Glu Mobile, Inc.
Annual Report 2014

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2014 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) Delaware91-2143667(State or Other Jurisdiction of(IRS EmployerIncorporation or Organization)Identification No.) 500 Howard Street Suite 30094105San 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 ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.0001 per shareNASDAQ Global 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 forsuch 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuantto 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 and post such files). Yes ☑ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large acceleratedfiler,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☐(Do not check if a smaller reporting company) 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, 2014, the last business day of the registrant’s most recently completed second fiscalquarter, based upon the closing price of such stock on such date as reported by The NASDAQ Global Market, was approximately $457,146,820. Shares of common stock held by each executiveofficer 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 beaffiliates. 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 March 1, 2015 was 107,800,539. DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement for registrant’s 2015 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days afterregistrant’s fiscal year ended December 31, 2014 are incorporated by reference into Part III of this Annual Report on Form 10-K. Table of ContentsTABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 16 Item 1B. Unresolved Staff Comments 37 Item 2. Properties 37 Item 3. Legal Proceedings 37 Item 4. Mine Safety Disclosures 38 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 38 Item 6. Selected Financial Data 42 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8. Financial Statements and Supplementary Data 67 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 107 Item 9A. Controls and Procedures 107 Item 9B. Other Information 108 PART III Item 10. Directors, Executive Officers and Corporate Governance 108 Item 11. Executive Compensation 108 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 109 Item 13. Certain Relationships and Related Transactions, and Director Independence 109 Item 14. Principal Accountant Fees and Services 109 PART IV Item 15. Exhibits and Financial Statement Schedules 109 Signatures 110 2 Table of Contents Forward-Looking Statements The information in this Annual Report on Form 10-K contains forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of1934, as amended (the “Exchange Act”). Such statements are based upon current expectations that involve risks anduncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-lookingstatements. 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-lookingstatements. 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 discussedelsewhere in this report, particularly in the section titled “Risk Factors,” and the risks discussed in our other Securities andExchange Commission (“SEC”) filings. We undertake no obligation to update the forward-looking statements after the date ofthis report, except as required by law. PART I Item 1. Business General Glu Mobile develops, publishes and markets a portfolio of games designed to appeal to a broad cross section of theusers of smartphones and tablet devices who download and make purchases within our games through direct-to-consumerdigital storefronts, such as the Apple App Store, Google Play Store, Amazon Appstore and others. We create games based onour own brands, including Blood & Glory, Contract Killer, Deer Hunter, Diner Dash, Eternity Warriors, Frontline Commando,Gun Bros, and Heroes of Destiny. We also create games based on third-party licensed brands, including Kim Kardashian:Hollywood, Robocop: The Official Game, and Hercules: The Official Game, as well as our own branded games that incorporatethird-party licensed brands, properties and other content, such as Racing Rivals and Tap Sports: Baseball. We plan to developand publish additional games based on our current brand franchises and based on newly licensed brands, properties and othercontent, including through our partnership with world-renowned singer and songwriter Katy Perry and games based on theJames Bond and Terminator motion picture franchises. We are headquartered in San Francisco, California, with major U.S.offices outside of Seattle, Washington and in Long Beach, California and international locations in Canada, China, India,Japan, Korea and Russia. We were incorporated in Nevada in May 2001 as Cyent Studios, Inc. and changed our name to Sorrent, Inc. later thatyear. In November 2001, we incorporated a wholly owned subsidiary in California, and, in December 2001, we merged theNevada corporation into this California subsidiary to form Sorrent, Inc., a California corporation. In May 2005, we changed ourname to Glu Mobile Inc. In March 2007, we completed our initial public offering and our common stock is traded on theNASDAQ Global Market under the symbol “GLUU.” Except where the context requires otherwise, in this Annual Report onForm 10-K, references to “Company,” “Glu,” “Glu Mobile,” “we,” “us” and “our” refer to Glu Mobile Inc., and whereappropriate, 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 statementsand other reports, and amendments to these reports, required of public companies with the SEC. The public can read and copythe materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549 and canobtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC alsomaintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regardingissuers that file electronically with the SEC. We make available free of charge on the Investor Relations section of ourcorporate website all of the reports we file with the SEC as soon as reasonably practicable after they are filed. Our internetwebsite is located at www.glu.com and our Investor Relations website is located at www.glu.com/investors. The information onour website is not incorporated into this report, unless otherwise expressly stated. Copies of our Annual Report on Form 10-Kfor the year ended December 31, 2014 may3 Table of Contents also be obtained, without charge, by contacting Investor Relations, Glu Mobile Inc., 500 Howard Street, Suite 300, SanFrancisco, California 94105 or by calling 415-800-6100. Business Developments and Strategy Since January 1, 2014, we have taken the following actions to support our business:·We continued to focus our efforts on developing and publishing games for smartphones and tablet devices, suchas Apple’s iPhone and iPad and mobile devices utilizing Google’s Android operating system, such as Samsung’sGalaxy product line and Amazon’s Kindle Fire. Our significant achievements related to these efforts include thefollowing:·We generated total revenue of $223.1 million for the year ended December 31, 2014 compared to totalrevenue of $105.6 million for the year ended December 31, 2013. ·We generated income before income taxes of $593,000 for the year ended December 31, 2014 compared to aloss before income taxes of $22.8 million for the year ended December 31, 2013.·We generated cash flows from operations of $30.6 million during the year ended December 31, 2014compared to cash flows used in operations of $9.6 million for the year ended December 31, 2013, finishingthe year with a cash balance of $70.9 million.·In December 2014, we had approximately 7.2 million daily active users and 62.6 million monthly activeusers of our games on our primary distribution platforms, including Apple’s App Store, the Google Play Store,Amazon’s Appstore and the Mac App Store. This is a significant increase from December 2013 in which wehad 6.4 million daily active users and 56.3 million monthly active users of our games on our primarydistribution platforms.·As of December 31, 2014, we had approximately 969.2 million cumulative installs of our games on ourprimary distribution platforms noted in the preceding bullet, including approximately 89.4 million installsduring the fourth quarter of 2014.·We continued to execute on our strategy to become the leading developer and publisher of free-to-play games forsmartphones, tablets and other platforms. Free-to-play games are games that a player can download and play forfree, but which allow players to access a variety of additional content and features for a fee and to engage withvarious advertisements and offers that generate revenues for us. We globally released 16 free-to-play games thatwe developed during 2014.·We have undertaken a number of measures to diversify our product portfolio and strengthen our core actionfranchises to position us for continued growth in 2015. As a result of these efforts, we now occupy leadershippositions in four gaming genres: action, casual, racing and sports. Some of the key actions we have taken tosolidify our leadership position in each of these genres include:oAction §We released Frontline Commando 2 and Contract Killer: Sniper, the latest and most advancediterations of our Frontline Commando and Contract Killer franchises, as well as Dino Hunter:Deadly Shores, which was an extension of our popular Deer Hunter franchise. §We deepened our partnership with MGM Interactive Inc. by releasing two games based on MGMfeature films, Robocop: The Official Game and Hercules: The Official Game, as well as by enteringinto an agreement with MGM and Danjaq, LLC to create a new free-to-play mobile4 Table of Contents game based on the James Bond film franchise.§In June 2014, we announced that we had partnered with Skydance Productions to create a free-to-play mobile game in coordination with the theatrical release of the new Terminator film. oCasual §Our Kim Kardashian: Hollywood game released in June 2015 set new Glu records for single-day andcumulative revenues and reached the #3 position on the Apple App Store’s U.S. iPhone top grossingrankings.§In September 2014, we amended our license agreement with Kim Kardashian West to extend the termof our agreement through June 30, 2019, which will enable us to continue updating KimKardashian: Hollywood, and will allow us to develop additional games or other softwareapplications featuring the Kim Kardashian brand.§In February 2015, we signed a five year exclusive mobile gaming partnership with world-renownedsinger and songwriter Katy Perry. This partnership is indicative of our ongoing strategy to build thepremier Hollywood and other celebrity gaming platform. We expect to release a game featuringKaty Perry in late 2015.§In May 2014, we closed our acquisition of PlayFirst, Inc., developers of casual games and creators ofthe Dash® series of franchises. In October 2014, we released the first free-to-play Diner Dash game.oRacing§In August 2014, we closed our acquisition of racing genre game developer Cie Games, Inc., creatorsof Racing Rivals, which has consistently been the highest ranked free-to-play racing genre title inthe Apple App Store’s U.S. iPhone top grossing rankings since the acquisition. §Our 2015 product roadmap includes the planned release of Car Town Rivals in the second of 2015,which is the sequel to the popular Car Town game published on Facebook.oSports§In August 2014 we launched Tap Sports: Baseball, in which we partnered with the Major LeagueBaseball Players Association to include the names and numbers of real-world baseball stars. TapSports: Baseball has consistently been the highest ranked free-to-play baseball title in the AppleApp Store’s U.S. iPhone top grossing rankings since its release.§Our 2015 product roadmap includes the planned release of a sequel to Tap Sports: Baseball prior tothe upcoming major league baseball season, as well as our first football title, Tap Sports: Football.·We continued transitioning towards becoming primarily a games-as-a-service, or GaaS, company, which webelieve will contribute to better monetization in our games. Our experiences with product launches in 2014 haveled us to believe the most effective way to implement our GaaS strategy is on a game by game basis, giving ourstudios more autonomy on the level of GaaS implementation for each particular game rather than mandating theuse of GaaS technology from a centralized team at headquarters. Our strengthened live operations capabilitiescombined with continuous content updates enabled a number of our titles to show continued strength manymonths after their initial global launch. For example, Racing Rivals set new daily5 Table of Contents revenue records for the title in the fourth quarter of 2014 despite having been initially globally released in thesummer of 2013. Similarly, Deer Hunter 2014 has continued to generate significant revenues now nearly 18months after its global release, and early indications are that Kim Kardashian: Hollywood will have similar long-term success.·We continue to seek opportunities to expand into adjacent or emerging platforms. As part of these efforts, in June2014, we announced support for Google’s Android TV platform with Deer Hunter 2014 and Eternity Warriors 2immediately available on the platform. In September 2014, we launched Racing Rivals on Facebook and inOctober 2014, we launched Kim Kardashian: Hollywood on Facebook.·In December 2014, we amended our software license agreement with Unity Technologies ApS, to extend the termof the license for the Unity game development engine we use to create most of our games through October 28,2017 and to secure rights to any future updates to the Unity game development engine and the same level ofsupport through the extended term. ·In June 2014, we closed an underwritten public offering of 9,861,250 shares of common stock, in which wereceived net proceeds of approximately $32.1 million, after deducting underwriter discounts and other offeringexpenses. The mobile games market continued to undergo significant changes in 2014. There has been, and we believe thatthere will continue to be, an increase in the number of smartphones and tablets sold. In addition, Apple, Amazon, Microsoft,Samsung and a number of other manufacturers continue to introduce new, larger and more powerful smartphone and tabletdevices that enable mobile game developers to create titles that are optimized for larger screen sizes and designed to takeadvantage of these devices’ advanced capabilities and functionality. We believe that the worldwide proliferation ofsmartphones and tablets will continue for the foreseeable future. We continued to execute on our strategy of becoming the leading developer and publisher of free-to-play games forsmartphones, tablets and other advanced platforms. In order for us to achieve this goal, we must develop and publish mobilegames that are widely accepted and commercially successful on digital storefronts that distribute games for these devices andplatforms. These include Apple’s App Store and Mac App Store, the Google Play Store and Amazon’s Appstore. Accordingly,we have concentrated on improving and diversifying our portfolio of mobile gaming franchises, building a strong portfolio ofeight product franchises and becoming a leader in four gaming genres. We are dedicated to extending our leadership positionin these gaming genres, including through further development of our Hollywood and other celebrity-based gamingrelationships and platform.We have succeeded in generating a large number of downloads of our games. This is in part because our games can bedownloaded and played for free, which enables us to build a significantly larger customer base more quickly than we could ifwe charged users an up-front fee for downloading our games, which was our previous feature phone business model. We havealso been successful in licensing and incorporating well-known third-party brands, properties and other content in our games,which helps create awareness and drives installs of our games. In furtherance of this strategy, we are seeking to build games thatutilize transmedia storytelling, such as with our Kim Kardashian: Hollywood title. We have been successful in driving installsand awareness of the game through Ms. Kardashian West’s significant social media presence and celebrity following. We alsobuild content for the game that incorporates events occurring in Ms. Kardashian West’s public life. This game content becomesentwined with Ms. Kardashian West’s persona, becoming a part of her social media presence, part of the storyline for hertelevision series and otherwise creating additional buzz around her celebrity status, with the game developing a social mediapresence of its own. In addition, we believe that our games consistently have high production values, are visually appealingand have engaging core gameplay. These characteristics have typically resulted in highly positive consumer reviews, allowedus to partner with premier talent and some of the most well-known brands, properties and personalities in the world toincorporate into our games and enhanced our reputation for publishing compelling free-to-play games. We also believe that wehave been a consistently good partner of both Apple and Google, which has contributed to the majority of our games beingfeatured on their storefronts when they are commercially released. 6 Table of Contents However, for us to continue to execute on our strategy, we must continue to improve our monetization of our playersand continue to drive installs and awareness of our games. In addition to building strong core gameplay, improvingmonetization requires that we continually create new content within games and otherwise find ways to retain players andincentivize them to make in-app purchases. One way we are improving monetization and increasing awareness of our games isthrough building and nurturing social media communities around our franchises both in-game and holistically via communityfeatures such as dedicated social channels. Our GaaS capabilities also allow us to deliver a number of additional features incertain of our games, such as tournaments, live events and more frequent content updates, which we believe will contribute tobetter monetization in those games. We have made significant investments in our proprietary analytics and monetizationinfrastructure. With our enhanced analytics capabilities, we intend to devote resources towards segmenting and learning moreabout each of our franchise’s user base, which we believe should improve retention and monetization. We aim to connect ouranalytics and monetization infrastructure to every element of our business – from marketing to merchandising. In addition, weplan to continue monitoring the successful aspects of our games to enhance monetization, whether by securing additionallicenses of well-known third-party licensed brands, properties and other content, building enhanced and more complex coregameplay, adding additional social features, tournaments and events or otherwise. Continuing to drive installs and awareness ofour games through licensing efforts requires that we continue to partner with top celebrities, Hollywood film studios, athletes,sports organizations and other popular brands, properties and personalities to build content for our games. Signing highlydesirable licensing partners and renewing our existing licenses requires that we continue to develop successful games based onlicensed content and are able to compete with other mobile gaming companies on financial and other terms in signing suchpartners. We also plan to increase our licensing efforts to drive installs and awareness of our own originally branded games,introducing third-party licensed brands, properties and personalities as title-based characters, for cameo appearances or forlimited time events.Across the globe our industry is evidencing that strong titles at peak generally remain higher in the charts forlonger. We believe this is due to the continued specialization and investment of teams and companies in their hit titles, and thelive, social nature of certain games. Our business developments and strategy position us to take advantage of these trends.Our Products We develop and publish a portfolio of mobile games designed to appeal to a broad cross section of the users ofsmartphones and tablet devices. We are a leader in free-to-play action, casual, racing and sports genre mobile gaming, andintend to focus on developing games in these genres during 2015. We plan to continue developing games based on our ownintellectual property, including certain of our core franchises, such as Blood & Glory, Contract Killer, Deer Hunter, the Dashseries, Eternity Warriors, and Frontline Commando, as well as our original branded games that incorporate third-party licensedcontent, such as Racing Rivals and Tap Sports: Baseball. In addition, following the success of our Kim Kardashian:Hollywood game, we intend to build the premier Hollywood and other celebrity gaming platform by securing licensing rightsto well-known third-party brands, properties and other content for our games. As part of these efforts, we plan to release gamesin 2015 based on the James Bond and Terminator film franchises as well as a game featuring singer and songwriter Katy Perry. Although users can download and play our free-to-play games free of charge, they can purchase virtual currency to buyvarious virtual items 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:·Play Longer Through Better Equipment – We generally design our games to become significantly morechallenging as the player advances through the game. For a game like Frontline Commando 2, players can usetheir virtual currency to purchase more powerful weapons, stronger armor and healing med kits to increase theirodds of continued survival.·Play Longer Through Energy Replenishment – We design some of our games, such as Deer Hunter 2014 and KimKardashian: Hollywood, to have short playing sessions, the duration of which are limited by the energy availablefor each session. Players of Deer Hunter 2014 and Kim Kardashian: Hollywood can use their virtual currency topurchase items that will replenish their energy and enable them to extend their game7 Table of Contents play session.·Accelerate Game Progress – Although some players are content to slowly “grind” their way through progressingin a game, others are willing to purchase items to accelerate their progression. For example, Heroes of Destinyenables players to spend their virtual currency to upgrade their weapons and armor and have tasks, such as theleveling up of their heroes, instantly completed, thus allowing the player to accelerate his or her progress in thegame.·Customization – Our games generally enable players to express themselves by customizing their character or theworld the character inhabits. For example, Kim Kardashian: Hollywood allows users to personalize theircharacters’ appearance, clothing and living environment, as well as purchase special items available for a limitedtime, such as for holidays. We sell virtual currency to consumers at various prices ranging from $0.99 to $99.99 (adjusted for local currencies forsales to players in foreign countries), which is consistent with storefront pricing guidelines, with the significant majority ofplayer purchases occurring at the lower price points. The digital storefronts generally share with us 70% of the consumers’payments for virtual currency, although these rates are generally lower for Android-based platforms in China; we do not haveany special agreement or arrangement with respect to pricing or terms with any of the digital storefronts. Consumers may alsoacquire virtual currency through game play or by completing offers, as described below. In addition to in-app purchases of virtual currency, we also monetize our games through offers and in-gameadvertising. Offers enable users to acquire virtual currency without paying cash but by instead taking specified actions, such asdownloading another application, watching a short video, subscribing to a service or completing a survey. We work with thirdparties to provide these offers to players of our free-to-play games, and we receive a payment from the third-party offer providerbased on consumers responding to these offers. We also work with third-party advertising aggregators who embed advertising,such as ads appearing in-games between content transitions and in-game pop-up ads; the aggregators typically pay us based onthe number of impressions, which is the number of times an advertisement is shown to a player. In addition, from time to timewe work directly with other application developers to include advertising for their applications in our games, and thedevelopers pay us based on either the number of impressions in our games or the number of users who download thedeveloper’s application. We have generally designed our games to incorporate social features that enhance the user’s game play experience,and we intend to continue to introduce more social, community-based features into many of our new titles by leveraging ourGaaS technology platform. For example, Eternity Warriors 3 includes live chat functionality and enables users to createalliances with other players, Racing Rivals enables players across Apple’s iOS and Google’s Android platforms to competeagainst each other in real-time, synchronous racing, and Kim Kardashian: Hollywood allows users to incorporate their friendsinto the game by sending them gifts and going on dates with them. Many of our games also leverage technologies such asApple’s Game Center or Facebook Connect, which enables players to compare their high scores and achievements with theirfriends and against the global leaderboard. We intend to analyze each particular game release to determine the appropriatelevel of GaaS technology to be incorporated. Our smartphone 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 100 megabytes or more, that resides on theplayer’s device. Because of the inherent limitations of the digital platforms and telecommunications networks, which, at best,only allow applications that are less than 100 megabytes to be downloaded over a carrier’s wireless network, users generallymust download one of our games either via a wireless Internet (wifi) connection or initially to their computer and then load thegame to their device. 8 Table of Contents The table below sets forth each of the first party and third party titles that we released in 2014, as well as the title’slaunch date and genre. First party titles are those created by our internal development studios, while third party titles are gamescreated by other companies that we publish through our Glu Publishing business. First or Third Title Release Date Genre Party Title Robocop: The Official Game January 2014 Action First Party Defenders & Dragons January 2014 Casual First Party Motocross Meltdown January 2014 Action First Party Frontline Commando 2 March 2014 Action First Party Pirates of Everseas March 2014 Casual Third Party Knights of Puzzelot May 2014 Casual First Party Dead Route June 2014 Action Third Party Kim Kardashian: Hollywood June 2014 Casual First Party Hercules: The Official Game July 2014 Action First Party Dino Hunter: Deadly Shores July 2014 Action First Party Bingo Flick 3D July 2014 Casual Third Party Tap Sports: Baseball August 2014 Sports First Party Real Fishing 2014 August 2014 Sports Third Party Amazing Battle Creatures September 2014 Casual First Party Diner Dash October 2014 Casual First Party Contract Killer: Sniper November 2014 Action First Party A majority of the first-party games that we released in 2014 were based on our own intellectual property, and weexpect this to be the case for a majority of the games that we release in 2015; however, considering the success of KimKardashian: Hollywood and games incorporating licensed third-party brands and properties, like Racing Rivals, we do intendto increase our licensing efforts in 2015, and may extend our licensing efforts in our own originally branded games. In 2014,2013, and 2012, games based on our own intellectual property accounted for approximately 62.7%, 93.3%, and 83.5% of ourrevenues, respectively. The drop in 2014 is primarily related to the success of our Kim Kardashian: Hollywood game, and to alesser extent our Robocop and Hercules titles. For games based on or significantly incorporating licensed brands, properties or other content, we share a portion ofour revenues with the respective licensors. The average royalty rate that we paid on games based on licensed content (such asKim Kardashian: Hollywood, Robocop: The Official Game and Hercules: The Official Game) or significantly incorporatinglicensed content (such as Racing Rivals and Tap Sports: Baseball) was approximately 21.3% in 2014, 44.8% in 2013, and34.9% in 2012 of gross revenues. However, the individual royalty rates that we pay can be significantly above or below theaverage based on a variety of factors, such as the strength of the licensed brand, our development and porting obligations, andthe platforms for which we are permitted to distribute the licensed content.Although since 2010 we have focused our efforts on developing free-to-play games, we may create additional softwareapplications and games that are sold for a fee. We have typically sold our premium games at prices ranging between $0.99 and$6.99, which is consistent with storefront pricing guidelines. For our premium games, we generally receive 70% of theconsumers’ payments from the digital storefront owner, as we do with sales of virtual currency. Sales, Marketing and Distribution We market, sell and distribute our games primarily through direct-to-consumer digital storefronts, such as Apple’s AppStore, the Google Play Store and Amazon’s Appstore. In addition to publishing our smartphone games on direct-to-consumerdigital storefronts, we also publish some of our titles on other platforms, such as the Mac App Store and Facebook. Thesignificant majority of our smartphone revenues have historically been derived from Apple’s iOS platform, which accounted for61.8%, 59.6% and 56.0% of our total revenues in 2014, 2013 and 2012, respectively. We generated the majority of these iOS-related revenues from the Apple App Store, which represented 52.2%, 50.1% and 41.3% of our total revenues in 2014, 2013 and2012, respectively, with the significant majority of such revenues derived9 Table of Contents from in-app purchases. We generated the balance of our iOS-related revenues from offers and advertisements in gamesdistributed on the Apple App Store and, to a far lesser extent, sales of premium games. In addition, we generated approximately35.4%, 30.5% and 27.3% of our total revenues in 2014, 2013 and 2012, respectively, from the Android platform. We generatedthe majority of our Android-related revenues from in-app purchases and sales of premium games made through the Google PlayStore, which represented 24.8%, 19.2% and 20.3% of our total revenues in 2014, 2013 and 2012, respectively. No othercustomer or digital storefront accounted for more than 10% of our total revenues in 2014, 2013 or 2012. Because of the fragmentation inherent in the Android platform, we need to “port” – or convert into separate versions –our games for a significant percentage of the thousands of Android-based devices that are currently commercially available,many of which have different technical requirements. Since the number and variety of Android-based smartphones and tabletsshipped worldwide continues to grow, we must maintain and enhance our porting capabilities, which require, and will likelycontinue to require, us to invest considerable resources in this area. As part of our efforts to successfully market our games on the direct-to-consumer digital storefronts, we attempt toeducate the storefront owners about our title roadmap and seek to have our games featured or otherwise prominently placedwithin the storefront. We believe that the featuring or prominent placement of our games facilitates organic user discovery andis likely to result in our games achieving a greater degree of commercial success. We believe that a number of factors mayinfluence the featuring or placement of a game, including: ·the perceived attractiveness of the title or brand; ·the level of critical or commercial success of the game or of other games previously introduced by a publisher; ·incorporation of the storefront owner’s latest technology in the publisher’s title; ·how strong the consumer experience is on all of the devices that discover titles using any given digital storefront;·the publisher’s relationship with the applicable storefront owner and future pipeline of quality titles for it; and ·the current market share of the publisher. In addition to our efforts to secure prominent featuring or placement for our games, we have also undertaken a numberof marketing initiatives designed to acquire players and increase downloads of our games and increase sales of virtual currency,including: ·using social networking websites, such as Facebook and Twitter, to build a base of fans and followers to whom wecan quickly and easily provide information about our games;·paying third parties to advertise or incentivize consumers to download our games through offers orrecommendations;·using “push” notifications to alert users of sales on virtual currency or items in our games;·cross-promoting our games through banner advertisements in our other games, as well as advertising our games inour competitors’ games; and·undertaking extensive outreach efforts with video game websites and related media outlets, such as providingreviewers with access to our games prior to launch. 10 Table of Contents In addition, certain of our games featuring celebrities or other licensed content like Kim Kardashian: Hollywoodgenerate significant attention through social media channels. We look to leverage existing social media presences in order toincrease the virality and commercial success of our games. In addition, in games like Racing Rivals, we are able to build andmaintain a highly engaged community of players around the title. 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 KimKardashian West. Development StudiosWe have eight global studios that create and develop our games. These studios are based in San Francisco, RedwoodCity and Long Beach, California; Bellevue, Washington; Toronto, Canada; Beijing, China; Moscow, Russia and Hyderabad,India. Our studios are generally supported by central services personnel in our San Francisco, California headquarters whoprovide expertise with respect to areas such as game design, monetization, production, user experience, data analytics and liveoperations, with each studio leveraging such central services to varying degrees. During 2015, we plan to bolster our studiosby hiring six additional development teams in North America, which will add approximately 135 people to our developmentstudios. Our game development process involves a significant amount of creativity, particularly with respect to developingoriginal intellectual property franchises or games in which we license intellectual property from celebrities, motion pictures orbrands that are not based on games from other media. In addition, even where we license intellectual property based on consoleor Internet games, our developers must create games that are inspired by the game play of the original. In each of these cases,creative and technical studio expertise is necessary to design games that appeal to players and work well on mobile phones andtablets with their inherent limitations, such as small screen sizes and control buttons.Our development personnel are located in five different countries across three continents, which results in certaininherent complexities. To address these issues, we have instituted our Glu University training program. Glu University isdesigned to increase interaction among our studio teams, including having international studio team members regularly spendtime in our U.S. studios. The goal of this program is to ensure that we increase the uniformity, quality and commercial successof our games. Product Development We have developed proprietary technologies and product development processes that are designed to enable us torapidly and cost effectively develop and publish games that meet the expectations and preferences of consumers and the needsof our distributors. These technologies and processes include: · core development platforms; · porting tools and processes; · broad development capabilities; · limited application hosting; · provisioning and billing capabilities; · localization capabilities, including supporting multiple languages and customization for specific markets, such asChina; · capabilities for integrating and configuring third party advertising plug-ins, including for maximization ofadvertising revenue through placements that complement game flow; 11 Table of Contents · networking technologies for supporting game saves, guilds, matchmaking, leaderboards, and in-game messaging;and · merchandising, monetization tools and marketing platforms. Since the markets for our products are characterized by rapid technological change, particularly in the technicalcapabilities of mobile phones and tablets, and changing end-user preferences, continuous investment is required to innovateand publish new games, regularly update our games, and modify existing games for distribution on new platforms. We haveinstituted a number of measures that are designed to both increase the speed with which we bring our game concepts to market,and earlier in the product development cycle identify and terminate game concepts that are unlikely to be commerciallysuccessful. For example, we typically publish our games in limited markets for several months prior to worldwide launch toidentify bugs and refine gameplay and monetization before publishing the game globally. We have historically published themajority of our games internally, and have, in certain cases, retained a third-party to support our development activities. Wealso use third-party development tools to create many of our games, including a game development engine licensed from UnityTechnologies to create most of our newest games. We are working with Unity to develop our new game releases with 64-bitsupport. We also rely on our own servers and third-party infrastructure to operate our games and to maintain and provide ouranalytics data. In particular, a significant portion of game traffic is hosted by Amazon Web Services, which provides us serverredundancy by using multiple locations on various distinct power grids, and we expect to continue utilizing Amazon for asignificant portion of our hosting services for the foreseeable future. Research and development expenses were $64.3 million, $46.9 million and $54.3 million for 2014, 2013 and 2012,respectively. Seasonality Many new smartphones and tablets are released in or shortly before the fourth calendar quarter to coincide with theholiday shopping season. Because many players download our games soon after they purchase or receive their new devices, wegenerally experience seasonal sales increases based on the holiday selling period. Although we believe that the majority of thisholiday impact occurs during the fourth quarter, some of this seasonality also occurs for us in our first calendar quarter due tosome lag between device purchases and game purchases. However, the impact of this seasonality on our operating results issignificantly affected by our title release schedule. In addition, companies’ advertising budgets are generally highest duringthe fourth quarter and decline significantly in the first quarter of the following year, which affects the revenues we derive fromadvertisements and offers in our games. Conversely, our marketing expenses also increase in the fourth quarter, since demandfor marketing is higher during the holiday season and this increased demand drives up marketing costs. Competition Developing, distributing and selling mobile games is a highly competitive business, characterized by frequent productintroductions and rapidly emerging new platforms, technologies and storefronts. For players, we compete primarily on the basisof game quality, brand and customer reviews. We compete for promotional and digital storefront placement based on thesefactors, as well as our relationship with the storefront owner, historical performance, perception of sales potential andrelationships with licensors of brands, properties and other content. For content and brand licensors, we compete based onroyalty and other economic terms, historical financial performance of third-party licensed brand and property games,perceptions of development quality, porting abilities, speed of execution, distribution breadth and relationships with storefrontowners. We also compete for experienced and talented employees. We compete with a continually increasing number of companies, including Activision, DeNA, Disney, Electronic Arts(EA Mobile), Gameloft, GREE, GungHo Online Entertainment, King Digital Entertainment, Nexon, Warner Brothers and Zyngaand many well-funded private companies, including Kabam, Machine Zone, Rovio, Storm 8/Team Lava and Supercell. Inaddition, we face competition from online game developers and distributors who are primarily12 Table of Contents focused on specific international markets, such as Tencent Holdings Limited in Asia. We could also face increased competitionif those companies choose to compete more directly in the United States or the other markets that are significant to us or if largecompanies with significant online presences such as Apple, Google, Amazon, Facebook or Yahoo, choose to enter or expand inthe games space or develop competing games. In addition, given the open nature of the development and distribution forsmartphones and tablets, we also compete or will compete with a vast number of small companies and individuals who are ableto create and launch games and other content for these devices using relatively limited resources and with relatively limitedstart-up time or expertise. As an example of the competition that we face, it has been estimated that more than 1.4 millionapplications, including more than 300,000 active games, were available on Apple’s U.S. App Store as of December 31,2014. The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from otherdevelopers and to compete for players who purchase content for their devices without substantially increasing marketing ordevelopment costs. Some of our competitors and our potential competitors have one or more advantages over us, either globally or inparticular geographic markets, which include: ·significantly greater financial resources;·greater experience with the free-to-play games and GaaS business models and more effective gamemonetization;·stronger brand and consumer recognition regionally or worldwide;·greater experience and effectiveness integrating community features into their games and increasing therevenues derived from their users;·the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobileproducts;·larger installed customer bases from their existing mobile games;·larger installed customer bases from related platforms, such as console gaming or social networking websites, towhich they can market and sell mobile games;·more substantial intellectual property of their own from which they can develop games without having to payroyalties;·lower labor and development costs and better overall economies of scale;·greater platform-specific focus, experience and expertise; and·broader global distribution and presence. Intellectual Property Our intellectual property is an essential element of our business. We use a combination of trademark, copyright, tradesecret and other intellectual property laws, confidentiality agreements and license agreements to protect our intellectualproperty. Our employees and independent contractors are required to sign agreements acknowledging that all inventions, tradesecrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assigningto us any ownership that they may claim in those works. Despite our precautions, it may be possible for third parties to obtainand use without our consent intellectual property that we own or license. Unauthorized use of our intellectual property by thirdparties, including piracy, and the expenses incurred in protecting our intellectual property rights, may adversely affect ourbusiness. In addition, some of our competitors have in the past released games that are nearly identical to successful gamesreleased by their competitors in an effort to confuse the market and divert users from the competitor’s game to the copycatgame. To the extent that these tactics are employed with respect to any13 Table of Contents of our games, it could reduce our revenues. Our trademarks that have been registered with the U.S. Patent and Trademark Office include Glu, our 2-D ‘g’ characterlogo, our 3-D ‘g’ character logo and several of our game titles, including Blood & Glory, Contract Killer, Deer Hunter, DinerDash, Eternity Warriors, Frontline Commando, Gun Bros, Heroes of Destiny and Racing Rivals. In addition, we havetrademark applications pending with the U.S. Patent and Trademark Office for many of our game titles. For certain titles we donot yet have, and do not intend to seek, trademark registration. We also own, or have applied to own, one or more registeredtrademarks in certain foreign countries, depending on the relevance of each brand to other markets. Registrations of bothU.S. and foreign trademarks are renewable every ten years. We have one patent issued by the U.S. Patent and Trademark Office and have eight patent applications pending.We also use third-party development tools to create many of our games, including a game development enginelicensed 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 notprevail in these disputes, we may lose some or all of our intellectual property protection, be enjoined from further sales of ourgames or other applications determined to infringe the rights of others, and/or be forced to pay substantial royalties to a thirdparty, 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 thoserelating 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, andgambling. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitationson or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of ourcustomers or employees, communicate with our customers, and deliver products and services, or may significantly increase ourcompliance costs. As our business expands to include new uses or collection of data that are subject to privacy or securityregulations, our compliance requirements and costs will increase and we may be subject to increased regulatory scrutiny.Financial Information about Segments and Geographic Areas We manage our operations and allocate resources as a single reporting segment. Financial information about oursegment and geographic areas is incorporated into this section by reference to Note 11 of Notes to Consolidated FinancialStatements contained in Item 8 of this report. In addition, financial information regarding our operations, assets and liabilities,including our total net revenue and net income / (loss) for the years ended December 31, 2012, 2013 and 2014 and our totalassets as of December 31, 2014 and 2013, is included in our Consolidated Financial Statements contained in Item 8 of thisreport.Employees As of December 31, 2014, we had 653 employees, of which 360 were based in the United States and Canada, 135 werebased in Europe and 158 were based in Asia. Our employees in China are represented by a labor union. We have notexperienced any employment-related work stoppages and consider relations with our employees to be good. We believe thatour future success depends in part on our continued ability to hire, assimilate and retain qualified employees.14 Table of Contents Executive Officers The following table shows Glu’s executive officers as of March 1, 2015 and their areas of responsibility. Theirbiographies follow the table. Name Age Position Niccolo M. deMasi 34 President, Chief Executive Officer and Chairman Eric R. Ludwig 45 Executive Vice President, Chief Operating Officer and ChiefFinancial Officer Chris Akhavan 32 President of Publishing Scott J. Leichtner 44 Vice President, General Counsel and Corporate Secretary Niccolo M. de Masi has served as our President and Chief Executive Officer and as one of our directors since January2010, as interim Chairman of our board of directors from July 2014 to December 2014 and as the Chairman of our board ofdirectors since December 2014. Prior to joining Glu, Mr. de Masi was the Chief Executive Officer and President of Hands-OnMobile, a mobile technology company and developer and publisher of mobile entertainment, from October 2009 to December2009, and previously served as the President of Hands-On Mobile from March 2008 to October 2009. Prior to joining Hands-On Mobile, Mr. de Masi was the Chief Executive Officer of Monstermob Group PLC, a mobile entertainment company, fromJune 2006 to February 2007. Mr. de Masi joined Monstermob in 2004 and, prior to becoming its Chief Executive Officer, heldpositions as its Managing Director and as its Chief Operating Officer, where he was responsible for formulating andimplementing Monstermob’s growth and product strategy. Prior to joining Monstermob, Mr. de Masi worked in a variety ofcorporate finance and operational roles within the technology, media and telecommunications (TMT) sector, beginning hiscareer with JP Morgan on both the TMT debt capital markets and mergers and acquisitions teams in London. He has alsoworked as a physicist with Siemens Solar and within the Strategic Planning and Development divisions of Technicolor. Mr. deMasi holds an M.A. degree in Physics and an MSci. degree in Electronic Engineering—both from Cambridge University. Eric R. Ludwig has served as our Chief Operating Officer since October 2014, as our Executive Vice President, ChiefFinancial Officer since October 2011 and as our Chief Financial Officer since August 2008. Mr. Ludwig previously held theposition of Senior Vice President, Chief Financial Officer and Chief Administrative Officer from September 2010 to October2011. Prior to becoming our Chief Financial Officer, Mr. Ludwig served as our Vice President, Finance, Interim Chief FinancialOfficer from May 2008 to August 2008, served as our Vice President, Finance from April 2005 to May 2008 and served as ourDirector of Finance from January 2005 to April 2005. In addition, Mr. Ludwig has served as our Assistant Secretary since July2006. Prior to joining us, from January 1996 to January 2005, Mr. Ludwig held various positions at Instill Corporation, an on-demand supply chain software company, most recently as Chief Financial Officer, Vice President, Finance and CorporateSecretary. Prior to Instill, Mr. Ludwig was Corporate Controller at Camstar Systems, Inc., an enterprise manufacturingexecution 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 PublicAccountant (inactive). Chris Akhavan has served as our President of Publishing since April 2013. Before joining us, from January 2010 toApril 2013, Mr. Akhavan served in several management positions at Tapjoy, Inc., a provider of incentivized offers, mostrecently as Senior Vice President, Partnerships. From April 2009 to January 2010, Mr. Akhavan was a Manager, PublisherNetwork at RockYou!, a social gaming company, and from October 2007 to November 2008, he served as a Strategic PartnerManager at VideoEgg (now SAY Media), an advertising inventory and platform provider. Mr. Akhavan holds a B.A. inEconomics from the University of California at Santa Cruz. Scott J. Leichtner has served as our Vice President, General Counsel and Corporate Secretary since September2010. Mr. Leichtner joined Glu in June 2009 as our Senior Corporate Counsel. Prior to joining us, Mr. Leichtner was acorporate attorney at Fenwick & West LLP, a law firm focused on serving technology clients, from October 1997 to May2009. Mr. Leichtner holds an A.B. in Political Science from Duke University and a J.D. from the University of Michigan. 