS EQUITY - Celebrity Warrants (Details)
$ / shares in Units, shares in Thousands, $ in Thousands

INCOME TAXES - Components of Income Tax Benefit/(Expense) (Details) - USD ($)
$ in Thousands

STOCK OPTION AND OTHER BENEFIT PLANS - 401(k) Defined Contribution Plan (Details) - USD ($)
$ in Thousands

QUARTERLY FINANCIAL DATA (unaudited) (Details) - USD ($)
$ / shares in Units, $ in Thousands

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($)
$ in Thousands

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Document and Entity Information - USD ($)

BUSINESS COMBINATIONS / DIVESTITURE

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

STOCKHOLDERS EQUITY

INCOME TAXES (Tables)


		Page
	PART I

Item 1.	Business	3
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	41
Item 2.	Properties	41
Item 3.	Legal Proceedings	41
Item 4.	Mine Safety Disclosures	41
	PART II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	42
Item 6.	Selected Financial Data	43
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	102
Item 9A.	Controls and Procedures	102
Item 9B.	Other Information	103
	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	103
Item 11.	Executive Compensation	103
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	103
Item 13.	Certain Relationships and Related Transactions, and Director Independence	105
Item 14.	Principal Accounting Fees and Services	105
	PART IV

Item 15.	Exhibits, Financial Statement Schedules	105
Item 16.	Form 10-K Summary	105
Signatures		110

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Internal Use Software (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Internal Use Software [Abstract]
Capitalized internal use software costs	$ 1,216	$ 65	$ 924
Amortization of capitalized software costs	$ 809	$ 896	$ 1,031
Capitalized software costs
Internal Use Software [Abstract]
Intangible assets estimated useful life	3 years

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Estimates and Judgments (Details)	12 Months Ended
	Dec. 31, 2019
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of days required to be considered an active user	30 days
Revenue, minimum number of days of data required	120 days

STOCKHOLDERS EQUITY - Common and Preferred Stock (Details) - shares shares in Thousands	Dec. 31, 2019	Dec. 31, 2018
Common Stock [Abstract]
Common stock, shares authorized	250,000	250,000
Common stock, reserved for future issuance	39,468
Preferred Stock [Abstract]
Preferred stock, shares authorized	5,000	5,000

LEASES - Future Minimum Lease Payments under Noncancelable Leases (Details) $ in Thousands	Dec. 31, 2019 USD ($)
LEASES
2020	$ 4,587
2021	6,999
2022	6,927
2023	6,964
2024 and thereafter	27,667
Total lease payments	53,144
Less imputed interest	(12,265)
Total	$ 40,879

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 127,053	$ 97,834
Restricted cash		110
Other Investments	1,565	1,410
Total financial assets	128,618	99,354
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	127,053	97,834
Restricted cash		110
Total financial assets	127,053	97,944
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Investments	1,565	1,410
Total financial assets	$ 1,565	$ 1,410

BALANCE SHEET COMPONENTS - Accounts Receivable (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
BALANCE SHEET COMPONENTS
Accounts receivable	$ 29,304	$ 27,325
Accounts receivable, net	$ 29,304	$ 27,325

STOCKHOLDERS EQUITY - Celebrity Warrants (Details) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2015 item shares	Dec. 31, 2014 item shares
Celebrity Warrants
Warrants and Rights Note Disclosure [Abstract]
Number of other entities \| item				1	1
Number of shares, if warrants exercised				1,600	1,600
Warrant vesting period					60 months
Non-cash warrant expense/(benefit) \| $	$ 0	$ 1,046	$ 569
Celebrity Warrants August 2015
Warrants and Rights Note Disclosure [Abstract]
Number of shares, if warrants exercised				1,000	1,000
Percent of shares that vest upon public announcement of license agreement				50.00%	50.00%
Warrant vesting period				24 months	24 months
Celebrity Warrants September 2015
Warrants and Rights Note Disclosure [Abstract]
Number of shares, if warrants exercised				100
Warrant vesting period				60 months
Common stock \| Celebrity Warrants
Warrants and Rights Note Disclosure [Abstract]
Number of shares, if warrants exercised					500
Warrants exercise price, per share \| $ / shares	$ 4.61
Warrant exercisable term period	5 years 5 months 8 days
Number of shares outstanding under warrant	1,600

INCOME TAXES - Components of Income Tax Benefit/(Expense) (Details) - USD ($) $ in Thousands	3 Months Ended							12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Current:
Federal								$ 373	$ (96)	$ 947
State								(10)	(8)	(10)
Foreign								(590)	(500)	(521)
Current Income Tax Expense (Benefit), Total								(227)	(604)	416
Deferred:
Federal										294
Foreign								(244)	55	116
Deferred Income Tax Expense (Benefit), Total								(244)	55	410
Total:
Federal								373	(96)	1,241
State								(10)	(8)	(10)
Foreign								(834)	(445)	(405)
Income tax benefit/(provision)	$ (641)	$ 348	$ (178)	$ (49)	$ (118)	$ (207)	$ (175)	$ (471)	$ (549)	$ 826

QUARTERLY FINANCIAL DATA (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
QUARTERLY FINANCIAL DATA (unaudited)
Revenue	$ 112,879	$ 107,077	$ 95,540	$ 95,885	$ 95,640	$ 99,285	$ 90,193	$ 81,443
Cost of revenue:
Platform commissions, royalties and other	38,278	36,758	32,806	32,813	32,508	34,384	32,386	29,167	$ 140,655	$ 128,445	$ 103,499
Impairment of prepaid royalties and minimum guarantees				457	612			99	457	711	27,323
Impairment and amortization of intangible assets	1,039	1,040	1,056	1,252	2,017	4,167	1,468	1,467	4,387	9,119	10,331
Total cost of revenue	39,317	37,798	33,862	34,522	35,137	38,551	33,854	30,733	145,499	138,275	141,153
Gross profit	73,562	69,279	61,678	61,363	60,503	60,734	56,339	50,710	265,882	228,286	145,674
Operating expenses:
Research and development	25,877	22,968	19,736	26,546	25,553	23,839	22,832	22,710	95,127	94,934	92,420
Sales and marketing	31,013	46,140	35,040	28,105	28,435	28,874	29,741	26,810	140,298	113,860	104,356
General and administrative	5,751	5,879	4,951	6,635	8,074	8,095	7,608	7,890	23,216	31,667	34,425
Restructuring charge						160		80		240	6,019
Total operating expenses	62,641	74,987	59,727	61,286	62,062	60,968	60,181	57,490	258,641	240,701	237,220
Income/(loss) from operations	10,921	(5,708)	1,951	77	(1,559)	(234)	(3,842)	(6,780)	7,241	(12,415)	(91,546)
Interest and other income/(expense), net	510	271	556	764	286	96	(366)	(251)	2,101	(235)	(6,850)
Income/(loss) before income taxes	11,431	(5,437)	2,507	841	(1,273)	(138)	(4,208)	(7,031)	9,342	(12,650)	(98,396)
Income tax (provision)/benefit	(641)	348		(178)	(49)	(118)	(207)	(175)	(471)	(549)	826
Net income/(loss)	$ 10,790	$ (5,089)	$ 2,507	$ 663	$ (1,322)	$ (256)	$ (4,415)	$ (7,206)	$ 8,871	$ (13,199)	$ (97,570)
Net income/(loss) per share
Basic net income/(loss) per share	$ 0.07	$ (0.03)	$ 0.02	$ 0.00	$ (0.01)	$ 0.00	$ (0.03)	$ (0.05)	$ 0.06	$ (0.09)	$ (0.72)
Diluted net income/(loss) per share	$ 0.07	$ (0.03)	$ 0.02	$ 0.00	$ (0.01)	$ 0.00	$ (0.03)	$ (0.05)	$ 0.06	$ (0.09)	$ (0.72)

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2019	Feb. 18, 2020	Jun. 30, 2019
Document And Entity Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2019
Entity File Number	001-33368
Entity Registrant Name	Glu Mobile Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	91-2143667
Entity Address, Address Line One	875 Howard Street, Suite 100
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103
City Area Code	415
Local Phone Number	800-6100
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	GLUU
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 879,331,800
Entity Common Stock, Shares Outstanding		150,031,695
Entity Central Index Key	0001366246
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

BUSINESS COMBINATIONS / DIVESTITURE - Pro forma (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares
CrowdStar Inc and Plain Vanilla
Business Acquisition [Line Items]
Total pro forma revenues	$ 286,827
Pro forma net loss	$ (98,450)
Pro forma net loss per share - basic \| $ / shares	$ (0.73)
Pro forma net loss per share - diluted \| $ / shares	$ (0.73)
Dairy Free, Inc.
Business Acquisition [Line Items]
Acquisition related entities contribution to the company's net losses	$ 1,081