15 Table of Contents Item 1A. Risk FactorsOur business is subject to many risks and uncertainties, which may affect our future financial performance. If any of theevents or circumstances described below occurs, our business and financial performance could be harmed, our actual resultscould differ materially from our expectations and the market value of our stock could decline. The risks and uncertaintiesdiscussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us orthat we currently do not believe are material that may harm our business and financial performance. Because of the risks anduncertainties discussed below, as well as other variables affecting our operating results, past financial performance shouldnot be considered as a reliable indicator of future performance and investors should not use historical trends to anticipateresults or trends in future periods.We have a history of net losses, may incur substantial net losses in the future and our recent profitability and growth may notbe indicative of future profitability or growth.We have incurred significant losses since inception, including a net loss of $20.5 million in 2012, and a net loss of $19.9million in 2013. As of December 31, 2014, we had an accumulated deficit of $244.1 million. Although we achievedprofitability and significant growth in revenues for the year ended December 31, 2014, this profitability and growth wasprimarily related to the success of our Kim Kardashian: Hollywood game, and we do not expect to maintain the growth weexperienced in 2014. In 2014, our costs increased in absolute dollars over 2013 levels, and we expect this trend to continue in2015 as we implement additional initiatives designed to increase revenues, such as increasing the number of games we develop,increased payments of upfront license fees or minimum guarantees to secure licenses to well-known third-party brands,properties and other content, developing games with greater complexity and higher production values, making investmentsrelated to our games-as-a-service, or GaaS capabilities, increasing the amount we spend in acquiring new players and otherwisemarketing our new titles (particularly since advertising costs in our industry have generally been rising). In connection withincreasing the number of games we are able to develop and enhancing our development efforts, we have announced a plan tohire six new development teams in 2015, and we expect to hire around 135 additional employees to staff those new teams andto bolster existing studio teams and our central services in San Francisco. If our revenues do not increase to offset theseadditional expenses, if we experience unexpected increases in operating expenses or if we are required to take additionalcharges related to impairments or restructurings, we will incur losses and will not be able to maintain profitability on asustained basis. If we are unable to significantly increase our revenues or reduce our expenses, it will continue to negativelyaffect our operating results and our ability to sustain profitability.We have a relatively new and evolving business model.In early 2010, we changed our business model to focus on becoming a leading developer and publisher of “free-to-play”games for smartphones, tablets and other next-generation platforms. Free-to-play games are games that a player can downloadand play for free, but which allow players to access a variety of additional content and features for a fee and to engage withvarious advertisements and offers that generate revenues for us. We launched our first free-to-play titles in the fourth quarter of2010, so we have a relatively short history operating under this business model. This limits the experience upon which we candraw when making operating decisions. In addition, part of our strategy is to continue transitioning towards becoming a GaaScompany, and we may not successfully execute this transition. Our efforts to develop free-to-play games and transition towardsbecoming a GaaS company may prove unsuccessful or, even if successful, it may take more time than we anticipate to achievesignificant revenues because, among other reasons:·we may have difficulty optimizing the monetization of our games due to our relatively limited experiencecreating games that include micro-transaction capabilities, advertising and offers, as well as our limitedexperience in offering the features that are often associated with free-to-play games published by GaaScompanies, such as tournaments, live events and more frequent content updates;·we intend to continue to develop the majority of our games based upon our own intellectual property, rather thanwell-known licensed brands and properties, and we may encounter difficulties in generating sufficient consumerinterest in and downloads of our games, particularly since we have had relatively limited success16 Table of Contents generating significant revenues from games based on our own intellectual property;·many well-funded public and private companies have released, or plan to release, free-to-play games, includingthose provided under the GaaS model, and this competition will make it more difficult for us to differentiate ourgames and derive significant revenues from them;·free-to-play games, including those delivered as a service, have a relatively limited history, and it is unclear howpopular this style of game will become or remain or its revenue potential;·our free-to-play strategy assumes that a large number of players will download our games because they are freeand that we will then be able to effectively monetize the games; however, players may not widely download ourgames for a variety of reasons, including poor consumer reviews or other negative publicity, ineffective orinsufficient marketing efforts, lack of sufficient community features, lack of prominent storefront featuring andthe relatively large file size of some of our games—our thick-client games often utilize a significant amount ofthe available memory on a user’s device, and due to the inherent limitations of the smartphone platforms andtelecommunications networks, which at best only allow applications that are less than 100 megabytes to bedownloaded over a carrier’s wireless network, players must download one of our thick-client games either via awireless Internet (wifi) connection or initially to their computer and then side-loaded to their device;·even if our games are widely downloaded, we may fail to retain users or optimize the monetization of these gamesfor a variety of reasons, including poor game design or quality, lack of community features, gameplay issues suchas game unavailability, long load times or an unexpected termination of the game due to data server or othertechnical issues, or our failure to effectively respond and adapt to changing user preferences through gameupdates;·we may have difficulty hiring the additional monetization, live operations, server technology, user experienceand product management personnel that we require to support our continued transition to becoming a GaaScompany, or may face difficulties in developing our GaaS technology platform and incorporating it into ourproducts;·we will depend on the proper and continued functioning of our own servers and third-party infrastructure tooperate our connected games that are delivered as a service;·the billing and provisioning capabilities of some smartphones and tablets are currently not optimized to enableusers to purchase games or make in-app purchases, which make it difficult for users of these smartphones andtablets to purchase our games or make in-app purchases and could reduce our addressable market, at least in theshort term; and·the Federal Trade Commission has indicated that it intends to review issues related to in-app purchases,particularly with respect to games that are marketed primarily to minors (for example, the FTC reached asettlement with Apple in January 2014 and with Google in September 2014 on this issue), and the commissionmight issue rules significantly restricting or even prohibiting in-app purchases or name us as a defendant in afuture class-action lawsuit.If we do not achieve a sufficient return on our investment with respect to our free-to-play business model, it will negativelyaffect our operating results and may require us to formulate a new business strategy.We rely on a very small portion of our total players for nearly all of our revenues that we derive from in-app purchases. Since our free-to-play games can be downloaded and played for free, we have succeeded in generating a significant17 Table of Contents number of game installations and significant user-base growth. However, we rely on a very small portion of our total players fornearly all of our revenues derived from in-app purchases (as opposed to advertisements and incentivized offers). Since thelaunch of our first free-to-play titles in the fourth quarter of 2010, the percentage of unique paying players for our largestrevenue-generating free-to-play games has typically been less than 2%, when measured as the number of unique paying userson a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than2% for certain of our games during specific, relatively short time periods, such as immediately following worldwide launch orthe week following content updates, marketing campaigns or certain other events. To significantly increase our revenues, wemust increase the number of players who convert into a paying player by making in-app purchases, increase the amount that ourpaying players spend in our games and/or increase the length of time our players generally play our games. We have to dateencountered difficulties with game monetization (for example, developing a sufficient quantity and variety of virtual goods toenable a relatively large scale of in-app purchases by an individual user). We might not succeed in our efforts to increase themonetization rates of our users, particularly if we do not succeed in our transition to becoming a GaaS company. If we areunable to convert non-paying players into paying players, if we are unable to retain our paying players or if the average amountof revenues that we generate from our players does not increase or declines, our business may not grow, our financial results willsuffer, and our stock price may decline.We derive the majority of our revenues from Apple’s App Store and the Google Play Store, and if we are unable to maintain agood relationship with each of Apple and Google or if either of these storefronts were unavailable for any prolonged periodof time, our business will suffer.The majority of our smartphone revenues is derived from Apple’s iOS platform, which accounted for 61.8% of our totalrevenues in 2014 compared with 59.6% of our total revenues in 2013. We generated the majority of these iOS-related revenuesfrom the Apple App Store, which represented 52.2% and 50.1% of our total revenues in 2014 and 2013, respectively, with thesignificant majority of such revenues derived from in-app purchases. We generated the balance of our iOS-related revenuesfrom offers and advertisements in games distributed on the Apple App Store and, to a far lesser extent, sales of premiumgames. In addition, we derived approximately 35.4% and 30.5% of our total revenues in 2014 and 2013, respectively, from theAndroid platform. We generated the majority of our Android-related revenues from the Google Play Store, which representedapproximately 24.8% and 19.2% of our total revenues for 2014 and 2013, respectively, with the significant majority of suchrevenues derived from in-app purchases. We believe that we have good relationships with each of Apple and Google, whichhave contributed to the majority of our games released in 2014 being featured on their storefronts when they were commerciallyreleased. If we do not continue to receive prominent featuring, users may find it more difficult to discover our games and wemay not generate significant revenues from them. We may also be required to spend significantly more on marketingcampaigns to generate substantial revenues on these platforms. In addition, currently neither Apple nor Google charges apublisher when it features one of their apps. If either Apple or Google were to charge publishers to feature an app, it couldcause our marketing expenses to increase considerably. Accordingly, any change or deterioration in our relationship withApple 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 digitalstorefronts have been unavailable for short periods of time or experienced issues with their in-app purchasing functionality. Forexample, on March 11, 2015, the Apple App Store experienced an approximately 12-hour global outage, which resulted inplayers and potential players of our games being unable to download our games and unable to make in-app purchases withinour games during such outage. If either of these events recurs on a prolonged basis or other similar issues arise that impact ourability to generate revenues from these storefronts, it would have a material adverse effect on our revenues and operatingresults. In addition, if these storefront operators fail to provide high levels of service, our players’ ability to access our gamesmay be interrupted or players may not receive the virtual currency or goods for which they have paid, which may adverselyaffect our brand.18 Table of Contents The operators of digital storefronts on which we publish our free-to-play games and the advertising channels through whichwe 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 andconditions are often “click through” agreements that we are not able to negotiate with the storefront operator. For example, weare subject to each of Apple’s and Google’s standard click-through terms and conditions for application developers, whichgovern the promotion, distribution and operation of apps, including our games, on their storefronts. Each of Apple and Googlecan unilaterally change its standard terms and conditions with no prior notice to us. In addition, the agreement terms can bevague and subject to changing interpretations by the storefront operator. Further, these storefront operators typically have theright to prohibit a developer from distributing its applications on its storefront if the developer violates its standard terms andconditions. For example, in the second quarter of 2011, Apple began prohibiting certain types of virtual currency-incentedadvertising offers in games sold on the Apple App Store. These offers accounted for approximately one-third of our smartphonerevenues during the three months ended June 30, 2011, and our inability to subsequently use such offers negatively impactedour smartphone revenues thereafter. In addition, Apple informed us early in the fourth quarter of 2012 that we could no longerinclude links to Tapjoy’s HTML5 website in our games, which has since negatively impacted our ability to generate revenuethrough incented offers. Most recently, Apple has implemented certain restrictions related to games that include guns,including changing its game rating methodology, which has resulted in all of our games that include gun violence receiving a17+ rating, and prohibiting certain depictions of guns in game icons and other storefront art; these restrictions, couldpotentially negatively impact the number of people playing these “shooter” games and the revenues we generate from thesegames. In addition, during the second quarter of 2014, there were reports that Apple was considering prohibiting certain typesof virtual currency-incented video advertising in games sold on the Apple App Store. These incented video advertisementsgenerate a meaningful percentage of our overall smartphone revenues, and any prohibition of these advertisements would havehad a negative impact on our smartphone revenues. If Apple or Google, or any other key storefront operator, determines that weor one of our key vendors are violating its standard terms and conditions, by a new interpretation or otherwise or prohibits usfrom distributing our games on its storefront, it would materially harm our business and likely cause our stock price tosignificantly decline.In addition, in the first quarter of 2014, Facebook prohibited HasOffers, whose software development kit we hadincorporated into our games to track advertising metrics, from participating in Facebook’s mobile measurement programbecause Facebook asserted that HasOffers had violated its agreement with Facebook. As a result, we removed HasOffers’software development kit from our games and replaced it with software from a new vendor. While this change did not adverselyimpact our revenues or operations, any similar changes or prohibitions in the future could negatively impact our revenues orotherwise materially harm our business, and we may not receive significant or any advance warning of such changes.19 Table of Contents Apple’s requirement that beginning February 1, 2015 all new applications, and beginning June 1, 2015 all updates toexisting applications, submitted to the Apple App Store must include 64-bit support and be built with the iOS 8 softwaredevelopment kit, could harm our business. In the fourth quarter of 2014, Apple informed developers that beginning on February 1, 2015 all new applications, andbeginning June 1, 2015 all updates to existing applications, submitted to the Apple App Store must include 64-bit support andbe built with the iOS 8 software development kit. We have not in the past built our games to include 64-bit support nor did theUnity development engine that we utilize to create many of our games support 64-bit development; however, we are currentlyworking with Unity to ensure that we meet Apple’s requirement. If we fail to implement 64-bit support for all of our gamescurrently under development that we intend to launch after February 1, 2015 as well as any of our currently released games thatwe intend to update after June 1, 2015, it would negatively impact our revenues in 2015 and potentially beyond. In addition,due to the expense involved in supporting 64-bit development, we will likely not continue updating certain of our existinggames after June 1, 2015 that we otherwise would have continued to update due to the cost of upgrading such games to 64-bitversus our expected returns for such games, which will cause the revenues that we generate from these games to decline morequickly than they otherwise would have. Furthermore, building our games to support 64-bit development will increase the filesize of our games, which could reduce the number of downloads of these games, particularly if we are unable to keep the size ofthe games below 100 megabytes, which is the maximum file size that can currently be downloaded over any carrier’s wirelessnetwork.The markets in which we operate are highly competitive, and many of our competitors have significantly greater resourcesthan we do. Developing, distributing and selling mobile games is a highly competitive business, characterized by frequent productintroductions and rapidly emerging new platforms, technologies and storefronts. For players, we compete primarily on the basisof game quality, brand and customer reviews. We compete for promotional and storefront placement based on these factors, aswell as our relationship with the digital storefront owner, historical performance, perception of sales potential and relationshipswith licensors of brands, properties and other content. For content and brand licensors, we compete based on royalty and othereconomic terms, perceptions of development quality, porting abilities, speed of execution, distribution breadth andrelationships with storefront owners. We also compete for experienced and talented employees.We compete with a continually increasing number of companies, including Activision, DeNA, Disney, Electronic Arts (EAMobile), Gameloft, GREE, GungHo Online Entertainment, King Digital Entertainment, Nexon, Warner Brothers and Zynga andmany well-funded private companies, including Kabam, Machine Zone, Rovio, Storm 8/Team Lava and Supercell. In addition,we face competition from online game developers and distributors who are primarily focused on specific international markets,such as Tencent Holdings Limited in Asia. We could also face increased competition if those companies choose to competemore directly in the United States or the other markets that are significant to us or if large companies with significant onlinepresences such as Apple, Google, Amazon, Facebook or Yahoo, choose to enter or expand in the games space or developcompeting games.In addition, given the open nature of the development and distribution for smartphones and tablets and the relatively lowbarriers to entry, we also compete or will compete with a vast number of small companies and individuals who are able to createand launch games and other content for these devices using relatively limited resources and with relatively limited start-up timeor expertise. As an example of the competition that we face, it has been estimated that more than 1.4 million applications,including more than 300,000 active games, were available on Apple’s U.S. App Store as of December 31, 2014. Theproliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developersand 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 particulargeographic markets, which include: ·significantly greater financial resources;20 Table of Contents ·greater experience with the free-to-play games and GaaS business models and more effective gamemonetization;·stronger brand and consumer recognition regionally or worldwide;·greater experience and effectiveness integrating community features into their games, operating as a GaaScompany and increasing the revenues derived from their users;·the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobileproducts;·larger installed user bases from their existing mobile games;·larger installed user bases from related platforms, such as console gaming or social networking websites, towhich they can market and sell mobile games;·more substantial intellectual property of their own from which they can develop games without having to payroyalties;·lower labor and development costs and better overall economies of scale;·greater platform-specific focus, experience and expertise; and·broader global distribution and presence.If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales coulddecline, our margins could decline and we could lose market share, any of which would materially harm our business, operatingresults and financial condition.Our financial results could vary significantly from quarter to quarter and are difficult to predict, which in turn could causevolatility in our stock price.Our revenues and operating results could vary significantly from quarter to quarter due to a variety of factors, many of whichare outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Inaddition, we may not be able to accurately predict our future revenues or results of operations. We base our current and futureexpense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed. As aresult, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even asmall shortfall in revenues could disproportionately and adversely affect financial results for that quarter.In addition to other risk factors discussed in this section, factors that may contribute to the variability of our quarterly resultsinclude:·our ability to increase the number of our paying players and the amount that each paying player spends in ourgames; ·the popularity and monetization rates of our new games released during the quarter and the ability of gamesreleased in prior periods to sustain their popularity and monetization rates;·the number and timing of new games released by us and our competitors, particularly those games that mayrepresent a significant portion of revenues in a quarter, which timing can be impacted by internal developmentdelays, shifts in product strategy and how quickly digital storefront operators review and21 Table of Contents approve our games for commercial release;·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 that we are not able to adapt to our gameofferings;·fluctuations in the size and rate of growth of overall consumer demand for smartphones, tablets, games andrelated content;·changes in the mix of revenues derived from games based on original intellectual property versus licensedintellectual property;·changes in the mix of revenues derived from in-app purchases, advertisements and offers, which mix oftendepends on the nature of new titles launched during the quarter;·changes in the mix of revenues derived from first party titles and third party titles;·changes in the amount of money we spend marketing our titles in a particular quarter, including the averageamount we pay to acquire each new user, as well as changes in the timing of these marketing expenses within thequarter;·decisions by us to incur additional expenses, such as increases in research and development, or unanticipatedincreases 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 overwhich we recognize revenue for in-app purchases of virtual currency and goods within certain of our games;·the amount and timing of charges related to any future impairments of goodwill, intangible assets, prepaidroyalties and guarantees; for example, in 2012 we impaired $3.6 million of our goodwill related to our APACreporting unit and in 2013 and 2014 we impaired $435,000 and $257,000, respectively, related to contractualminimum guarantee commitments in our Glu Publishing business; and·macro-economic fluctuations in the United States and global economies, including those that impactdiscretionary consumer spending.If we fail to develop and publish new mobile games that achieve market acceptance, as well as continue to enhance ourexisting games, particularly our most successful games, our revenues would suffer.Our business depends on developing and publishing mobile games that consumers will download and spend time andmoney playing. We must continue to invest significant resources in research and development, analytics and marketing tointroduce new games and continue to update our successful free-to-play games, and we often must make decisions about thesematters well in advance of product release to timely implement them. Our success depends, in part, on unpredictable andvolatile factors beyond our control, including consumer preferences, competing games, new mobile platforms and theavailability of other entertainment activities. If our games do not meet consumer expectations, or they22 Table of Contents are not brought to market in a timely and effective manner, our business, operating results and financial condition would beharmed. Even if our games are successfully introduced and initially adopted, a failure to continue to update them withcompelling content or a subsequent shift in the entertainment preferences of consumers could cause a decline in our games’popularity that could materially reduce our revenues and harm our business, operating results and financial condition, whicheffect is magnified for our most successful games, such as Kim Kardashian: Hollywood, Racing Rivals and Deer Hunter2014. It is difficult to predict when and how quickly one of our games will decline. As a result of the life cycle of our games,our business depends on our ability to consistently and timely launch new games or versions of games that achieve significantpopularity and have the potential to become franchise games. If rates of decline are higher than expected in a particularquarterly period and/or we experience delays in the launch of new games that we expect to offset these declines, we may notmeet our expectations or the expectations of securities analysts or investors for a given quarter. In addition, our KimKardashian: Hollywood game benefitted significantly from awareness of the game through media coverage and social mediachannels, and such viral success can be difficult to predict or to repeat in the future, even for games based on highly popularcelebrities such as Katy Perry. Furthermore, we compete for the discretionary spending of consumers, who face a vast array ofentertainment choices, including games played on personal computers and consoles, television, movies, sports and theInternet. If we are unable to sustain sufficient interest in our games compared to other forms of entertainment, our business andfinancial results would be seriously harmed. If we do not successfully establish and maintain awareness of our brand and games, if we incur excessive expenses promotingand maintaining our brand or our games or if our games contain defects or objectionable content, our operating results andfinancial condition could be harmed. We believe that establishing and maintaining our brand is critical to establishing a direct relationship with players whopurchase our products from direct-to-consumer channels and to maintaining our existing relationships with distributors andcontent licensors, as well as potentially developing new such relationships. Increasing awareness of our brand and recognitionof our games is particularly important in connection with our strategic focus of developing games based on our own intellectualproperty. Our ability to promote the Glu brand and increase recognition of our games depends on our ability to develop high-quality, engaging games. If consumers, digital storefront owners and branded content owners do not perceive our existinggames as high-quality or if we introduce new games that are not favorably received by them, then we may not succeed inbuilding brand recognition and brand loyalty in the marketplace. In addition, globalizing and extending our brand andrecognition of our games is costly and involves extensive management time to execute successfully, particularly as we expandour efforts to increase awareness of our brand and games among international consumers. Although we make significant salesand marketing expenditures in connection with the launch of our games, these efforts may not succeed in increasing awarenessof our brand or the new games. If we fail to increase and maintain brand awareness and consumer recognition of our games, ourpotential revenues could be limited, our costs could increase and our business, operating results and financial condition couldsuffer.In addition, if a game contains objectionable content, we could experience damage to our reputation and brand. Themajority of our successful free-to-play games are in the action genre, and we expect that the majority of the games that we willrelease in 2015 will be in that category. Some of these games contain violence or other content that certain consumers may findobjectionable. For example, Apple has assigned each of our shooter games a 17-and-older rating due to its violence. Inaddition, Google required us to submit two versions of our Blood & Glory and Contract Killer: Zombies games, one of whichdid not depict blood. Despite these ratings and precautions, consumers may be offended by certain of our game content andchildren 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 one our games without our knowledge,which might contain profanity, graphic violence, sexually explicit or otherwise objectionable material. If consumers believethat a game we published contains objectionable content, it could harm our brand, consumers could refuse to buy it or demanda refund, and could pressure the digital storefront operators to no longer allow us to publish the game on theirplatforms. Similarly, if any of our games are introduced with defects or have playability issues, we may receive negative userreviews and our brand may be damaged. These issues could be exacerbated if our customer service department does not timelyand adequately address issues that our players have encountered with our games.23 Table of Contents We have depended on a small number of games for a significant portion of our revenues in recent fiscal periods. If thesegames do not continue to succeed or we do not release highly successful new games, our revenues would decline. In the mobile gaming industry, new games are frequently introduced, but a relatively small number of games account for asignificant portion of industry sales. Similarly, a significant portion of our revenues comes from a limited number of games,although the games in that group have shifted over time. Despite only having been launched in June 2014, Kim Kardashian:Hollywood was our largest revenue generating title in 2014, with Deer Hunter 2014 also accounting for more than 10% of ourrevenues in 2014; no other game accounted for more than 10% of our revenues in 2014. While we expect Kim Kardashian:Hollywood to continue to account for a significant portion of our revenues during the first quarter of 2015, we expect revenuesfrom this title to continue to decline. We expect revenues from new game releases and content updates to partially offset thedecline, but do not expect such offsets to enable us to maintain current revenue levels during the first quarter of 2015. Inaddition, revenues from Kim Kardashian: Hollywood are in part tied to the continued popularity of Kim Kardashian West andher marketing efforts though social media and other channels, and we have little to no control over these matters and they arehard for us to predict. Accordingly, we must continue to launch new games that generate significant revenues to continue togrow revenues in the future, which we have sometimes failed to do. For example, in the third quarter of 2012, we launched 11new games, only two of which generated significant revenues, which, in part, contributed to our revenues declining from thesecond quarter of 2012. Developing and launching our games and providing future content updates requires us to investsignificant time and resources with no guarantee that our efforts will result in significant revenues. If our new games are notsuccessful or if we are not able to cost-effectively extend the lives of our successful games, our revenues could be limited andour business and operating results would suffer.We rely on a combination of our own servers and technology and third party infrastructure to operate our games. If weexperience any system or network failures, cyber attacks or any other interruption to our games, it could reduce our sales,increase costs or result in a loss of revenues or end users of our games.We rely on digital storefronts and other third-party networks to deliver games to our players and on their or other thirdparties’ billing systems to track and account for our game downloads. We also rely on our own servers and third-partyinfrastructure to operate our connected games, and our reliance on such third-party infrastructure and our GaaS technologyplatform will increase as we continue transitioning to becoming a GaaS company. In particular, a significant portion of ourgame traffic is hosted by Amazon Web Services, which service provides server redundancy and uses multiple locations onvarious distinct power grids. Amazon may terminate its agreement with us upon 30 days’ notice. Amazon experienced a poweroutage during the second quarter of 2012, which affected the playability of our games for approximately one day. In addition,Amazon effected a large scale maintenance reboot of a portion of its systems during September 2014 to remedy a securityflaw. While neither of these events adversely impacted our business, a similar outage of a longer duration could. In addition,the operation of our online-only games that we began releasing in the fourth quarter of 2013 will depend on the continuedfunctionality of our GaaS technology platform. As a result, we could experience unexpected technical problems with regard tothe operation of our online-only games, particularly if the number of concurrent users playing our games is significantly morethan we anticipate. Any technical problem with, cyber attack on, or loss of access to these third parties’ or our systems, serversor other technologies, including the GaaS technology platform, could result in the inability of end users to download or playour games, cause interruption to gameplay, prevent the completion of billing for a game or result in the loss of users’ virtualcurrency or other in-app purchases, interfere with access to some aspects of our games or result in the theft of end-user personalinformation. For example, in July 2014, users could not play our Kim Kardashian: Hollywood game for about six hours due to aproblem with one of our servers, and in November 2014 and March 2015, we experienced similar outages with respect to ourRacing Rivals game. In addition, in the fourth quarter of 2013, our Eternity Warriors 3 title was inoperable for approximatelyeight consecutive hours due to technical issues with our GaaS platform. We were also the victim of a cyber attack in earlyNovember 2014, when an animal rights group took down our main website and user forums. In October 2013, we were also thevictim of a “CryptoLocker” ransomware attack that temporarily prevented our access to sensitive company files. Althoughthese incidents did not result in a material loss of revenues, any future incidents, particularly of longer duration, could damageour brand and reputation and result in a material loss of revenues. Further, if virtual assets are lost, or if users do not receivetheir purchased virtual currency, we may be required to issue refunds, we may receive negative publicity and game ratings, wemay lose players of our games, and we may become subject to24 Table of Contents regulatory investigation or class action litigation, any of which would negatively affect our business. Any of these problemscould harm our reputation or cause us to lose players or revenues or incur substantial repair costs and distract management fromoperating our business.If we fail to maintain and enhance our capabilities for porting games to a broad array of mobile devices, particularly thoserunning the Android operating system, our revenues and financial results could suffer. We derive the majority of our revenues from the sale of virtual goods within our games for smartphones and tablets that runApple’s iOS or Google’s Android operating system. Unlike the Apple ecosystem in which Apple controls both the device(iPhone, iPod Touch and iPad) and the storefront (Apple’s App Store), the Android ecosystem is highly fragmented since a largenumber of OEMs manufacture and sell Android-based devices that run a variety of versions of the Android operating system,and there are many Android-based storefronts in addition to the Google Play Store. For us to sell our games to the widestpossible audience of Android users, we must port our games to a significant portion of the more than 1,000 Android-baseddevices that are commercially available, many of which have different technical requirements. Since the number of Android-based smartphones and tablets shipped worldwide is growing significantly, it is important that we maintain and enhance ourporting capabilities, which could require us to invest considerable resources in this area. These additional costs could harm ourbusiness, operating results and financial condition. In addition, we must continue to increase the efficiency of our portingprocesses or it may take us longer to port games to an equivalent number of devices, which would negatively impact ourmargins. If we fail to maintain or enhance our porting capabilities, our revenues and financial results could suffer.We use a game development engine licensed from Unity Technologies to create many of our games. If we experience anyprolonged technical issues with this engine or if we lose access to this engine for any reason, it could delay our gamedevelopment efforts and cause our financial results to fall below expectations for a quarterly or annual period, which wouldlikely 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 tocontinue to use this engine for the foreseeable future. Because we do not own this engine, we do not control its operation ormaintenance. As a result, any prolonged technical issues with this engine might not be resolved quickly, despite the fact thatwe have contractual service level commitments from Unity. In addition, although Unity cannot terminate our agreement absentan uncured material breach of the agreement by us, we could lose access to this engine under certain circumstances, such as anatural disaster that impacts Unity or a bankruptcy event. If we experience any prolonged issues with the operation of theUnity game development engine or if we lose access to this engine for any reason, it could delay our game development effortsand cause us to not meet revenue expectations for a quarterly or annual period, which would likely cause our stock price todecline. 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 createdon the Unity engine.We derive a significant portion of our revenues from advertisements and offers that are incorporated into our free-to-playgames through relationships with third parties. If we lose the ability to provide these advertisements and offers for anyreason, or if any events occur that negatively impact the revenues we receive from these sources, it would negatively impactour operating results.We derive revenues from our free-to-play games through in-app purchases, advertisements and offers. We incorporateadvertisements and offers into our games by implementing third parties’ software development kits. We rely on these thirdparties to provide us with a sufficient inventory of advertisements and offers to meet the demand of our user base. If we exhaustthe available inventory of these third parties, it will negatively impact our revenues. If our relationship with any of these thirdparties terminates for any reason, or if the commercial terms of our relationships do not continue to be renewed on favorableterms, we would need to locate and implement other third party solutions, which could negatively impact our revenues, at leastin the short term. Furthermore, the revenues that we derive from advertisements and offers is subject to seasonality, ascompanies’ advertising budgets are generally highest during the fourth quarter and decline significantly in the first quarter ofthe following year, which negatively impacts our revenues in the first quarter (and conversely significantly increases ourmarketing expenses in the fourth quarter).25 Table of Contents In addition, the actions of the storefront operators can also negatively impact the revenues that we generate fromadvertisements and offers. For example, in the second quarter of 2011, Apple began prohibiting certain types of virtualcurrency-incented advertising offers in games sold on the Apple App Store. These offers accounted for approximately one-thirdof our revenues during the three months ended September 30, 2011, and our inability to use such offers has negativelyimpacted our revenues. In addition, during the second quarter of 2014, there were reports that Apple was consideringprohibiting certain types of virtual currency-incented video advertising in games sold on the Apple App Store. These incentedvideo advertisements generate a meaningful percentage of our overall revenues, and any prohibition of these advertisementswould have had a negative impact on our revenues. Any similar changes in the future that impact our revenues that we generatefrom advertisements and offers could materially harm our business.We may not, or may be unable to, renew our existing brand and content licenses when they expire and may not choose toobtain additional licenses, which could negatively impact our revenues if we fail to replace such revenues with revenues fromgames based on our own intellectual property.Although we generated 93.3% of our revenues from games based on our own intellectual property during 2013, thatpercentage declined to 62.7% for 2014, largely due to the success of Kim Kardashian: Hollywood and, to a lesser extent,Robocop: The Official Game, Racing Rivals, and Tap Sports: Baseball. We expect our revenues derived from games based onthird party intellectual property to increase further in 2015, as we expect to continue to derive significant revenue from KimKardashian: Hollywood and to release games based on newly licensed brands, properties and other content, including throughour partnership with Katy Perry, and games based on the James Bond and Terminator motion picture franchises and other thirdparty celebrities, brands and content, which, if successful, would further increase the revenues we generate from third partyintellectual property. Certain of our licenses expire at various times during the next several years, and we may be unable torenew these licenses on terms favorable to us or at all. In addition, these licensors could decide to license to our competitors ordevelop and publish their own mobile games, competing with us in the marketplace. Failure to maintain or renew our existinglicenses or to obtain additional licenses would prevent us from continuing to offer our current licensed games and introducingnew 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 third-party licensed brands, properties and othercontent, such as with Kim Kardashian: Hollywood, Robocop: The Official Game, Hercules: The Official Game and ourforthcoming games based on the James Bond movie franchise and Katy Perry, among others, typically requires that we makeminimum guaranteed royalty payments, and to the extent such payments become impaired, our operating results would beharmed.In connection with recently announced partnerships and other potential partnerships with celebrities and other third-partybrands, properties and content, we have incurred and expect to continue to incur significant minimum guaranteed royaltyrequirements at a rate substantially higher than in prior years. As a result, we may incur increased levels of impairments on suchprepaid royalty guarantees if our forecasts for these games are lower than we anticipated at the time we entered into theagreements. For example, in 2013 and 2014 we impaired $435,000 and $257,000, respectively, related to contractual minimumguarantee commitments in our Glu Publishing business. As a result, our impairments on prepaid royalty guarantees may rise in2015 or in later periods.We publish games developed by third parties, which exposes us to a number of potential operational and legal risks. Our Glu Publishing team is focused on entering into relationships with developers of games, primarily in Asian and EasternEuropean markets, where we will localize and globally publish those games. Our Glu Publishing business exposes us to anumber of potential operational and legal risks. For example, we may be required to provide third party developers withupfront license fees or non-recoupable minimum guarantees in order to obtain the rights to publish their games, and we mayincur significant costs marketing these games after they have been commercially launched. The games may not becommercially successful if they do not appeal to a Western audience, if our limited experience in publishing other developers’games leads to unexpected results or for any other reason, which would negatively impact our operating results. Further, in thethird quarter of 2013, we were required to take an impairment charge of $435,000 related to certain minimum guaranteecommitments. In addition, if any of the games created by third party developers26 Table of Contents with which we work infringe intellectual property owned by others, or otherwise violate any third party’s rights or anyapplicable laws and regulations, such as laws with respect to data collection and privacy, we would be exposed to potentiallegal risks by publishing these games. 