REVENUE FROM CONTRACTS WITH CUSTOMERS - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Jan. 01, 2018	Dec. 31, 2017
Deferred revenue	$ 97,629	$ 85,736		$ 67,788
ASU 2014-09
Cumulative effect adjustment from adoption of ASU			$ 8,826

SEGMENT INFORMATION AND OPERATIONS BY GEOGRAPHIC AREA - Revenue (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) segment	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Long-lived assets (primarily consist of property and equipment)
Number of Operating Segments \| segment	1
Revenues	$ 411,381	$ 366,561	$ 286,827
United States of America
Long-lived assets (primarily consist of property and equipment)
Revenues	320,343	280,264	216,468
Americas, excluding the United States
Long-lived assets (primarily consist of property and equipment)
Revenues	25,240	21,903	15,976
EMEA
Long-lived assets (primarily consist of property and equipment)
Revenues	45,700	41,585	33,180
APAC
Long-lived assets (primarily consist of property and equipment)
Revenues	$ 20,098	$ 22,809	$ 21,203

INCOME TAXES - Income Tax Rate Reconciliation (Details)	12 Months Ended
INCOME TAXES - Income Tax Rate Reconciliation (Details)	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Tax at federal statutory rate	21.00%	21.00%	34.00%
Meals and entertainment	3.10%	(2.00%)	(0.10%)
Research and development credit	(41.0)	21.3	2.5
Stock-based compensation	(29.00%)	17.90%	(2.00%)
Revenue from contracts with customers		(14.60%)
Other	(0.60%)	(3.10%)	0.60%
Global intangible low-taxed income	4.20%	(1.70%)
Valuation allowance	17.50%	(35.30%)	(33.80%)
Executive compensation	6.10%
Foreign tax credit	23.70%	(7.80%)	(0.40%)
Effective tax rate	5.00%	(4.30%)	0.80%

LEASES - Material impact on Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating lease right of use assets	$ 35,170	$ 28,345
Short-term operating lease liabilities	3,528	3,732
Long-term operating lease liabilities	$ 37,351	30,197
Accounts payable
Deferred rent payable			$ 122
Other long-term liabilities
Deferred rent payable			5,162
As Previously Reported
Deferred rent payable			$ 5,284
2016-02 \| Adjustments
Operating lease right of use assets		28,345
Short-term operating lease liabilities		3,732
Long-term operating lease liabilities		30,197
Deferred rent payable		$ (5,284)

COMMITMENTS AND CONTINGENCIES - Other Commitments (Details) - Indemnification Agreement - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Officers And Directors
Indemnification Agreements [Abstract]
Indemnification liability recorded	$ 0	$ 0
Digital Storefronts
Indemnification Agreements [Abstract]
Indemnification liability recorded	$ 0	$ 0

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($) shares in Thousands, $ in Thousands	Common stock	Additional Paid-In Capital	Accumulated other comprehensive income/(loss)	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2016	$ 13	$ 571,243	$ 246	$ (338,688)	$ 232,814
Beginning balances (in shares) at Dec. 31, 2016	134,001
Net loss				(97,570)	(97,570)
Stock-based compensation expense		14,845			14,845
Issuance of common stock upon exercise of stock options		2,564			2,564
Issuance of common stock upon exercise of stock options (in shares)	1,083
Issuance of common stock upon exercise of warrants		3,000			3,000
Issuance of common stock upon exercise of warrants (in shares)	1,000
Taxes paid related to net share settlement of equity awards	$ 1	(3,369)			(3,368)
Taxes paid related to net share settlement of equity awards (in shares)	1,767
Issuance of common stock pursuant to Employee Stock Purchase Plan		1,567			1,567
Issuance of common stock pursuant to Employee Stock Purchase Plan (in shares)	894
Non-cash warrant expense		260			260
Other comprehensive income/(loss)			(252)		(252)
Ending balance at Dec. 31, 2017	$ 14	589,962	(6)	(436,110)	153,860
Ending balances (in shares) at Dec. 31, 2017	138,745
Cumulative effect adjustment from adoption of ASU \| ASU 2016-09		(148)		148
Net loss				(13,199)	(13,199)
Stock-based compensation expense		24,592			24,592
Issuance of common stock upon exercise of stock options		6,922			6,922
Issuance of common stock upon exercise of stock options (in shares)	2,721
Taxes paid related to net share settlement of equity awards		(7,097)			(7,097)
Taxes paid related to net share settlement of equity awards (in shares)	1,634
Issuance of common stock pursuant to Employee Stock Purchase Plan		2,356			2,356
Issuance of common stock pursuant to Employee Stock Purchase Plan (in shares)	770
Non-cash warrant expense		1,046			1,046
Other comprehensive income/(loss)			7		7
Ending balance at Dec. 31, 2018	$ 14	617,781	1	(440,483)	177,313
Ending balances (in shares) at Dec. 31, 2018	143,870
Cumulative effect adjustment from adoption of ASU \| ASU 2016-09				8,826	8,826
Net loss				8,871	8,871
Stock-based compensation expense		17,383			17,383
Issuance of common stock upon exercise of stock options	$ 1	4,553			4,554
Issuance of common stock upon exercise of stock options (in shares)	1,723
Taxes paid related to net share settlement of equity awards		(8,408)			(8,408)
Taxes paid related to net share settlement of equity awards (in shares)	1,457
Issuance of common stock pursuant to Employee Stock Purchase Plan		3,412			3,412
Issuance of common stock pursuant to Employee Stock Purchase Plan (in shares)	728
Other comprehensive income/(loss)			(38)		(38)
Ending balance at Dec. 31, 2019	$ 15	$ 634,721	$ (37)	$ (431,612)	$ 203,087
Ending balances (in shares) at Dec. 31, 2019	147,778