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 retain and motivate our key personnel, namely ourmanagement team, particularly Niccolo de Masi, our President and Chief Executive Officer, as well as experienced gamedevelopment personnel. In addition, to grow our business, execute on our business strategy and replace departing employees,we must identify, hire and retain qualified personnel, particularly additional monetization, live operations, server technology,user experience and product management personnel to support our continued transition to becoming a GaaScompany. Competition for qualified management, game development and other staff is intense. Attracting and retainingqualified personnel may be particularly difficult for us if our stock price remains relatively depressed, since individuals mayelect to seek employment with other companies that they believe have better long-term prospects. Competitors have in the pastand may in the future attempt to recruit our employees, and our management and key employees are not bound by agreementsthat could prevent them from terminating their employment at any time. As we continue to develop expertise in free-to-playmobile gaming, operating a GaaS company and monetization in particular, our competitors may increasingly seek to recruit ouremployees, particularly from our development studios. In addition, we do not maintain a key-person life insurance policy onany 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 theseactions may adversely affect our business.We have implemented a number of restructurings during the last several years, most recently in the third quarter of 2014, inwhich we implemented certain restructuring actions and cost reduction initiatives to streamline operations and improve costefficiencies. The restructuring included a reduction in personnel supporting our centralized services related to our GaaStechnology and the reduction of a senior executive position. While we remain committed to developing our GaaS capabilities,our experiences with product launches in 2014 have led us to believe the most effective way to implement our GaaS strategy ison a game by game basis, giving our studios more autonomy on the level of GaaS implementation for each particular gamerather than mandating the use of GaaS technology as a global requirement from headquarters. We plan to continue to managecosts to better and more efficiently manage our business. This most recent restructuring plan and other such efforts could resultin disruptions to our operations and adversely affect our business. In addition, we cannot be sure that the cost reduction andstreamlining initiatives will be as successful in reducing our overall expenses as we expect or that additional costs will notoffset any such reductions or streamlining. If our operating costs are higher than we expect or if we do not maintain adequatecontrol of our costs and expenses, our operating results will suffer.We may need to raise additional capital or borrow funds to grow our business, and we may not be able to raise capital orborrow funds on terms acceptable to us or at all.As of December 31, 2014, we had $70.9 million of cash and cash equivalents. If our cash and cash equivalents and cashinflows are insufficient to meet our cash requirements or if we wish to strengthen our balance sheet, including to potentiallypursue additional acquisitions, we will need to seek additional capital, potentially pursuant to our existing universal shelfregistration statement, and we may be unable to do so on terms that are acceptable to us or at all. Equity financings woulddilute our existing stockholders, and the holders of new securities may receive rights, preferences or privileges that are senior tothose of existing stockholders. Alternatively, we may wish to enter into a credit facility or other debt arrangement, and we maybe unable to procure one on terms that are acceptable to us, particularly in light of the current credit market conditions. If werequire new sources of financing but they are insufficient or unavailable, we would be required to modify our operating plans toalign them with available resources, which would harm our ability to grow our business.27 Table of Contents Our reported financial results could be adversely affected by changes in financial accounting standards or by the applicationof 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 standardsbodies and the methods, estimates and judgments that we use in applying our accounting policies. Due to recent economicevents, the frequency of accounting policy changes may accelerate, including conversion to unified international accountingstandards. Policies affecting revenue recognition have affected, and could further significantly affect, the way we account forrevenue. For example, the accounting for revenue derived from smartphone platforms and free-to-play games, particularly withregard to revenues generated from online digital storefronts, is still evolving and, in some cases, uncertain. In particular, wewere required to file an amendment to our Annual Report on Form 10-K for the year ended December 31, 2012 and ourQuarterly Report on Form 10-Q for the quarter ended March 31, 2013 to restate or revise the financial statements contained inthose reports (including for the year ended December 31, 2011) because we did not correctly apply the applicable revenuerecognition accounting guidance relating to our smartphone revenues. While we believe that we are now correctly accountingfor our smartphone revenues, this is an area that continues to involve significant discussion among accounting professionalsand which is not completely settled. It is possible that the relative application, interpretation and weighting of the factors thatrelate to whether we should be considered the principal in the sales transaction of games sold through digital storefronts mayevolve, and we may in the future conclude that our new accounting policy for smartphone revenue, as reflected in the restatedfinancial statements, is incorrect, which could result in another restatement of affected financial statements. In addition, wecurrently defer revenues related to virtual goods and currency over the average playing period of paying users, whichapproximates the estimated weighted average useful life of the transaction. While we believe our estimates are reasonablebased on available game player information, we may revise such estimates in the future as our games’ operation periodschange. Any adjustments arising from changes in the estimates of the lives of these virtual items would be applied to thecurrent quarter and prospectively on the basis that such changes are caused by new information indicating a change in thegame player behavior patterns of our paying users. Any changes in our estimates of useful lives of these virtual items mayresult in our revenues being recognized on a basis different from prior periods’ and may cause our operating results tofluctuate. As we enhance, expand and diversify our business and product offerings, the application of existing or futurefinancial accounting standards, particularly those relating to the way we account for our smartphone revenues, could have asignificant 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 financialreporting may be adversely affected.Maintaining effective internal control over financial reporting is necessary for us to produce reliable financialstatements. In connection with the restatement of our financial statements in our Annual Report on Form 10-K for the yearended December 31, 2012 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, management,including our Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of our internal control overfinancial reporting as of December 31, 2012. Based on this reassessment using the guidelines established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992,management had concluded that we did not maintain effective internal control over financial reporting as of December 31,2012 because of a material weakness related to the application of revenue accounting guidance to our smartphone revenues forsales through digital storefronts. This control deficiency resulted in the misstatement of our revenues and cost of revenues,including gross margin percentages, and the related balance sheet accounts and financial disclosures for the years endedDecember 31, 2011 and 2012 (and the restatement of unaudited interim condensed consolidated financial statements for thequarters ended March 31, June 30, and September 30 for such years). Although we have remediated this material weakness, ifwe are otherwise unable to maintain adequate internal controls for financial reporting, or if our independent registered publicaccounting firm is unable to express an opinion as to the effectiveness of our internal controls as required pursuant to theSarbanes-Oxley Act, it could result in another material misstatement of our financial statements that would require arestatement, investor confidence in the accuracy and timeliness of our financial reports may be impacted or the market price ofour common stock could be negatively impacted.28 Table of Contents 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 may continue to acquire and invest in, companies, products and technologies thatcomplement 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 businesses to issues related to integrationand administration;·our ability to successfully integrate the acquired technology and operations into our business and maintainuniform standards, controls, policies and procedures;·significant competition from other game companies as the gaming industry consolidates;·challenges retaining the key employees, customers and other business partners of the acquired business;·our ability to realize synergies expected to result from an acquisition or strategic investment;·an impairment of acquired goodwill and other intangible assets or investments in future periods would result in acharge to earnings in the period in which the write-down occurs;·the internal control environment of an acquired entity may not be consistent with our standards and may requiresignificant time and resources to improve;·in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and toaddress the particular economic, currency, political and regulatory risks associated with specific countries; and·liability for activities of the acquired companies before the acquisition, including violations of laws, rules andregulations, commercial disputes, tax liabilities and other known and unknown liabilities. In addition, if we issue equity securities as consideration in an acquisition or strategic investment, as we did for ouracquisitions of Griptonite, Inc., Blammo Games Inc., GameSpy Industries, Inc., PlayFirst, Inc. and Cie Games, Inc., our currentstockholders’ percentage ownership and earnings per share would be diluted. Because acquisitions and strategic investmentsare inherently risky, our transactions may not be successful and may, in some cases, harm our operating results or financialcondition. Changes in foreign exchange rates and limitations on the convertibility of foreign currencies could adversely affect ourbusiness and operating results.We currently transact business in 100 countries and in dozens of different currencies, with Pounds Sterling, Euros andChinese Renminbi being the primary international currencies in which we transact business. Conducting business in currenciesother than U.S. Dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reportedoperating results. We experienced significant fluctuations in currency exchange rates in 2013 and 2014, and expect toexperience continued significant fluctuations in the future. We incur expenses for employee compensation and other operatingexpenses at our non-U.S. locations in the local currency, and an increasing percentage of our international revenue is fromcustomers who pay us in currencies other than the U.S. Dollar. Fluctuations in the exchange rates between the U.S. Dollar andthose other currencies could result in the U.S. Dollar equivalent of these expenses being higher and/or the U.S. Dollarequivalent of the foreign-denominated revenue being lower than would be the case if exchange rates were stable. This couldnegatively impact our operating results. Conversely, the current economic crisis in29 Table of Contents Russia has led to a significant devaluation of the Ruble compared to the U.S. Dollar, which has reduced the effective salaries ofour employees in our Moscow studio. As a result, we may be at risk of losing key employees to competitors who are willing tooffer higher effective wages. To date, we have not engaged in exchange rate hedging activities, and we do not expect to do soin the foreseeable future.We face additional risk if a currency is not freely or actively traded. Some currencies, such as the Chinese Renminbi inwhich our Chinese operations principally transact business, are subject to limitations on conversion into other currencies,which can limit our ability to react to rapid foreign currency devaluations and to repatriate funds to the United States should werequire additional working capital.We face added business, political, regulatory, operational, financial and economic risks as a result of our internationaloperations and distribution, any of which could increase our costs and adversely affect our operating results.International sales represented approximately 40.6%, 53.9%, and 46.6% of our revenues in 2014, 2013, and 2012,respectively. To target international markets, we develop games that are customized for consumers in those markets. We haveinternational offices located in a number of foreign countries including Canada, China, India, Japan, Korea and Russia. Weexpect to maintain our international presence, and we expect international sales will continue to be an important component ofour revenues, particularly in APAC markets. 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 asa result of distance, language, and cultural differences;·multiple and conflicting laws and regulations, including complications due to unexpected changes in theselaws and regulations;·our ability to develop, customize and localize games that appeal to the tastes and preferences of consumers ininternational markets;·competition from local game developers that have significant market share in certain foreign markets and abetter understanding of local consumer preferences;·potential violations of the Foreign Corrupt Practices Act and local laws prohibiting improper payments togovernment officials or representatives of commercial partners;·regulations that could potentially affect the content of our products and their distribution, particularly in China;·foreign exchange controls that might prevent us from repatriating income earned in countries outside the UnitedStates, particularly China;·potential adverse foreign tax consequences, since due to our international operations, we must pay income taxin numerous foreign jurisdictions with complex and evolving tax laws;·political, economic and social instability, including the ongoing hostilities in the Ukraine and the economiccrisis in Russia, which could potentially negatively impact us given that we have a development studio inMoscow;·restrictions on the export or import of technology;30 Table of Contents ·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. In particular, we have approximately 130 employees located at our developmentstudio in Moscow, Russia. The current economic crisis in Russia, including the destabilization of the Ruble, could lead tounstable political conditions, civil unrest or other developments that could materially affect our business, including throughdistractions and potential hardships to our Russian employees, restrictions on our ability to fund our Russian operations, andother difficulties that could cause delays to our game launches or even the cancellation of a game release and otherwise affectour ability to update and maintain games previously released from our Moscow studio. If we fail to deliver our games at the same time as new mobile devices are commercially introduced, our revenues may suffer.Our business depends, in part, on the commercial introduction of new mobile devices with enhanced features, includinglarger, higher resolution color screens, improved audio quality, and greater processing power, memory, battery life andstorage. For example, the introduction of new and more powerful versions of Apple’s iPhone and iPad and devices based onGoogle’s Android operating system, have helped drive the growth of the mobile games market. In addition, consumersgenerally purchase the majority of content, such as our games, for a new device within a few months of purchasing it. We donot control the timing of these device launches. Some manufacturers give us access to their mobile devices prior to commercialrelease. 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 notadequately build into our title plan the demand for games for a particular mobile device or experience game launch delays, wemiss the opportunity to sell games when new mobile devices are shipped or our end users upgrade to a new mobile device, ourrevenues would likely decline and our business, operating results and financial condition would likely suffer.If the use of smartphones and tablet devices as game platforms and the proliferation of mobile devices generally do notincrease, our business could be adversely affected.While the number of people using mobile Internet-enabled devices, such as smartphones and tablet devices, has increaseddramatically in the past few years, the mobile market, particularly the market for mobile games, is still emerging, and it may notgrow as we anticipate. Our future success is substantially dependent upon the continued growth of use of mobile devices forgames. The proliferation of mobile devices may not continue to develop at historical rates and consumers may not continue touse mobile Internet-enabled devices as a platform for games. In addition, new and emerging technologies could make themobile devices on which our games are currently released obsolete, requiring us to transition our business model to developgames for other next-generation platforms. Our business is subject to increasing governmental regulation. If we do not successfully respond to these regulations, ourbusiness may suffer.We are subject to a number of domestic and foreign laws and regulations that affect our business. Not only are these lawsconstantly evolving, which could result in their being interpreted in ways that could harm our business, but legislation is alsocontinually being introduced that may affect both the content of our products and their distribution. In the United States, forexample, numerous federal and state laws have been introduced which attempt to restrict the content or distribution ofgames. Legislation has been adopted in several states, and proposed at the federal level, that prohibits the sale of certain gamesto minors. If such legislation is adopted, it could harm our business by limiting the games we are able to offer to our customersor by limiting the size of the potential market for our games. We may also be required to modify certain games or alter ourmarketing strategies to comply with new and possibly inconsistent regulations, which could be costly or delay the release ofour games. For example, the United Kingdom’s Office of Fair Trading issued new principles in January 2014 relating to in-apppurchases in free-to-play games that are directed towards children 16 and31 Table of Contents under, which principles became effective in April 2014. In addition, in response to a request made by the EuropeanCommission, Google has announced that it will no longer label free-to-play games as free in European Unioncountries. Similarly, in the fourth quarter of 2014, Apple changed its label for free-to-download applications from “FREE” to“GET” in the Apple App Store. The Federal Trade Commission has also indicated that it intends to review issues related to in-app purchases, particularly with respect to games that are marketed primarily to minors; the Federal Trade Commission recentlyreached settlement agreements with Apple and Google on this subject. If the Federal Trade Commission issues rulessignificantly restricting or even prohibiting in-app purchases, 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 (PanEuropean Game Information (PEGI)) provide consumers with rating information on various products such as entertainmentsoftware 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. In response to thesemeasures, some Chinese telecommunications operators have suspended billing their customers for certain mobile gamingplatform services, including those services that do not contain offensive or unauthorized content, which could negativelyimpact our revenues in China. Any one or more of these factors could harm our business by limiting the products we are able tooffer to our customers, by limiting the size of the potential market for our products, or by requiring costly additionaldifferentiation 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 morestringent consumer protection laws that may impose additional burdens on companies such as ours. We anticipate that scrutinyand regulation of our industry will increase and that we will be required to devote legal and other resources to addressing suchregulation. For example, existing laws or new laws regarding the regulation of currency and banking institutions may beinterpreted to cover virtual currency or goods. If that were to occur we may be required to seek licenses, authorizations orapprovals from relevant regulators, the granting of which may depend on us meeting certain capital and other requirements andwe may be subject to additional regulation and oversight, all of which could significantly increase our operatingcosts. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhereregarding 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 recentlylaunched a version of our Frontline Commando: D-Day game utilizing the Skillz technology platform that allows players tocompete against each other in tournaments for cash prizes. We have also in the past through a partnership with Probability PLCoffered a suite of Glu branded mobile slots games in the United Kingdom and might continue to explore opportunities withrespect to real money gambling. We are subject to laws in a number of jurisdictions concerning the operation and offering ofsuch activities and games, many of which are still evolving and could be interpreted in ways that could harm our business. Anycourt ruling or other governmental action that imposes liability on providers of online services could result in criminal or civilliability and could harm our business.In addition, because our services are available worldwide, certain foreign jurisdictions and others may claim that we arerequired 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 perceivedfailure 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 collectregarding 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 Federal Trade Commission and the Department of Commerce, is continuing to review the need forgreater regulation over collecting information concerning consumer behavior on the Internet and on mobile devices. Forexample, in December 2012, the Federal Trade Commission adopted amendments to the Children’s Online Privacy ProtectionAct to strengthen privacy protections for children under age 13, which amendments became effective in July 2013. In addition,the European Union has proposed reforms to its existing data protection legal framework. Various government and consumeragencies have also called for new regulation and changes in industry practices. For example,32 Table of Contents in February 2012, the California Attorney General announced a deal with Amazon, Apple, Google, Hewlett-Packard, Microsoftand Research in Motion to strengthen privacy protection for users that download third-party apps to smartphones and tabletdevices. Additionally, in January 2014, the Federal Trade Commission announced a settlement with Apple related to in-apppurchases made by minors. In response to developments in the interpretation and understanding of regulations such as theseand guidance and inquiries from the California Attorney General, we released updates to our My Dragon and Deer HunterReloaded games and made changes to our games in development to make our privacy policy readily accessible to players ofthese games as required by the California Online Privacy Protection Act. If we do not follow existing laws and regulations, aswell as the rules of the smartphone platform operators, with respect to privacy-related matters, or if consumers raise anyconcerns about our privacy practices, even if unfounded, it could damage our reputation and operating results.All of our games are subject to our privacy policy and our terms of service located on our corporate website. If we fail tocomply with our posted privacy policy, terms of service or privacy-related laws and regulations, including with respect to theinformation 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 isoften unclear. These laws may be interpreted and applied in conflicting ways from state to state, country to country, or regionto region, and in a manner that is not consistent with our current data protection practices. Complying with these varyingrequirements could cause us to incur additional costs and change our business practices. Further, if we fail to adequatelyprotect 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 have passed laws requiring notification to users whenthere is a security breach for personal data, such as the 2002 amendment to California’s Information Practices Act, or requiringthe adoption of minimum information security standards that are often vaguely defined and difficult to implement. Costs tocomply with these laws may increase as a result of changes in interpretation. Furthermore, any failure on our part to complywith these laws may subject us to significant liabilities. The security measures we have in place to protect our data and thepersonal information of our employees, customers and partners could be breached due to cyber-attacks initiated by third partyhackers, employee error or malfeasance, or otherwise. Because the techniques used to obtain unauthorized access, disable ordegrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may beunable to anticipate these techniques or to implement adequate preventative measures. Any breach or unauthorized accesscould materially interfere with our operations or our ability to offer our services or result in significant legal and financialexposure, damage to our reputation and a loss of confidence in the security of our data, which could have an adverse effect onour business and operating results.Our stock price has fluctuated and declined significantly since our initial public offering in March 2007, and may continue tofluctuate, may not rise and may decline further. The trading price of our common stock has fluctuated in the past and is expected to continue to fluctuate in the future, as aresult of a number of factors, many of which are outside our control, such as changes in the operating performance and stockmarket valuations of other technology companies generally, or those in our industry in particular, such as Electronic Arts, KingDigital Entertainment and Zynga. We also experience stock price volatility as investors monitor the performance of our gamesthrough third party tools, such as App Annie, the Apple App Store’s “Top Grossing” rankings and other measurements of theperformance of our games. In addition, The NASDAQ Global Market on which our common stock is listed has recently and in the past experiencedextreme price and volume fluctuations that have affected the market prices of many companies, some of which appear to beunrelated or disproportionate to their operating performance. These broad market fluctuations could adversely affect themarket price of our common stock. In the past, following periods of volatility in the market price of a particular company’ssecurities, securities class action litigation has often been brought against that company. Securities class action litigationagainst us could result in substantial costs and divert our management’s attention and resources.33 Table of Contents If we do not adequately protect our intellectual property rights, it may be possible for third parties to obtain and improperlyuse 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 secretand other intellectual property laws and contractual restrictions on disclosure to protect our intellectual property rights. Todate, we have only one issued U.S. patent, and have filed only six patent applications and inherited an additional two patentapplications through acquisitions, so we will not be able to protect the vast majority of our technologies from independentinvention by third parties. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt tocopy or otherwise to obtain and use our technology and games, and some parties have distributed “jail broken” versions of ourgames where all of the content has been unlocked and made available for free. Further, some of our competitors have releasedgames that are nearly identical to successful games released by their competitors in an effort to confuse the market and divertusers from the competitor’s game to the copycat game. We believe that these tactics were employed by Hothead Games in theirgame Kill Shot, which we believe infringes certain Glu copyrights and trade dress contained in our Deer Hunter 2014game. We have initiated litigation against Hothead Games related to their Kill Shot game, which could result in substantialcosts and divert our management’s attention. To the extent competitors continue to copy our games, it could reduce ourrevenues that we generate from these games. Monitoring unauthorized use of our games is difficult and costly, and we cannotbe certain that the steps we have taken will prevent piracy and other unauthorized distribution and use of our technology andgames, particularly in certain international jurisdictions, such as China, where the laws may not protect our intellectualproperty rights as fully as in the United States. In the future, we may have to institute additional litigation to enforce ourintellectual 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 tradesecrets, to acknowledge that all inventions, trade secrets, works of authorship, developments and other processes generated bythem on our behalf are our property and to assign to us any ownership they may have in those works, it may still be possible forthird parties to obtain and improperly use our intellectual properties without our consent. This could harm our brand, business,operating results and financial condition.We may become involved in intellectual property disputes, which may disrupt our business and require us to pay significantdamage awards.Third parties may sue us for intellectual property infringement, or initiate proceedings to invalidate our intellectualproperty, which, if successful, could disrupt our business, cause us to pay significant damage awards or require us to paylicensing fees. For example, on August 20, 2014, Inventor Holdings, LLC, a Delaware limited liability company, filed acomplaint in the U.S. District Court for the District of Delaware alleging that we were infringing one of its patents and seekingunspecified damages, including interest, costs, expenses and an accounting of all infringing acts, attorneys’ fees and such othercosts as the Court deems just and proper. In addition, in November 2014, Telinit Technologies, LLC, a Texas company, filed acomplaint in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that we were infringing one ofits patents and seeking unspecified damages, attorneys’ fees and costs. We settled the dispute with Telinit for an immaterialamount in January 2015. If there is a successful claim against us in the future, we might be enjoined from using our intellectualproperty or licensed intellectual property that we use in our business, we might incur significant licensing fees and we might beforced to develop alternative technologies. We may also be required to pay penalties, judgments, royalties or significantsettlement costs. If we fail or are unable to develop non-infringing technology or games or to license the infringed or similartechnology or games on a timely basis, we may be forced to withdraw games from the market or prevented from introducingnew 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 thefuture. We may face claims from companies that incorporate open source software into their products, claiming ownership of, ordemanding release of, the source code, the open source software and/or derivative works that were developed using suchsoftware, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result inlitigation, require us to purchase a costly license or require us to devote additional research and34 Table of Contents development resources to change our games, any of which would have a negative effect on our business and operating results. We may become a party to litigation and regulatory inquiries, which could result in an unfavorable outcome and have anadverse effect on our business, financial condition, results of operation and cash flows. We may become subject to various legal proceedings, claims and regulatory inquiries that arise out of the ordinary conductof our business and are not yet resolved and additional claims and inquiries may arise in the future. In addition, events maygive occur that give rise to a potential risk of litigation. The number and significance of regulatory inquiries have increased asour business has evolved. Any proceedings, claims or inquiries initiated by or against us, whether successful or not, may betime consuming; result in costly litigation, damage awards, consent decrees, injunctive relief or increased costs of business,require us to change our business practices or products, require significant amounts of management time, result in diversion ofsignificant operations resources or otherwise harm of business and future financial results. “Cheating” programs, scam offers, black-markets and other offerings or actions by unrelated third parties that seek toexploit our games and players affect the game-playing experience and may lead players to stop playing our games or divertrevenues to unrelated third parties. Unrelated third parties have developed, and may continue to develop, “cheating” programs, scam offers, black-markets andother offerings that may decrease our revenues generated from our virtual economies, divert our players from our games orotherwise harm us. Cheating programs enable players to exploit vulnerabilities in our games to obtain virtual currency or otheritems that would otherwise generate in-app purchases for us, play the games in automated ways or obtain unfair advantagesover other players who do play fairly. Unrelated third parties attempt to scam our players with fake offers for virtual goods orother game benefits. We devote resources to discover and disable these programs and activities, but if we are unable to do so ina prompt and timely manner, our operations may be disrupted, our reputation damaged and players may play our games lessfrequently or stop playing our games altogether. This may lead to lost revenue from paying players, increased cost ofdeveloping technological measures to combat these programs and activities, legal claims relating to the diminution in value ofour virtual currency and goods, and increased customer service costs needed to respond to disgruntled players.Unanticipated changes in our income tax rates or exposure to additional tax liabilities may affect our future financialresults. Our future effective income tax rates may be favorably or unfavorably affected by unanticipated changes in the valuation ofour deferred tax assets and liabilities, or by changes in tax laws or their interpretation. Determining our worldwide provision forincome taxes requires significant judgments. The estimation process and applicable laws are inherently uncertain, and ourestimates are not binding on tax authorities. Our effective tax rate could also be adversely affected by a variety of factors, manyof which are beyond our control. Recent and contemplated changes to U.S. tax laws, including limitations on a taxpayer’sability to claim and utilize foreign tax credits and defer certain tax deductions until earnings outside of the U.S. are repatriatedto the U.S., could impact the tax treatment of our foreign earnings. Further, the taxing authorities of the jurisdictions in whichwe operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including ourtransfer pricing, or determine that the manner in which we operate our business is not consistent with the manner in which wereport our income to the jurisdictions, which could increase our worldwide effective tax rate and harm our financial positionand results of operations. In addition, we are subject to the continuous examination of our income tax returns by the InternalRevenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from theseexaminations to determine if our provision for income taxes is adequate. These continuous examinations may result inunforeseen tax-related liabilities, which may harm 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 U.S. and foreign jurisdiction. If tax authorities assert that we have taxablenexus in a jurisdiction, they may seek to impose past as well as future tax liability and/or penalties. Any such impositionscould also cause significant administrative burdens and decrease our future sales. Moreover, state and35 Table of Contents 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 toour 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 disastercould 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 todamage from other types of disasters, including power loss, fires, explosions, floods, communications failures, terrorist attacksand similar events. If any natural or other disaster were to occur, our ability to operate our business could be impaired.If securities or industry analysts do not publish research about our business, or publish negative or misinformed reports aboutour 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 publishabout our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade ourshares or lower their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverageof our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn couldcause our share price or trading volume to decline. In addition, our share price and the volatility of our shares can be affectedby misinformed or mistaken research reports on our business.Our common stock price may be affected by third-party data regarding our games.Third parties publish daily data about us and other mobile gaming companies with respect to downloads of our games, dailyand monthly active users and estimated revenues generated by our games. These metrics can be volatile, particularly forspecific games, and in many cases do not accurately reflect the actual levels of usage of our games across all platforms or therevenue generated by our games. To the extent that securities analysts or investors base their views of our business or prospectson such third-party data, the price of our common stock may be affected by such third party data and may not reflect the actualperformance of our business.Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, couldreduce the price that our common stock might otherwise attain and may dilute your voting power and your ownership interestin 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 ourcurrent shelf registration statements, through a large number of shares of our common stock becoming available for sale, or theperception in the market that holders of a large number of shares intend to sell their shares. For example, we issued 9,982,886shares in connection with our acquisition of Cie Games, Inc. in August 2014. We filed a Registration Statement on Form S-3covering the resale of such shares. Accordingly, the shares issued in the Cie Games acquisition are subject to only limited re-sale restrictions and sales of substantial amounts of such shares may occur.Some provisions in our certificate of incorporation and bylaws, as well as Delaware law, may deter third parties from seekingto acquire us.Our certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficultwithout 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;36 Table of Contents ·only our chairman of the board, our lead independent director, our chief executive officer, our president or amajority of our board of directors is authorized to call a special meeting of stockholders;·our stockholders are able to take action only at a meeting of stockholders and not by written consent;·only our board of directors and not our stockholders is able to fill vacancies on our board of directors;·our certificate of incorporation authorizes undesignated preferred stock, the terms of which may be establishedand 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 bringmatters before a meeting of stockholders. In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the DelawareGeneral Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding common stock fromengaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding commonstock not held by such 15% or greater stockholder. Item 1B. Unresolved Staff Comments None. Item 2. Properties Our principal locations, their purposes, the approximate square footage of the facilities at these locations and theexpiration dates for the leases on facilities at those locations as of December 31, 2014 are shown in the table below. LocationPurposeApproximateSquareFeetPrincipalLeaseExpirationDateSan Francisco, CaliforniaCorporate headquarters and development studio29,000 March 2018Long Beach, CaliforniaDevelopment studio9,200 September2016Bellevue, WashingtonDevelopment studio17,600 September2020Beijing, ChinaAsia-Pacific corporate offices and development studio15,800 November 2015Hyderabad, IndiaResearch and development center8,425 July 2016Moscow, RussiaDevelopment studio16,025 June 2017Toronto, CanadaDevelopment studio6,375 January 2018 We believe our space is adequate for our current needs and that suitable additional or substitute space will be availableto accommodate the foreseeable expansion of our operations. See Note 7 to the financial statements in Item 8 of this report formore information about our lease commitments. Item 3. Legal ProceedingsOn August 19, 2014, Inventor Holdings, LLC (“IHL”), a Delaware limited liability company, filed a complaint in theU.S. District Court for the District of Delaware alleging that we were infringing one of its patents and seeking unspecifieddamages, including interest, costs, expenses and an accounting of all infringing acts, attorneys’ fees and such other costs as theCourt deems just and proper. On October 10, 2014, we filed a motion to dismiss the complaint with37 Table of Contents prejudice on the ground that the patent asserted by IHL claims patent-ineligible subject matter pursuant to 35 U.S.C. § 101 andthus the complaint fails to state a claim upon which relief can be granted. On October 27, 2014, IHL filed an opposition to ourmotion to dismiss the complaint with prejudice. We filed our reply to IHL’s opposition on November 6, 2014. The motionremains pending. In the meanwhile, the Court has entered a scheduling order for the case. Trial, if necessary, is set to beginDecember 5, 2016.On November 5, 2014, we filed a complaint against Hothead Games, Inc. (“Hothead”) in the United States DistrictCourt for the Northern District of California. In the complaint, we allege that Hothead has willfully infringed, and continues towillfully infringe, certain of our copyrights and trade dress contained in our Deer Hunter 2014 game through Hothead’s releaseof its game, Kill Shot. Our complaint requests that the Court grant the following relief: (1) preliminary and/or permanentinjunction restraining Hothead and its affiliates from directly or indirectly violating our rights under the Copyright Act and theLanham Act; (2) an order directing that Hothead file with the Court and serve upon our counsel within 30 days after entry ofsuch order or judgment a report in writing and under oath setting forth in detail the manner and form in which Hothead hascomplied with the injunction; (3) an award to us of damages we have sustained or will sustain by reason of Hothead’s conduct,all profits derived by Hothead from such conduct, or in lieu of any portion thereof, should we so elect, such statutory damagesas provided by law; (4) our costs and reasonable attorneys’ fees; (5) prejudgment and post-judgment interest; and (6) all suchfurther and additional relief, in law or in equity, to which we may be entitled or which the Court deems just andproper. Following a case management conference on February 6, 2015, the Court set all pre-trial and trial dates, with a jury trialset to commence on May 31, 2016.In November 2014, Telinit Technologies, LLC, a Texas company, filed a complaint in the U.S. District Court for theEastern District of Texas, Marshall Division, alleging that we were infringing one of its patents and seeking unspecifieddamages, attorneys’ fees and costs. We settled this dispute in January 2015 for an immaterial amount. From time to time, we are subject to various claims, complaints and legal actions in the normal course of business. Weare 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 managementresources and other factors. Item 4. Mine Safety Disclosures Not applicable. 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 Market under the symbol “GLUU” since our initial publicoffering in March 2007. The following table sets forth, for the periods indicated, the high and low intra-day prices38 Table of Contents for our common stock as reported on The NASDAQ Global Market. The closing price of our common stock on March 12, 2015was $4.75. High LowYear ended December 31, 2013 First quarter $3.86 $2.00 Second quarter $3.25 $2.10 Third quarter $2.91 $2.10 Fourth quarter $4.14 $2.50 Year ended December 31, 2014 First quarter $5.65 $3.61 Second quarter $5.09 $3.56 Third quarter $7.60 $4.73 Fourth quarter $5.32 $3.35 Our stock price has fluctuated and declined significantly since our initial public offering. Please see the Risk Factor –“Our stock price has fluctuated and declined significantly since our initial public offering in March 2007, and may continue tofluctuate, may not rise and may decline further” – in Item 1A of this report. Stock Price Performance Graph The following graph shows a comparison from December 31, 2009 through December 31, 2014 of the cumulative totalreturn for an investment of $100 (and the reinvestment of dividends) in our common stock, the NASDAQ Composite Index andthe NASDAQ Telecommunications Index. Such returns are based on historical results and are not intended to suggest futureperformance. 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 registrationstatement or other document filed by us with the SEC, whether made before or after the date of this report, regardless of anygeneral incorporation language in such filing, except as expressly set forth by specific reference39 Table of Contents in such filing.Equity Compensation Plan Information The following table sets forth certain information, as of December 31, 2014, concerning securities authorized forissuance under all of our equity compensation plans: our 2001 Second Amended and Restated Stock Option Plan (the “2001Plan”), which terminated when we adopted the 2007 Equity Incentive Plan (the “2007 Plan”), 2007 Employee Stock PurchasePlan (the “ESPP”) and 2008 Equity Inducement Plan (the “Inducement Plan”). The ESPP contains an “evergreen” provision,pursuant to which on January 1st of each year we automatically add 1% of our shares of common stock outstanding on thepreceding December 31st to the shares reserved for issuance under the ESPP; this evergreen provision expired after the increaseon January 1, 2015. In addition, pursuant to a “pour over” provision in our 2007 Plan, options that are cancelled, expired orterminated under the 2001 Plan are added to the number of shares reserved for issuance under our 2007 Plan. Plan Category Number ofSecurities to beIssued UponExercise ofOutstandingOptions, Warrantsand Rights Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights (1) Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans(Excluding SecuritiesReflected in Column (a) (a) (b) (c) Equity compensation plans approved by security holders 11,616,444 $3.33 2,314,286 (2)Equity compensation plans not approved by securityholders 671,251 (3) 3.23 349,117 (4)Total 12,287,695 $3.32 2,663,403 (5) (1)The weighted average exercise price does not take into account the shares subject to outstanding restricted stock units,which have no exercise price.(2)Represents 1,031,459 shares available for issuance under our the 2007 Plan, which plan permits the grant of incentive andnon-qualified stock options, stock appreciation rights, restricted stock, stock awards and restricted stock units; and1,282,827 shares available for issuance under the ESPP. (3)Represents outstanding options under the Inducement Plan. (4)Represents shares available for issuance under the Inducement Plan, under which we may only grant non-qualified stockoptions and restricted stock units.(5)Excludes 1,071,735 shares available for issuance under the ESPP, which were added to the share reserve on January 1,2015 pursuant to the evergreen provision described above. In March 2008, in connection with our acquisition of Superscape Group plc, our Board of Directors adopted theInducement Plan to augment the shares available under our then existing 2007 Plan. We have not sought stockholder approvalfor the Inducement Plan. As such, awards under the Inducement Plan are granted in accordance with NASDAQ Listing Rule5635(c)(4) and only to persons not previously an employee or director, or following a bona fide period of non-employment, asan inducement material to such individuals entering into employment with us. The Inducement Plan, which has a ten-yearterm, did not require the approval of our stockholders. We initially reserved 600,000 shares of our common stock for issuanceunder the Inducement Plan. On December 28, 2009, the Compensation Committee of our Board of Directors increased thenumber of shares reserved for issuance under the Inducement Plan by 819,245 shares. We used all of the 1,250,000 shares thenavailable for a stock option grant to Niccolo M. de Masi in connection with his appointment as our new President and ChiefExecutive Officer. Furthermore, in connection with the acquisitions of Griptonite, Inc. and Blammo Games Inc., theCompensation Committee increased the number of shares reserved for issuance under our Inducement Plan by 1,050,000 sharesto grant stock options to certain of the new non-executive officer employees of Griptonite and Blammo. In November 2012, theCompensation Committee further increased the number of shares available for issuance by an additional 300,000 shares, all ofwhich we used to award a stock option grant to our newly hired President of Studios. Finally, in May 2013, the CompensationCommittee amended the Inducement Plan to increase the number of shares available for grant by 200,000 shares in order toissue shares to new hires, including our President of Publishing. Accordingly, as of December 31, 2014, we had reserved a totalof 2,969,245 shares of our common stock for grant and issuance under the Inducement Plan since its inception, of which,671,251 shares were40 Table of Contents subject to outstanding stock options and 349,117 shares remained available for issuance. The remaining 1,948,877 sharesrepresent shares that were subject to previously granted stock options under the Inducement Plan that have been exercised bythe option holders.The Inducement Plan initially permitted us to grant only non-qualified stock options. However, effective November2013, the Compensation Committee amended the Inducement Plan to permit the award of restricted stock units under the plan. We may grant non-qualified stock options under the Inducement Plan at prices less than 100% of the fair value of the shares onthe date of grant, at the discretion of our Board of Directors. The fair value of our common stock is determined by the last saleprice of our stock on The NASDAQ Global Market on the date of determination. If any option granted under the InducementPlan expires or terminates for any reason without being exercised in full, the unexercised shares will be available for grantunder the 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 Inducement Plan. If we were acquired and the acquiringcorporation did not assume or replace the awards granted under the Inducement Plan, or if we were to liquidate or dissolve, alloutstanding awards will expire on such terms as our Board of Directors determines. Stockholders As of March 3, 2015, we had approximately 74 record holders of our common stock and thousands of additionalbeneficial holders. Dividend Policy We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any futureearnings and do not expect to pay any dividends in the foreseeable future. Any future determination related to our dividendpolicy will be made at the discretion of our Board of Directors. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 41 Table of Contents Item 6. Selected Financial Data The following selected consolidated financial data should be read in conjunction with Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” Item 8, “Financial Statements and SupplementaryData,” and other financial data included elsewhere in this report. Our historical results of operations are not necessarilyindicative of results of operations to be expected for any future period. Year Ended December 31, 2014 2013 2012 2011 2010 (In thousands, except per share amounts)Consolidated Statements of Operations Data: Revenues $223,146 $105,613 $108,183 $74,025 $66,804 Cost of revenues: Platform commissions, royalties and other 80,992 32,806 29,630 20,760 19,765 Amortization of intangible assets 4,767 4,238 3,783 5,447 4,226 Total cost of revenues 85,759 37,044 33,413 26,207 23,991 Gross profit 137,387 68,569 74,770 47,818 42,813 Operating expenses(1): Research and development 64,284 46,877 54,275 39,073 25,180 Sales and marketing 45,076 26,120 20,893 14,607 12,140 General and administrative 25,019 15,550 14,744 14,002 13,108 Amortization of intangible assets 508 1,336 1,980 825 205 Restructuring charge 435 1,448 1,371 545 3,629 Impairment of goodwill - - 3,613 - -Total operating expenses 135,322 91,331 96,876 69,052 54,262 Income/(loss) from operations 2,065 (22,762) (22,106) (21,234) (11,449)Interest and other income (expense), net (1,472) 10 (347) 747 (1,265)Income/(loss) before income taxes 593 (22,752) (22,453) (20,487) (12,714)Income tax benefit (provision) 7,555 2,843 1,994 (614) (709)Net income/(loss) 8,148 (19,909) (20,459) (21,101) (13,423) Net income /(loss) per share: Basic $0.09 $(0.28) $(0.32) $(0.37) $(0.38)Diluted $0.08 $(0.28) $(0.32) $(0.37) $(0.38) Weighted average common shares outstanding: Basic 91,826 71,453 64,318 57,518 35,439 Diluted 96,922 71,453 64,318 57,518 35,439 _________ (1) Includes stock-based compensation expense as follows:Research and development $7,422 $1,948 $3,491 $1,387 $480 Sales and marketing 701 303 386 351 217 General and administrative 3,510 2,034 1,945 1,372 871 Year Ended December 31, 2014 2013 2012 2011 2010 (In thousands)Cash and cash equivalents and short-term investments $70,912 $28,496 $22,325 $32,212 $12,863 Total assets 251,663 87,011 74,955 85,010 45,117 Current portion of long-term debt - - - - 2,288 Total stockholder's equity $171,706 $46,697 $38,887 $49,173 $13,885 Please see Note 1, Note 3 and Note 7 of Notes to Consolidated Financial Statements for a discussion of factors such asbusiness combinations 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. 42 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion of our financial condition and results of operations in conjunction withour consolidated financial statements and the related notes included in Item 8, “Financial Statements and SupplementaryData” of this report. In addition to our historical consolidated financial information, the following discussion containsforward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from thosediscussed in the forward-looking statements. Factors that could cause or contribute to these differences include thosediscussed 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 (“MD&A”) includesthe 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 andjudgments underlying our financial statements;·Recent Accounting Pronouncements;·Results of Operations, including a more detailed discussion of our revenues and expenses; and·Liquidity and Capital Resources, which discusses key aspects of our statements of cash flows, changes in ourbalance sheets and our financial commitments. 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 fiscal 2014, as well asour future prospects. We do not intend this summary to be exhaustive, or to be a substitute for the detailed discussion andanalysis provided elsewhere in this report, including our consolidated financial statements and accompanying notes. Financial Results and Trends Revenues for 2014 were $223.1 million, a 111.3% increase compared to 2013, in which we reported revenues of$105.6 million. The increase in total revenues was largely attributable to sales generated from Kim Kardashian: Hollywood, ourmost successful initial title launch to date, which we globally launched in June 2014. The increase in total revenues was alsodue to the continued success of Deer Hunter 2014 and Eternity Warriors 3; Deer Hunter 2014 was launched in September 2013and Eternity Warriors 3 was launched in December 2013, and each of these contributed significantly more revenue in 2014compared to 2013 as a result of having a full twelve months of contribution in 2014. Revenues from other successful new titlelaunches in 2014, particularly Dino Hunter: Deadly Shores and Contract Killer: Sniper, as well as revenues that we generatedfrom Racing Rivals subsequent to our acquisition of Cie Games, Inc. (“Cie Games”) in August 2014 further contributed to ourincrease in revenues. Revenues for 2013 were $105.6 million, a 2.4% decrease compared to 2012, in which we reported revenues of $108.2million. The decrease in total revenues primarily resulted from a decrease in revenues that we generated from our feature phonegames, as our feature phone revenues declined from $13.1 million in 2012 to $5.3 million in 2013. This decrease was due to thecontinued migration of users from feature phones to smartphone devices and our decision to concentrate our productdevelopment efforts exclusively towards developing new titles for smartphones, tablets and other next-generation platforms,such as the Mac App Store. The decrease in our feature phone revenues were partially offset by an increase in our smartphonerevenues from $95.0 million in 2012 to $100.3 million in 2013. This increase was partially43 Table of Contents attributable to sales generated from our then most successful title launch to date, Deer Hunter 2014, which we globallylaunched in September 2013. We have concentrated our product development efforts towards developing games for smartphones, tablets and othernext-generation platforms. We generate the majority of our revenues from Apple’s iOS platform, which accounted for 61.8%and 59.6% of our total revenues for the year ended December 31, 2014 and 2013, respectively. We generated the majority ofthese iOS-related revenues through the Apple App Store, which represented 52.2% and 50.1% of our total revenues for the yearended December 31, 2014 and 2013, respectively, with the significant majority of such revenues derived from in-app purchases.We generated the balance of our iOS-related revenues from offers and advertisements in games distributed on the Apple AppStore and, to a far lesser extent, sales of premium games. In addition, we generated approximately 35.4% and 30.5% of our totalrevenues for the year ended December 31, 2014 and 2013, respectively, from the Android platform. We generated the majorityof our Android-related revenues through the Google Play Store, which represented 24.8% and 19.2% of our total revenues forthe year ended December 31, 2014 and 2013, respectively, with the significant majority of such revenues derived from in-apppurchases. We generated the balance of our Android-related revenues from other platforms that distribute apps that run theAndroid operating system (e.g., the Amazon App store) and through offers and advertisements in games distributed through theGoogle Play Store and other Android platforms.To increase our revenues, we must continue to execute on our strategy of becoming the leading developer andpublisher of free-to-play games for smartphones, tablets and other next-generation platforms. Free-to-play games are games thata player can download and play for free, but which allow players to access a variety of additional content and features for a feeand to engage with various advertisements and offers that generate revenues for us. Because our games can be downloaded andplayed for free, we are able to more quickly build a significantly larger customer base than we could if we charged users anupfront fee for downloading our games, which was our previous feature phone business model. We have also been successful inlicensing and incorporating well-known third-party brands, properties and other content in our games, which helps createawareness and drives installs of our games. In furtherance of this strategy, we are seeking to build games that utilize transmediastorytelling, such as with our Kim Kardashian: Hollywood title. We have been successful in driving installs and awareness ofthe game through Ms. Kardashian West’s significant social media presence and celebrity following. We also build content forthe game that incorporates events occurring in Ms. Kardashian West’s public life. This game content becomes entwined withMs. Kardashian West’s persona, becoming a part of her social media presence, part of the storyline for her television series andotherwise creating additional buzz around her celebrity status, with the game developing a social media presence of its own. Inaddition, we believe that our games consistently have high production values, are visually appealing and have engaging coregameplay. These characteristics have typically resulted in highly positive consumer reviews, allowed us to partner with premiertalent and some of the most well-known brands and properties in the world to incorporate into our games and enhanced ourreputation for publishing compelling free-to-play games. We also believe that we have been a consistently good partner ofboth Apple and Google, which has contributed to the majority of our games being featured on their storefronts when they arecommercially released.However, for us to continue to execute on our strategy, we must continue to improve our monetization of our playersand continue to drive installs and awareness of our games. In addition to building strong core gameplay, improvingmonetization requires that we continually create new content within games and otherwise find ways to retain players andincentivize them to make in-app purchases. One way we are improving monetization and increasing awareness of our games isthrough building and nurturing social media communities around our franchises both in-game and holistically via communityfeatures such as dedicated social channels. Our GaaS capabilities also allow us to deliver a number of additional features incertain of our games, such as tournaments, live events and more frequent content updates, which we believe will contribute tobetter monetization in those games. We have made significant investments in our proprietary analytics and monetizationinfrastructure. With our enhanced analytics capabilities, we intend to devote resources towards segmenting and learning moreabout each of our franchise’s user base, which we believe should improve retention and monetization. We aim to connect ouranalytics and monetization infrastructure to every element of our business – from marketing to merchandising. In addition, weplan to continue monitoring the successful aspects of our games to enhance monetization, whether by securing additionallicenses of well-known third-party licensed brands, properties and other content, building enhanced and more complex coregameplay, adding additional social features, tournaments and events or otherwise. Continuing to drive installs and awareness ofour games through licensing efforts44 Table of Contents requires that we continue to partner with top celebrities, Hollywood film studios, athletes, sports organizations and otherpopular brands and properties to build content for our games. Signing highly desirable licensing partners and renewing ourexisting licenses requires that we continue to develop successful games based on licensed content and are able to compete withother mobile gaming companies on financial and other terms in signing such partners. We also plan to increase our licensingefforts to drive installs and awareness of our own originally branded games, introducing third-party licensed brands, propertiesand personalities as title-based characters, for cameo appearances or for limited time events.We have recently grown and broadened our revenue base and diversified our mobile gaming franchises through theacquisitions of PlayFirst, Inc., or PlayFirst, in May 2014 and Cie Games in August 2014. The acquisition of PlayFirst willenable us to expand our portfolio of casual games beyond Kim Kardashian: Hollywood and our Stardom titles, and welaunched our first title based on the acquired PlayFirst intellectual property, Diner Dash, in October 2014. Cie Games is aleading publisher of racing games on the Apple App Store and Google Play, particularly with respect to its successful RacingRivals game, and this acquisition has allowed us to add a new genre of games to our product portfolio; we now occupyleadership positions in four gaming genres: action, casual, racing and sports. For more information regarding the PlayFirst andCie Games acquisitions, see “—Significant Transactions” below. We expect to continue to explore, and potentiallyconsummate, acquisitions of companies or technologies that we believe can further our strategic objectives.Following the success of our Kim Kardashian: Hollywood game, we intend to build the premier Hollywood and othercelebrity gaming platform by securing licensing rights to well-known third-party brands, properties and other content for ourgames. As part of these efforts, we plan to release games in 2015 based on the James Bond and Terminator film franchises aswell as a game featuring singer and songwriter Katy Perry. In connection with these partnerships and other potentialpartnerships with celebrities and other third-party brands, properties and content, we expect our minimum guaranteed royaltypayments to rise in 2015. In addition, our revenues will continue to depend significantly on growth in the mobile games market and our abilityto successfully compete against a continually increasing number of developers, many of whom are larger than us or have othercompetitive advantages, and the overall strength of the economy, particularly in the United States. Our revenues also dependon maintaining our continued good relationship with the digital storefront operators, primarily Apple and Google, each ofwhom could unilaterally alter their terms of service in ways that could harm our business. For example, Apple has during thelast several years made changes to its app store developer agreement relating to privacy and our ability to include certain typesof third-party advertising in our games. In addition, Apple recently informed developers that beginning on February 1, 2015, allnew applications that are submitted to the Apple App Store must include 64-bit support, and beginning on June 1, 2015 allupdates to existing applications must include 64-bit support. Some of these changes have in the past, and may in the future,negatively impact our revenues and operating results.Our net income in the year ended December 31, 2014 was $8.1 million versus a net loss of $19.9 million in the yearended December 31, 2013. This increase in our net income was primarily due to an increase in revenues of $117.5 million, andan increase in income tax benefit of $4.7 million. These favorable factors were partially offset by an increase in cost of revenuesof $48.7 million, an increase in operating expenses of $44.0 million, and a decrease in interest and other income of $1.5million. See “—Results of Operations—Comparison of the Year Ended December 31, 2014 and 2013” below for further details.Our operating results were also affected by fluctuations in foreign currency exchange rates of the currencies in which weincurred meaningful operating expenses (principally the British Pound Sterling, Euro, Chinese Renminbi, Russian Ruble, andIndian Rupee), and our customers’ reporting currencies, which fluctuated significantly in 2013 and 2014.Our net loss in 2013 was $19.9 million versus a net loss of $20.5 million in 2012. This decrease in our net loss wasprimarily due to a decrease in our operating expenses of $5.5 million, an increase in income tax benefit of $849,000, and anincrease in interest and other income of $357,000. The decrease in operating expenses was primarily driven by a decrease of$7.4 million in research and development expenses and a decrease of $3.6 million in our goodwill impairment charge, whichwas partially offset by a $5.2 million increase in sales and marketing expenses and an $806,000 increase in our general andadministrative expenses. These favorable factors that contributed to a decrease in our net loss were partially offset by anincrease of $3.6 million in cost of sales along with a $2.6 million decrease in revenues. See “—Results of Operations—Comparison of the Years Ended December 31, 2013 and 2012” below for further details. Our45 Table of Contents operating results were also affected by fluctuations in foreign currency exchange rates of the currencies in which we incurredmeaningful operating expenses (principally the British Pound Sterling, Euro, Chinese Renminbi, Brazilian Real and RussianRuble), and our customers’ reporting currencies, which fluctuated significantly in 2012 and 2013.Our ability to sustain profitability depends not only on our ability to grow our revenues, but also on our ability tomanage our operating expenses. The largest component of our recurring expenses is personnel costs, which consist of salaries,benefits and incentive compensation, including bonuses and stock-based compensation. We expect our personnel costs toincrease in 2015, primarily due to our plans to bolster our studios by hiring six additional development teams in NorthAmerica, which will add approximately 135 people to our development studios, and through a full year with the increasedpersonnel from our recent acquisitions of PlayFirst and Cie Games. We also increased our spending on sales and marketinginitiatives in 2014 compared to 2013 in connection with the launch and promotion of our games.Cash and cash equivalents at December 31, 2014 totaled $70.9 million, an increase of $42.4 million from the $28.5million balance at December 31, 2013. This increase was primarily due to $32.1 million of net proceeds we received from ourJune 2014 public offering, $30.6 million of cash provided by operations and $10.1 million of aggregate proceeds from warrantexercises, option exercises and purchases under our employee stock purchase program that occurred during the year endedDecember 31, 2014. These inflows were partially offset by $26.2 million of net cash used in investing activities primarily forour acquisition of Cie Games and $2.3 million of cash used in financing activities to repay line of credit agreements and a termloan assumed in our acquisition of PlayFirst. We plan to utilize some of our available cash in 2015 to secure well-knownintellectual property and other content for our games, for investments and acquisitions and to support our increased headcountand product launches. Key Operating MetricsWe manage our smartphone business by tracking various non-financial operating metrics that give us insight into userbehavior in our free-to-play and premium smartphone games. The three metrics that we use most frequently are Daily ActiveUsers (DAU), Monthly Active Users (MAU), and Average Revenue Per Daily Active User (ARPDAU). Our methodology forcalculating 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 playstwo different games on the same day is counted as two active users for that day when we aggregate DAU across games. Inaddition, an individual who plays the same game on two different devices during the same day (e.g., an iPhone and an iPad) isalso counted as two active users for each such day when we average or aggregate DAU over time. Average DAU for a particularperiod is the average of the DAUs for each day during that period. We use DAU as a measure of player engagement with thetitles that our players have downloaded.MAU is the number of individuals who played a particular smartphone game in the month for which we are calculatingthe metric. An individual who plays two different games in the same month is counted as two active users for that month whenwe aggregate MAU across games. In addition, an individual who plays the same game on two different devices during the samemonth (e.g., an iPhone and an iPad) is also counted as two active users for each such month when we average or aggregate MAUover time. Average MAU for a particular period is the average of the MAUs for each month during that period. We use the ratiobetween DAU and MAU as a measure of player retention.ARPDAU is the total free-to-play smartphone revenue – consisting of micro-transactions, advertisements and offers – forthe measurement period divided by the number of days in the measurement period divided by the DAU for the measurementperiod. ARPDAU reflects game monetization. Revenues for purposes of our ARPDAU calculation are our free-to-play revenuesfrom micro-transactions and offers. Under our revenue recognition policy, we recognize these revenues over the estimatedaverage playing period of a user, but our methodology for calculating our DAU does not align with our revenue recognitionpolicy for micro-transactions and offers, under which we defer revenues. For example, if a title is introduced in the last month ofa quarter, we defer a substantial portion of the micro-transaction and offer revenue to future months, but the entire DAU for thenewly released title is included in the month of launch.46 Table of Contents We calculate DAU, MAU and ARPDAU for only our primary distribution platforms, such as Apple’s App Store, theGoogle Play Store, Amazon’s Appstore and the Mac App Store; we are not able to calculate these metrics across all of ourdistribution channels. In addition, the platforms that we include for purposes of this calculation have changed over time, andwe expect that they will continue to change as our business evolves, but we do not expect that we will adjust prior metrics totake any such additions or deletions of distribution platforms into account. We believe that calculating these metrics for onlyour primary distribution platforms at a given period is generally representative of the metrics for all of our distributionplatforms. 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 theinformation as reported and our DAU and MAU calculation methodology.Beginning in the first quarter of 2014, we have estimated the DAU and MAU for certain older titles because the analyticstools incorporated into those titles are incompatible with newer device operating systems (e.g., iOS 8), preventing us fromcollecting complete data. For these titles, we estimate DAU and MAU by extrapolating from each affected title’s historical datain light of the behavior of similar titles for which complete data is available. The table below sets forth our aggregate DAU,MAU and ARPDAU for all of our then-active smartphone titles for the periods specified, followed by a qualitative discussion ofthe changes in these metrics. Aggregate DAU and MAU include users of both our free-to-play and premium titles, whereasaggregate ARPDAU is calculated based only on revenues from our free-to-play games. Aggregate DAU and MAU for eachperiod presented represents the aggregate metric for the last month of the period. For example, DAU for the three months endedDecember 31, 2014 is aggregate daily DAU for the month of December 2014 calculated for all active smartphone free-to-playand premium titles in that month across the distribution platforms for which we calculate the metric. Three Months Ended 2014 2013 March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31 (In thousands, except aggregate ARPDAU)Aggregate DAU 7,028 5,324 7,237 7,222 3,894 2,895 4,273 6,415 Aggregate MAU 64,472 51,857 60,301 62,578 40,056 29,359 45,229 56,297 Aggregate ARPDAU $0.07 $0.08 $0.10 $0.11 $0.06 $0.08 $0.05 $0.06 The increase in aggregate DAU and MAU for the three months ended December 31, 2014 as compared to the sameperiod of the prior year was primarily the result of increased downloads related to the fourth quarter launch of Contract Killer:Sniper, as well as the continued strong performance of titles launched earlier in 2014 such as Kim Kardashian: Hollywood,Racing Rivals and Dino Hunter: Deadly Shores. Our aggregate ARPDAU has generally increased quarter over quarter due to higher revenues per paying user, primarilyattributable to the success of Kim Kardashian: Hollywood and Racing Rivals. Future increases in our aggregate DAU, MAU andARPDAU will depend on our ability to retain current players, attract new paying players, launch new games and expand intonew markets and distribution platforms. We rely on a very small portion of our total users for nearly all of our revenues derived from in-app purchases. Sincethe launch of our first free-to-play titles in the fourth quarter of 2010, the percentage of unique paying users for our largestrevenue-generating free-to-play games has typically been less than 2%, when measured as the number of unique paying userson a given day divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than2% for certain of our games during specific, relatively short time periods, such as immediately following worldwide launch orthe week following content updates, marketing campaigns or certain other events. 47 Table of Contents Significant TransactionsPublic OfferingsIn June 2014, we sold in an underwritten public offering an aggregate of 9,861,250 shares of our common stock at apublic offering price of $3.50 per share for net cash proceeds of approximately $32.1 million after underwriting discounts andother offering expenses.In September 2013, we sold in an underwritten public offering an aggregate of 7,245,000 shares of our common stock at apublic offering price of $2.10 per share for net cash proceeds of approximately $14.0 million after deducting underwritingdiscounts and other offering expenses.Acquisition of Cie GamesOn August 20, 2014, we completed the acquisition of Cie Games, a developer of racing genre mobile games based inLong Beach, California. We intend to continue to leverage Cie Games’ racing genre expertise, assembled workforce andexisting mobile games in order to expand our game offerings on smartphones and tablets. The purchase price considerationincluded 9,982,886 shares of our common stock valued at $5.09 per share as of the closing date of the acquisition, for anaggregate of $50.8 million in share consideration. In addition, we agreed to pay approximately $29.5 million in cashconsideration, for total overall consideration of $80.3 million. We are holding back 2,139,190 of the 9,982,886 shares issued inthe acquisition for 18 months from the closing to satisfy potential indemnification claims under the merger agreement for theacquisition. In addition, $280,000 of the cash consideration was held back and may be released to the former stockholders ofCie Games to the extent we receive a tax refund relating to Cie Games’ operations from January 1, 2014 through August 20,2014. $250,000 of the cash consideration that was held back to satisfy potential working capital shortfalls was paid to theformer Cie Games stockholders during the fourth quarter of 2014. All outstanding Cie Games capital stock and stock optionswere cancelled at the closing of the acquisition. During the third quarter of 2014, we and the stockholders’ agent under themerger agreement agreed that we were entitled to retain approximately 24,000 shares from the holdback due to a workingcapital adjustment, and an adjustment of $93,000 was made to goodwill representing the fair value of the shares on the date ofacquisition.Acquisition of PlayFirstIn May 2014, we completed the acquisition of PlayFirst, a developer of casual games for smartphones and tablets based inSan Francisco, California. The purchase price consideration was $11.6 million, representing 2,954,659 shares of our common stock valued at $3.91per share as of the closing date of the acquisition. The number of shares comprising the purchase price consideration wasreduced from 3,000,000 shares to 2,954,659 shares due to a working capital adjustment. In addition, we withheldapproximately 106,000 shares to cover stockholders’ agent expenses and tax obligations of certain PlayFirst stockholders,which resulted in us issuing a total of 2,849,276 shares in the acquisition valued at $11.1 million and paying $412,000 of cash.Of the 2,849,276 shares issued in the acquisition, 1,500,000 shares are being held back and will be retained by us for 24 monthsfrom the closing date to satisfy potential indemnification claims under the PlayFirst merger agreement. In addition, we assumedapproximately $3.5 million of PlayFirst net liabilities.All outstanding PlayFirst capital stock, stock options and warrants were cancelled at the closing of the acquisition. Ourfirst title created by PlayFirst, Diner Dash, was released in the fourth quarter of 2014.Acquisition of GameSpyOn August 2, 2012, we completed the acquisition of GameSpy Industries, Inc., or GameSpy, from IGN Entertainment, Inc.by issuing to IGN 600,000 shares of our common stock.48 Table of Contents Purchase of the Deer Hunter Brand AssetsOn April 1, 2012, we acquired from Atari, Inc. its Deer Hunter trademark and associated domain names and also took alicense to the other intellectual property associated with the Deer Hunter brand for total consideration of $5.0 million in cash.KAP WarrantsIn September 2014, we and Kimsaprincess, Inc., or KAP, entered into a second amendment to our existing LicenseAgreement. In connection with entry into this second amendment, we issued to KAP and two other entities associated withKAP’s president, Kim Kardashian West, a total of three warrants exercisable for up to an aggregate of 500,000 shares of ourcommon stock. Each of the warrants has an initial exercise price of $4.99 per share, subject to adjustments for dividends,reorganizations and other common stock events. Each of the warrants expires on September 2, 2020. Each of the warrants vestsand becomes exercisable in equal monthly installments over the 60-month term of the license agreement between us and KAP,subject to full acceleration or cessation of vesting under certain circumstances, as stipulated in the license agreement. Each ofthe warrants may, at the election of the holder, be either exercised for cash or net exercised on a cashless basis. During the fourthquarter of 2014, 33,333 of the warrants vested and we recorded a corresponding warrant compensation charge of $66,000classified to cost of sales.MGM WarrantsIn July 2013, we and MGM Interactive Inc., or MGM, entered into a warrant agreement that gives MGM the right topurchase up to 3,333,333 shares of our common stock at an exercise price of $3.00 per share, subject to certain adjustments. Ofthe 3,333,333 shares of our common stock underlying the warrant, 333,333 shares were immediately vested and exercisable onthe warrant agreement effective date and the remaining shares will vest and become exercisable based on conditions related tous releasing mobile games based on mutually agreed upon intellectual property licensed by MGM to us. The warrant expires onJuly 15, 2018.In April 2014, we entered into a license agreement with MGM, United Artists Corporation and Danjaq, LLC pursuant towhich we will develop and publish a free-to-play mobile game based on the James Bond film franchise. Our commercial releaseof this mobile game, which is expected to occur in the second half of 2015, will trigger the vesting of an additional 1,000,000shares of the 3,333,333 total shares subject to the warrant we issued to MGM.On July 3, 2014, 333,333 shares vested in conjunction with the worldwide commercial release of our game based onMGM’s intellectual property, Hercules. In connection with the release of this game, we recorded a $1.1 million non-cashwarrant expense during the twelve months ended December 31, 2014. On July 3, 2014, MGM exercised 666,666 vested sharespursuant to which we received aggregate cash proceeds of $2.0 million.Blammo EarnoutOn August 1, 2011, we completed the acquisition of Blammo Games Inc., or Blammo, by entering into a SharePurchase Agreement among Glu, Blammo and the owners of Blammo’s outstanding share capital (the “Sellers”). Under theShare Purchase Agreement we purchased all of the Blammo share capital, and we (1) issued to the Sellers an aggregate1,000,000 shares of our common stock and (2) agreed to issue to the Sellers up to an aggregate of an additional 3,312,937shares of our common stock (the “Additional Shares”) if Blammo achieved certain baseline and upside Net Revenue (as suchterm is defined in the Share Purchase Agreement) targets during the years ending March 31, 2013 (up to 909,091 AdditionalShares), March 31, 2014 (up to 1,250,000 Additional Shares) and March 31, 2015 (up to 1,153,846 Additional Shares). InMay 2013, we issued 742,036 shares of common stock to the former Blammo shareholders based on the Net Revenue thatBlammo achieved for its fiscal year ended March 31, 2013, and in May 2014, we issued 434,865 shares of common stock to theformer Blammo shareholders based on the Net Revenue that Blammo achieved for its fiscal year ended March 31, 2014. Sincethe contingency related to the number of shares earned in connection with the targets for the years ended March 31, 2013 and2014 was resolved and the number of shares became fixed as of March 31,49 Table of Contents 2013 and 2014, the fair values of these shares as then last re-measured in the amount of $2.3 million and $2.1 million,respectively, have been presented as additional paid-in capital in our consolidated balance sheet since March 31, 2013 and2014. As of June 30, 2014, we reached a mutual understanding with the former Blammo shareholders of a change in the vestingcondition of the last tranche of earnout shares and agreed to settle any future earnout payments for a fixed number of shares. InJuly 2014, we and the former Blammo shareholders entered into a formal agreement memorializing this mutual agreement,pursuant to which we issued to the former Blammo shareholders 750,000 Additional Shares in lieu of the opportunity to earn upto 1,153,846 Additional Shares for the fiscal year ending March 31, 2015 (“Fiscal 2015”) if Blammo were to generate $15.0million in Net Revenues during Fiscal 2015. Since the contingency related to the number of shares to be earned in connectionwith the target for Fiscal 2015 has been resolved and the number of shares has become fixed, the fair value of these shares, aslast re-measured in the amount of approximately $3.8 million, has been presented in additional paid-in capital on ourconsolidated balance sheet since June 30, 2014. Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with United States generally accepted accountingprinciples, or GAAP. These accounting principles require us to make certain estimates and judgments that can affect thereported amounts of assets and liabilities as of the dates of the consolidated financial statements, the disclosure ofcontingencies as of the dates of the consolidated financial statements, and the reported amounts of revenues and expensesduring the periods presented. Although we believe that our estimates and judgments are reasonable under the circumstancesexisting at the time these estimates and judgments are made, actual results may differ from those estimates, which could affectour consolidated financial statements.We believe the following to be critical accounting policies because they are important to the portrayal of ourfinancial condition or results of operations and they require critical management estimates and judgments about matters that areuncertain:·revenue recognition;·fair value;·business combinations – purchase accounting;·long-lived assets;·goodwill;·stock-based compensation; and·income taxes. Revenue Recognition We generate revenues through in-app purchases, advertising and other offers within our games on smartphones andtablets, such as Apple’s iPhone and iPad and other mobile devices utilizing Google’s Android operating system. Smartphonegames are distributed primarily through digital storefronts, such as the Apple App Store and the Google Play Store. We alsogenerate some revenue from sales of legacy feature phone games distributed primarily through wireless carriers.RevenueWe distribute our games for smartphones and tablets to the end customers through digital storefronts such as50 Table of Contents Apple’s App Store and the Google Play Store. Within these storefronts, users can download our free-to-play games and pay toacquire virtual currency which is redeemed in the game for virtual goods. We recognize revenue when persuasive evidence ofan arrangement exists, the service has been provided to the user, the price paid by the user is fixed or determinable, andcollectability is reasonably assured. Determining whether and when some of these criteria have been satisfied requiresjudgments that may have a significant impact on the timing and amount of revenue we report in each period. For the purpose ofdetermining when the service has been provided to the player, we have determined that an implied obligation exists to thepaying user to continue displaying the purchased virtual goods within the game over the estimated average playing period ofpaying players for the game, which represents our best estimate of the estimated average life of virtual goods. We sell both consumable and durable virtual goods, and we receive reports from digital storefronts whichbreakdown the various purchases made in our games for a given time period. We review these reports and determine on a per-item basis whether the purchase was a consumable virtual good or a durable virtual good. Consumable goods are itemsconsumed at a predetermined time or otherwise have limitations on repeated use, while durable goods are items remain in thegame for as long as the player continues to play. Our revenues from consumable virtual goods have been insignificant since welaunched our first free-to-play title in the fourth quarter of 2010. We recognize revenue from the sale of durable virtual goods,such as virtual currency and other virtual items, ratably over the estimated average playing period of paying users, which hasgenerally been three months. If a new game is launched and only a limited period of paying player data is available, then wealso consider other qualitative factors, such as the playing patterns for paying users for other games with similar characteristics.Where we do not have the ability to differentiate revenues from durable and consumable virtual goods, all revenues are deferredratably over the average playing period of paying users. We compute our estimated average playing period of paying users at least twice each year, and more frequently ifqualitative evidence exists that would indicate a possible change in estimated average playing life, including consideration ofchanges in the characteristics of games. We have examined the playing patterns of paying users across a representative sampleof our games across various genres. To compute the estimated average playing period for paying users, we group the dailypopulations of paying players (the “daily cohort”) from the date of their first installation of the game and track each dailycohort to understand the number of players from each daily cohort who played the game after their initial purchase. For titleswith a year or more of data, we compute a weighted average playing period for paying users using this dataset. For titles withless than a year of data (“new titles”), we use a linear interpolation model to estimate the average playing period of payingusers. The measured average playing periods of games with at least one year of player data are mapped against the retentionpercentages of those same games at 150 days, generating a linear interpolation curve. The 150 day retention rate of a new titleis then inputted into that curve to estimate an average playing period for that new title. Ninety day retention rates are used fornew titles that do not have 150 days of data to interpolate their respective average playing period. We then compute a revenue-based weighted average of the estimated playing period across all of the games in the sample to arrive at the overall weightedaverage playing period of paying users. With the exception of one game for which the useful life has been demonstrated to bematerially different from the majority of all other games, we apply this weighted average playing period for all paying users toall of our games because the computed weighted average playing period for each game is generally consistent across all of ourgames analyzed. While we believe our estimates to be reasonable based on available game player information, we may revisesuch estimates in the future as the games’ operation periods change. Any adjustments arising from changes in the estimates ofthe lives of these virtual goods would be applied to the current quarter and prospectively on the basis that such changes arecaused by new information indicating a change in game player behavior patterns. Any changes in our estimates of useful livesof these virtual goods may result in revenues being recognized on a basis different from prior periods’ and may cause ouroperating results to fluctuate. We also have relationships with certain advertising service providers for advertisements within our smartphone gamesand revenue from these advertising providers is generated through impressions, click-throughs, banner ads and offers. Revenueis recognized as advertisements are delivered and reported to us, an executed contract exists, the price is fixed or determinableand collectability has been reasonably assured. Delivery generally occurs when the advertisement has been displayed or theoffer has been completed by the user. The fee received for certain offer advertisements that result in the user receiving virtualcurrency for redemption within a game are deferred and recognized over the average playing period of paying users.51 Table of Contents Our feature phone revenues have been declining year over year and were immaterial in 2014, due to the continuedmigration of users from feature phone to smartphone devices, and our decision to concentrate product development effortsexclusively towards developing new titles for smartphones.Other Estimates and JudgmentsWe estimate revenues from digital storefronts in the current period when reasonable estimates of these amounts canbe made. Certain digital storefronts provide reliable interim preliminary reporting and others report sales data within areasonable time frame following the end of each month, both of which allow us to make reasonable estimates of revenues andtherefore to recognize revenues during the reporting period. Determination of the appropriate amount of revenue recognizedinvolves judgments and estimates that we believe are reasonable, but it is possible that actual results may differ from ourestimates. When we receive the final reports, to the extent not received within a reasonable time frame following the end of eachmonth, we record any differences between estimated revenues and actual revenues in the reporting period. Historically, therevenues on the final revenue report have not differed significantly from the reported revenues for the period. Principal Agent ConsiderationsIn accordance with the Accounting Standards Codification (ASC) 605-45, Revenue Recognition: Principal AgentConsiderations, we evaluate our digital storefront and advertising service provider agreements in order to determine whether ornot we are acting as the principal or as an agent when selling our games or when selling advertisements within our games,which we consider in determining if revenue should be reported gross or net. We primarily use digital storefronts fordistributing our smartphone games and advertising service providers for distributing advertisements within our games. Keyindicators that we evaluate in order to reach this determination include:·the terms and conditions of our contracts with the digital storefronts and advertising service providers;·the party responsible for billing and collecting fees from the end-users, including the resolution of billingdisputes;·whether we are paid a fixed percentage of the arrangement’s consideration or a fixed fee for each game,transaction, or advertisement;·the party which sets the pricing with the end-user, has the credit risk and provides customer support; and·the party responsible for the fulfillment of the game or serving of advertisement and that determines thespecifications of the game or advertisement.Based on the evaluation of the above indicators, we have determined that we are generally acting as a principal and arethe primary obligor to end-users for smartphone games distributed through digital storefronts and advertisements servedthrough our advertising service providers. Therefore, we recognize revenue related to these arrangements on a gross basis, whenthe necessary information about the gross amounts or platform fees charged, before any adjustments, are made available to usby the digital storefronts and advertising service providers. Fair Value MeasurementsWe account for fair value in accordance with ASC 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 (anexit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between marketparticipants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the useof observable inputs and minimize the use of unobservable inputs. We use a three tier hierarchy,52 Table of Contents 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 forsimilar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can becorroborated 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 fairvalue of the assets or liabilities.The first two are levels in the hierarchy are considered observable inputs and the last is considered unobservable.Our cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quotedmarket prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. As ofDecember 31, 2014 and December 31, 2013, we had $70.9 million and $28.5 million in cash and cash equivalents. The carryingvalue of accounts receivable and payables approximates fair value due to the short time to expected receipt of payment or cash. Business Combinations — Purchase AccountingWe apply ASC 805, Business Combinations (“ASC 805”), which is the accounting guidance related to businesscombinations. The standard requires recognition of assets acquired, liabilities assumed, and contingent consideration at theirfair value on the acquisition date with subsequent changes recognized in earnings; requires acquisition-related expenses andrestructuring costs to be recognized separately from the business combination and expensed as incurred; requires in-processresearch and development to be capitalized at fair value as an indefinite-lived intangible asset until completion orabandonment; and requires that changes in accounting for deferred tax asset valuation allowances and acquired income taxuncertainties after the measurement period be recognized as a component of provision for taxes.We account for acquisitions of entities that include inputs and processes and have the ability to create outputs asbusiness combinations. The purchase price of the acquisition is allocated to tangible assets, liabilities, and identifiableintangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values isrecorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. While we use our bestestimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilitiesassumed at the business combination date, these estimates and assumptions are inherently uncertain and subject to refinement.Our key assumptions used have included projected revenue, cost of goods sold, and operating expenses for our acquiredentities, the future amortization tax benefit of legacy titles, and discount rates. In addition, our key assumptions have includedprojected opportunity costs of re-establishing app store relationships. As a result, during the preliminary purchase priceallocation period, which may be up to one year from the business combination date, we may record adjustments to the assetsacquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocationperiod, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in ouroperating results in the period in which the adjustments were determined.Long-Lived Assets We evaluate our long-lived assets, including property and equipment and intangible assets with finite lives, forimpairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverablein accordance with ASC 360, Property Plant & Equipment (“ASC 360”). Factors considered important that could result in animpairment review include significant underperformance relative to expected historical or projected future operating results,significant changes in the manner of use of the acquired assets, significant negative industry or economic trends, and asignificant decline in our stock price for a sustained period of time. We recognize impairment based on the difference betweenthe fair value of the asset and its carrying value. Fair value is generally measured based on either quoted market prices, ifapplicable, or a discounted cash flow analysis. 