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 127,053	$ 97,834
Accounts receivable, net	29,304	27,325
Prepaid royalties	15,347	8,520
Deferred royalties	5,067	4,410
Deferred platform commission fees	29,239	25,862
Restricted cash		110
Prepaid expenses and other assets	8,629	6,940
Total current assets	214,639	171,001
Property and equipment, net	17,643	13,888
Operating lease right of use assets	35,170
Long-term prepaid royalties	26,879	1,667
Other long-term assets	2,733	2,505
Intangible assets, net	4,758	9,145
Goodwill	116,227	116,227
Total assets	418,049	314,433
Current liabilities:
Accounts payable	16,892	10,480
Accrued liabilities	643	1,384
Accrued compensation	11,260	17,896
Accrued royalties	20,802	14,139
Accrued restructuring		294
Short-term operating lease liabilities	3,528
Deferred revenue	97,629	85,736
Total current liabilities	150,754	129,929
Long-term accrued royalties	26,842	1,649
Long-term operating lease liabilities	37,351
Other long-term liabilities	15	5,542
Total liabilities	214,962	137,120
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized at December 31, 2019 and December 31, 2018; no shares issued and outstanding at December 31, 2019 and December 31, 2018
Common stock, $0.0001 par value; 250,000 shares authorized at December 31, 2019 and December 31, 2018; 147,778 and 143,870 shares issued and outstanding at December 31, 2019 and December 31, 2018	15	14
Additional paid-in capital	634,721	617,781
Accumulated other comprehensive (loss)/income	(37)	1
Accumulated deficit	(431,612)	(440,483)
Total stockholders' equity	203,087	177,313
Total liabilities and stockholders' equity	$ 418,049	$ 314,433

RESTRUCTURING (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
RESTRUCTURING (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Restructuring Reserve [Roll Forward]
Beginning Balance		$ 759	$ 294	$ 759	$ 271
Charges to operations	$ 160	80		240	6,019
Non-cash charges/adjustments			(294)		190
Charges settled in cash				(705)	(5,721)
Ending Balance				294	759
Restructuring Workforce
Restructuring Reserve [Roll Forward]
Beginning Balance		143		143
Charges to operations				160	4,319
Non-cash charges/adjustments					146
Charges settled in cash				(303)	(4,322)
Ending Balance					143
Restructuring Facility
Restructuring Reserve [Roll Forward]
Beginning Balance		$ 616	294	616	271
Charges to operations				80	1,700
Non-cash charges/adjustments			(294)		44
Charges settled in cash				(402)	(1,399)
Ending Balance				294	616
Employee Termination
Restructuring Reserve [Roll Forward]
Charges to operations			$ 0	$ 240	$ 6,019

STOCK OPTION AND OTHER BENEFIT PLANS (Details) $ in Thousands			1 Months Ended			6 Months Ended	7 Months Ended	12 Months Ended			91 Months Ended
	Feb. 22, 2016 shares	Aug. 15, 2009 shares	Apr. 30, 2019 shares	Apr. 30, 2018 shares	Apr. 30, 2017 shares	Aug. 14, 2009 shares	Dec. 31, 2015	Dec. 31, 2019 USD ($) tranche shares	Dec. 31, 2018 USD ($) shares	Dec. 31, 2017 USD ($) shares	Jun. 04, 2015	Dec. 31, 2007 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation \| $								$ 17,383	$ 24,592	$ 15,063
Common stock, reserved for future issuance								39,468,000
Options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation \| $								$ 7,043	$ 6,386
Options granted, number of shares								815,000	(6,092,000)	5,346,000
Options to purchase common stock \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term								6 years
Options to purchase common stock \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term								10 years
Incentive Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation \| $										$ 3,585
PSOs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term								10 years
Options granted, number of shares								0	2,737,000	4,246,000
2007 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for issuance, increased			4,600,000	10,000,000	8,000,000
Carve-out percentage					5.00%
Number of shares available for grant								2,686,000
2007 Equity Incentive Plan \| Options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee options, vesting percentage, after first year								25.00%
Vesting period								1 year
Employee options, vesting percentage, monthly after first year								0.02083%
Contractual term							10 years				6 years
2007 Equity Incentive Plan \| Options to purchase common stock \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								85.00%
2007 Equity Incentive Plan \| Incentive Stock Option \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								100.00%
2007 Equity Incentive Plan \| Non Qualified Stock Option \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								85.00%
2007 Equity Incentive Plan \| Non Qualified Stock Option \| Minimum \| 10% Stockholder [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								110.00%
2007 Equity Incentive Plan \| Non Qualified Stock Option \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								85.00%
2007 Equity Incentive Plan \| PSOs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation \| $								$ 0
2007 Equity Incentive Plan \| PSOs \| Creative leaders
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of annual bonus opportunity replaced									50.00%	50.00%
2007 Equity Incentive Plan \| PSOs and PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of tranches \| tranche								3
2007 Equity Incentive Plan \| PSOs and PSUs \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage								0.00%
2007 Equity Incentive Plan \| PSOs and PSUs \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage								200.00%
2007 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for issuance, increased					4,000,000
Percentage of outstanding shares reserved for grant increase during each January 1 for the first eight calendar years								1.00%
Stock-based compensation \| $								$ 1,360	$ 927	$ 561
Maximum shares issued over a plan period								5,333,000
Common stock, reserved for future issuance												667,000
Number of shares available for grant								2,787,000
Maximum offering period share amount	450,000	200,000				500,000
2018 Equity Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, reserved for future issuance				400,000				156,000
2018 Equity Inducement Plan \| Non Qualified Stock Option \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, percentage of fair market value of common stock on grant date								100.00%

BUSINESS COMBINATIONS / DIVESTITURE - Moscow Studio (Details) shares in Thousands, $ in Thousands	1 Months Ended		12 Months Ended
	Apr. 30, 2018 USD ($)	Jan. 31, 2018 USD ($)	Dec. 31, 2019 USD ($) item shares	Dec. 31, 2018 USD ($) shares	Dec. 31, 2017 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from divestiture of Moscow studio				$ 2,726
Prepaid expenses and other assets			$ 8,629	6,940
Disposed by sale \| Moscow Studio and GMRL
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss on divestiture					$ (6,459)
Assignment of contract					10,000
Goodwill write-off					1,220
Net assets written-off					479
Disposed by sale \| Moscow Studio and GMRL \| Saber and MGL
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total cash consideration					3,226
Disposed by sale \| Moscow Studio and GMRL \| TSA
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Bonus expense				500
Accelerated vesting expense				$ 514
Accelerated vesting, shares \| shares				147
Amortization of transition services				$ 515
Disposed by sale \| Moscow Studio and GMRL \| TSA \| Saber
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total cash consideration					514
Disposed by sale \| Moscow Studio and GMRL \| TSA \| Saber \| Maximum
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Bonus expense			$ 500
Accelerated vesting, shares \| shares			150
Disposed by sale \| Moscow Studio and GMRL \| APLA \| MGL
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of mobile games sold \| item			4
Disposed by sale \| Moscow Studio and GMRL \| Celebrity Game \| MGL
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Minimum guarantee and other payments obligation			$ 1,500
Total cash consideration					$ 1,500
Disposed by sale \| Moscow Studio and GMRL \| SPA and APLA
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total cash consideration	$ 3,226
Proceeds from divestiture of Moscow studio	1,500	$ 1,726
Transition bonus payment	$ 500

LEASES - Supplemental Information (Details) $ in Thousands	12 Months Ended
LEASES - Supplemental Information (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 5,832
Operating leases	$ 11,231

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Useful Lives (Details)	12 Months Ended
	Dec. 31, 2019
Computer equipment
Property, Plant and Equipment [Line Items]
Property plant and Equipment useful life	3 years
Computer software \| Minimum
Property, Plant and Equipment [Line Items]
Property plant and Equipment useful life	2 years
Computer software \| Maximum
Property, Plant and Equipment [Line Items]
Property plant and Equipment useful life	3 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property plant and Equipment useful life	3 years

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenue recognized relating to performance obligations satisfied in prior periods	$ 0	$ 0
Revenue, Remaining Performance Obligation, Optional Exemption, Performance Obligation [true false]	true
Number of years revenue from consumable virtual items has been insignificant	3 years
Minimum
Estimated useful life of a paying user	4 months
Maximum
Estimated useful life of a paying user	8 months

LEASES - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
LEASES - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Lease terms
Lessee, Operating Lease, Existence of Option to Extend [true false]	true
Longest extension option	6 years
Weighted-average remaining non-cancelable lease term	7 years 6 months 18 days
Weighted-average discount rate	6.70%
Rent expense	$ 5,311	$ 5,759	$ 4,472
Minimum
Lease terms
Operating leases, remaining lease terms	3 months
Maximum
Lease terms
Operating leases, remaining lease terms	7 years 11 months 1 day

COMMITMENTS AND CONTINGENCIES - Minimum Guaranteed Royalties (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Future unpaid minimum guaranteed royalty commitments
2020	$ 11,540
2021	10,160
2022	6,150
2023	6,150
2024	6,150
Total future unpaid minimum guaranteed royalty commitments	40,150
Agreements With Various Licensors \| Current and long-term liabilities
Future unpaid minimum guaranteed royalty commitments
Total future unpaid minimum guaranteed royalty commitments	40,150
Agreements With Various Licensors \| Current and long-term assets
Future unpaid minimum guaranteed royalty commitments
Recoupment of earned royalties	$ 40,150

SEGMENT INFORMATION AND OPERATIONS BY GEOGRAPHIC AREA - Long-Lived Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	$ 17,643	$ 13,888
United States of America
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	16,738	12,653
Rest of the World
Long-lived assets (primarily consist of property and equipment)
Long-Lived Assets	$ 905	$ 1,235

INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets:
Fixed assets	$ 280	$ 35
Net operating loss carryforwards	48,993	50,216
Accruals, reserves and other	5,336	11,025
Foreign tax credit	2,905	5,246
Stock-based compensation	5,882	4,787
Research and development credit	22,630	17,945
Capitalized research and development	7,189	2,835
Intangible assets	355
Other	2,951	2,888
Total deferred tax assets	96,521	94,977
Deferred tax liabilities:
Fixed assets	(40)	(73)
Intangible assets		(513)
Net deferred tax assets	96,481	94,391
Less valuation allowance	(96,316)	(93,982)
Net deferred tax liability	165	409
US
Deferred tax assets:
Fixed assets	209
Net operating loss carryforwards	48,968	50,119
Accruals, reserves and other	5,202	10,853
Foreign tax credit	2,905	5,118
Stock-based compensation	5,882	4,787
Research and development credit	22,630	17,945
Capitalized research and development	7,189	2,835
Intangible assets	355
Other	2,951	2,888
Total deferred tax assets	96,291	94,545
Deferred tax liabilities:
Fixed assets		(54)
Intangible assets		(513)
Net deferred tax assets	96,291	93,978
Less valuation allowance	(96,291)	(93,978)
Foreign Tax Authority
Deferred tax assets:
Fixed assets	71	35
Net operating loss carryforwards	25	97
Accruals, reserves and other	134	172
Foreign tax credit		128
Total deferred tax assets	230	432
Deferred tax liabilities:
Fixed assets	(40)	(19)
Net deferred tax assets	190	413
Less valuation allowance	(25)	(4)
Net deferred tax liability	$ 165	$ 409

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	147,778	143,870
Common stock, shares outstanding	147,778	143,870