53 Table of Contents Goodwill In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), we do not amortize goodwill or otherintangible assets with indefinite lives but rather test them for impairment. ASC 350 requires us to perform an impairment reviewof our goodwill balance at least annually, which we do as of September 30 each year, and also whenever events or changes incircumstances indicate that the carrying amount of these assets may not be recoverable. In our impairment reviews, we look atthe goodwill allocated to our reporting units — the Americas, EMEA and Asia-Pacific (“APAC”).We evaluate qualitative factors and overall financial performance to determine whether it is necessary to performthe 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 lessthan its carrying amount, then the entity will need to proceed to the first step of the two-step goodwill impairment test. ASC350 requires a multiple-step approach to testing goodwill for impairment for each reporting unit annually, or whenever eventsor changes in circumstances indicate the fair value of a reporting unit is below its carrying amount. The first step measures forimpairment by applying the fair value-based tests at the reporting unit level. The second step (if necessary) measures theamount of impairment by applying the fair value-based tests to individual assets and liabilities within each reporting unit. Thefair value of the reporting units is estimated using a combination of the market approach, which utilizes comparable companies’data, and/or the income approach, which uses discounted cash flows.We have three reporting units comprised of the (1) Americas, (2) EMEA and (3) APAC regions. As of December 31,2014, we only had goodwill attributable to the APAC and Americas reporting units. The cash flows of these reporting unitsreflect the income and expenses of assets directly employed by, and liabilities related to, the operations of the reporting unit,including revenue related to local contractual relationships, but exclude revenues related to global contractual relationshipssuch as digital storefronts which are owned by the U.S. and allocated directly to the Americas reporting unit. In performing ourannual goodwill impairment assessment for 2014, we performed a Step 0 qualitative assessment for our Americas and APACreporting units. Based on this assessment, we concluded that it was more likely than not that the fair value of each of thereporting units was greater than their carrying amounts, and, as a result, did not proceed to further impairment testing.Accordingly, we did not recognize an impairment of goodwill during 2014. In 2013, we did not record any goodwillimpairment charges as the fair values of the reporting units exceeded their respective carrying values. In 2012, we concludedthat a portion of the goodwill attributed to the APAC reporting unit was impaired and recorded a $3.6 million impairmentcharge. Stock-Based CompensationWe apply the fair value provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-basedpayments, including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards onthe grant date using an option pricing model. The fair value of stock options and stock purchase rights granted pursuant to ourequity incentive plans and 2007 Employee Stock Purchase Plan, respectively, is determined using the Black-Scholes valuationmodel. The determination of fair value is affected by the stock price, as well as assumptions regarding subjective and complexvariables 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 maybe indicators of future outcomes. Employee stock-based compensation expense is calculated based on awards ultimatelyexpected to vest and is reduced for estimated forfeitures. Forfeitures are revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates and an adjustment to stock-based compensation expense will be recognized at that time.Changes to the assumptions used in the Black-Scholes option valuation calculation and the forfeiture rate, as well as futureequity granted or assumed through acquisitions could significantly impact the compensation expense we recognize.We also grant restricted stock units, or RSUs, to our employees under our equity incentive plans. The cost of RSUs isdetermined using the fair value of our common stock based on the quoted closing price of our common stock on the54 Table of Contents date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on oraround the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost isamortized on a straight-line basis over the requisite service period.In 2014, 2013, and 2012, we recorded total employee non-cash stock-based compensation expense of $11.6million, $4.3 million and $5.8 million, respectively. The 2014, 2013 and 2012 compensation expense includes contingentconsideration issued to Blammo employees, which was recorded as research and development expense over the term of theearn-out periods, as these employees are primarily employed in product development. We re-measured the fair value of thecontingent consideration each reporting period and only recorded a compensation expense for the portion of the earn-out targetwhich was likely to be achieved. As a result, $4.6 million, $171,000, and $1.5 million of stock-based compensation expensewas recorded during the years ended December 31, 2014, 2013, and 2012, respectively. Additionally, ASC 718 requires that werecognize compensation expense only for the portion of stock options that are expected to vest. If the actual number offorfeitures differs from that estimated by management, we may be required to record adjustments to stock-based compensationexpense in future periods. Income Taxes We account for income taxes in accordance with ASC 740, Income Taxes (ASC 740). As part of the process ofpreparing our consolidated financial statements, we are required to estimate our income tax benefit (provision) in each of thejurisdictions in which we operate. This process involves estimating our current income tax benefit (provision) together withassessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differencesresult in deferred tax assets and liabilities, which are included within our consolidated balance sheet using the enacted tax ratesin effect for the year in which we expect the differences to reverse.We record a valuation allowance to reduce our deferred tax assets to an amount that more likely than not will berealized. As of December 31, 2014 and 2013, our valuation allowance on our net deferred tax assets was $68.5 million and$73.8 million, respectively. While we have considered future taxable income and ongoing prudent and feasible tax planningstrategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realizeour deferred tax assets in the future in excess of our net recorded amount, we would need to make an adjustment to theallowance for the deferred tax asset, which would increase income in the period that determination was made.We account for uncertain income tax positions in accordance with ASC 740-10, which clarifies the accounting foruncertainty in income taxes recognized in financial statements. ASC 740-10 prescribes a recognition threshold andmeasurement attribute of tax positions taken or expected to be taken on a tax return. The interpretation also provides guidanceon de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our policy isto recognize interest and penalties related to unrecognized tax benefits in income tax expense.Results of Operations The following sections discuss and analyze the changes in the significant line items in our statements of operations forthe comparison periods identified. Comparison of the Years Ended December 31, 2014 and 2013 Revenues 55 Table of Contents Year Ended December 31, 2014 2013Revenue by Type (In thousands)Micro-Transactions $182,213 $79,169 Advertisements 14,566 6,638 Offers 22,984 8,336 Other 2,009 6,151 Feature phone 1,374 5,319 Total Revenues $223,146 $105,613 Our revenues increased $117.5 million, or 111.3%, from $105.6 million for the year ended December 31, 2013 to$223.1 million for the year ended December 31, 2014, which was primarily related to a $103.0 million increase in our revenuesfrom micro-transactions (in-app purchases) and a $22.6 million increase in our revenues from advertisements and offers. Theseincreases were primarily driven by the success of our Kim Kardashian: Hollywood, Racing Rivals, and Dino Hunter: DeadlyShores titles and the continued success of our Deer Hunter 2014 and Eternity Warriors 3 titles during 2014. These increaseswere partially offset by an $8.1 million decrease in premium and feature phone revenues due to the continued migration ofusers from feature phones to smartphone devices and our decision to concentrate our product development efforts exclusivelytowards developing new free-to-play titles for smartphones, tablets and other next-generation platforms. We generate revenuesfrom micro-transactions, advertisements and, offers, and we sometimes change the focus of our monetization efforts amongmethods within a given game over the life of the title in an attempt to maximize revenue. For example, we may elect to disableadvertisements within a game if we believe doing so will encourage users to play the game longer and thus increase the chancethat they will make micro-transactions or complete offers, which generally result in higher revenues for us than advertisements.We rely on a very small portion of our total users for nearly all of our revenues derived from in-app purchases. Since the launchof 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 2%, when measured as the number of unique paying users on a givenday divided by the number of unique users on that day, though this percentage fluctuates, and it may be higher than 2% forcertain of our games during specific, relatively short time periods, such as immediately following worldwide launch or the weekfollowing content updates, marketing campaigns or certain other events. Our revenues do not include approximately $37.3million of revenues as of December 31, 2014 relating primarily to micro-transactions and offers that have been deferred over theweighted average useful lives of paying users. International revenues (defined as revenues generated from distributors and advertising service providers whoseprincipal operations are located outside the United States or, in the case of the digital storefronts, the revenues generated byend-user purchases made outside of the United Sates) increased by $33.8 million, from $56.9 million in the year endedDecember 31, 2013 to $90.7 million in the year ended December 31, 2014. This was primarily related to a $20.7 millionincrease in our EMEA revenues, an $8.8 million increase in our APAC revenues, primarily related to increased revenues fromJapan, Korea, and China, and a $4.3 million increase in our Americas (excluding the United States) revenues. The increase inour international revenues was supplemented by an increase of $83.8 million in our United States revenues. Cost of Revenues Year Ended December 31, 2014 2013 (In thousands) Cost of revenues: Platform commissions, royalties and other $80,992 $32,806 Amortization of intangible assets 4,767 4,238 Total cost of revenues $85,759 $37,044 Revenues $223,146 $105,613 Gross margin 61.6 % 64.9 % Our cost of revenues increased $48.7 million, or 131.5%, from $37.0 million in the year ended December 31, 2013 to$85.8 million in the year ended December 31, 2014. This increase was primarily due to a $30.8 million increase56 Table of Contents in platform commissions due to a higher volume of revenue transactions through the digital storefronts, a $14.5 millionincrease in royalties associated with an increase in royalty-burdened revenues due largely to the success of titles like KimKardashian: Hollywood, Racing Rivals and Robocop: The Official Game, a $2.2 million increase in hosting fees to support ourfree-to-play titles, a $765,000 increase in non-cash warrant expense due to the vesting of 333,333 shares in connection with thelaunch of our game based on MGM’s intellectual property, Hercules, and the vesting of 33,333 shares in connection with ourlicense agreement with Kim Kardashian West, and a $529,000 increase in amortization of intangible assets primarily associatedwith intangible assets purchased through our PlayFirst and Cie Games acquisitions. Revenues attributable to games based uponoriginal intellectual property decreased as a percentage of revenues from 93.3% in the year ended December 31, 2013 to 62.7%in the year ended December 31, 2014, primarily due to an increase in revenue generated from games based on or significantlyincorporating licensed brands and other content, in particular our Kim Kardashian: Hollywood game, which launched in lateJune 2014. We expect to continue to launch a significant number of games based on or incorporating licensed brands or othercontent in 2015. The average royalty rate that we paid on games based on or significantly incorporating licensed brands orother content, excluding royalty impairments, decreased from 44.8% in the year ended December 31, 2013 to 21.3% in the yearended December 31, 2014, due to lower royalty rates for distribution of certain games based on or significantly incorporatinglicensed brands or other content. Overall royalties, including impairment of prepaid royalties and guarantees, as a percentageof total revenues increased from 3.4% in the year ended December 31, 2013 to 8.1% in the year ended December 31, 2014. Research and Development Expenses Year Ended December 31, 2014 2013 (In thousands) Research and development expenses $64,284 $46,877 Percentage of revenues 28.8 % 44.4 % Our research and development expenses increased $17.4 million, or 37.1%, from $46.9 million in the year endedDecember 31, 2013 to $64.3 million in the year ended December 31, 2014. The increase in research and development costs wasprimarily due to an $8.7 million increase in salaries and benefits, as our research and development headcount increased from418 employees at December 31, 2013 to 520 employees at December 31, 2014, resulting primarily from headcount addedthrough our PlayFirst and Cie Games acquisitions in the second and third quarters of 2014, respectively. The increase inresearch and development expenses was also driven by a $5.5 million increase in employee stock-based compensation expenseprimarily related to fair value changes of the contingent consideration issued to employees who are former Blammoshareholders, as we issued them 750,000 shares in July 2014 in lieu of the potential earnout they would have earned for theirfiscal 2015 earnout period. Further contributing to the increase in research and development expenses was a $1.2 millionincrease in outside services due to higher external developer costs, and a $962,000 increase in temporary and consulting feesassociated with outsourced art, engineering, and quality assurance personnel. As a percentage of revenues, research anddevelopment expenses decreased from 44.4% in the year ended December 31, 2013 to 28.8% in the year ended December 31,2014. Research and development expenses included $7.4 million of stock-based compensation expense in the year endedDecember 31, 2014 and $1.9 million in the year ended December 31, 2013. We anticipate that our research and developmentexpenses will increase in absolute dollars in 2015 due primarily to the increase in headcount added through our PlayFirst andCie Games acquisitions and our plans to bolster our studios by hiring six additional development teams in North America,which will add approximately 135 people to our development studios. Sales and Marketing Expenses Year Ended December 31, 2014 2013 (In thousands) Sales and marketing expenses $45,076 $26,120 Percentage of revenues 20.2 % 24.7 % Our sales and marketing expenses increased $19.0 million, or 72.6%, from $26.1 million in the year ended December31, 2013 to $45.1 million in the year ended December 31, 2014. The increase was primarily due to a $16.757 Table of Contents million increase in marketing promotions associated with our free-to-play games and an increase of $1.6 million in salaries,benefits and variable compensation, as our sales and marketing headcount increased from 42 at December 31, 2013 to 54 atDecember 31, 2014. As a percentage of revenues, sales and marketing expenses decreased from 24.7% in the year endedDecember 31, 2013 to 20.2% in the year ended December 31, 2014. Sales and marketing expenses included $701,000 of stock-based compensation expense in the year ended December 31, 2014 and $303,000 in the year ended December 31, 2013. Weexpect our sales and marketing expenditures to continue to increase in 2015 in absolute dollars in connection with the salesand marketing initiatives we intend to undertake related to the new free-to-play games that we expect to release during 2015. General and Administrative Expenses Year Ended December 31, 2014 2013 (In thousands) General and administrative expenses $25,019 $15,550 Percentage of revenues 11.2 % 14.7 % Our general and administrative expenses increased $9.5 million, or 60.9%, from $15.6 million in 2013 to $25.0million in 2014. The increase in general and administrative expenses was primarily due to a $5.6 million increase in salaries,benefits and variable compensation resulting from higher attainment of employee and executive bonuses in 2014 and anincrease in the annual base salaries for our executives, a $1.2 million increase in professional services due to higher legal andaccounting fees associated with the acquisitions of PlayFirst and Cie Games, and a $1.5 million increase in stock-basedcompensation due to stock-based awards issued to new employees and other executives. General and administrative expensesalso increased in 2014 by an $835,000 increase in the fair market value of contingent consideration issued to Blammo non-employee shareholders. Our general and administrative headcount increased from 67 employees at December 31, 2013 to 79employees at December 31, 2014. As a percentage of revenues, general and administrative expenses decreased from 14.7% inthe year ended December 31, 2013 to 11.2% in the year ended December 31, 2014. General and administrative expensesincluded $3.5 million of stock-based compensation expense in the year ended December 31, 2014 and $2.0 million in the yearended December 31, 2013. We expect our general and administrative expenses to continue to increase in terms of absolutedollars in 2015 as we expand to support a greater number of development teams and product launches. Other Operating Expenses Our restructuring charge decreased from $1.4 million in the year ended December 31, 2013 to $435,000 in the yearended December 31, 2014, as the restructuring that took place in 2014 resulted in fewer terminated employees. Our amortization of intangible assets decreased from $1.3 million in the year ended December 31, 2013 to $508,000 inthe year ended December 31, 2014 due to the non-compete agreements associated with our acquisitions of Superscape in 2008and Griptonite in August 2011 being fully amortized in July 2013 and March 2014, respectively. Interest and Other Income/(Expense), Net Interest and other income/(expense), net, decreased from net income of $10,000 in the year ended December 31, 2013 to netexpense of $1.5 million in the year ended December 31, 2014. This decrease was primarily due to foreign currency lossesrelated to the revaluation of certain assets and liabilities including accounts payable and accounts receivable. Income Tax Benefit Our income tax benefit increased from $2.8 million in 2013 to $7.6 million in 2014. This change was primarily due tothe release of a portion of our valuation allowance for $6.8 million, primarily resulting from our acquisition of Cie Games andthe release of a $1.2 million liability of uncertain tax positions from 2011 and 2012, and as we received a closure notice for anongoing tax return inquiry in July 2014. The change in income tax benefit was also due to changes in the jurisdictionsincluded in the anticipated effective tax rate computation and changes in pre-tax income in the United58 Table of Contents States and certain foreign entities. The provision for income taxes differs from the amount computed by applying the statutoryU.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 deferredtax valuation allowance, as well as changes in our business such as intercompany transactions, any acquisitions, any changes inour international structure, any changes in the geographic location of our business functions or assets, changes in thegeographic mix of our income, any changes in or termination of our agreements with tax authorities, changes in applicableaccounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and othermatters, and variations in our annual pre-tax income or loss. We incur certain tax expenses that do not decline proportionatelywith declines in our pre-tax consolidated income or loss. As a result, in absolute dollar terms, our tax expense will have agreater influence on our effective tax rate at lower levels of pre-tax income or loss than at higher levels. In addition, at lowerlevels of pre-tax income or loss, our effective tax rate will be more volatile. At December 31, 2014, we anticipated that theliability for uncertain tax positions, excluding interest and penalties, could decrease by approximately $102,000 within thenext twelve months due to the expiration of certain statutes of limitation in foreign jurisdictions in which we do business. Comparison of the Years Ended December 31, 2013 and 2012 Revenues Year Ended December 31, 2013 2012Revenue by Type (In thousands)Micro-Transactions $79,169 $67,323 Advertisements 6,638 8,674 Offers 8,336 12,054 Other 6,151 6,997 Feature phone 5,319 13,135 Total Revenues $105,613 $108,183 Our revenues decreased $2.6 million, or 2.4%, from $108.2 million in 2012 to $105.6 million in 2013. This decreasewas due to a $7.8 million decrease in our feature phone revenues, which was partially offset by a $5.2 million increase in oursmartphone revenues. Our smartphone revenues increased $5.3 million, or 5.5%, from $95.0 million in 2012 to $100.3 millionin 2013, which was primarily related to an $11.8 million increase in micro-transactions. This increase was partially offset by a$3.7 million decrease in our revenues from offers which have been negatively impacted since the beginning of the second halfof 2012 when we lost the ability to make certain types of offers available to our users on the Apple platform, and a $2.0 milliondecrease in advertisements due to a reduction in our direct advertisement campaigns at the end of the fourth quarter of 2012.Our smartphone revenues do not include approximately $18.2 million of revenues as of December 31, 2013 relating primarilyto offers and in-app-purchases that have been deferred over the weighted average useful lives of paying users. Internationalrevenues increased by $6.5 million, from $50.4 million in 2012 to $56.9 million in 2013. This was primarily related to a $5.7million increase in our APAC revenues, primarily related to increased revenues from Korea and China resulting from additionalrevenues attributable to smartphone storefronts and OEM relationships. This increase in our international revenues waspartially offset by a $9.1 million decrease in our United States revenues, primarily related to declining feature phone andincented offer revenues. 59 Table of Contents Cost of Revenues Year Ended December 31, 2013 2012 (In thousands)Cost of revenues:Platform commissions, royalties and other$32,806 $29,630 Amortization of intangible assets4,238 3,783 Total cost of revenues$37,044 $33,413 Revenues$105,613 $108,183 Gross margin64.9 %69.1 % Our cost of revenues increased $3.6 million, or 10.9%, from $33.4 million in 2012 to $37.0 million in 2013. Thisincrease was primarily due to a $4.0 million increase in platform commission expense due to a higher volume of revenuetransactions through the digital storefronts, a $1.4 million increase in hosting fees to support our free-to-play titles, and a$455,000 increase in amortization of intangible assets primarily related to 12 months of amortization for acquired intangibleassets from Atari and GameSpy. In addition, we recorded a prepaid royalty impairment charge of $435,000 for two of our third-party publishing titles, and a non-cash expense of $427,000 for the vested portion of the warrant issued to MGM InteractiveInc. during the third quarter of 2013. These increases were partially offset by a $3.1 million decrease in royalties associated witha decline in royalty-burdened revenues. Revenues attributable to games based upon original intellectual property increased as apercentage of revenues from 83.5% in 2012 to 93.3% in 2013, primarily due to our focus on developing free-to-play games forsmartphones and tablets that are based on our own intellectual property. The average royalty rate that we paid on games basedon or significantly incorporating licensed brands or other content, excluding royalty impairments, increased from 34.9% in2012 to 44.8% in 2013, due to renewing a number of our existing licenses at higher royalty rates and higher royalty rates fordistribution of certain games based on or significantly incorporating licensed brands or other content. Overall royalties,including impairment of prepaid royalties and guarantees, as a percentage of total revenues decreased from 5.8% in 2012 to3.4% in 2013. Research and Development Expenses Year Ended December 31, 2013 2012 (In thousands) Research and development expenses $46,877 $54,275 Percentage of revenues 44.4 % 50.2 % Our research and development expenses decreased $7.4 million, or 13.6%, from $54.3 million in 2012 to $46.9 millionin 2013. The decrease in research and development costs was primarily due to a $4.8 million decrease in salaries, benefits andvariable compensation resulting from the restructurings we implemented in the fourth quarter of 2012 and first half of 2013 inour Brazil, San Francisco, China, Washington and EMEA offices, as our research and development headcount decreased from433 employees at the end of 2012 to 418 employees at the end of 2013. The decrease in research and development costs wasalso due to a $1.5 million decrease in stock-based compensation expense primarily related to vesting and fair value changes ofthe contingent consideration issued to employees who are former Blammo shareholders, a $875,000 decrease in outsideservices due to lower external developer costs incurred in 2013, and a $633,000 decrease in temporary and consulting feesassociated with outsourced quality assurance personnel. As a percentage of revenues, research and development expensesdecreased from 50.2% in 2012 to 44.4% in 2013. Research and development expenses included $1.9 million of stock-basedcompensation expense in 2013 and $3.5 million in 2012. 60 Table of Contents Sales and Marketing Expenses Year Ended December 31, 2013 2012 (In thousands) Sales and marketing expenses $26,120 $20,893 Percentage of revenues 24.7 % 19.3 % Our sales and marketing expenses increased $5.2 million, or 25.0%, from $20.9 million in 2012 to $26.1 million in2013. The increase was primarily due to a $5.0 million increase in marketing promotions associated with our free-to-play gamesand an increase of $428,000 in allocated facility and overhead costs. Our sales and marketing headcount increased from 38 atthe end of 2012 to 42 at the end of 2013. As a percentage of revenues, sales and marketing expenses increased from 19.3% in2012 to 24.7% in 2013. Sales and marketing expenses included $303,000 of stock-based compensation expense in 2013 and$386,000 in 2012. General and Administrative Expenses Year Ended December 31, 2013 2012 (In thousands) General and administrative expenses $15,550 $14,744 Percentage of revenues 14.7 % 13.6 % Our general and administrative expenses increased $806,000, or 5.5%, from $14.7 million in 2012 to $15.6 million in2013. The increase in general and administrative expenses was primarily due to a $681,000 increase in professional servicesfees associated with external legal, accounting and recruiting services, and a $379,000 increase in consulting fees associatedwith additional finance and human resource consultants. These increases in general and administrative expenses were partiallyoffset by a $503,000 decrease in sales and use taxes due to a one time VAT charge in the second quarter of 2012, and a$160,000 decrease in the fair market value of contingent consideration issued to Blammo non-employee shareholders. As apercentage of revenues, general and administrative expenses increased from 13.6% in 2012 to 14.7% in 2013. General andadministrative expenses included $2.0 million of stock-based compensation expense in 2013 and $1.9 million in 2012. Salariesand benefits expenses remained relatively flat, as we increased our general and administrative headcount from 66 employees atthe end of 2012 to 67 employees at the end of 2013. Other Operating Expenses Our restructuring charge remained consistent at $1.4 million in 2013 and 2012. Our restructuring charges in 2013were comprised of employee termination costs in our Brazil, San Francisco, China and EMEA offices, and facility-related costsrelated to streamlining of our facility in Washington and additional costs associated with vacating our Brazil office. Inaddition, we recorded a non-cash adjustment of $238,000 in respect of the write-off of cumulative translation adjustment uponthe substantial liquidation of our Brazilian entity, which is recognized as “Restructuring charge” on our consolidated statementof operations for 2013.Our amortization of intangible assets decreased from $2.0 million in 2012 to $1.3 million in 2013, and was due tothe non-compete agreements associated with our acquisition of Griptonite in August 2011 being fully amortized in July 2013.Our goodwill impairment charge decreased from $3.6 million in 2012 to zero in 2013 because we did not record animpairment of goodwill in 2013.Interest and Other Income/(Expense), Net61 Table of Contents Interest and other income/(expense), net, increased from net expense of $347,000 in 2012 to net income of $10,000in 2013. This increase was primarily due to foreign currency gains related to the revaluation of certain assets and liabilitiesincluding accounts payable and accounts receivable.Income Tax BenefitOur income tax benefit increased from $2.0 million in 2012 to $2.8 million in 2013. These benefits were primarilydue to the release of uncertain tax positions in certain foreign jurisdictions due to the expiration of the statute of limitations,release of valuation allowances, changes in the jurisdictions included in the anticipated effective tax rate computation andchanges in pre-tax income in certain foreign entities. Liquidity and Capital Resources Year Ended December 31, 2014 2013 2012 (In thousands) Consolidated Statement of Cash Flows Data: Capital expenditures $3,292 $2,722 $2,014 Cash flows provided by/(used in) operating activities 30,574 (9,578) (6,749) Cash flows used in investing activities (26,188) (4,905) (6,101) Cash flows provided by financing activities 38,955 20,587 3,205 While we achieved profitability in 2014, we have incurred recurring losses since our inception, and we had anaccumulated deficit of $244.1 million as of December 31, 2014. Operating Activities In 2014, net cash provided by operating activities was $30.6 million, which was primarily due to net income of$8.1 million, an increase in deferred revenues of $18.8 million, an increase in accrued royalties of $10.2 million, an increase inaccrued compensation of $5.3 million, and adjustments for non-cash items, including stock-based compensation expense of$11.6 million, amortization expense of $5.3 million, depreciation expense of $2.5 million, a non-cash warrant expense of $1.2million, and a fair value expense adjustment of $835,000 related to the Blammo earnout for non-employee shareholders. Thesefavorable factors were partially offset by an increase in accounts receivable of $9.2 million, an increase in prepaid expenses andother current assets of $9.1 million, a decrease in non-current liabilities of $8.6 million, an increase in prepaid royalties of $5.2million, and a decrease of $4.3 million in accounts payable and other accrued liabilities.In 2013, net cash used in operating activities was $9.6 million, compared to net cash used in operating activities of$6.7 million in 2012. This increase in cash utilized in our business was primarily due to a net loss of $19.9 million, an increasein accounts receivable of $6.5 million, an increase in prepaid expenses and other current assets of $2.7 million, a decrease innon-current liabilities of $3.1 million and a decrease in accrued royalties of $1.5 million. These amounts were partially offsetby an increase in deferred revenues of $6.5 million, an increase in accounts payable of $3.3 million, an increase in accruedcompensation of $910,000, and adjustments for non-cash items, including amortization expense of $5.6 million, stock-basedcompensation expense of $4.3 million, depreciation expense of $2.7 million, an impairment of prepaid royalties and guaranteesof $435,000 and a non-cash warrant expense of $427,000.In 2012, net cash used in operating activities was $6.7 million, compared to net cash used in operating activities of$6.7 million in 2011. The cash utilized in our business was primarily due to a net loss of $20.5 million, a decrease in otherlong-term liabilities of $3.1 million and decreases in accrued compensation of $1.3 million and accrued royalties of $1.1million. These amounts were partially offset by adjustments for non-cash items, including goodwill62 Table of Contents impairment charges of $3.6 million, amortization expense of $5.8 million, stock-based compensation expense of $5.8 millionand depreciation expense of $2.4 million. Investing Activities Our primary investing activities have consisted of purchases of property and equipment and leasehold improvementsfor our offices and acquisitions of mobile gaming companies.In 2014, we used $26.2 million of cash for investing activities, of which $22.6 million related to the acquisitions ofPlayFirst and Cie Games and $3.3 million for property and equipment purchases.In 2013, we used $4.9 million of cash for investing activities resulting primarily from deposits of $1.7 millionunder our letters of credit associated with the sublease for our new San Francisco headquarters lease and our new office for ourBellevue, Washington studio, $2.7 million of property and equipment purchases, $253,000 of intangible asset purchases and$200,000 of other investments.In 2012, we used $6.1 million of cash in investing activities related primarily to $5.0 million used to purchasethe Deer Hunter trademark and brand assets during the second quarter of 2012 and $2.0 million of payments for leaseholdimprovements, computer, server and networking equipment and software to support our free-to-play games. These cash outflowswere partially offset by $913,000 in cash acquired in connection with our acquisition of GameSpy in the third quarter of 2012. Financing Activities In 2014, net cash provided by financing activities was $39.0 million due to proceeds received from our underwrittenpublic offering in June 2014, option and warrant exercises and purchases under our employee stock purchase plan. These cashinflows were partially offset by payments made on the line of credit agreement and outstanding term loan assumed in ouracquisition of PlayFirst.In 2013, net cash provided by financing activities was $20.6 million due to $14.0 million in net proceeds receivedfrom our underwritten public offering of common stock in September 2013, and $6.6 million of proceeds received from optionand warrant exercises and purchases under our employee stock purchase plan.In 2012, net cash provided by financing activities was $3.2 million due to proceeds received from option andwarrant exercises and purchases under our employee stock purchase plan. Sufficiency of Current Cash and Cash Equivalents Our cash and cash equivalents were $70.9 million as of December 31, 2014. Cash and cash equivalents held outside ofthe U.S. in various foreign subsidiaries were $7.9 million as of December 31, 2014, most of which were held by our UnitedKingdom, China, and Russia subsidiaries. Under current tax laws and regulations, if cash and cash equivalents held outside theU.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes andforeign withholding taxes. We have not provided deferred taxes on unremitted earnings attributable to foreign subsidiariesbecause these earnings are intended to be reinvested indefinitely. We expect to fund our operations, grow our business and satisfy our contractual obligations during the next 12 monthsprimarily through our cash and cash equivalents and cash flows from operations. We believe our cash and cash equivalents andcash inflows will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our cashrequirements for the next 12 months may be greater than we anticipate due to, among other reasons, revenues that are lowerthan we currently anticipate, greater than expected operating expenses, particularly with respect to our research anddevelopment and sales and marketing initiatives, use of cash to pay upfront license fees or minimum guarantees, use of cash tofund our foreign operations and the impact of foreign currency rate changes, unanticipated limitations or timing restrictions onour ability to access funds that are held in our non-U.S. subsidiaries or any63 Table of Contents investments or acquisitions that we may decide to pursue. We expect our use of cash to fund minimum guaranteed royaltypayments to rise in 2015 as we increase the number of games we develop incorporating third party licensed property, includingsigning Hollywood and other celebrity license partners with significant minimum guaranteed royalty requirements. If thegames we develop based on such licensing arrangements fail to perform to our expectations, we may not fully recoup theseminimum guaranteed royalty payments, which would negatively impact our operating results. 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, particularly given current capital market and overalleconomic conditions. Contractual Obligations The following table is a summary of our contractual obligations as of December 31, 2014: Payments Due by Period Total 2015 2016-2018 2019-2020 Thereafter (In thousands) Operating lease obligations $13,663 $4,359 $7,571 $1,733 $ - Guaranteed royalties(1) 1,474 604 870 - - Developer commitments(2) 520 520 - - - Uncertain tax position obligations, including interest and penalties(3) 1,094 117 - - 977 Total contractual obligations $16,751 $5,600 $8,441 $1,733 $977 (1)We have entered into license and publishing agreements with various owners of brands, properties and other content todevelop and publish games for mobile devices. Pursuant to some of these agreements, we are required to pay minimumguaranteed royalties or license fees over the term of the agreement regardless of actual game sales. Future minimumguaranteed royalty payments as of December 31, 2014 were $1.5 million, which are due over the next one to three years.(2)We from time to time enter into contracts with various external software developers to design and develop games. Weadvance funds to these third-party developers, in installments, payable upon the completion of specified developmentmilestones. Future developer commitments as of December 31, 2014 were $520,000, which are due within the next twelvemonths.(3)As of December 31, 2014, unrecognized tax benefits and potential interest and penalties were classified within “otherlong-term liabilities” and “accounts payable” on our consolidated balance sheets. As of December 31, 2014, the settlementof $977,000 of our income tax liabilities cannot be determined; however, the liabilities are not expected to become duewithin the next twelve months. Off-Balance Sheet Arrangements At December 31, 2014, 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 coststhrough price increases. Our inability or failure to do so could harm our business, operating results and financial condition. Recent Accounting PronouncementsIn July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating LossCarryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under this guidance, an unrecognized tax benefit, or aportion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a64 Table of Contents deferred tax asset for a net operating loss carryforward. This guidance is effective for fiscal years, and interim periods withinthose years, beginning after December 15, 2013. This accounting guidance did not have a material impact on our consolidatedfinancial statements once adopted.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Under this guidance, revenue isrecognized when promised goods or services are transferred to customers in an amount that reflects the consideration that isexpected to be received for those goods or services. The updated standard will replace most existing revenue recognitionguidance under U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effecttransition method. Early adoption is not permitted. The updated standard will be effective for the Company beginningJanuary 1, 2017. We have not yet selected a transition method and are currently evaluating the effect that the updated standardwill have on our consolidated financial statements and related disclosures.In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as aGoing Concern. The new standard provides guidance around management’s responsibility to evaluate whether there issubstantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The newstandard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Earlyadoption is permitted. The adoption of this standard is not expected to have a material impact on our 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 fromchanges in interest rates. We are potentially exposed to the impact of changes in interest rates as they affect interest earned on our investmentportfolio. As of December 31, 2014, we had no short-term investments and substantially all $70.9 million of our cash and cashequivalents was held in operating bank accounts earning nominal interest. Accordingly, we do not believe that a 10% changein 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 liquidityand maximize income without significantly increasing risk. We do not currently use or plan to use derivative financialinstruments in our investment portfolio. As of December 31, 2014 and December 31, 2013, our cash and cash equivalents were maintained by financialinstitutions in the United States, the United Kingdom, Brazil, Canada, China, France, Hong Kong, India, Russia, Japan, Koreaand our current deposits are likely in excess of insured limits. Our accounts receivable primarily relate to revenues earned from digital storefront operators and advertising platforms.We perform ongoing credit evaluations of our customers’ and the digital storefronts’ financial condition but generally requireno collateral from them. At December 31, 2014, Apple accounted for 55.0%, and Google accounted for 15.2% of total accountsreceivable. At December 31, 2013, Apple accounted for 46.3%, and Jirbo (dba AdColony) and Google each accounted for11.1% of total accounts receivable. Foreign Currency Exchange Risk We transact business in 100 countries in more than 30 different currencies, and in 2013 and 2014, some of thesecurrencies fluctuated significantly. Our revenues are usually denominated in the functional currency of the distributor while theoperating expenses of our operations outside of the United States are maintained in their local currency, with the significantoperating currencies consisting of British Pound Sterling (“GBP”), Chinese Renminbi, Brazilian Real and65 Table of Contents Russian Ruble. Although recording operating expenses in the local currency of our foreign operations mitigates some of theexposure of foreign currency fluctuations, variances among the currencies of our customers and our foreign operations relativeto the United States Dollar (“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 in GBP versus theUSD, the Russian Ruble versus the USD and in the Euro versus GBP. At month-end, non-functional currency-denominatedaccounts receivable and intercompany balances are marked to market and unrealized gains and losses are included in otherincome (expense), net. Translation adjustments arising from the use of differing exchange rates are included in accumulatedother comprehensive income 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. Foreigncurrency exchange gains and losses could have a material adverse effect on our business, operating results and financialcondition. There is also additional risk if the currency is not freely or actively traded. Some currencies, such as the ChineseRenminbi, in which our Chinese operations principally transact business, are subject to limitations on conversion into othercurrencies, which can limit our ability to react to foreign currency devaluations. To date, we have not engaged in exchange rate hedging activities, and we do not expect to do so in the foreseeablefuture.66 Table of Contents 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 68 Consolidated Balance Sheets 69 Consolidated Statements of Operations 70 Consolidated Statements of Comprehensive Income/(Loss) 71 Consolidated Statements of Stockholders’ Equity 72 Consolidated Statements of Cash Flows 73 Notes to Consolidated Financial Statements 74 67 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Glu Mobile Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations,of comprehensive loss, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position ofGlu Mobile Inc. and its subsidiaries at December 31, 2014 and December 31, 2013, and the results of their operations and theircash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principlesgenerally 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, 2014, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). TheCompany's management is responsible for these financial statements, for maintaining effective internal control over financialreporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management'sReport on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions onthese financial statements and on the Company's internal control over financial reporting based on our integrated audits. Weconducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement and whether effective internal control over financial reporting was maintained in allmaterial respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Ouraudits also included performing such other procedures as we considered necessary in the circumstances. We believe that ouraudits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition 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 detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. /s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaMarch 13, 201568 Table of Contents GLU MOBILE INC. CONSOLIDATED BALANCE SHEETS(in thousands, except per share data) As of December 31, 2014 2013ASSETS Current assets: Cash and cash equivalents $70,912 $28,496 Accounts receivable, net 32,231 18,305 Prepaid expenses and other 18,252 7,663 Total current assets 121,395 54,464 Property and equipment, net 6,116 5,096 Restricted cash 1,990 1,730 Other long-term assets 6,674 637 Intangible assets, net 27,524 5,599 Goodwill 87,964 19,485 Total assets $251,663 $87,011 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $11,685 $10,657 Accrued liabilities 3,812 1,971 Accrued compensation 10,751 5,378 Accrued royalties 12,440 1,727 Deferred revenues 37,333 18,224 Total current liabilities 76,021 37,957 Other long-term liabilities 3,936 2,357 Total liabilities 79,957 40,314 Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $0.0001 par value; 5,000 shares authorized at December 31, 2014 and 2013; no sharesissued and outstanding at December 31, 2014 and 2013 - -Common stock, $0.0001 par value: 250,000 authorized at December 31, 2014 and 2013; 107,174 and78,464 shares issued and outstanding at December 31, 2014 and 2013 11 8 Additional paid-in capital 415,766 298,593 Accumulated other comprehensive (loss)/income (8) 307 Accumulated deficit (244,063) (252,211)Total stockholders’ equity 171,706 46,697 Total liabilities and stockholders’ equity $251,663 $87,011 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents GLU MOBILE INC. CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data) Year Ended December 31, 2014 2013 2012Revenues $223,146 $105,613 $108,183 Cost of revenues: Platform commissions, royalties and other 80,992 32,806 29,630 Amortization of intangible assets 4,767 4,238 3,783 Total cost of revenues 85,759 37,044 33,413 Gross profit 137,387 68,569 74,770 Operating expenses: Research and development 64,284 46,877 54,275 Sales and marketing 45,076 26,120 20,893 General and administrative 25,019 15,550 14,744 Amortization of intangible assets 508 1,336 1,980 Restructuring charge 435 1,448 1,371 Impairment of goodwill - - 3,613 Total operating expenses 135,322 91,331 96,876 Income/(loss) from operations 2,065 (22,762) (22,106)Interest and other income/(expense), net: Interest income 30 16 21 Other expense, net (1,502) (6) (368)Interest and other income/(expense), net (1,472) 10 (347)Income/(loss) before income taxes 593 (22,752) (22,453)Income tax benefit 7,555 2,843 1,994 Net income/(loss) $8,148 $(19,909) $(20,459) Net income /(loss) per share: Basic $0.09 $(0.28) $(0.32)Diluted $0.08 $(0.28) $(0.32) Weighted average common shares outstanding: Basic 91,826 71,453 64,318 Diluted 96,922 71,453 64,318 The accompanying notes are an integral part of these consolidated financial statements.70 Table of Contents GLU MOBILE INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)(in thousands) Year Ended December 31, 2014 2013 2012 Net income/(loss) $8,148 $(19,909) $(20,459) Other comprehensive income/(loss): Foreign currency translation adjustments (315) 378 (99) Reclassification to net loss (1) - (238) - Other comprehensive income/(loss) (315) 140 (99) Comprehensive income/(loss) $7,833 $(19,769) $(20,558) (1)The reclassification to net loss relates to the write-off of cumulative translation adjustment upon substantial liquidation of the Company’sBrazilian entity and is recognized in Restructuring charge in the Company’s consolidated statement of operations for the year ended December31, 2013. The accompanying notes are an integral part of these consolidated financial statements.71 Table of Contents GLU MOBILE INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands) Accumulated Other Compre- Total Additional hensive Stockholders' Common Stock Paid-In Income Accumulated Equity Shares Amount Capital (loss) Deficit Deficit (In thousands, except per share data) Balances at December 31, 2011 63,749 $6 $260,744 $266 $(211,843) $49,173 Net loss - - - - (20,459) (20,459) Stock-based compensation expense - - 4,271 - - 4,271 Issuance of common stock upon exercise of stock options 806 - 1,357 - - 1,357 Issuance of common stock upon exercise of warrants 413 - 619 - - 619 Issuance of common stock as consideration for acquisitions 600 - 2,796 - - 2,796 Issuance of common stock pursuant to Employee StockPurchase Plan 454 - 1,229 - - 1,229 Other comprehensive loss - - - (99) - (99) Balances at December 31, 2012 66,022 $6 $271,016 $167 $(232,302) $38,887 Net loss - - - - (19,909) (19,909) Stock-based compensation expense - - 4,113 - - 4,113 Issuance of common stock upon exercise of stock options 958 - 1,295 - - 1,295 Issuance of common stock upon exercise of warrants 2,886 1 4,328 - - 4,329 Issuance of common stock as consideration for property andequipment 89 - 189 - - 189 Issuance of common stock pursuant to Employee StockPurchase Plan 522 - 978 - - 978 Issuance of common stock as contingent considerationearned 742 - 2,263 - - 2,263 Issuance of common stock upon Public Offering, net ofissuance costs 7,245 1 13,984 - - 13,985 Non-cash warrant expense - - 427 - - 427 Other comprehensive income - - - 140 - 140 Balances at December 31, 2013 78,464 $8 $298,593 $307 $(252,211) $46,697 Net income - - - - 8,148 8,148 Stock-based compensation expense - - 7,073 - - 7,073 Issuance of common stock upon exercise of stock options 2,867 1 6,270 - - 6,271 Issuance of common stock upon exercise of warrants 1,191 - 2,786 - - 2,786 Taxes paid related to net share settlement of equity awards 348 - (896) - - (896) Issuance of common stock pursuant to Employee StockPurchase Plan 426 - 1,076 - - 1,076 Issuance of common stock as contingent considerationearned 1,185 - 5,821 - - 5,821 Issuance of common stock upon Public Offering, net ofissuance costs 9,861 1 32,057 - - 32,058 Non-cash warrant expense - - 1,126 - - 1,126 Issuance of common stock as consideration for acquisitions 12,832 1 61,860 - - 61,861 Other comprehensive loss - - - (315) - (315) Balances at December 31, 2014 107,174 $11 $415,766 $(8) $(244,063) $171,706 The accompanying notes are an integral part of these consolidated financial statements. 72 Table of Contents GLU MOBILE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2014 2013 2012Cash flows from operating activities: Net income/(loss) $8,148 $(19,909) $(20,459)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,513 2,707 2,368 Amortization of intangible assets 5,275 5,574 5,763 Stock-based compensation 11,633 4,285 5,822 Change in fair value of Blammo earnout 835 7 167 Non-cash warrant expense 1,192 427 -Non-cash foreign currency remeasurement (gain)/loss 1,495 23 365 Non-cash valuation allowance adjustment for change in enacted tax rate 1,531 - -Impairment of goodwill - - 3,613 Impairment of prepaid royalties and guarantees 257 435 -Non-cash restructuring charges - 244 -Changes in allowance for doubtful accounts (162) 27 281 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (9,195) (6,540) 2,430 Prepaid expenses and other assets (14,332) (2,726) (359)Accounts payable (4,298) 3,347 (586)Other accrued liabilities (20) (157) (459)Accrued compensation 5,259 910 (1,300)Accrued royalties 10,231 (1,495) (1,133)Deferred revenues 18,810 6,499 680 Accrued restructuring - (161) (883)Other long-term liabilities (8,598) (3,075) (3,059)Net cash provided by/(used) in operating activities 30,574 (9,578) (6,749) Cash flows from investing activities: Purchase of property and equipment (3,292) (2,722) (2,014)Restricted cash (60) (1,730) -Other investing activities (250) (200) -Purchase of intangible assets - (253) (5,000)Net cash paid for acquisitions (22,586) - 913 Net cash used in investing activities (26,188) (4,905) (6,101) Cash flows from financing activities: PlayFirst payments on acquired line of credit and term loan (2,340) - -Proceeds from public offering, net 32,058 13,985 -Taxes paid related to net share settlement of equity awards (896) - -Proceeds from exercise of stock options and ESPP 7,347 2,273 2,586 Proceeds from exercise of stock warrants and issuance of common stock 2,786 4,329 619 Net cash provided by financing activities 38,955 20,587 3,205 Effect of exchange rate changes on cash (925) 67 (242)Net increase/(decrease) in cash and cash equivalents 42,416 6,171 (9,887)Cash and cash equivalents at beginning of period 28,496 22,325 32,212 Cash and cash equivalents at end of period $70,912 $28,496 $22,325 Supplemental disclosures of cash flow information Common stock issued for acquisitions $61,861 $ - $2,796 Common stock issued for property and equipment $ - $189 $ -Common stock issued as contingent consideration earned $5,821 $2,263 $ -Income taxes paid $303 $269 $394 The accompanying notes are an integral part of these consolidated financial statements. 73 Table of Contents GLU MOBILE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except per share data and percentages) 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 ofDelaware in March 2007. The Company develops, publishes, and markets a portfolio of games designed for users ofsmartphones and tablet devices who download and make purchases within its games through direct-to-consumer digitalstorefronts, such as the Apple App Store, Google Play Store, Amazon Appstore and others (“Digital Storefronts”). TheCompany creates games based on its own original brands, as well as third-party licensed brands, properties and other content. The Company has generally incurred losses from operations since inception and had an accumulated deficit of$244,063 as of December 31, 2014. However, for the year ended December 31, 2014, the Company generated net income of$8,148 and generated operating cash flows of $30,574. However, the Company may incur additional losses and negative cashflows in the future. Failure to generate sufficient revenues, reduce spending or raise additional capital could adversely affect theCompany’s ability to achieve its intended business objectives. Basis of Presentation The Company's consolidated financial statements have been prepared in accordance with accounting principlesgenerally accepted in the United States. Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Allmaterial intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accountingprinciples (“U.S. GAAP”) requires the Company’s management to make judgments, assumptions and estimates that affect theamounts reported in its consolidated financial statements and accompanying notes. Management bases its estimates onhistorical experience and on various other assumptions it believes to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assets and liabilities. Significant estimates andassumptions reflected in the financial statements include, but are not limited to, the estimated lives that the Company uses forrevenue recognition, the allowance for doubtful accounts, useful lives of property and equipment and intangible assets, incometaxes, fair value of stock awards issued and contingent consideration issued to Blammo shareholders, fair value of warrantsissued, accounting for business combinations, and evaluating goodwill and long-lived assets for impairment. Actual resultsmay differ from these estimates and these differences may be material. Revenue Recognition The Company generates revenues through in-app purchases within its games on smartphones and tablets, such asApple’s iPhone and iPad and mobile devices utilizing Google’s Android operating system. Smartphone and tablet games aredistributed primarily through Digital Storefronts. Revenue The Company distributes its games for smartphones and tablets to the end customer through Digital Storefronts.74 Table of Contents Within these Digital Storefronts, users can download the Company’s free-to-play games and pay to acquire virtual currencywhich can be redeemed in the game for virtual goods. The Company recognizes revenue, when persuasive evidence of anarrangement exists, the service has been provided to the user, the price paid by the user is fixed or determinable, andcollectability is reasonably assured. Determining whether and when some of these criteria have been satisfied requiresjudgments that may have a significant impact on the timing and amount of revenue the Company reports in each period. For thepurposes of determining when the service has been provided to the player, the Company has determined that an impliedobligation exists to the paying user to continue displaying the purchased virtual goods within the game over the estimatedaverage playing period of paying players for the game, which represents the Company’s best estimate of the estimated averagelife of virtual goods. The Company sells both consumable and durable virtual goods and receives reports from the Digital Storefronts,which breakdown the various purchases made from their games over a given time period. The Company reviews these reports todetermine on a per-item basis whether the purchase was a consumable virtual good or a durable virtual good. Consumablegoods are items that can be purchased directly by the player through the Digital Storefront and are consumed at apredetermined time or otherwise have limitations on repeated use, while durable goods are items accessible to the user over anextended period of time. The Company’s revenues from consumable virtual goods have been insignificant over the previousthree years. The Company recognizes the revenues from these items immediately, since it believes that the delivery obligationhas been met and there are no further implicit or explicit performance obligations related to the purchase of that consumablevirtual good. Revenues from durable virtual goods are generated through the purchase of virtual coins by users through aDigital Storefront. Players convert the virtual coins within the game to durable virtual goods such as weapons, armor or otheraccessories to enhance their game-playing experience. The durable virtual goods remain in the game for as long as the playercontinues to play. The Company believes this represents an implied service obligation, and accordingly, recognizes therevenues from the purchase of these durable virtual goods over the estimated average playing period of paying users. Based onthe Company’s analysis, the estimated weighted average useful life of a paying user is approximately three months for themajority of our games, except for one game for which the estimated weighted average useful life of a paying user has beendetermined to be approximately four months. If a new game is launched and only a limited period of paying player data isavailable, then the Company also considers other quantitative and qualitative factors, such as the playing patterns for payingusers for other games with similar characteristics. While the Company believes its estimates to be reasonable based on availablegame player information, it may revise such estimates in the future as the games’ operation periods change. Any adjustmentsarising from changes in the estimates of the lives of these virtual goods would be applied to the current quarter andprospectively on the basis that such changes are caused by new information indicating a change in game player behaviorpatterns. Any changes in the Company’s estimates of useful lives of these virtual goods may result in revenues beingrecognized on a basis different from prior periods’ and may cause its operating results to fluctuate. The Company also has relationships with certain advertising service providers for advertisements within smartphonegames and revenue from these advertising providers is generated through impressions, clickthroughs, banner ads and offers.Revenue is recognized as advertisements are delivered and reported to the Company, an executed contract exists, the price isfixed or determinable and collectability has been reasonably assured. Delivery generally occurs when the advertisement hasbeen displayed or the offer has been completed by the user. The fee received for certain offer advertisements that result in theuser receiving virtual currency for redemption within a game are deferred and recognized over the average playing period ofpaying users. Other Estimates and Judgments The Company estimates revenues from Digital Storefronts in the current period when reasonable estimates of theseamounts can be made. Certain Digital Storefronts provide reliable interim preliminary reporting and others report sales datawithin a reasonable time frame following the end of each month, both of which allow the Company to make reasonableestimates of revenues and therefore to recognize revenues during the reporting period. Determination of the appropriate amountof revenue recognized involves judgments and estimates that the Company believes are reasonable, but it is possible that actualresults may differ from the Company’s estimates. When the Company receives the final reports, to the extent not receivedwithin a reasonable time frame following the end of each month, the Company records any differences between estimatedrevenues and actual revenues in the reporting period when the Company determines75 Table of Contents the actual amounts. Historically, the revenues on the final revenue report have not differed significantly from the reportedrevenues for the period. Principal Agent Considerations In accordance with ASC 605-45, Revenue Recognition: Principal Agent Considerations, the Company evaluates itsDigital Storefront and advertising service provider agreements in order to determine whether or not it is acting as the principalor as an agent when selling its games or when selling advertisements within its games, which it considers in determining ifrevenue should be reported gross or net. The Company primarily uses Digital Storefronts for distributing its smartphone gamesand advertising service providers for serving advertisements within its games. Key indicators that the Company evaluates toreach this determination include:·the terms and conditions of the Company’s contracts with the Digital Storefronts and advertising serviceproviders;·the party responsible for billing and collecting fees from the end-users, including the resolution of billingdisputes;·whether the Company is paid a fixed percentage of the arrangement’s consideration or a fixed fee for each game,transaction, or advertisement;·the party which sets the pricing with the end-user, has the credit risk and provides customer support; and·the party responsible for the fulfillment of the game or serving of advertisements and that determines thespecifications of the game or advertisement.Based on the evaluation of the above indicators, the Company has determined that it is generally acting as a principaland is the primary obligor to end-users for smartphone games distributed through digital storefronts and advertisements servedthrough our advertising service providers. Therefore, the Company recognizes revenue related to these arrangements on a grossbasis, when the necessary information about the gross amounts or platform fees charged, before any adjustments, are madeavailable by the Digital Storefronts and advertising service providers. Deferred Platform Commissions and Royalties Digital Storefronts retain platform commissions and fees on each purchase made by the paying players through theDigital Storefront. The Company is also obligated to pay ongoing licensing fees in the form of royalties related to the gamesdeveloped based on or significantly incorporating licensed brands, properties or other content, and we plan to incorporateadditional licensed content in even our own originally branded games. Additionally, certain smartphone games sold throughdigital storefronts require the revenue to be deferred due to an implied obligation to the paying player to continue displayingthe purchased virtual goods within the game over the estimated average playing period of paying players for the game. Asrevenues from sales to paying players through Digital Storefronts are deferred, the related direct and incremental platformcommissions and fees as well as third party royalties are also deferred and reported in “Prepaid expenses and other” on theconsolidated balance sheets. The deferred platform commissions and royalties are recognized in the consolidated statements ofoperations in “Cost of revenues” in the period in which the related sales are recognized as revenues. Cash and Cash Equivalents The Company considers all investments purchased with an original or remaining maturity of three months or less at thedate of purchase to be cash equivalents. The Company deposits cash and cash equivalents with financial institutions thatmanagement believes are of high credit quality. Deposits held with financial institutions often exceed the amount of insuranceon these deposits.76 Table of Contents Restricted Cash Restricted cash consists of deposits related to letters of credit to secure obligations under the Company’s operatinglease agreements. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cashequivalents and accounts receivable.The Company derives its accounts receivable from revenues earned from customers or through Digital Storefrontslocated in the U.S. and other locations outside of the U.S. The Company performs ongoing credit evaluations of its customers’and the Digital Storefronts’ financial condition and, generally, requires no collateral from its customers or the DigitalStorefronts. The Company bases its allowance for doubtful accounts on management’s best estimate of the amount of probablecredit losses in the Company’s existing accounts receivable. The Company reviews past due balances over a specified amountindividually for collectability on a monthly basis. It reviews all other balances quarterly. The Company charges off accountsreceivable balances against the allowance when it determines that the amount will not be recovered.The following table summarizes the revenues from customers or aggregate purchases through Digital Storefronts inexcess of 10% of the Company’s revenues: Year Ended December 31, 2014 2013 2012 Apple 52.2 % 50.1 % 41.3 % Google 24.8 19.2 20.3 Tapjoy - - 10.7 At December 31, 2014, Apple Inc. (“Apple”) accounted for 55.0% and Google Inc. (“Google”) accounted for 15.2% oftotal accounts receivable. At December 31, 2013, Apple accounted for 46.3%, and Jirbo (dba AdColony) and Google eachaccounted for 11.1% of total accounts receivable. No other customer or Digital Storefront represented more than 10% of theCompany’s total accounts receivable as of these dates. Fair Value The Company accounts for fair value in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction betweenmarket participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximizethe use of observable inputs and minimize the use of unobservable inputs. The Company uses a three tier hierarchy, whichprioritizes 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 similarassets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroboratedby 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 valueof the assets or liabilities. The first two levels in the hierarchy are considered observable inputs and the last is considered unobservable. TheCompany’s cash and cash equivalents, which were held in operating bank accounts, are classified within Level 1 of77 Table of Contents the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricingsources with reasonable levels of price transparency. Please refer to Note 4 for further details. 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, propertiesand other licensed content, including trademarks and copyrights, in the development of the Company’s games. Royalty-basedobligations are either paid in advance and capitalized on the balance sheet as prepaid royalties or accrued as incurred andsubsequently paid. These royalty-based obligations are expensed to cost of revenues at the greater of the revenues derived fromthe relevant game multiplied by the applicable contractual rate or an effective royalty rate based on expected net product sales.Advanced license payments that are not recoupable against future royalties are capitalized and amortized over the lesser of theestimated life of the title incorporating licensed content or the term of the license agreement. The Company’s contracts with some licensors include minimum guaranteed royalty payments, which are payableregardless of the ultimate volume of sales to end users. In accordance with ASC 460-10-15, Guarantees (“ASC 460”), theCompany recorded a minimum guaranteed liability of $1,434 and $433 as of December 31, 2014 and 2013, respectively. Whenno significant performance remains with the licensor, the Company initially records each of these guarantees as an asset and asa liability at the contractual amount. The Company believes that the contractual amount represents the fair value of theliability. When significant performance remains with the licensor, the Company records royalty payments as an asset whenactually paid and as a liability when incurred, rather than upon execution of the contract. The Company classifies minimumroyalty payment obligations as current liabilities to the extent they are contractually due within the next twelve months. Each quarter, the Company evaluates the realization of its prepaid and guaranteed royalties as well as anyunrecognized guarantees not yet paid to determine amounts that it deems unlikely to be realized through product sales. TheCompany uses estimates of revenues, cash flows and net margins to evaluate the future realization of prepaid royalties andguarantees. This evaluation considers multiple factors, including the term of the agreement, forecasted demand, game life cyclestatus, game development plans, and current and anticipated sales levels, as well as other qualitative factors such as the successof similar games and similar genres on mobile devices for the Company and its competitors and/or other game platforms (e.g.,consoles, personal computers and Internet) utilizing the intellectual property and whether there are any future plannedtheatrical releases or television series based on the intellectual property. To the extent that this evaluation indicates that theremaining prepaid and guaranteed royalty payments are not recoverable, the Company records an impairment charge to cost ofrevenues in the period that impairment is indicated. The Company recorded impairment charges to cost of revenues of $257, $435, and zero during the years ended December 31, 2014, 2013, and 2012, respectively. Goodwill and Intangible Assets In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortizedbut is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carryingamount of these assets may not be recoverable. Under ASC 350, the Company performs the annual impairment review of itsgoodwill balance as of September 30. This impairment review involves a multiple-step process as follows: Step — 0 The Company evaluates qualitative factors and overall financial performance to determine whether it isnecessary to perform the first step of the two-step goodwill test. This step is referred to as “Step 0.” Step 0 involves, among otherqualitative factors, weighing the relative impact of factors that are specific to the reporting unit as well as industry andmacroeconomic factors. After assessing those various factors, if it is determined that it is more likely than not that the fair valueof a reporting unit is less than its carrying amount, then the entity will need to proceed to the first step of the two-step goodwillimpairment test. Step — 1 The Company compares the fair value of each of its reporting units to the carrying value including78 Table of Contents goodwill of that unit. For each reporting unit where the carrying value, including goodwill, exceeds the unit’s fair value, theCompany moves on to step 2. If a unit’s fair value exceeds the carrying value, no further work is performed and no impairmentcharge is necessary. Step — 2 The Company performs an allocation of the fair value of the reporting unit to its identifiable tangible andintangible assets (other than goodwill) and liabilities. This allows the Company to derive an implied fair value for the unit’sgoodwill. The Company then compares the implied fair value of the reporting unit’s goodwill with the carrying value of theunit’s goodwill. If the carrying amount of the unit’s goodwill is greater than the implied fair value of its goodwill, animpairment charge would be recognized for the excess. In 2014 and 2013, the Company did not record any goodwill impairment charges as the fair values of the reportingunits exceeded their respective carrying values. In 2012, the Company concluded that a portion of the goodwill attributed tothe APAC reporting unit was impaired and recorded a $3,613 impairment charge. Purchased intangible assets with finite lives are amortized using the straight-line method over their useful livesranging from one to nine years and are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment(“ASC 360”). 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 berecoverable in accordance with ASC 360. Factors considered important that could result in an impairment review includesignificant underperformance relative to expected historical or projected future operating results, significant changes in themanner of use of acquired assets, significant negative industry or economic trends, and a significant decline in the Company’sstock price for a sustained period of time. The Company recognizes impairment based on the difference between the fair valueof the asset and its carrying value. Fair value is generally measured based on either quoted market prices, if available, or adiscounted cash flow analysis. Property and Equipment The Company states property and equipment at cost. The Company computes depreciation or amortization using thestraight-line method over the estimated useful lives of the respective assets or, in the case of leasehold improvements, the leaseterm of the respective assets, whichever is shorter. The depreciation and amortization periods for the Company’s property and equipment are as follows: Computer equipmentThree yearsComputer softwareThree yearsFurniture and fixturesThree yearsLeasehold improvementsShorter of the estimated useful life or remaining term of lease Research and Development Costs The Company charges costs related to research, design and development of products to research and developmentexpense as incurred. The types of costs included in research and development expenses include salaries, contractor fees andallocated facilities costs. Software Development Costs The Company applies the principles of ASC 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 withproduct development be charged to research and development expense until technological feasibility is established.79 Table of Contents Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower ofunamortized 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 indevelopment to have passed the technological feasibility milestone until the Company has completed a model of the game thatcontains essentially all the functionality and features of the final game and has tested the model to ensure that it works asexpected. To date, the Company has not incurred significant costs between the establishment of technological feasibility andthe release of a game for sale; thus, the Company has expensed all software development costs as incurred. The Companyconsiders the following factors in determining whether costs can be capitalized: the uncertainty regarding a game’s revenue-generating potential and its historical practice of canceling games at any stage of the development process. Internal Use Software The Company recognizes internal use software development costs in accordance with ASC 350-40, Intangibles-Goodwill and Other-Internal Use Software (“ASC 350-40”). Thus, 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 developmentdecisions have been made. The Company capitalized certain internal use software costs totaling approximately $2,165, $249and $1,598 during the years ended December 31, 2014, 2013, and 2012, respectively. The estimated useful life of costscapitalized is generally three years. During the years ended December 31, 2014, 2013 and 2012, the amortization of capitalizedsoftware costs totaled approximately $950, $1,097 and $1,014, respectively. Capitalized internal use software developmentcosts are included in property and equipment, net. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requiresrecognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included inits financial statements or tax returns. Under ASC 740, the Company determines deferred tax assets and liabilities based on thetemporary difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effectfor the year in which it expects the differences to reverse. The Company establishes valuation allowances when necessary toreduce 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 adjusttheir financial statements to reflect only those tax positions that are more-likely-than-not to be sustained. ASC 740 prescribes acomprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain taxpositions taken or expected to be taken in income tax returns. The Company’s policy is to recognize interest and penaltiesrelated to unrecognized tax benefits in income tax expense. Restructuring The Company accounts for costs associated with employee terminations and other exit activities in accordance withASC 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company records employee termination benefits as an operatingexpense when it communicates the benefit arrangement to the employee and it requires no significant future services, other thana minimum retention period, from the employee to earn the termination benefits. In addition, termination benefits related tointernational employees are recognized when the amount of such termination benefits becomes estimable and payment isprobable. Stock-Based Compensation The Company applies the fair value provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-basedpayments including stock options and restricted stock units (“RSUs”). ASC 718 requires companies to estimate the fair value ofstock-option awards on the grant date using an option pricing model. The fair value of stock options and80 Table of Contents stock purchase rights granted pursuant to the Company’s 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 bythe stock price, as well as assumptions regarding subjective and complex variables such as expected employee exercisebehavior and expected stock price volatility over the expected term of the award. Generally, these assumptions are based onhistorical information and judgment is required to determine if historical trends may be indicators of future outcomes.Employee stock-based compensation expense is calculated based on awards ultimately expected to vest and is reduced forestimated forfeitures. Forfeitures are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimatesand an adjustment to stock-based compensation expense will be recognized at that time. Changes to the assumptions used inthe Black-Scholes option valuation calculation and the forfeiture rate, as well as future equity granted or assumed throughacquisitions could significantly impact the compensation expense the Company recognizes. The cost of RSUs is determinedusing the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on thedate of grant, and is reduced for estimated forfeitures. The compensation cost for all share-based payment awards is amortizedon a straight-line basis over the requisite service period. The Company has elected to use the “with and without” approach as described in determining the order in which taxattributes are utilized. As a result, the Company will only recognize a tax benefit from stock-based awards in additional paid-incapital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have beenutilized. In addition, the Company has elected to account for the indirect effects of stock-based awards on other tax attributes,such as the research tax credit, through its statement of operations. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 718and ASC 505-50. Advertising Expenses The Company expenses the production costs of advertising, including direct response advertising, the first time theadvertising takes place. Advertising expense was $35,169, $18,308 and $12,124 in the years ended December 31, 2014, 2013and 2012, respectively. Comprehensive Income/(loss) Comprehensive income/(loss) consists of two components, net income/(loss) and other comprehensive income/(loss).Other comprehensive income/(loss) refers to revenues, expenses, gains and losses that under GAAP are recorded as an elementof stockholders’ equity but are excluded from net income/(loss). The Company’s other comprehensive income/(loss) includedforeign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, and areclassification to net loss from the write-off of cumulative translation adjustment. Foreign Currency Translation In preparing its consolidated financial statements, the Company translates the financial statements of its foreignsubsidiaries from their functional currencies, the local currency, into U.S. Dollars. This process resulted in unrealized exchangegains and losses, which are included as a component of accumulated other comprehensive loss within stockholders’ deficit.However, if the functional currency is deemed to be the U.S. Dollar, any gain or loss associated with the translation of thesefinancial statements would be included within the Company’s consolidated statements of operations. Cumulative foreign currency translation adjustments include any gain or loss associated with the translation of asubsidiary’s financial statements when the functional currency of a subsidiary is the local currency. If the Company disposes ofany of its subsidiaries, any cumulative translation gains or losses would be realized and recorded within the Company’sconsolidated statement of operations in the period during which the disposal occurs. If the Company determines that there hasbeen a change in the functional currency of a subsidiary relative to the U.S. Dollar, any translation gains or losses arising afterthe date of change would be included within the Company’s consolidated statement of operations.81 Table of Contents Business Combination The Company applies the accounting standard related to business combinations, ASC 805, Business Combinations(“ASC 805’). The standard requires recognition of assets acquired, liabilities assumed, and contingent consideration at their fairvalue on the acquisition date with subsequent changes recognized in earnings; requires acquisition-related expenses andrestructuring costs to be recognized separately from the business combination and expensed as incurred; requires in-processresearch and development to be capitalized at fair value as an indefinite-lived intangible asset until completion orabandonment; and requires that changes in accounting for deferred tax asset valuation allowances and acquired income taxuncertainties 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 tocreate outputs as business combinations. The purchase price of the acquisition is allocated to tangible assets, liabilities, andidentifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fairvalues is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. While theCompany uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assetsacquired and liabilities assumed at the business combination date, these estimates and assumptions are inherently uncertain andsubject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year fromthe business combination date, the Company may record adjustments to the assets acquired and liabilities assumed, with thecorresponding offset to goodwill. After the preliminary purchase price allocation period, the Company records adjustments toassets acquired or liabilities assumed subsequent to the purchase price allocation period in its operating results in the period inwhich the adjustments were determined. Recent Accounting Pronouncements In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating LossCarryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under this guidance, an unrecognized tax benefit, or aportion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset fora net operating loss carryforward. This guidance is effective for fiscal years, and interim periods within those years, beginningafter December 15, 2013. This accounting guidance did not have a material impact on the Company’s consolidated financialstatements once adopted.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Under this guidance, revenue isrecognized when promised goods or services are transferred to customers in an amount that reflects the consideration that isexpected to be received for those goods or services. The updated standard will replace most existing revenue recognitionguidance under U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effecttransition method. Early adoption is not permitted. The updated standard will be effective for the Company beginningJanuary 1, 2017. The Company has not yet selected a transition method and is currently evaluating the effect that the updatedstandard will have on its consolidated financial statements and related disclosures. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as aGoing Concern. The new standard provides guidance around management’s responsibility to evaluate whether there issubstantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The newstandard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Earlyadoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financialstatements. 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 theweighted average number of common shares outstanding during the period less the weighted average common shares subject torestrictions imposed by the Company. Diluted net income/(loss) per share reflects the potential dilution that82 Table of Contents could occur from common shares issuable through stock-based compensation plans (including stock options, RSUs andcommon stock issuable through the Company’s employee stock purchase plan), warrants and contingently issuable shares byapplication of the treasury stock method. Year Ended December 31, 2014 2013 2012Net income/(loss) $8,148 $(19,909) $(20,459)Shares used to compute net income/(loss) per share: Weighted average common shares outstanding 93,575 71,543 64,932 Weighted average common shares subject to restrictions (1,749) (90) (614) Weighted average shares used to compute basic net income/(loss) per share 91,826 71,453 64,318 Dilutive potential common shares 5,096 - - Weighted average shares used to compute diluted net income/(loss) per share 96,922 71,453 64,318 Basic net income/(loss) per share $0.09 $(0.28) $(0.32) Diluted net income/(loss) per share $0.08 $(0.28) $(0.32) The following weighted average options to purchase common stock, warrants to purchase common stock, shares ofcommon stock subject to restrictions, shares contingently issuable in connection with the Blammo earnout (as described belowin Note 4 – Fair Value Measurements), and RSUs have been excluded from the computation of diluted net income/(loss) pershare of common stock for the periods presented because including them would have had an anti-dilutive effect: Year Ended December 31, 2014 2013 2012Options to purchase common stock 6,347 10,646 10,321 Warrants to purchase common stock 2,362 3,310 4,187 RSUs 2,746 936 -Common shares subject to restrictions 1,596 90 614 13,051 14,982 15,122 NOTE 3 — BUSINESS COMBINATIONS Cie Games, Inc.On August 20, 2014, the Company completed its acquisition of Cie Games, Inc. (“Cie Games”), a developer of racinggenre mobile games based in Long Beach, California. The Company acquired Cie Games’ to leverage its racing genre expertise,assembled workforce and existing mobile games in order to expand the Company’s game offerings on smartphones andtablets. The purchase price consideration included 9,983 shares of the Company’s common stock valued at $5.09 per share as ofthe closing date of the acquisition, for an aggregate of $50,813 in share consideration. In addition, the Company agreed to payapproximately $29,495 in cash consideration, for total overall consideration paid of $80,308. The Company is holding back inescrow approximately 2,139 of the share consideration for 18 months from the closing date to satisfy potential indemnificationclaims under the Merger Agreement. In addition, $280 of the cash consideration was held back and may be released to theformer stockholders of Cie Games to the extent the Company receives a tax refund relating to Cie Games’ operations fromJanuary 1, 2014 through August 20, 2014, $250 of cash consideration that had been held back to satisfy potential workingcapital shortfalls, was paid by the Company to the former Cie Games stockholders during the fourth quarter of 2014. Alloutstanding Cie Games capital stock and stock options were cancelled at the closing of the acquisition. The allocation of the purchase price is preliminary and based on valuations derived from estimated fair value assessmentsand assumptions used by the Company. While the Company believes that its preliminary estimates and assumptions underlyingthe valuations are reasonable, different estimates and assumptions could result in different83 Table of Contents valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. Thefollowing table summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of acquisition: Assets acquired: Cash $5,281 Accounts receivable, net 4,624 Restricted Cash 200 Other current assets 422 Property and equipment 519 Intangible assets: Titles, content and technology 19,200 Customer contract and related relationships 4,300 Goodwill 57,247 Total assets acquired 91,793 Liabilities assumed: Accounts payable (2,317)Other accrued liabilities (2,053)Deferred revenue (294)Deferred tax liability (6,821)Total liabilities acquired (11,485)Net acquired assets $80,308 Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-linebasis over their estimated lives of three to five years, which approximates the pattern in which the economic benefits of theintangible assets are expected to be realized. Of the total purchase price, $23,500 was allocated to identifiable intangible assets.Pursuant to ASC 805, the Company incurred and expensed a total of $513 in acquisition and transitional costs associated withthe acquisition of Cie Games during the year ended December 31, 2014, which were primarily general and administrativerelated.The Company allocated the residual value of $57,247 to goodwill, which includes a valuation allowance adjustment forchange in enacted tax rate that was recorded in fourth quarter of 2014. Goodwill represents the excess of the purchase price overthe fair value of the net tangible and intangible assets acquired. In accordance with ASC 350, Intangibles – Goodwill andOther (“ASC 350”), goodwill will not be amortized but will be tested for impairment at least annually. Goodwill created as aresult of the Cie Games acquisition is not deductible for tax purposes.PlayFirst, Inc.On May 14, 2014, the Company completed the acquisition of PlayFirst, Inc. (“PlayFirst”), a developer of casual games forsmartphones and tablets based in San Francisco, California. The Company acquired PlayFirst to leverage its casual gameexpertise, assembled workforce and existing mobile games in order to expand the Company’s game offerings on smartphonesand tablets.The purchase price consideration was $11,553, representing 2,955 shares of the Company’s common stock valued at$3.91 per share as of the closing date of the acquisition. The number of shares comprising the purchase price consideration wasreduced from 3,000 shares to 2,955 shares due to a working capital adjustment. In addition, the Company withheld a total of106 shares to cover stockholders’ agent expenses and tax obligations of certain PlayFirst stockholders, which resulted in theCompany issuing a total of 2,849 shares valued at $11,141 and paying $412 in cash. Of the 2,849 shares issued in theacquisition, 1,500 are being held in escrow and will be retained by the Company for 24 months to satisfy potentialindemnification claims under the PlayFirst merger agreement. In addition, the Company assumed approximately $3,480 ofPlayFirst net liabilities. All outstanding PlayFirst capital stock, stock options and warrants were cancelled at the closing of thePlayFirst acquisition.During the third quarter of 2014, approximately 24 shares that were being held back pursuant to the PlayFirst mergeragreement were cancelled to satisfy a net working capital adjustment and a corresponding adjustment of $93 was made togoodwill representing the fair value of the shares on the date of acquisition. 84 Table of Contents The allocation of the purchase price is preliminary and based on valuations derived from estimated fair value assessmentsand assumptions used by the Company. While the Company believes that its preliminary estimates and assumptions underlyingthe valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individualassets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the preliminaryfair values of assets acquired and liabilities assumed at the date of acquisition: Assets acquired: Cash $123 Accounts receivable, net 736 Other current assets 145 Property and equipment 15 Intangible assets: Titles, content and technology 2,200 In Process Research and Development 800 Customer contract and related relationships 700 Goodwill 11,241 Total assets acquired 15,960 Liabilities assumed: Accounts payable (1,509)Other accrued liabilities (651)Line of credit (890)Term loan (1,450)Total liabilities acquired (4,500)Net acquired assets $11,460 Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-linebasis over their estimated lives of three to five years, which approximates the pattern in which the economic benefits of theintangible assets are expected to be realized. Of the total purchase price, $3,700 was allocated to identifiable intangible assets.Pursuant to ASC 805, the Company incurred and expensed a total of $917 in acquisition and transitional costs associated withthe acquisition of PlayFirst during the year ended December 31, 2014, respectively, which were primarily general andadministrative related.The Company allocated the residual value of $11,241 to goodwill. Goodwill represents the excess of the purchase priceover the fair value of the net tangible and intangible assets acquired. In accordance with ASC 350, goodwill will not beamortized but will be tested for impairment at least annually. Goodwill created as a result of the PlayFirst acquisition is notdeductible for tax purposes. Acquisition of GameSpy Industries, Inc. On August 2, 2012, the Company completed the acquisition of GameSpy Industries, Inc. (“GameSpy”) pursuant to anAgreement and Plan of Merger (the “GameSpy Merger Agreement”) by and among the Company, Galileo Acquisition Corp., aCalifornia corporation and wholly owned subsidiary of the Company (“Galileo”), IGN Entertainment, Inc. (“IGN”) andGameSpy. GameSpy, which is based in California, provides technology and services for multiplayer and server-based gaming.The Company acquired GameSpy as part of its efforts to enhance the monetization and retention of the Company’s players byincorporating GameSpy’s expertise in community functionality, synchronous multiplayer and asynchronous player versusplayer mechanics into the Company’s games.Pursuant to the terms of the GameSpy Merger Agreement, the Company issued to IGN, as GameSpy’s sole shareholder, inexchange for all of the issued and outstanding shares of GameSpy capital stock, a total of 600 shares of the Company’s commonstock, for consideration of approximately $2,796, based on the $4.66 closing price of the Company’s common stock on TheNASDAQ Global Market on August 2, 2012. In addition, the Company, GameSpy and IGN entered into a Transition ServicesAgreement, pursuant to which IGN provided to the Company and GameSpy certain backend data center transition servicesrelated to GameSpy’s private cloud storage infrastructure through August 2, 2014.The allocation of the GameSpy purchase price was based upon valuations for certain assets acquired and liabilities assumed.The valuation was based upon calculations and valuations, and the Company’s estimates and assumptions are85 Table of Contents subject to change as the Company obtains additional information for its estimates during the respective measurement periods(up to one year from the acquisition date). The following table summarizes the fair values of assets acquired and liabilitiesassumed at the date of acquisition: Assets acquired: Cash $913 Accounts receivable, net 1,695 Property and equipment 485 Intangible assets: Customer contracts and related relationships 250 Titles, content and technology 1,300 Goodwill 1,096 Total assets acquired 5,739 Liabilities assumed: Other accrued liabilities (689) Deferred revenue (1,684) Deferred tax liability (570) Total liabilities acquired (2,943) Net acquired assets $2,796 Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-linebasis over their estimated lives of two to three years, which approximates the pattern in which the economic benefits of theintangible assets are expected to be realized.In connection with the acquisition of GameSpy, the Company recorded net deferred tax liabilities of $570, with acorresponding adjustment to goodwill. These deferred taxes were primarily related to identifiable intangible assets and netoperating losses.The Company allocated the residual value of $1,096 to goodwill. Goodwill represents the excess of the purchase priceover the fair value of the net tangible and intangible assets acquired. In accordance with ASC 350, Intangibles – Goodwill andOther (“ASC 350”), goodwill will not be amortized but will be tested for impairment at least annually. Goodwill created as aresult of the GameSpy acquisition is not deductible for tax purposes.Valuation MethodologyThe Company engaged a third-party valuation firm to aid management in its analyses of the fair value of Cie Games,PlayFirst, and GameSpy. All estimates, key assumptions and forecasts were either provided by or reviewed by the Company.While the Company chose to utilize a third-party valuation firm, the fair value analyses and related valuations represent theconclusions of management and not the conclusions or statements of any third party.The Company valued titles, content and technology, and in-process research and development using the Multi-PeriodExcess Earnings (“MPEE”) method of the income approach and key assumptions used included: projected revenue, cost ofgoods sold, and operating expenses for PlayFirst’s and Cie Games’ legacy titles, the future amortization tax benefit of thelegacy titles, and a discount rate of between 20% and 35%.As of the valuation date, PlayFirst was in the process of developing a game, which was launched in the fourth quarter of2014, and the Company has estimated the majority of the revenues associated with this game will be generated in 2015.The Company valued customer relationships using the replacement cost method of the cost approach and based on theperceived value that a market participant would ascribe to the PlayFirst and Cie Games customer relationships, which includeexisting relationships with Amazon, Apple and Google. Key assumptions used in valuing customer relationships included legalfees and opportunity costs in re-establishing such relationships.In the valuation of GameSpy customer contracts, these contracts were valued over their remaining terms,86 Table of Contents which included consideration of moderate anticipated renewals and is consistent with market participant considerations. Thesecontracts were fair valued using the MPEE method of the income approach and key assumptions used included: projectedrevenue and operating expenses for GameSpy’s remaining contracts, the remaining contractual period of the contracts and adiscount rate of 14%. The Company valued developed technology using the replacement cost method of the cost approach andbased on the perceived value that a market participant would ascribe to the GameSpy technology, which allows for hostingmulti-player games on mobile devices and other platforms. Key assumptions used included fully burdened headcount spendinginformation. As of the valuation date, the fair value of GameSpy’s deferred revenue was $1,684, which reflects the costsincluding hosting fees, salaries and benefits, equipment and facilities to support the contractual obligations associated withthese revenues, plus a market participant margin. The deferred revenue will be recognized on a straight-line basis over 24months.Pro Forma Financial InformationThe results of operations for PlayFirst and Cie Games and the estimated fair market values of the assets acquired andliabilities assumed have been included in the Company’s consolidated financial statements since their respective dates ofacquisition. For the year ended December 31, 2014 and since the dates of their respective acquisition, PlayFirst and Cie Gamescontributed approximately $13,601 to the Company’s gross revenue and increased net losses by $315. The unaudited pro formafinancial information in the table below summarizes the combined results of the Company’s operations and those of PlayFirstand Cie Games for the periods shown as if the acquisition of PlayFirst and Cie Games had each occurred on January 1, 2013.The pro forma financial information includes the business combination accounting effects of the acquisition, includingamortization charges from acquired intangible assets. The pro forma financial information presented below is for informationalpurposes only, and is subject to a number of estimates, assumptions and other uncertainties. In addition, the pro forma financialinformation presented below does not include the unaudited financial information of GameSpy, since these were not material. Year Ended December 31, 2014 2013Total pro forma revenues $243,971 $137,095 Pro forma net income/ (loss) 2,800 (33,009)Pro forma net income/ (loss) per share - basic $0.03 $(0.41)Pro forma net income/ (loss) per share - diluted $0.03 $(0.41) All of the goodwill related to the Cie Games, PlayFirst and GameSpy transactions was assigned to the Company’sAmericas reporting unit. See Note 6 for additional information related to the changes in the carrying amount of goodwill. NOTE 4 — FAIR VALUE MEASUREMENTS Fair Value Measurements The Company accounts for fair value in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC820”). Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction betweenmarket participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximizethe use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, whichprioritizes 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 similarassets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroboratedby 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 valueof the assets or liabilities.87 Table of Contents The first two levels in the hierarchy are considered observable inputs and the last is considered unobservable. TheCompany’s cash and cash equivalents, which were held in operating bank accounts, are classified within Level 1 of the fairvalue hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sourceswith reasonable levels of price transparency. As of December 31, 2014 and December 31, 2013, the Company had $70,912 and$28,496, respectively, in cash and cash equivalents. In addition, the Company’s restricted cash is classified within Level 1 ofthe fair value hierarchy. The carrying value of accounts receivable and payables approximates fair value due to the short time toexpected receipt of payment or cash.Liabilities for Contingent ConsiderationOn August 1, 2011, the Company completed the acquisition of Blammo Games Inc. (“Blammo”), by entering into a SharePurchase Agreement (the “Share Purchase Agreement”) by and among the Company, Blammo and each of the owners of theoutstanding share capital of Blammo (the “Sellers”). Blammo was a developer of free-to-play games for Digital Storefrontslocated in Toronto, Canada. Pursuant to the terms of the Share Purchase Agreement, the Company agreed to issue to the Sellers,in the aggregate, 1,000 shares of the Company’s common stock plus up to an additional 3,313 shares of the Company’scommon stock (the “Additional Shares”) if Blammo achieved certain Net Revenue (as such term is defined in the SharePurchase Agreement) targets during the fiscal years ending March 31, 2013, March 31, 2014 and March 31, 2015.The Company issued 742 shares of common stock in May 2013 and 435 shares of common stock in May 2014 to theformer Blammo shareholders based on the Net Revenue that Blammo achieved for its fiscal years ended March 31, 2013 and2014, respectively. Since the contingency related to the number of shares earned in connection with the earnout targets forthese fiscal years was resolved and the number of shares became fixed, the fair values of these shares have been presented inadditional paid-in capital in the Company’s consolidated balance sheet since March 31, 2013 and 2014, respectively. In July2014, the Company and the former Blammo shareholders entered into a formal agreement to change the vesting condition ofthe last tranche of earnout shares. Pursuant to this agreement, the Company agreed to issue to the former Blammo shareholders750 Additional Shares in lieu of the opportunity to earn up to 1,154 Additional Shares for the year ending March 31, 2015(“Fiscal 2015”) if Blammo were to generate $15,000 in Net Revenues during Fiscal 2015. Since the contingency related to thenumber of shares to be earned in connection with the target for Fiscal 2015 was resolved as of June 30, 2014, and the number ofshares has become fixed, the fair value of these shares in the amount of $3,750 has been presented in additional paid-in capitalon the Company’s consolidated balance sheet since June 30, 2014. Three of the five Sellers were also employees of Blammo. The fair value of the contingent consideration issued to thethree Sellers who were also employees of Blammo was not considered part of the purchase price, since vesting was contingentupon these employees’ continued service during the earn-out periods. In accordance with ASC 805, Business Combinations,non-employee contingent consideration issued to the two Sellers who are not employees of Blammo was recorded as part of thepurchase accounting and was fair valued at each subsequent reporting period. During the year ended December 31, 2014, 2013,and 2012, the Company recorded fair value benefit adjustments of $835, $7, and $167, respectively, which represent thechanges in fair value of the non-employee contingent consideration for all respective periods. In accordance with ASC 805,changes in the fair value of non-employee contingent consideration are recognized in general and administrative expense inthe Company’s consolidated statements of operations. Level 3 liabilities consist of acquisition-related liabilities for contingent consideration (i.e., earnouts) related to theacquisition of Blammo. As of December 31, 2014, the Company recorded no contingent consideration liability, as the finaltranche of Blammo earnout shares had been earned and recorded in additional paid-in capital. As of December 31, 2013, theCompany recorded a contingent consideration liability of $427, of which $329 was recorded as a current liability in accruedcompensation as settlement was less than one year. The Company used a risk-neutral framework to estimate the probability ofachieving the revenue targets set forth above for each year. The fair value of the contingent consideration was determined usinga digital option, which captures the present value of the expected payment multiplied by the probability of reaching therevenue targets for each year. Key assumptions for the years ended December 31, 2014,88 Table of Contents 2013, and 2012, are shown in the table below. Year Ended December 31, 2014 2013 2012 Discount rate 35 % 35 % 35 %Risk-free interest rate minimum 0.13 % 0.07 % 0.05 %Risk-free interest rate maximum 0.13 % 0.19 % 0.28 %Expected volatility 42 % 35 % 38 % NOTE 5 — BALANCE SHEET COMPONENTS Accounts Receivable December 31, 2014 2013Accounts receivable $32,528 $18,764 Less: Allowance for doubtful accounts (297) (459) $32,231 $18,305 Accounts receivable include amounts billed and unbilled as of the respective balance sheet dates, but net of platformcommissions to our digital storefronts. The movement in the Company’s allowance for doubtful accounts is as follows: Balance at Balance at Beginning of End ofDescription Year Additions Deductions YearYear ended December 31, 2014 $459 $219 $381 $297 Year ended December 31, 2013 $432 $51 $24 $459 Year ended December 31, 2012 $800 $202 $570 $432 The Company had no significant write-offs or recoveries during the years ended December 31, 2014, 2013, and 2012. Prepaid expenses and other December 31, 2014 2013 Deferred platform commission fees 9,776 4,516 Deferred royalties 3,739 - Deferred tax asset 921 108 Prepaid royalties 864 740 Other 2,952 2,299 $18,252 7,663 89 Table of Contents Property and Equipment December 31, 2014 2013Computer equipment $6,721 $6,134 Furniture and fixtures 949 862 Software 8,504 6,290 Leasehold improvements 3,381 2,768 19,555 16,054 Less: Accumulated depreciation and amortization (13,439) (10,958) $6,116 $5,096 Depreciation and amortization for the years ended December 31, 2014, 2013 and 2012 was $2,513, $2,707 and$2,368, respectively.Other long-term assetsAs of December 31, 2014 and December 31, 2013, respectively, other long-term assets include $5,870 and zero ofprepaid minimum guarantees for certain license agreements. These amounts are recoupable against future revenues expected tobe generated greater than one year from the balance sheet date. Other Long-Term Liabilities December 31, 2014 2013Deferred rent $1,001 $1,131 Uncertain tax position obligations 977 890 Accrued royalties 870 -Deferred tax liability 842 122 Other 246 214 $3,936 $2,357 NOTE 6 — GOODWILL AND INTANGIBLE ASSETS Intangible Assets The Company’s intangible assets were acquired primarily in connection with the acquisitions of Macrospace in 2004,iFone in 2006, MIG in 2007, Superscape in 2008, Griptonite and Blammo in 2011, GameSpy in 2012 and PlayFirst and CieGames in 2014, as well as in connection with the purchase of the Deer Hunter trademark and brand assets from Atari, Inc. in2012. The carrying amounts and accumulated amortization expense of the acquired intangible assets,90 Table of Contents including the impact of foreign currency exchange translation, at December 31, 2014 and December 31, 2013 were as follows: December 31, 2014 December 31, 2013 Gross Accumulated Net Gross Accumulated Net Carrying Amortization Carrying Carrying Amortization Carrying Value Expense Value Value Expense Value (Including (Including (Including (Including (Including (Including Estimated Impact of Impact of Impact of Impact of Impact of Impact of Useful Foreign Foreign Foreign Foreign Foreign Foreign Life Exchange) Exchange) Exchange) Exchange) Exchange) Exchange)Intangible assets amortized to cost ofrevenues: Titles, content and technology 3 yrs $34,095 $(15,214) $18,881 $12,851 $(12,165) $686 Catalogs 1 yr 1,208 (1,208) - 1,283 (1,283) -ProvisionX Technology 6 yrs 199 (199) - 211 (211) -Carrier contract and related relationships 5 yrs 24,794 (20,192) 4,602 19,940 (19,645) 295 Licensed content 5 yrs 3,012 (3,012) - 3,040 (3,040) -Service provider license 9 yrs 479 (375) 104 482 (324) 158 In-process research and development 3 yrs 800 (100) 700 - - -Trademarks 7 yrs 5,226 (2,190) 3,036 5,230 (1,480) 3,750 69,813 (42,490) 27,323 43,037 (38,148) 4,889 Other intangible assets amortized tooperating expenses: Emux Technology 6 yrs 1,289 (1,289) - 1,368 (1,368) -Noncompete agreement 4 yrs 5,417 (5,216) 201 5,452 (4,742) 710 6,706 (6,505) 201 6,820 (6,110) 710 Total intangibles assets, net $76,519 $(48,995) $27,524 $49,857 $(44,258) $5,599 Acquisition-related intangibles included in the above table are finite-lived and are being amortized on a straight-linebasis over their estimated lives, which approximate the pattern in which the economic benefits of the intangible assets arerealized. The Company has included amortization of acquired intangible assets directly attributable to revenue-generatingactivities in cost of revenues. The Company has included amortization of acquired intangible assets not directly attributable torevenue-generating activities in operating expenses. As of December 31, 2014, the Company acquired $27,200 of identifiableintangible assets from its acquisition of PlayFirst and Cie Games, and approximately $1,550 of intangible assets as part of theGameSpy acquisition in the third quarter of 2012; see Note 3 for further details. During the years ended December 31, 2014, 2013 and 2012, the Company recorded amortization expense in theamounts of $4,767, $4,238 and $3,783, respectively, in cost of revenues. During the years ended December 31, 2014, 2013 and2012, the Company recorded amortization expense in the amounts of $508, $1,336 and $1,980, respectively, in operatingexpenses. The Company recorded no impairment charges during the years ended December 31, 2014, 2013 and 2012. As of December 31, 2014, the total expected future amortization related to intangible assets was as follows: Amortization Amortization Included in Included in Total Cost of Operating Amortization Period Ending December 31, Revenues Expenses Expense 2015 $9,554 $201 $9,755 2016 9,199 - 9,199 2017 6,076 - 6,076 2018 1,714 - 1,714 2019 and thereafter 780 - 780 $27,323 $201 $27,524 91 Table of Contents Goodwill The Company has goodwill attributable to its MIG, GameSpy, Blammo, Griptonite, PlayFirst, and Cie Gamesacquisitions as of December 31, 2014. The Company has three reporting units comprised of the 1) Americas, 2) EMEA and 3)APAC regions. The Company attributed all of the goodwill resulting from the MIG acquisition to its Asia and Pacific (“APAC”)reporting unit. All of the goodwill attributable to the GameSpy, Blammo, Griptonite, PlayFirst, and Cie Games acquisitions hasbeen fully assigned to the Company’s Americas reporting unit. The Company had fully impaired in prior years all goodwillallocated to its EMEA reporting unit. The goodwill allocated to the Americas reporting unit is denominated in U.S. Dollars(“USD”) and the goodwill allocated to the APAC reporting unit is denominated in Chinese Renminbi (“RMB”). As a result, thegoodwill attributed to the APAC reporting unit is subject to foreign currency fluctuations. In the valuation of the goodwill balance for Griptonite, Blammo, MIG, GameSpy, PlayFirst, and Cie Games theCompany gave consideration to the future economic benefits of other assets that were not individually identified or separatelyrecognized. The acquired studio workforce for each of these acquisitions was estimated to have value, and since the acquiredworkforce is not individually identified or separately recognized, it was subsumed within the goodwill recognized as part ofeach business combination. The Company further planned to leverage its preexisting contractual relationships with DigitalStorefronts to distribute new titles developed by the Griptonite, Blammo, PlayFirst, and Cie Games studios and the expectedsynergies are reflected in the value of the goodwill recognized. The Company also used the GameSpy acquired workforce andexpertise to help in its development efforts for its games-as-a-service technology platform, and these synergies are reflected inthe value of goodwill recognized. Goodwill by geographic region is as follows: December 31, 2014 December 31, 2013 Americas EMEA APAC Total Americas EMEA APAC Total Balance as of January 1 Goodwill $42,946 $25,354 $24,296 $92,596 $42,946 $25,354 $24,251 $92,551 Accumulated Impairment Losses (24,871) (25,354) (22,886) (73,111) (24,871) (25,354) (22,886) (73,111) 18,075 - 1,410 19,485 18,075 - 1,365 19,440 Goodwill Acquired during the year 68,488 - - 68,488 - - - - Effects of Foreign Currency Exchange - - (9) (9) - - 45 45 Balance as of period ended: 86,563 - 1,401 87,964 18,075 - 1,410 19,485 Goodwill 111,434 25,354 24,287 161,075 42,946 25,354 24,296 92,596 Accumulated Impairment Losses (24,871) (25,354) (22,886) (73,111) (24,871) (25,354) (22,886) (73,111) Balance as of period ended: $86,563 $ - $1,401 $87,964 $18,075 $ - $1,410 $19,485 In accordance with ASC 350, the Company’s goodwill is not amortized but is tested for impairment on an annual basisor whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. UnderASC 350, the Company performs the annual impairment review of its goodwill balance as of September 30 or more frequently iftriggering events occur. The Company evaluates qualitative factors and overall financial performance to determine whether it is necessary toperform the first step of the multiple-step goodwill test. This step is referred to as “Step 0.” Step 0 involves, among otherqualitative factors, weighing the relative impact of factors that are specific to the reporting unit as well as industry andmacroeconomic factors. After assessing those various factors, if it is determined that it is more likely than not that the fair valueof a reporting unit is less than its carrying amount, then the entity will need to proceed to the first step of the goodwillimpairment test. ASC 350 requires a multiple-step approach to testing goodwill for impairment for each reporting unit annually,or whenever events or changes in circumstances indicate the fair value of a reporting unit is below its carrying amount. The firststep measures for impairment by applying the fair value-based tests at the reporting unit level. The second step (if necessary)measures the amount of impairment by applying the fair value-based tests to individual assets and liabilities within eachreporting unit. The fair value of the reporting units is estimated using a combination of the market approach, which utilizescomparable companies’ data, and/or the income approach, which uses discounted cash flows. 92 Table of Contents As of December 31, 2014, the Company had goodwill attributable to the APAC and Americas reporting units. The cashflows of these reporting units reflect the income and expenses of assets directly employed by, and liabilities related to, theoperations of the reporting unit, including revenue related to local contractual relationships, but excludes revenue related toglobal contractual relationships such as Digital Storefronts which are owned by the U.S. and allocated directly to the Americasreporting unit. During the third quarter of 2014, the Company performed a Step 0 qualitative assessment for its Americas andAPAC reporting units. Based on this assessment, the Company concluded that it was more likely than not that the fair value ofeach of the reporting units was greater than their carrying amounts, and, as a result, did not proceed to further impairmenttesting and accordingly did not recognize an impairment of goodwill in the year ended December 31, 2014. In 2013, theCompany did not record any goodwill impairment charges as the fair values of the reporting units exceeded their respectivecarrying values. In 2012, the Company concluded that a portion of the goodwill attributed to the APAC reporting unit wasimpaired and recorded a $3,613 impairment charge. NOTE 7 — COMMITMENTS AND CONTINGENCIES LeasesThe Company leases office space under non-cancelable operating facility leases with various expiration dates throughSeptember 2020. Rent expense for the years ended December 31, 2014, 2013 and 2012 was $4,149, $3,380 and $2,704,respectively. The terms of the facility leases provide for rental payments on a graduated scale. The Company recognizes rentexpense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid. The deferred rentbalance was $1,001 and $1,131 at December 31, 2014 and 2013, respectively, and was included within other long-termliabilities.In April 2013 and June 2013, Company entered into lease agreements for space at its San Francisco headquarters andWashington offices that will expire on March 31, 2018 and September 30, 2020, respectively. In May 2014, the Companyentered into a lease amendment for its Washington offices to expand the rentable square footage by 13 square feet and amendedthe lease payment schedule. The Company has provided deposits for lines of credit totaling $1,790 to secure its obligationsunder the leases, which have been classified as restricted cash on the Company’s consolidated balance sheet as of December 31,2014. At December 31, 2014, future minimum lease payments under non-cancelable operating leases were as follows: Minimum Operating Lease Period Ending December 31, Payments 2015 $4,359 2016 3,571 2017 2,672 2018 1,328 2019 979 2020 and thereafter 754 $13,663 Minimum Guaranteed Royalties and Developer CommitmentsThe Company has entered into license and publishing agreements with various owners of brands, properties and othercontent to develop and publish games based on or incorporating such licensed content for mobile devices. Pursuant to some ofthese agreements, the Company is required to pay minimum guaranteed royalties or license fees over the term of the agreementregardless of actual game sales. Future minimum guaranteed royalty payments as of December 31, 2014 were $1,474.In September 2014, the Company and Kimsaprincess, Inc. (“KAP”), Kim Kardashian West is President of KAP, enteredinto a second amendment to their existing License Agreement (the “KAP License Agreement”) entered into in November 2013,as first amended in June 2014. In consideration of KAP’s additional commitments and obligations under the amended licenseagreement and the extension of the term of the KAP License Agreement by three years, the Company93 Table of Contents paid KAP an additional minimum guarantee, which has been fully recouped by the Company against royalties that it wouldotherwise pay to KAP. The Company also from time to time contracts with various external software developers (“third-party developers”) todesign and develop its games. The Company advances funds to these third-party developers, in installments, payable upon thecompletion of specified development milestones. Future developer commitments as of December 31, 2014 were $520, whichare due over the next twelve months. These developer commitments reflect the Company’s minimum cash obligations but donot necessarily represent the periods in which they will be expensed. The Company expenses developer commitments asservices are provided. Income Taxes As of December 31, 2014, unrecognized tax benefits and potential interest and penalties are classified within “otherlong-term liabilities” and “accounts payable” on the Company’s consolidated balance sheets. As of December 31, 2014, thesettlement of the Company’s income tax liabilities could not be determined; however, the liabilities are not expected tobecome due within the next 12 months. Indemnification Arrangements The Company has entered into agreements under which it indemnifies each of its officers and directors during his orher lifetime for certain events or occurrences while the officer or director is or was serving at the Company’s request in thatcapacity. The maximum potential amount of future payments the Company could be required to make under theseindemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits itsexposure and enables the Company to recover a portion of any future amounts paid. As a result of its insurance policy coverage,the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company hadrecorded no liabilities for these agreements as of December 31, 2014 or 2013. In the ordinary course of its business, the Company includes standard indemnification provisions in most of itscommercial agreements with Digital Storefronts and licensors. Pursuant to these provisions, the Company generally indemnifiesthese parties for losses suffered or incurred in connection with its games, including as a result of intellectual propertyinfringement, viruses, worms and other malicious software, and legal or regulatory violations. The term of these indemnityprovisions is generally perpetual after execution of the corresponding license agreement, and the maximum potential amount offuture payments the Company could be required to make under these provisions is often unlimited. To date, the Company hasnot incurred costs to defend lawsuits or settle indemnified claims of these types. As a result, the Company believes theestimated fair value of these indemnity provisions is minimal. Accordingly, the Company had recorded no liabilities for theseprovisions as of December 31, 2014 or 2013. ContingenciesFrom time to time, the Company is subject to various claims, complaints and legal actions in the normal course ofbusiness. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using availableinformation. The Company’s estimate of losses is developed in consultation with inside and outside counsel, which involves asubjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlementstrategies. After taking all of the above factors into account, the Company determines whether an estimated loss from acontingency should be accrued by assessing whether a loss is deemed reasonably probable and the amount can be reasonablyestimated. The Company further determines whether an estimated loss from a contingency should be disclosed by assessingwhether a material loss is deemed reasonably possible. Such disclosure will include an estimate of the additional loss or rangeof loss or will state that an estimate cannot be made.On August 19, 2014, Inventor Holdings, LLC (“IHL”), a Delaware limited liability company, filed a complaint in theU.S. District Court for the District of Delaware alleging that the Company is infringing one of its patents and seekingunspecified damages, including interest, costs, expenses and an accounting of all infringing acts, attorneys’ fees and such othercosts as the Court deems just and proper. On October 10, 2014, the Company filed a motion to dismiss the94 Table of Contents complaint with prejudice on the ground that the patent asserted by IHL claims patent-ineligible subject matter pursuant to 35U.S.C. § 101 and thus the complaint fails to state a claim upon which relief can be granted. On October 27, 2014, IHL filed anopposition to the Company’s motion to dismiss the complaint with prejudice. The Company filed its reply to IHL’s oppositionon November 6, 2014. The motion remains pending. In the meanwhile, the Court has entered a scheduling order for thecase. Trial, if necessary, is set to begin December 5, 2016. On November 5, 2014, the Company filed a complaint against Hothead Games, Inc. (“Hothead”) in the United StatesDistrict Court for the Northern District of California. In the complaint, the Company alleges that Hothead has willfullyinfringed, and continues to willfully infringe, certain of its copyrights and trade dress contained in its Deer Hunter 2014 gamethrough Hothead’s release of its game, Kill Shot. The Company’s complaint requests that the Court grant the following relief:(1) preliminary and/or permanent injunction restraining Hothead and its affiliates from directly or indirectly violating its rightsunder the Copyright Act and the Lanham Act; (2) an order directing that Hothead file with the Court and serve upon theCompany’s counsel within 30 days after entry of such order or judgment a report in writing and under oath setting forth indetail the manner and form in which Hothead has complied with the injunction; (3) an award to the Company of damages it hassustained or will sustain by reason of Hothead’s conduct, all profits derived by Hothead from such conduct, or in lieu of anyportion thereof, should it so elect, such statutory damages as provided by law; (4) its costs and reasonable attorneys’ fees; (5)prejudgment and post-judgment interest; and (6) all such further and additional relief, in law or in equity, to which it may beentitled or which the Court deems just and proper. Following a case management conference on February 6, 2015, the Court setall pre-trial and trial dates, with a jury trial set to commence on May 31, 2016.In November 2014, Telinit Technologies, LLC, a Texas company, filed a complaint in the U.S. District Court for theEastern District of Texas, Marshall Division, alleging that the Company was infringing one of its patents and seekingunspecified damages, attorneys’ fees and costs. The Company settled this dispute in January 2015 for an immaterial amount.The Company does not believe it is party to any currently pending litigation, the outcome of which is reasonably likelyto have a material adverse effect on its operations, financial position or liquidity. However, the ultimate outcome of anylitigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defensecosts, potential negative publicity, diversion of management resources and other factors. NOTE 8 — STOCKHOLDERS’ EQUITY Common Stock At December 31, 2014, the Company was authorized to issue 250,000 shares of common stock. As of December 31,2014, the Company had reserved 18,568 shares for future issuance under its stock plans and outstanding warrants. Preferred Stock At December 31, 2014, the Company was authorized to issue 5,000 shares of preferred stock. AcquisitionsOn August 20, 2014, as part of the consideration for its acquisition of Cie Games, the Company issued an aggregate of9,983 shares of its common stock to Cie Games’ former shareholders, of which approximately 2,139 shares will be held back byGlu for 18 months from the closing date of the acquisition to satisfy potential indemnification claims under the Cie Gamesmerger agreement. On May 14, 2014, as consideration for its acquisition of PlayFirst, the Company issued an aggregate of 2,849 shares ofits common stock to PlayFirst’s former shareholders, which is net of shares withheld to cover a net working capital adjustment,stockholders’ agent expenses and tax obligations of certain former PlayFirst shareholders. Of the 2,84995 Table of Contents shares issued in the acquisition, 1,500 are being held in escrow and will be retained by the Company for 24 months to satisfypotential indemnification claims under the PlayFirst merger agreement. During the third quarter of 2014, approximately 24shares that were being held back pursuant to the PlayFirst merger agreement were cancelled to satisfy a net working capitaladjustment. On August 2, 2012, the Company issued an aggregate of 600 shares of its common stock to IGN in connection withthe Company’s acquisition of GameSpy. See Note 3 – Business Combinations – for more information about these acquisitions. Shares Issues In Connection With the Blammo EarnoutIn May 2013, the Company issued 742 shares to the former Blammo shareholders based on the Net Revenue thatBlammo achieved for its fiscal year ended March 31, 2013. In May 2014, the Company issued 435 shares of common stock tothe former Blammo shareholders based on the Net Revenue that Blammo achieved for its fiscal year ended March 31, 2014. InJuly 2014, the Company issued 750 shares of common stock to the former Blammo shareholders in lieu of the opportunity thatthe former Blammo shareholders otherwise would have had under the Share Purchase Agreement to earn up to 1,154 shares ofthe Company’s common stock for Fiscal 2015. The fair values of these earnout amounts have been presented in additional paid-in capital on the Company’s consolidated balance sheet as of December 31, 2014. See Note 4 for more information about theseissuances. Public Offerings In June 2014, the Company sold in an underwritten public offering an aggregate of 9,861 shares of its common stockat a public offering price of $3.50 per share for net cash proceeds of approximately $32,058 after underwriting discounts andother offering expenses. In September 2013, the Company sold in an underwritten public offering an aggregate of 7,245 shares of its commonstock at a public offering price of $2.10 per share for net cash proceeds of approximately $13,985 after underwriting discountsand other offering expenses. This public offering exhausted all of the securities that the Company was able to issue under itsshelf registration statement that the SEC declared effective in December 2010. Warrants to Purchase Common Stock In connection with entry into the second amendment of the KAP License Agreement, the Company issued to KAP andtwo other entities associated with KAP’s president, Kim Kardashian West, a total of three warrants exercisable for up to anaggregate of 500 shares of the Company’s common stock (collectively, the “Kardashian Warrants”). Each of the KardashianWarrants has an initial exercise price of $4.99 per share, subject to adjustments for dividends, reorganizations and othercommon stock events. Each of the Kardashian Warrants expires on September 2, 2020. Each of the Kardashian Warrants vestsand becomes exercisable in equal monthly installments over the 60-month term of the KAP License Agreement, subject to fullacceleration or cessation of vesting under certain circumstances, as stipulated in the amended KAP License Agreement. Each ofthe Kardashian Warrants may, at the election of the holder, be either exercised for cash or net exercised on a cashless basis.During the fourth quarter of 2014, 33 of the warrants vested and we recorded a corresponding warrant compensation charge of$66 classified to cost of sales. Key assumptions used in the Black-Scholes valuation model for the twelve months endedDecember 31, 2014 included an expected term of 6.0 years, volatility of 61.1%, risk-free interest rate of 1.99% and a dividendyield of 0%.In July 2013, the Company and MGM Interactive Inc. (“MGM”) entered into a warrant agreement that gives MGM theright to purchase up to 3,333 shares of the Company’s common stock at an exercise price of $3.00 per share (the “MGMWarrant”), subject to certain adjustments for dividends, reorganizations and other common stock events. Of the 3,333 shares ofthe Company’s common stock underlying the MGM Warrant, 333 shares were immediately vested and exercisable on thewarrant agreement effective date and the remaining shares will vest and become exercisable based on conditions related to theCompany releasing mobile games based on mutually agreed upon intellectual property licensed96 Table of Contents by MGM to the Company. The MGM Warrant expires on July 15, 2018. Under ASC 505, Equity-Based Payments to Non-Employees, the Company estimated the fair value of the vested shares of the MGM Warrant on the grant date using the Black-Scholes option valuation model. Key assumptions used in the Black-Scholes valuation model for the twelve months endedDecember 31, 2013 included an expected term of 5.0 years, volatility of 64.2%, risk-free interest rate of 1.5% and a dividendyield of 0%. During the twelve months ended December 31, 2013, the Company recorded $427 of non-cash warrant relatedexpense in cost of revenues. The Company recorded the warrant issuance as a non-cash warrant related expense in cost ofrevenues for warrant shares immediately vested upon signing of the agreement, as such vesting was not tied to any game releasenor to any specific intellectual property license. In July 2014, 333 shares vested in conjunction with the worldwide commercialrelease of a game based on MGM’s intellectual property, Hercules. Under ASC 505, the Company estimated the fair value of thevested portion of the MGM Warrant related to the Hercules game on the vest date using the Black-Scholes option valuationmodel. Key assumptions used in the Black-Scholes valuation model for the year ended December 31, 2014 included anexpected term of 5.0 years, volatility of 56.8%, risk-free interest rate of 1.8% and a dividend yield of 0%. During the year endedDecember 31, 2014, the Company recorded $1,126 of non-cash warrant related expense in cost of revenues in the current periodas the Hercules game is not expected to generate meaningful revenues over its lifetime. On July 11, 2014, MGM exercised 667vested shares pursuant to which the Company received aggregate cash proceeds of $2,000. In April 2014, the Company entered into a license agreement with MGM, United Artists Corporation and Danjaq, LLCpursuant to which the Company will develop and publish a free-to-play mobile game based on the James Bond film franchise.The commercial release by the Company of this mobile game, which is expected to occur in second half of 2015, will triggerthe vesting of an additional 1,000 shares subject to the MGM Warrant. During the years ended December 31, 2014, 2013 and 2012, respectively, investors exercised warrants to purchase 1,191, 2,886, and 413 shares of the Company’s common stock, and the Company received gross proceeds of $2,786, $4,329, and$619, respectively, in connection with these exercises. These exercised warrants related to part of the MGM Warrant as well aswarrants issued by the Company in August 2010 in connection with a private placement transaction. Warrants outstanding at December 31, 2014 were as follows: Number Exercise of Shares Price Outstanding Term per Under Date of Issuance (Years) Share Warrant August 2010 - Warrants issued in private offering 5 $1.50 450 July 2013 - Warrant issued to MGM 5 3.00 2,667 September 2014 - Warrant issued to KAP 6 4.99 500 3,617 NOTE 9 — 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 EquityIncentive Plan (the “2007 Plan”). The 2007 Plan permits the Company to grant stock options, RSUs, and other stock-basedawards to employees, non-employee directors and consultants. In April 2013, the Company’s Board of Directors approved, andin June 2013, the Company’s stockholders approved, the amended and restated 2007 Equity Incentive Plan (the “Amended2007 Plan”). The Amended 2007 Plan includes an increase of 7,200 shares in the aggregate number of shares of common stockauthorized for issuance under the plan. It also includes a fungible share provision, pursuant to which each share that is subjectto a stock-based award that is not a “full value award” (restricted stock, RSUs, or other stock-based awards where the pricecharged to the participant for the award is less than 100% of the fair market value) reduces the number of shares available forissuance by 1.39 shares. When a stock-based award that is not a full value award is cancelled, the underlying shares are returnedto the pool of shares available for grant at a ratio of 1.39 shares for each share cancelled.97 Table of Contents The Company may grant options under the 2007 Plan at prices no less than 85% of the estimated fair value of theshares on the date of grant as determined by its Board of Directors, provided, however, that (i) the exercise price of an incentivestock option (“ISO”) or non-qualified stock options (“NSO”) may not be less than 100% or 85%, respectively, of the estimatedfair value of the underlying shares of common stock on the grant date, and (ii) the exercise price of an ISO or NSO granted to a10% stockholder may not be less than 110% of the estimated fair value of the shares on the grant date. The fair value of theCompany’s common stock is determined by the last sale price of such stock on the NASDAQ Global Market on the date ofdetermination. The stock options granted to employees generally vest with respect to 25% of the underlying shares one yearfrom 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 have a contractual term of ten years and stock options granted onor after October 25, 2007 have a contractual term of six years. As of December 31, 2014, 1,031 shares were available for future grants under the Amended 2007 Plan. 2007 Employee Stock Purchase Plan In 2007, the Company’s Board of Directors adopted and the Company’s stockholders approved, the 2007 EmployeeStock Purchase Plan (the “2007 Purchase Plan”). The Company initially reserved 667 shares of its common stock for issuanceunder the 2007 Purchase Plan. On each January 1 for the first eight calendar years after the first offering date, the aggregatenumber of shares of the Company’s common stock reserved for issuance under the 2007 Purchase Plan was increasedautomatically by the number of shares equal to 1% of the total number of outstanding shares of the Company’s common stockon the immediately preceding December 31, provided that the Board of Directors had the power to reduce the amount of theincrease in any particular year and provided further that the aggregate number of shares issued over the term of this plan maynot exceed 5,333. The 2007 Purchase Plan permits eligible employees, including employees of certain of the Company’ssubsidiaries, to purchase common stock at a discount through payroll deductions during defined offering periods. The price atwhich the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of anoffering 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’sBoard of Directors may fix a maximum number of shares that may be purchased in the aggregate by all participants during anysingle offering period (the “Maximum Offering Period Share Amount”). The Committee may raise or lower the MaximumOffering Period Share Amount. The Committee established the Maximum Offering Period Share Amount of 500 shares for theoffering period that commenced on February 15, 2009 and ended on August 14, 2009, and a Maximum Offering Period ShareAmount of 200 shares for each offering period thereafter. In October 2011, the Committee increased the Maximum OfferingPeriod Share Amount for the offering period that started on August 22, 2011 and for each subsequent offering period to 300shares. As of December 31, 2014, 1,283 shares were available for issuance under the 2007 Purchase Plan. 2008 Equity Inducement PlanIn March 2008, the Company’s Board of Directors adopted the 2008 Equity Inducement Plan (the “Inducement Plan”)to augment the shares available under its existing 2007 Plan. The Company has not sought stockholder approval for theInducement Plan. As such, awards under the Inducement Plan are 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 InducementPlan initially permitted the Company to grant only nonqualified stock options, but in 2013, the Compensation Committee ofthe Company’s Board amended the Inducement Plan to permit the award of RSUs under the plan. The Company may grantNSOs under the Inducement Plan at prices less than 100% of the fair value of the shares on the date of grant, at the discretion ofits Board of Directors. The fair value of the Company’s common stock is determined by the last sale price of such stock on theNASDAQ Global Market on the date of determination. As of December 31, 2014, 349 shares were reserved for future grants under the Inducement Plan.98 Table of Contents Share-Based Awards Available for GrantThe calculation of share-based awards available for grant under the Amended 2007 Plan and the Inducement Plan forthe year ended December 31, 2014 is as follows: Shares Available Balances at December 31, 2013 4,890 Share-based awards granted (1) (6,620) Share-based awards canceled (2) 3,110 Balances at December 31, 2014 1,380 (1)Under the terms of the Amended 2007 Plan, RSUs granted on or after June 6, 2013 reduce the number of shares available for grant by 1.39shares for each share subject to an RSU award.(2)RSUs granted after June 6, 2013 that are forfeited and returned to the pool of shares available for grant increase the pool by 1.39 shares foreach share subject to an RSU that is forfeited. RSU ActivityA summary of the Company’s RSU activity for the year ended December 31, 2014 is as follows: Weighted Number of Average Units Grant Date Outstanding Fair Value Awarded and unvested, December 31, 2013 2,578 $2.91 Granted 3,925 4.25 Vested (574) 2.81 Forfeited (1,010) 3.50 Awarded and unvested, December 31, 2014 4,919 $3.87 Restricted stock units expected to vest, December 31, 2014 3,981 99 Table of Contents Stock Option Activity The following table summarizes the Company’s stock option activity: Options Outstanding Weighted Weighted Number Average Average Aggregate of Exercise Contractual Intrinsic Shares Price Term (Years) ValueBalances at December 31, 2011 9,744 2.80 Options granted 3,399 3.84 Options canceled (1,416) 3.89 Options exercised (806) 1.68 Balances at December 31, 2012 10,921 3.07 Options granted 2,937 2.70 Options canceled (2,502) 3.65 Options exercised (957) 1.35 Balances at December 31, 2013 10,399 2.98 Options granted 1,344 4.08 Options canceled (1,506) 3.72 Options exercised (2,867) 2.19 Balances at December 31, 2014 7,370 $3.32 3.57 $6,144 Options vested and expected to vest at December 31, 2014 6,945 $3.31 3.49 $5,926 Options exercisable at December 31, 2014 4,409 $3.22 2.90 $4,486 At December 31, 2014, the options outstanding and currently exercisable by exercise price were as follows: Options Outstanding Options Exercisable Weighted Average Remaining Weighted WeightedRange of Contractual Average AverageExercise Number Life Exercise Number ExercisePrices Outstanding (in Years) Price Exercisable Price$ 0.52 - $ 1.77 926 1.48 $1.44 926 $1.44 $ 1.90 - $ 2.74 1,023 4.05 2.50 597 2.42 $ 2.83 - $ 2.84 140 4.44 2.83 47 2.84 $ 2.90 - $ 2.90 821 2.77 2.90 632 2.90 $ 2.91 - $ 2.91 746 4.67 2.91 238 2.91 $ 2.98 - $ 3.20 11 2.88 3.15 6 3.17 $ 3.29 - $ 3.29 911 3.77 3.29 493 3.29 $ 3.39 - $ 3.78 739 3.71 3.69 492 3.69 $ 3.88 - $ 4.10 824 5.28 4.05 60 3.91 $ 4.15 - $ 11.88 1,229 3.17 5.34 918 5.54 $ 0.52 - $ 11.88 7,370 3.57 $3.32 4,409 $3.22 The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on thedifference between the original exercise price of the options and the fair value of the Company’s common stock of $3.90 pershare at December 31, 2014. The total intrinsic value of awards exercised during the years ended December 31, 2014, 2013 and2012 was $7,735, $1,886, and $2,114, respectively. Stock-Based Compensation The Company recognizes stock-based compensation expense in accordance with ASC 718, and has estimated the fairvalue of each option award on the grant date using the Black-Scholes option valuation model and the weighted100 Table of Contents average assumptions noted in the following table. Year Ended December 31, 2014 2013 2012 Dividend yield -% -% -% Risk-free interest rate 1.34 % 0.82 % 0.60 % Expected term (years) 4.00 4.00 4.00 Expected volatility 52 % 52 % 65 % The Company based its expected volatility on its own historic volatility and the historical volatility of a peer group ofpublicly traded entities. The expected term of options gave consideration to early exercises, post-vesting cancellations and theoptions’ six-year contractual term. The risk-free interest rate for the expected term of the option is based on the U.S. TreasuryConstant Maturity Rate as of the date of grant. The weighted-average fair value of stock options granted during the year endedDecember 31, 2014, 2013 and 2012 was $1.69, $1.10, and $1.90 per share, respectively. The cost of RSUs is determined using the fair value of the Company’s common stock based on the quoted closing price ofthe Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year periodwith 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vestingquarterly thereafter. Compensation cost is amortized on a straight-line basis over the requisite service period. The Company calculated employee stock-based compensation expense based on awards ultimately expected to vestand reduced it for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, ifnecessary, in subsequent periods if actual forfeitures differ from those estimates. During the year ended December 31, 2014, the Company granted to its Chief Executive Officer two RSU awards for atotal of 575 shares of the Company’s common stock with both time-based and stock-price-based vesting components (the“Market-Based RSUs”). One of the Market-Based RSUs for 225 shares vests over four years but also required that theCompany’s average closing stock price for 30 consecutive trading days equal $7.00 per share or greater (the “$7.00 VestingTrigger”). The other Market-Based RSU for 350 shares also vests over four years but required that the Company’s averageclosing stock price for 30 consecutive trading days equal $10.00 per share or greater (the “$10.00 Vesting Trigger”). TheCompany estimated the fair values and derived service periods of the Market-Based RSUs on the date of grant using a MonteCarlo valuation model. The total fair value of both Market-Based RSUs was initially estimated at $1,311 and was to berecognized in tranches over the longer of the derived service period or time-based vesting period on a graded vesting basis. Keyassumptions for the year ended December 31, 2014 included an expected volatility of 48.5%, risk-free rate of 1.35%, dividendyield of 0.00%, and grant price of $4.05 based on closing price of the Company’s common stock on The NASDAQ GlobalMarket on April 24, 2014. On July 24, 2014, the Compensation Committee of the Company’s Board of Directors approved amodification to the Market-Based RSUs to remove the $7.00 Vesting Trigger and the $10.00 Vesting Trigger. Accordingly, theMarket-Based RSUs will only be subject to time-based vesting from July 24, 2014 onwards. As a result of the modification tothe market-based vesting condition, the original unamortized stock-based compensation expense and an incrementalunamortized expense of $2,714 will be recognized over the remaining service period. 101 Table of Contents The following table summarizes the consolidated stock-based compensation expense by line items in the consolidatedstatement of operations: Year Ended December 31, 2014 2013 2012Research and development $7,422 $1,948 $3,491 Sales and marketing 701 303 386 General and administrative 3,510 2,034 1,945 Total stock-based compensation expense $11,633 $4,285 $5,822 The above table includes compensation expense attributable to the contingent consideration potentially issued to theBlammo employees who were former shareholders of Blammo, which was recorded as research and development expense over theterm of the earn-out periods, since these employees were primarily employed in product development. The Company re-measured thefair value of the contingent consideration each reporting period and only recorded a compensation expense for the portion of theearn-out target that was likely to be achieved. During the years ended December 31, 2014, 2013, and 2012 the Company recorded$4,560, $171, and $1,549 of stock-based compensation expense, respectively, related to this contingent consideration. See Note 4for further details. Consolidated net cash proceeds from option exercises were $6,271, $1,295 and $1,357 for the year ended December 31,2014, 2013 and 2012, respectively. The Company realized no significant income tax benefit from stock option exercises during theyear ended December 31, 2014, 2013 and 2012. As required, the Company presents excess tax benefits from the exercise of stockoptions, if any, as financing cash flows rather than operating cash flows. As permitted by ASC 718, the Company has deferred therecognition of its excess tax benefit from non-qualified stock option exercises. As of December 31, 2014, the Company had $15,658 of total unrecognized compensation expense related to RSUs, net ofestimated forfeitures. As of December 31, 2014, the Company had $4,480 of total unrecognized compensation expense related tostock options, net of estimated forfeitures. The unrecognized compensation expense related to RSUs will be recognized over aweighted average period of 3.00 years. The unrecognized compensation expense related to stock options will be recognized over aweighted average period of 2.38 years. 401(k) Defined Contribution Plan The Company sponsors a 401(k) defined contribution plan covering all employees. The Company does not match thecontributions made by its employees. NOTE 10 — INCOME TAXES The components of income/(loss) before income taxes by tax jurisdiction were as follows: Year Ended December 31, 2014 2013 2012United States $5,283 $(21,820) $(6,745)Foreign (4,690) (932) (15,708)Income/(loss) before income taxes $593 $(22,752) $(22,453) 102 Table of Contents The components of income tax benefit were as follows: Year Ended December 31,Current: 2014 2013 2012Federal $(5) $ - $ -State (5) (4) (4)Foreign 656 2,294 913 646 2,290 909 Deferred: Federal 6,821 - 497 State - - 64 Foreign 88 553 524 6,909 553 1,085 Total: Federal 6,816 - 497 State (5) (4) 60 Foreign 744 2,847 1,437 $7,555 $2,843 $1,994 The difference between the actual rate and the federal statutory rate was as follows: Year Ended December 31, 2014 2013 2012 Tax at federal statutory rate 34.0 % 34.0 % 34.0 % State tax, net of federal benefit 0.8 - 0.3 Foreign rate differential 56.6 (0.1) (0.6) Research and development credit (133.9) 5.1 - Warrants 67.7 - - Withholding taxes (10.5) (2.1) (0.3) Goodwill impairment - - (5.5) Stock-based compensation 224.9 (0.7) (2.7) Non-deductible intercompany bad debt 3.9 0.3 (16.5) FIN 48 interest and release (219.4) 14.6 10.0 Other 59.6 1.6 (0.7) Valuation allowance (1,357.7) (40.2) (9.1) Effective tax rate (1,274.0)% 12.5 % 8.9 % During 2012, the Company’s United Kingdom subsidiary recognized an intercompany bad debt expense ofapproximately $10,870 that is non-tax deductible for United Kingdom tax purposes. During 2014, the Company recorded a netrelease of its valuation allowance of $6,821 as a result of the acquisition of Cie Games in August 2014. 103 Table of Contents Deferred tax assets and liabilities consist of the following: December 31, 2014 December 31, 2013 US Foreign Total US Foreign TotalDeferred tax assets: Fixed assets $ - $1,231 $1,231 $554 $1,685 $2,239 Net operating loss carryforwards 41,885 9,902 51,787 36,299 10,552 46,851 Accruals, reserves and other 3,163 154 3,317 7,761 208 7,969 Foreign tax credit 6,398 - 6,398 6,348 - 6,348 Stock-based compensation 3,382 24 3,406 3,311 56 3,367 Research and development credit 7,929 - 7,929 4,245 - 4,245 Other 2,974 18 2,992 3,088 10 3,098 Total deferred tax assets $65,731 $11,329 $77,060 $61,606 $12,511 $74,117 Deferred tax liabilities: Fixed assets $(431) $ $(431) $ - $ - $ -Macrospace, MIG and iFone intangible assets - - - (94) (94)Blammo intangible assets - - - (129) (129)Superscape,CieGame and Playfirst intangible assets (7,915) (109) (8,024) (116) - (116)Other - - - (9) (9)Net deferred tax assets 57,385 11,220 68,605 61,490 12,279 73,769 Less valuation allowance (57,385) (11,141) (68,526) (61,490) (12,294) (73,784)Net deferred tax liability $ - $79 $79 $ - $(15) $(15) The Company has not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries becausethese earnings are intended to be reinvested indefinitely. No deferred tax asset was recognized since the Company does notbelieve the deferred tax asset will reverse in the foreseeable future. The amount of accumulated foreign earnings of theCompany’s foreign subsidiaries total $3,188 as of December 31, 2014. If the Company's foreign earnings were repatriated,additional tax expense might result. The Company determined that the calculation of the amount of unrecognized deferred taxliability related to these cumulative unremitted earnings attributable to foreign subsidiaries is not practicable. The Companyrecorded a release of its valuation allowance of $6,821, zero, and $562 during 2014, 2013, and 2012, respectively. The 2014and 2012 release was associated with the acquisitions of Cie Games in August 2014 and GameSpy in August 2012. Pursuant toASC 805-740, changes in the Company’s valuation allowance that stem from a business combination should be recognized asan element of the Company’s deferred income tax expense or benefit. The Company previously recognized a valuationallowance against its net operating loss carryforwards and determined that it should be able to utilize the benefit of those netoperating losses against the deferred tax liabilities of Cie Games and GameSpy; 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, theCompany believes that, it is more likely than not that its deferred tax assets will not be utilized, and has recorded a fullvaluation allowance against its net deferred tax assets in each of its jurisdictions except for one entity in China. The Companyassesses on a periodic basis the likelihood that it will be able to recover its deferred tax assets. The Company considers allavailable evidence, both positive and negative, including historical levels of income or losses, expectations and risksassociated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing theneed for the valuation allowance. If it is not more likely than not that the Company expects to recover its deferred tax assets, theCompany will increase its provision for taxes by recording a valuation allowance against the deferred tax assets that it estimateswill not ultimately be recoverable. The available negative evidence at December 31, 2014 and 2013 included historical andprojected future operating losses. As a result, the Company concluded that a reduction in valuation allowance of $5,258 andadditional valuation allowance of $10,073, net of the described releases, was required to reflect the change in its deferred taxassets prior to valuation allowance during 2014 and 2013, respectively. As of December 31, 2014 and 2013, the Companyconsidered it more likely than not that its deferred tax assets would not be realized with their respective carryforward periods.104 Table of Contents At December 31, 2014, the Company has net operating loss carryforwards of approximately $106,325 and $91,419 forfederal and state tax purposes, respectively. These carryforwards will expire from 2015 to 2034. In addition, the Company hasresearch and development tax credit carryforwards of approximately $7,732 for federal income tax purposes and $8,198 forCalifornia tax purposes. The federal research and development tax credit carryforwards will begin to expire in 2022. TheCalifornia state research credit will carry forward indefinitely. The Company has approximately $6,341 of foreign tax creditsthat will begin to expire in 2017, and approximately $12 of state alternative minimum tax credits that will carryforwardindefinitely. The Company’s ability to use its net operating loss carryforwards and federal and state tax credit carryforwards tooffset future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions thatresult in changes in ownership as defined by Internal Revenue Code Section 382. In addition, at December 31, 2014, the Company has net operating loss carryforwards of approximately $45,363 forUnited Kingdom tax purposes that are all limited and can only offset a portion of the annual combined profits in the UnitedKingdom until the net operating losses are fully utilized. A reconciliation of the total amounts of unrecognized tax benefits was as follows: Year Ended December 31, 2014 2013Beginning balance $6,538 $4,626 Reductions of tax positions taken during previous years (1,364) (725)Additions based on uncertain tax positions related to the current period 1,641 1,149 Additions based on uncertain tax positions related to prior periods 71 1,449 Cumulative translation adjustment (92) 39 Ending balance $6,794 $6,538 The total unrecognized tax benefits as of December 31, 2014 and 2013 include approximately $6,030 and $4,623,respectively of unrecognized tax benefits that have been netted against deferred tax assets. As of December 31, 2014,approximately $764 of unrecognized tax benefits, if recognized, would impact the Company’s effective tax rate. The remainingamount, if recognized, would adjust the Company’s deferred tax assets which are subject to valuation allowance. At December31, 2014, the Company anticipated that the liability for uncertain tax positions, excluding interest and penalties, coulddecrease by approximately $102 within the next twelve months due to the expiration of certain statutes of limitation in foreignjurisdictions in which the Company does business. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income taxexpense. The Company has accrued $329 of interest and penalties on uncertain tax positions as of December 31, 2014, ascompared to $283 as of December 31, 2013. Approximately $86, $105 and $182 of accrued interest and penalty expenserelated to estimated obligations for unrecognized tax benefits was recognized during 2014, 2013 and 2012 respectively. During2014, the Company released $37 of interest and penalties on uncertain tax positions due to the expiration of certain statutes oflimitation in foreign jurisdictions in which the Company does business. The Company is subject to taxation in the United States and various foreign jurisdictions. The material jurisdictionssubject to examination by tax authorities are primarily the State of California, United States, United Kingdom, Canada, andChina. The Company’s federal and California tax returns are open by statute for tax years 2002 and forward and could besubject to examination by the tax authorities. The statute of limitations for the Company’s 2013 tax returns for the variousentities in the United Kingdom is expected to be closed in 2015. The Company’s China income tax returns are open by statutefor tax years 2009 and forward. NOTE 11 — SEGMENT REPORTING 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 isevaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to105 Table of Contents allocate resources and in assessing performance. The Company’s chief operating decision-maker is its Chief Executive Officer.The Company’s Chief Executive Officer reviews selected financial information on a geographic basis; however this informationis included within one operating segment for purposes of allocating resources and evaluating financial performance. Accordingly, the Company reports as a single reportable segment—mobile games. In the case of Digital Storefronts,revenues are attributed to the geographic location where the end-user makes the purchase. The Company generates its revenuesin the following geographic regions: Year Ended December 31, 2014 2013 2012United States of America $132,447 $48,697 $57,816 China 11,835 10,985 5,827 Americas, excluding the USA 9,705 5,430 5,051 EMEA 43,507 22,820 22,381 APAC, excluding China 25,652 17,681 17,108 $223,146 $105,613 $108,183 The Company attributes its long-lived assets, which primarily consist of property and equipment, to a countryprimarily based on the physical location of the assets. Property and equipment, net of accumulated depreciation andamortization, summarized by geographic location was as follows: Year Ended December 31, 2014 2013 Americas $5,406 $4,108 EMEA 632 899 APAC 78 89 $6,116 $5,096 NOTE 12 — RESTRUCTURINGDuring 2012, 2013 and 2014, the Company’s management approved restructuring plans to improve the effectiveness andefficiency of its operating model and reduce operating expenses around the world. During the year ended December 31, 2012,the Company recorded $1,371 of restructuring charges relating to employee termination costs in the Company’s APAC, Braziland Washington offices and a reduction of executive sales and marketing headcount in the United States and Spain. During theyear ended December 31, 2013, the Company recorded $1,448, of restructuring plan charges relating to employee terminationcosts in its Brazil, San Francisco, China, Washington, and EMEA offices, and facility-related costs related to streamlining itsfacility in Washington and additional costs associated with vacating its Brazil office. During the year ended December 31,2014, the Company recorded $435 of restructuring charges, relating to employee termination costs associated with headcountreductions in its Moscow, Washington, and San Francisco studios.NOTE 13 – QUARTERLY FINANCIAL DATA (unaudited, in thousands) The following table sets forth unaudited quarterly consolidated statements of operations data for 2013 and 2014. TheCompany derived this information from its unaudited consolidated financial statements, which it prepared on the same basis asits audited consolidated financial statements contained in this report. In its opinion, these unaudited statements include alladjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair statement of thatinformation when read in conjunction with the consolidated financial statements and related106 Table of Contents notes included elsewhere in this report. The operating results for any quarter should not be considered indicative of results forany future period. For the Three Months Ended 2014 2013 March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31 Revenues $44,580 $40,910 $64,791 $72,865 $24,605 $24,445 $21,722 $34,841 Cost of revenues: Platform commissions, royalties and other 13,202 12,432 25,733 29,625 7,462 7,670 (d)7,871 9,803 Amortization of intangible assets 554 441 1,338 2,434 1,074 1,078 1,082 1,004 Total cost of revenues 13,756 12,873 27,071 32,059 8,536 8,748 8,953 10,807 Gross profit 30,824 28,037 37,720 40,806 16,069 15,697 12,769 24,034 Operating expenses: Research and development 15,579 17,297 15,355 16,053 11,630 11,224 11,405 12,618 Sales and marketing 9,485 7,989 (a)15,327 12,275 5,008 5,143 5,361 (e)10,608 General and administrative 4,926 6,131 6,808 7,154 3,919 3,852 3,617 4,162 Amortization of intangible assets 127 127 127 127 495 495 229 117 Restructuring charge - 159 209 67 511 937 - - Total operating expenses 30,117 31,703 37,826 35,676 21,563 21,651 20,612 27,505 Income (loss) from operations 707 (3,666) (106) 5,130 (5,494) (5,954) (7,843) (3,471) Interest and other income (expense), net (130) (24) (340) (c)(978) 132 163 (155) (130) Income/(loss) before income taxes 577 (3,690) (446) 4,152 (5,362) (5,791) (7,998) (3,601) Income tax benefit (provision) (444) (78) (b)10,850 (2,773) (135) (f)2,870 30 78 Net income/(loss) $133 $(3,768) 10,404 $1,379 $(5,497) $(2,921) (7,968) $(3,523) Net income /(loss) per share: Basic $0.00 $(0.04) $0.11 $0.01 $(0.08) $(0.04) $(0.11) $(0.05) Diluted $0.00 $(0.04) $0.10 $0.01 $(0.08) $(0.04) $(0.11) $(0.05) (a)Changes in the sales and marketing expense from $9,485 in the first quarter of 2014 to $15,327 in the third quarter of 2014was due primarily to higher marketing expenses associated with promoting Kim Kardashian: Hollywood.(b)The income tax benefit of $10,850 in the third quarter of 2014 was due primarily to the release of a portion of theCompany’s valuation allowance of $8,352 resulting from the acquisition of Cie Games in August 2014, and the release ofan $810 liability of uncertain tax positions relating to 2011, and as the Company received a closure notice for an ongoingtax return inquiry in July 2014.(c)Interest and other income (expense), net was a loss of $978 in the fourth quarter of 2014 primarily due to foreign currencylosses related to the revaluation of certain assets and liabilities driven by significant devaluation of the Russian Ruble, andother European currencies in which the Company transacts. (d)Includes an impairment of prepaid royalties and guarantees charge of $435 in the third quarter of 2013, primarily due to aprepaid royalty impairment charge recorded for two of the Company’s third-party publishing titles.(e)Change in sales and marketing expense from $5,008 in the first quarter of 2013 to $10,608 in the fourth quarter of 2013was due primarily to higher marketing expenses associated with promoting Deer Hunter 2014.(f)The income tax benefit of $2,870 in the second quarter of 2013 was due primarily to the release of uncertain tax positionsdue to the expiration of certain statutes of limitations in certain foreign jurisdictions. 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 theeffectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing andevaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, thedesign of disclosure controls and procedures must reflect the fact that there are resource constraints and107 Table of Contents that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative totheir costs. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,2014, our disclosure controls and procedures are designed to provide reasonable assurance and are effective to providereasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that suchinformation is accumulated and communicated to our management, including our Chief Executive Officer and Chief FinancialOfficer, 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, assuch term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of theeffectiveness of our internal control over financial reporting as of December 31, 2014 based on the guidelines established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). Based on the results of this evaluation, our management has concluded that our internal control overfinancial reporting was effective as of December 31, 2014 to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external reporting purposes in accordance with generally acceptedaccounting principles. The effectiveness of our internal control over financial reporting as of December 31, 2014 has been audited byPricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on page 69. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during our fourth quarter of fiscal 2014 that hasmaterially affected, or is 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 GovernanceThe information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2015Annual Meeting of Stockholders. For information with respect to our executive officers, see “Executive Officers” at the end ofPart 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 ofBusiness Conduct and Ethics is published on our website at www.glu.com/investors. We disclose on our website amendmentsto certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions granted to executive officersand directors. Item 11. Executive CompensationThe information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2015Annual Meeting of Stockholders.108 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our 2015Annual Meeting of Stockholders. 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 2015Annual 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 2015Annual Meeting of Stockholders. PART IV Item 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements: The financial statements filed as part of this report are listed on the index to financialstatements on page 68. (2) Financial Schedules: All schedules have been omitted because they are not required, not applicable, not present inamounts sufficient to require submission of the schedule, or the required information is otherwise included. (b) Exhibits. The exhibits listed on the Exhibit Index (following the Signatures section of this report) are included, orincorporated by reference, in this report. 109 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLU MOBILE INC. Date: March 13, 2015By:/s/ Niccolo M. de Masi Niccolo M. de Masi, President and Chief ExecutiveOfficer Date: March 13, 2015By:/s/ Eric R. Ludwig Eric R. Ludwig, Executive Vice President, ChiefOperating Officer and Chief Financial Officer 110 Table of Contents POWER OF ATTORNEY By signing this Annual Report on Form 10-K below, I hereby appoint each of Niccolo M. de Masi, Eric R. Ludwig andScott 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. Iauthorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact for himself and (2) perform any actions that hebelieves are necessary or appropriate to carry out the intention and purpose of this Power of Attorney. I ratify and confirm alllawful 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, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacity and on the dates indicated. SignatureTitleDate /s/ Niccolo M. de Masi President, Chief Executive OfficerMarch 13, 2015Niccolo M. de Masi and Chairman (Principal Executive Officer) /s/ Eric R. Ludwig EVP, Chief Operating Officer and Chief FinancialOfficerMarch 13, 2015Eric R. Ludwig (Principal Financial Officer) /s/ Gregory J. Cannon Vice President of Finance and Investor RelationsMarch 13, 2015Gregory J. Cannon (Principal Accounting Officer) /s/ Lorne Abony Lead Independent DirectorMarch 13, 2015Lorne Abony /s/ Eric R. Ball DirectorMarch 13, 2015Eric R. Ball /s/ Ann Mather DirectorMarch 13, 2015Ann Mather /s/ William J. Miller DirectorMarch 13, 2015William J. Miller /s/ Hany M. Nada DirectorMarch 13, 2015Hany M. Nada /s/ Benjamin T. Smith, IV DirectorMarch 13, 2015Benjamin T. Smith, IV 111 Table of ContentsExhibit Index Incorporated by Reference Exhibit FilingFiledNumberExhibit DescriptionFormFile No.ExhibitDateHerewith 2.01 Agreement and Plan of Merger, dated as of August 2, 2011 by andamong Glu Mobile Inc., Granite Acquisition Corp., Foundation 9Entertainment, Inc. and Griptonite, Inc.8-K001-333682.01 08/02/11 2.02 Amendment No. 1 to Agreement and Plan of Merger, dated as ofAugust 2, 2011 by and among Glu Mobile Inc., Granite AcquisitionCorp., Foundation 9 Entertainment, Inc. and Griptonite, Inc.8-K001-333682.01 08/15/11 2.03 Share Purchase Agreement, dated as of August 1, 2011, by andamong Glu, Blammo Games Inc. and each of the owners of theoutstanding share capital of Blammo.8-K001-333682.02 08/02/11 2.04 Agreement and Plan of Merger, dated as of August 2, 2012 by andamong Glu Mobile Inc., Galileo Acquisition Corp, IGNEntertainment, Inc. and GameSpy Industries, Inc.10-Q001-333682.01 11/09/12 2.05 Agreement and Plan of Merger, dated as of April 30, 2014 by andamong Glu Mobile Inc., Midas Acquisition Corp., PlayFirst, Inc. andFortis Advisors LLC8-K001-333682.01 05/02/14 2.06 Agreement and Plan of Merger and Reorganization, dated as of July30, 2014 by and among Glu Mobile Inc., Cardinals AcquisitionMerger Corporation, Cardinals Acquisition Merger LLC, Cie DigitalLabs, LLC, Cie Games, Inc. and Shareholder RepresentativeServices, LLC8-K001-333682.01 07/30/14 3.01 Restated Certificate of Incorporation of Glu Mobile Inc.S-1/A333-1394933.02 02/14/07 3.02 Amended and Restated Bylaws of Glu Mobile Inc., adopted onMarch 7, 2014.8-K001-3336899.01 03/13/14 4.01 Form of Registrant’s Common Stock Certificate.S-1/A333-1394934.01 02/14/07 10.01# Form of Indemnity Agreement entered into between Glu Mobile Inc.and each of its directors and executive officers, effective as ofOctober 24, 20138-K001-3336899.01 10/29/13 10.02# 2001 Stock Option Plan, form of option grant used fromDecember 19, 2001 to May 2, 2006, form of option grant used fromDecember 8, 2004 to May 2, 2006 and forms of option grant usedsince May 2, 2006.S-1/A333-13949310.02 01/22/07 10.03(A)# 2007 Equity Incentive Plan, as amended through June 6, 2013.8-K001-3336899.01 06/10/13 112 Table of Contents 10.03(B)# For the 2007 Equity Incentive Plan, forms of (a) Notice of StockOption Grant, Stock Option Award Agreement and Stock OptionExercise Agreement, (b) Notice of Restricted Stock Award andRestricted Stock Agreement, (c) Notice of Stock Appreciation RightAward and Stock Appreciation Right Award Agreement and(d) Notice of Stock Bonus Award and Stock Bonus Agreement.S-1/A333-13949310.03 02/16/07 10.03(C)# For the 2007 Equity Incentive Plan, form of Notice of RestrictedStock Unit Award and Restricted Stock Unit Agreement10-Q001-3336810.08 08/09/13 10.04# 2007 Employee Stock Purchase Plan, as amended and restated onAugust 1, 2011.10-K001-3336810.04 03/14/12 10.05(A)# 2008 Equity Inducement Plan, as amended effective November 1,2013.8-K001-3336899.01 10/04/13 10.05(B)# For the 2008 Equity Inducement Plan, forms of Notice of StockOption Grant, Stock Option Award Agreement and Stock OptionExercise Agreement.10-K001-3336810.05 03/21/10 10.05(C)# For the 2008 Equity Inducement Plan, form of Notice of RestrictedStock Unit Award and Restricted Stock Unit Award Agreement.10-K001-3336810.05 03/14/14 10.06# Forms of Stock Option Award Agreement (Immediately Exercisable)and Stock Option Exercise Agreement (Immediately Exercisable)under the Glu Mobile Inc. 2007 Equity Incentive Plan.10-Q001-3336810.05 08/14/08 10.07# Employment Agreement between Glu Mobile Inc. and Niccolo M.de Masi, dated December 28, 2009.8-K001-3336899.02 01/04/10 10.08# Summary of Compensation Terms of Niccolo M. de Masi.8-K001-33368--07/30/14 10.09# Change of Control Severance Agreement, dated as of December 28,2009, by and between Glu Mobile Inc. and Niccolo M. de Masi.8-K001-3336899.03 01/04/10 10.10# Amendment, dated as of July 7, 2011, to Change of Control andSeverance Agreement between Glu Mobile Inc. and Niccolo M. deMasi, dated as of December 28, 2009.10-Q001-3336810.01 11/14/11 10.11# Summary of Compensation Terms of Eric R. Ludwig.8-K001-33368--10/05/14 10.12# Change of Control Severance Agreement, dated as of October 10,2008, between Glu Mobile Inc. and Eric R. Ludwig.10-K001-3336810.09 03/13/09 10.13# Amendment, dated as of July 7, 2011, to Change of Control andSeverance Agreement between Glu Mobile Inc. and Eric R. Ludwig,dated as of October 10, 2008.10-Q001-3336810.02 11/14/11 10.14# Offer Letter between Glu Mobile Inc. and Chris Akhavan, dated as ofMarch 14, 2013.10-K001-3336810.14 03/14/14 10.15# Summary of Compensation Terms of Chris Akhavan.8-K001-33368--10/05/14 113 Table of Contents 10.16# Change of Control Severance Agreement between Glu Mobile Inc.and Chris Akhavan, dated as of April 22, 2013.10-Q001-33368--08/09/13 10.17# Summary of Compensation Terms of Scott J. Leichtner.8-K001-33368--02/14/14 10.18# Summary of Change of Control Severance Arrangement betweenGlu Mobile Inc. and Scott J. Leichtner, dated as of July 7, 2011.10-K001-3336810.15 03/15/13 10.19# Glu Mobile Inc. 2014 Executive Bonus Plan, as amended8-K001-3336899.01 02/14/14 10.20# Glu Mobile Inc. 2015 Executive Bonus Plan8-K001-3336899.01 12/19/14 10.21# Non-Employee Director Compensation Program, effective as ofOctober 1, 2013.10-K001-3336810.23 03/14/14 10.22 Sublease between Oracle America, Inc. and Glu Mobile Inc., dated asof April 16, 2013.8-K001-3336899.01 04/22/13 10.23 Lease between Talon Portfolio Services, LLC and Griptonite, Inc.,dated as of June 6, 2013.10-Q001-3336810.07 08/09/13 10.24 Purchase Agreement, dated as of June 30, 2010, by and between GluMobile Inc. and certain PIPE investors.8-K001-3336899.01 07/06/10 10.25 Form of Warrant by and between Glu Mobile Inc. and certain PIPEinvestors.8-K001-333684.01 07/06/10 10.26 Common Stock Warrant, between Glu Mobile Inc. and MGMInteractive Inc., dated as of July 15, 2013.S-3333-1905454.03 08/09/13 10.27 iOS Developer Program License Agreement between Glu Games Inc.and Apple Inc., as amended to date.10-K001-3336810.27 03/15/13 10.28 Android Market Developer Distribution Agreement between GluGames Inc. and Google Inc., as amended to date.10-K001-3336810.28 03/15/13 10.29+ License Agreement, dated as of March 31, 2012, by and betweenGlu Mobile Inc. and Atari, Inc.10-Q/A001-3336810.01 10/12/12 10.30+ Trademark and Domain Name Assignment and License Agreement,dated as of March 31, 2012, by and between Glu Mobile Inc. andAtari Inc.10-Q001-3336810.02 08/09/12 10.31++ Unity Technologies Software License Agreement between GluMobile Inc. and Unity Technologies ApS, dated as of October 29,2012, as amended effective October 29, 2014 and December 18,2014. X 10.32+ License Agreement, dated as of November 5, 2013, by and betweenGlu and Kimsaprincess, Inc., as amended June 13, 2014 andSeptember 2, 2014.10-Q001-3336810.01 11/10/14 114 Table of Contents 10.33 Earnout Agreement and Amendment to Share Purchase Agreement,effective as of July 2, 2014, by and amount Glu, Blammo GamesInc., each of the former shareholders of Blammo and MichaelHaines.8-K001-3336899.01 07/16/14 21.01 List of Subsidiaries of Glu Mobile Inc. X 23.01 Consent of PricewaterhouseCoopers LLP, independent registeredpublic accounting firm. X 24.01 Power of Attorney (see the Signature Page to this report). 31.01 Certification of Principal Executive Officer Pursuant to SecuritiesExchange Act Rule 13a-14(a). X 31.02 Certification of Principal Financial Officer Pursuant to SecuritiesExchange Act Rule 13a-14(a). X 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 XBRL Report Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document #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 confidentialtreatment issued by the SEC under Rule 24b-2 as promulgated under the Exchange Act.++Certain portions of this exhibit have been omitted and have been filed separately with the SEC pursuant to a request for confidentialtreatment under Rule 24b-2 as promulgated under the Exchange Act.*This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to theliability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of1933 or the Securities Exchange Act of 1934, except to the extent that Glu Mobile Inc. specifically incorporates it by reference. 115*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended EXHIBIT 10.31UNITY TECHNOLOGIES SOFTWARE LICENSE AGREEMENT This Software License Agreement (this “Agreement”) is entered into and made effective as of October 29, 2012 (the“Effective Date”), by and between Unity Technologies ApS, a Danish corporation with its principal place of business atVendersgade 28, DK-1363, Copenhagen, Denmark (“UTECH”), and Glu Mobile Inc., a Delaware corporation with its principalplace of business at 45 Fremont Street, Suite 2800, San Francisco, CA 94105 (“CUSTOMER”).1.Definitions.1.1“Affiliate” means an entity which controls, is controlled by or is under common control with a party hereto, where “control”means the power to control the composition of the board of directors of the relevant party (whether by contract, corporate law orother means), or the possession of more than half of the voting equity share capital of the relevant party, or the ability toconsolidate such company’s financial statements with those of such party in accordance with generally accepted accountingprinciples.1.2“CUSTOMER Modifications” means modifications to the Unity Source Code made by CUSTOMER by exercising itsrights under Section 2.1.1.3 “Prior Agreement” means the Software License Agreement by and between UTECH and CUSTOMER or its Affiliates enteredinto and effective as of March 23, 2011.1.4“Title” means one of CUSTOMER’s or its Affiliates’ products for which CUSTOMER or its Affiliates wishes to use the UnityProducts, including Customers’ updates to such Title whether made during or after the Term (as defined below in Section 7.1 ofthis Agreement). For the avoidance of doubt, CUSTOMER’s use of the Unity Products after the Term shall be in accordance withSection 7.3 hereof. 1.5“Unity Object Code” means the binary object code based on the source code for Unity Products.1.6“Unity Product(s)” means each of (i) UTECH’s 3D development editor and engine software offerings incorporated into (a)Unity Pro and (b) Unity Pro add-on products that are identified and described in Exhibit A, and (ii) Unity Web Player, each asidentified and defined in Exhibit A and all Updates thereto.1.7“Unity Source Code” means the source code for ***.1.8“Unity Source Code for PC/MAC” means the source code for Unity Pro for PC/MAC ***. 1.9“Updates” means interim Unity Source Code and Unity Object Code, as applicable, software releases and errorcorrection releases of the Unity Product, or parts thereof, which fix or correct known problems, but which do not provide thesubstantial feature enhancements which would be included in an upgrade or new version of the Unity Product (e.g., going from v.4.0 to 4.1 or adding a software patch or bug fix that does not change the version number).1.10“Upgrade” means an upgrade to the Unity Products ***. 1.11“UTECH Marks” means the name “UNITY,” as well as all other trademarks, service marks, logos or trade names usedby UTECH to identify itself and/or its products and services during the Term (as defined below in Section 7.1 of this Agreement). 2.License Grant.2.1Unity Source Code Licenses. Subject to payment of the applicable license fees set forth in Exhibit C and subject tothe terms and conditions of this Agreement, for the duration of the Term (as defined below in Section 7.1 of this Agreement), UTECH grants to CUSTOMER a limited, worldwide, non-exclusive, non-transferable, non-sublicensable (except as permittedherein) license to (a) use, reproduce and modify the Unity Source Code to create CUSTOMER1CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Modifications (also known as “derivative works” under U.S. copyright law), (b) to use and reproduce CUSTOMERModifications, and (c) use and reproduce the Unity Source Code, each such license for the sole purposes of the creation,publication and distribution of CUSTOMER’s or its Affiliates’ Titles for the applicable platforms and environments specificallyidentified on Exhibit B and for no other purpose or products. For the avoidance of doubt ***.2.2Object Code License. Subject to payment of the applicable license fees set forth in Exhibit C and subject to the termsand conditions of this Agreement, UTECH grants CUSTOMER and its Affiliates a limited, worldwide, non-exclusive, non-transferable, non-sublicensable (except as permitted herein), perpetual license to use and reproduce (a) the Unity Object Code,whether provided by UTECH (i.e., the Unity Products) or as the result of CUSTOMER’s compiling efforts during the Term (i.e.,object code of the Unity Source Code), to the licensed Unity Products, and (b) CUSTOMER Modifications, in object code only, ascompiled by CUSTOMER or its Affiliates, for the sole purposes of the creation, publication and distribution of CUSTOMER’s Titlesfor the applicable platforms and environments specifically identified on Exhibit B and for no other purpose or products. CUSTOMER may distribute the runtime portion of the Unity Products (less the Unity Web Player) solely as embedded orincorporated into the Titles and solely to third parties to whom CUSTOMER or its Affiliates licenses or sells the Titles pursuant toan agreement that is equally protective of UTECH and its licensors as this Agreement. For the avoidance of doubt, iOS Pro,Android Pro, and Team License (as such term is defined in Exhibit A) add-on licenses must be purchased for each individual thatrequires access to such tools, in addition to the Unity Pro license. 2.3Unity Pro Seat License Required For Each Developer. Use of the Unity Products is limited to the number of applicableseat licenses purchased for each individual using the Unity Products. For clarity, and unless otherwise agreed in writing, a singlelicense (or seat) means the right for a designated individual user to use the applicable Unity Product on one computer; providedthat such Unity Product may be installed on a second computer for sole use by the same individual user associated with thatlicense (or seat). CUSTOMER and its Affiliates may not use the free version of the Unity Products as a substitute for purchasingPro licenses for such Unity Products; provided, however, that CUSTOMER shall be provided 30-day trial versions of the relevantUnity Products upon reasonable request. 2.4Copy Protection. CUSTOMER agrees that the copy protection and license key code components of the Unity Editorproduct may not be modified, changed or circumvented in any way. CUSTOMER may not under any circumstances distribute theUnity Source Code, CUSTOMER Modifications or the Unity Object Code as a standalone program either alone, with its Titles orotherwise to any third parties, except as otherwise permitted by Section 2.6 of this Agreement. 2.5Restrictions; CUSTOMER Requirements. CUSTOMER acknowledges that the Unity Products contain trade secretsof UTECH, its Affiliates, and its licensors, and, in order to protect such trade secrets and other interests that UTECH, its Affiliatesand its licensors may have in the Unity Products, except to the extent expressly authorized above in Section 2.1 above,CUSTOMER agrees not to modify, reverse engineer, decompile or disassemble the Unity Products or permit a third party to doany of the foregoing. Except as expressly provided in Section 2.6 below, CUSTOMER shall not distribute sell, sublicense orotherwise transfer the Unity Products. CUSTOMER will comply with (i) all laws and regulations applicable to CUSTOMER’s useof Unity Products and, (ii) in all material respects, with all laws and regulations applicable to CUSTOMER’s creation and/orcommercialization of each Title. 2.6Third Party Contractors. The parties recognize that CUSTOMER and its Affiliates may, from time to time during theTerm (as defined below in Section 7.1), utilize third-party developers for the testing, development, and operation (with respect toonline services) of certain Titles (collectively, “Subcontracted Services”). The rights granted to CUSTOMER and its Affiliates inSections 2.1-2.2 above include the right to sublicense such rights and licenses to the applicable Unity Products to its appointedthird-party developers and to transfer the Title development, testing and/or operation to such appointed third-party developers forthe sole purpose of having such third-party developers provide the Subcontracted Services to CUSTOMER and itsAffiliates. CUSTOMER is responsible for ensuring that such third-party developers enter into an agreement that will obligate themto comply with the terms and conditions of this Agreement. Such agreement between CUSTOMER or one of its Affiliates andeach third-party developer will provide in particular that the licenses, materials and rights applicable to the Unity Products grantedtherein will be used solely by the third-party developers for the Subcontracted Services and that all embodiments of the UnityProduct will be returned to CUSTOMER or one of its Affiliates upon completion or other termination of such SubcontractedServices. Further, it is agreed and understood that any third party developers who have not already purchased Unity Products foruse in development for CUSTOMER’s Titles must have licenses to Unity Products in order to provide Subcontracted Services,and therefore shall be required to either (i) purchase licenses to Unity Products, or (ii) have licenses to Unity Products provided tothem by CUSTOMER via CUSTOMER’s sublicensing rights set forth in this Section 2.6 (and CUSTOMER shall acquire ortransfer 2CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended such licenses to them). CUSTOMER shall be responsible for its subcontractors’ compliance with all the terms and conditions ofthis Agreement or any breach thereof.2.7CUSTOMER Modifications. CUSTOMER agrees to deliver to UTECH all CUSTOMER Modifications it creates. *** 2.8. UTECH Ownership; CUSTOMER OWNERSHIP. *** UTECH and its Affiliates own all right, title and interest in andto the Unity Products and associated documentation or confidential information and reserves all rights and licenses in and to theUnity Products not expressly granted to CUSTOMER or its Affiliates under this Agreement. CUSTOMER’s rights in the UnityProducts are limited to those expressly granted in this Agreement. CUSTOMER and/or its Affiliates own all right, title and interestin and to the Titles *** associated documentation or confidential information and reserves all rights and licenses in and to theTitles *** not expressly granted to UTECH or its Affiliates under this Agreement. 2.9 Copyright Notice. CUSTOMER shall not remove, alter or otherwise modify any copyright, trademark or other noticesof proprietary interest contained in the Unity Products, Unity Source Code and documentation. CUSTOMER shall provide thefollowing attribution credit clearly visible on a page easily accessible by Title end users, such as the “About” page, within allCUSTOMER Titles that utilize the Unity Products: “This program was created using Unity ***. Portions of this program ©2005-2012 Unity Technologies.” or “This program was created using Unity ***. Portions of this program © 2005-2012Unity Technologies.” as may be applicable.2.10Bankruptcy. The parties hereby acknowledge and agree that, in the event of the bankruptcy of UTECH, the licensesgranted to CUSTOMER and its Affiliates in this Agreement constitute a “license of intellectual property” and shall be subject toSection 365(n) of the United States Bankruptcy Code, and that CUSTOMER and its Affiliates shall be entitled to all rights andbenefits of such Section 365(n) in accordance with its terms and conditions. For the avoidance of doubt, CUSTOMER and itsAffiliates have no obligation to use the Unity Products. 3.Support and Updates.3.1 Enterprise Support. Subject to payment of the applicable license fees set forth in Exhibit C and subject to the termsand conditions of this Agreement, UTECH shall provide CUSTOMER and its Affiliates with enterprise level support during theInitial Term (as defined in Section 7.1 of the Agreement) in accordance with the terms set forth in Exhibit D.3.2Updates. In the event that UTECH makes Updates to the Unity Products (including, but not limited to, the UnityObject Code) generally available during the Term (as defined below in Section 7.1), UTECH will make such Updates available toCUSTOMER and its Affiliates at no additional charge and will deliver such Updates to CUSTOMER and its Affiliates at least asoften as UTECH commercially releases such Updates. For the avoidance of doubt, CUSTOMER’s and its Affiliates’ right toreceive Updates hereunder does not include any custom additions to the Unity Product developed by UTECH, unless suchadditions are made commercially available to all UTECH customers as an Update. Other than as set forth in Section 3.3 below,new versions or upgrades are not included with any licenses.3.3Upgrades. During the Term (as defined below in Section 7.1) of this Agreement, UTECH will make commerciallyreasonable efforts to deliver to CUSTOMER Upgrades for all of the Unity Products previously licensed pursuant to the PriorAgreement, including, if applicable, Unity Source Code, within fifteen (15) days of such Upgrades becoming generally andcommercially available to UTECH’s licensees. Upon delivery of such Upgrades for the previously licensed Unity Products, thePrior Agreement shall be superseded by this Agreement with respect to the Unity Products and Unity Source Code licensedtherein, and shall have no further force or effect; such Upgrades and Unity Products shall be governed by the provisions of thisAgreement. To the extent Unity Products delivered to CUSTOMER during the Term are not the ***, UTECH will makecommercially reasonable efforts to deliver the Upgrades within fifteen (15) days of such Upgrades becoming generally andcommercially available to UTECH’s licensees. 3.4Connectivity. The Unity Products may make Internet connections to remote servers to (i) check for Updates; (ii)provide anonymous usage statistics used by UTECH to improve the Unity Products; and (iii) validate license keys and confirmcompliance with the terms of this Agreement.3CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 3.5Unity Source Code for PC/MAC. CUSTOMER acknowledges and agrees that, while CUSTOMER *** CUSTOMERhas *** Notwithstanding the foregoing, *** in accordance with the terms in the Enterprise Support Agreement set forth in ExhibitD *** in accordance with the terms of Exhibit D, CUSTOMER may ***. 4.Confidentiality.4.1Confidential Information. For purposes of this Agreement “Confidential Information” means: (a) the Unity Productsand the intellectual property embodied therein; (b) the intellectual property embodied in the software of any Title or any otherproprietary CUSTOMER source code or source code of a CUSTOMER Affiliate disclosed to UTECH; (c) any non-public data orinformation disclosed by one party or its Affiliates (the “Discloser”) to the other party or its Affiliates (the “Recipient”) that ismarked “confidential” or “proprietary” at the time of disclosure or which the Recipient should reasonably know to be confidentialgiven the nature of the data or information and the circumstance of disclosure; and (d) the specific terms and conditions of thisAgreement. 4.2Exceptions. The obligations set forth in Section 4.3 will not apply to any information that: (a) is or becomes generallyknown to the public through no fault of or breach of this Agreement by the Recipient; (b) is rightfully known by the Recipient at thetime of disclosure without an obligation of confidentiality; (c) is independently developed by the Recipient without use of theDiscloser’s Confidential Information; or (d) is rightfully obtained by the Recipient from a third party without restriction on use ordisclosure. In addition, either party may disclose a copy of this Agreement or the specific terms and conditions set forth herein inthe event such information is required to be disclosed by a competent legal or governmental authority or the rules of the Securitiesand Exchange Commission or The NASDAQ Stock Market, provided that (i) the party subject to such disclosure requirement (A)gives the other party prompt written notice of such requirement prior to the disclosure, (B) provides the party that is not subject tothe disclosure requirement with a reasonable opportunity to review and provide input on any materials that are submitted to suchcompetent legal or governmental authority, the Securities and Exchange Commission or The NASDAQ Stock Market, and (C)uses its commercially reasonable efforts to obtain an order protecting the Agreement or the redacted portions thereof from publicdisclosure to the greatest degree reasonably possible under the circumstances or, if permitted by the rules of the competent legalor governmental authority, the Securities and Exchange Commission or The NASDAQ Stock Market, gives the Discloser areasonable opportunity to seek a protective order or equivalent, and (ii) all information related to pricing is redacted from theAgreement prior to disclosure, provided that the party not subject to the disclosure requirement understands that the party that issubject to the disclosure requirement cannot guarantee whether such competent legal or governmental authority, the Securitiesand Exchange Commission or The NASDAQ Stock Market will ultimately permit such pricing information to be redacted. 4.3Obligations. Except as expressly permitted by this Agreement, during the Term (as defined below in Section 7.1) ofthis Agreement, the Recipient will: (a)not disclose the Discloser’s Confidential Information except (i) to the employees or contractors of the Recipient to theextent that they need to know that Confidential Information for the purpose of performing the Recipient’s obligations under thisAgreement, and who are bound by confidentiality terms with respect to that Confidential Information, which terms are no lessrestrictive than those contained in this Section 4.3; or (ii) as required to be disclosed by law, to the extent required to comply withthat legal obligation, provided that the Recipient will promptly notify the Discloser of such obligation;(b)use the Discloser’s Confidential Information only for the purpose of performing Recipient’s obligations and/or exercisingRecipient’s rights under this Agreement; and (c)use commercially reasonable care in handling and securing the Discloser’s Confidential Information, and employreasonable data security measures that the Recipient ordinarily uses with respect to protecting its own confidential information ofsimilar nature and importance from disclosure.4.4Return of Confidential Information. Except as otherwise expressly provided in this Agreement, the Recipient will return to theDiscloser, and destroy or erase all of the Discloser’s Confidential Information in tangible form, upon the expiration or termination ofthis Agreement, and the Recipient will promptly certify in writing to the Discloser that it has so erased or destroyed suchConfidential Information.4CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 5.Fees.5.1Fees. In consideration for the licenses granted and for the provision of Updates and Upgrades by UTECH toCUSTOMER and its Affiliates hereunder, CUSTOMER agrees to pay the License Fees set forth and further defined in Exhibit C . CUSTOMER may order additional licenses by executing and delivering to UTECH a quote or other mutually agreed order form toUTECH. This Agreement shall govern the payment of all such orders, and nothing contained in CUSTOMER’s quote, order orother communication shall in any way modify this Agreement; provided, however, that all licenses granted by virtue of aCUSTOMER order placed by CUSTOMER and accepted by UTECH during the Term (as defined below in Section 7.1) of thisAgreement shall be subject to all provisions of this Agreement. UTECH shall invoice CUSTOMER for such License Fees and forthe fees applicable to additional licenses granted to CUSTOMER during the Term (as defined below in Section 7.1) andCUSTOMER shall pay all invoices no later than thirty (30) days from receipt of an invoice.5.2Verification. UTECH may, upon reasonable suspicion that CUSTOMER has violated either (a) one or more of the userestrictions of the licenses granted under Sections 2.1, 2.2, or (2.6 in the case of Subcontracted Services) or (b) the provisions ofSections 2.3, 2.4 or 2.5 (or 2.6 in the case of Subcontracted Services) of this Agreement and with fifteen (15) business days’ priorwritten notice, access CUSTOMER’s facilities and computer systems for the sole purpose of reviewing and verifyingCUSTOMER’s compliance with the relevant material terms of this Agreement. Such verification processes shall, to the extentreasonably possible, occur during times other than CUSTOMER’s business hours and be minimally intrusive to CUSTOMER soas to allow CUSTOMER’s business operations to continue uninterrupted during the verification process. In the event CUSTOMERhas not paid for all Unity Products then in use by CUSTOMER or additional licenses for platforms on which Titles have beendeployed are required for CUSTOMER’s compliance with the relevant material terms of this Agreement, CUSTOMER shall payUTECH’s resulting invoice in accordance with the provisions of Section 5.1 above. 5.3Tax. CUSTOMER will pay all amounts due under this Agreement in U.S. currency. All fees payable under thisAgreement are net amounts and are payable in full, without deduction for taxes or duties of any kind. CUSTOMER will beresponsible for, and will promptly pay, all taxes and duties of any kind (including but not limited to sales, use and withholdingtaxes) associated with this Agreement or CUSTOMER’s receipt or use of the Unity Products, except for taxes based on UTECH’snet income. In the event that UTECH is required to collect any tax for which CUSTOMER is responsible, CUSTOMER will paysuch tax directly to UTECH. If CUSTOMER pays any withholding taxes that are required to be paid under applicable law,CUSTOMER will furnish UTECH with written documentation of all such tax payments, including receipts.5.4 Unity Accounts Receivable. All CUSTOMER payments will be sent to UTECH’s accounts receivable at the followingaddresses: Check PaymentsUnity Technologies ApS345 Broadway Street, Suite 200San Francisco, CA 94133Attn: Accounts Receivable Wire Payments***ABA number (routing number): ***SWIFT: ***Account number: ***Account: Unity Technologies ApS 6.Marketing and Branding. 6.1Publicity. Neither party shall, without the prior written consent of the other party, issue any press release or otherpublicity relating to this Agreement, the other party or the relationship between the parties. Notwithstanding the foregoing, duringthe Term, UTECH may use CUSTOMER’s name in its customer lists and web site, and may list and display5CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended CUSTOMER’s names of Titles, along with screenshots and marketing materials provided by CUSTOMER to UTECH on UTECH’sweb site upon public release of each Title. CUSTOMER shall use commercially reasonable efforts to provide screenshots andmarketing materials reasonably requested by UTECH within fifteen (15) days of such request. 6.2Branding. *** Any use of a UTECH Mark by CUSTOMER must correctly attribute ownership of such mark toUTECH and must be in accordance with applicable law and UTECH’s then-current trademark usage guidelines, if applicable. CUSTOMER hereby grants to UTECH and its Affiliates a non-exclusive, non-transferable license, during the Term (as definedbelow in Section 7.1), to use the CUSTOMER’s marks solely in connection with Section 6.1 above and any additional brandinginitiatives that the parties may mutually agree upon in writing. Any use of a CUSTOMER’s mark by UTECH must correctlyattribute ownership of such mark to CUSTOMER and must be in accordance with applicable law and CUSTOMER’s then-currenttrademark usage guidelines, if applicable, or as otherwise approved in advance by CUSTOMER in writing. CUSTOMERacknowledges and agrees that UTECH owns the UTECH Marks and that any and all goodwill and other proprietary rights that arecreated by or that result from CUSTOMER’s use of a UTECH Mark hereunder inure solely to the benefit of UTECH, and likewise,UTECH acknowledges and agrees that CUSTOMER owns CUSTOMER’s marks and that any goodwill and other proprietary rightsthat are created by or result from UTECH’s use of the CUSTOMER marks inures solely to the benefit of CUSTOMER. Therefore, neither party will at any time contest or aid in contesting the validity or ownership of any mark belonging to the otherparty or take any action in derogation of the owning party’s rights therein, including, but not limited to, applying to register anytrademark, trade name or other designation that is confusingly similar to any marks belonging to the other party.7.Term and Termination.7.1Term. This Agreement will commence on the Effective Date and will continue in effect for a period of two (2) years (the“Initial Term”), unless this Agreement is earlier terminated pursuant to Section 7.2. Upon expiration of the Term, *** by providingUTECH at least thirty (30) days prior written notice *** the “Term.” CUSTOMER acknowledges and agrees that each *** shall notinclude Enterprise Support set forth in Section 3.1 and further detailed in Exhibit D.7.2Termination. Either party may terminate this Agreement at any time upon written notice to the other party if the other partybreaches any material term hereof and fails to cure such breach within thirty (30) days after receiving written notice of suchbreach from the non-breaching party.7.3Effects of Termination. Upon expiration of the Term, CUSTOMER and its Affiliates shall cease all use of the Unity SourceCode and will promptly permanently delete or destroy all copies of the Unity Source Code and so certify in writing. CUSTOMERand its Affiliates may continue to use any fully paid up licenses for the Unity Products in Unity Object Code form after theexpiration of the Term. Thus such expiration shall have no effect on CUSTOMER’s Titles whether such Titles were releasedduring the term of the Prior Agreement or during the Term or on CUSTOMER’s ability to support the same, provided thatCUSTOMER’s support of its Titles does not imply any right to use or access to the Unity Source Code after the Term. Notwithstanding the foregoing, in the case of termination of this Agreement by UTECH for an uncured material breach byCUSTOMER of Sections 2.1-2.6, 4, or 5.1 of this Agreement (to the extent CUSTOMER is able to take commercially reasonablesteps to cure such breach), CUSTOMER will immediately cease all use of the Unity Source Code and all Unity Products in UnityObject Code form, and will promptly return to UTECH, permanently delete and/or destroy any copies of the Unity Source Code andUnity Object Code and so certify in writing. All payable amounts of License Fees are immediately due and payable upon anytermination of this Agreement other than a termination by CUSTOMER for an uncured breach by UTECH. 7.4 Survival. After termination or expiration of this Agreement, the following Sections will survive: Section 1, 2, 4, 7, 8, 9, 10 and 11.8.Representations; Disclaimer of Warranties.8.1UTECH’s Representations & Warranties. UTECH makes the following representations and warranties to CUSTOMER:(a)The Unity Products will not infringe upon any copyright, trademark, trade secret or other proprietary right (other than a patentright) of another party; and to the best of UTECH’s knowledge the Unity Products will not infringe upon any patent rights of anotherparty. 6CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended (b)Use of UTECH’s trademarks, as directed by UTECH, on and in connection with the marketing and distribution of the Titles, willnot infringe any trademark rights of others.(c)UTECH has full corporate power to enter into this Agreement, to carry out its obligations hereunder and to grant the rightsherein granted to CUSTOMER and its Affiliates. 8.2CUSTOMER's Representations & Warranties. CUSTOMER makes the following representations and warranties to UTECH: CUSTOMER has full power to enter into this Agreement and to carry out its obligations hereunder and to grant the rights hereingranted to UTECH and its Affiliates. 8.3UTECH Indemnity. UTECH agrees to indemnify, hold harmless and defend CUSTOMER and its Affiliates from all third partyclaims, defense costs (including reasonable attorneys' fees), settlements, judgments and other expenses arising out of or onaccount of the following (i) alleged or actual infringement or violation of any trademark, copyright, patent, trade secret or otherproprietary right, where such alleged or actual infringement or violation is caused directly by the Unity Products or UTECH’sMarks, except to the extent any such claim arises solely from CUSTOMER’s or CUSTOMER’s Affiliates’ Modifications, whetheror not UTECH was knowledgeable about the alleged or actual infringement, as applicable or (ii) alleged or actual violation ofprivacy rights of CUSTOMER’s end users where such violation of privacy rights was caused directly by the Unity Products. Inthe event that CUSTOMER is enjoined from distributing one or more Titles in any country due to a claim for which UTECH isobligated to indemnify CUSTOMER pursuant to this Section 8, at UTECH’s option, UTECH will use its commercially reasonableefforts to procure a license from any claimants with respect to the Unity Product that will enable CUSTOMER to continuedistributing the affected Titles in that country. In the event UTECH chooses to not seek or is unable to procure a license from anyclaimants with respect to the Unity Product that will enable CUSTOMER to continue distributing the affected Titles in that country,at CUSTOMER’s option, UTECH shall use commercially reasonable efforts to assist CUSTOMER in procuring such licenses. Notwithstanding the above, UTECH shall have no liability to CUSTOMER for any claim to the extent that such claim is basedupon any element of a Title other than the licensed Unity Product or portions thereof incorporated into such Titles or to the extentthat it is a claim for which CUSTOMER has agreed to indemnify UTECH in Section 8.4 below. The rights granted to CUSTOMERunder this Sections 8.3 shall be CUSTOMER’s sole and exclusive remedy for any alleged infringement of any intellectual propertyrights of any third party. 8.4CUSTOMER Indemnification. CUSTOMER agrees to indemnify, hold harmless and defend UTECH and its Affiliates from allthird party claims, defense costs (including reasonable attorneys' fees), judgments, settlements and other expenses arising out ofthe following: (i) alleged or actual infringement or violation of any trademark, copyright, patent, or trade secret which alleged oractual infringement or violation is caused directly by the Titles (except for claims arising with respect to the Unity Products orUTECH’s Marks or for claims which UTECH has agreed to indemnify CUSTOMER in Section 8.3 above); (ii) alleged or actualviolation of privacy rights of CUSTOMER’s end users (except where such violation of privacy rights was caused directly by theUnity Products); and (iii) any violation by CUSTOMER (or any of its agents) of any law or regulation applicable to (a)CUSTOMER’s use of the Unity Products licensed by UTECH under this Agreement or (b) CUSTOMER’s creation, publication,commercialization, and distribution of the Titles.8.5Indemnification Procedures. If any action shall be brought against one of the parties hereto in respect to which indemnitymay be sought against the other party (the "Indemnifying Party") pursuant to Sections 8.3 or 8.4 above, the Indemnifying Party’sobligation to provide such indemnification will be conditioned on receipt of prompt notice of such claim (including the nature of theclaim and the amount of damages and nature of other relief sought, if available) being provided to the Indemnifying Party by theparty against which such action is brought (the "Indemnified Party"). The Indemnified Party’s rights and the Indemnifying Party’sobligations to indemnify, hold harmless and defend the Indemnified Party are not to be conditioned upon the timing of the deliveryor receipt of such notice unless the Indemnified Party suffers actual detriment or prejudice as a result of the delay in providing thenotice to the Indemnifying Party. The Indemnifying Party shall, upon written notice from the Indemnified Party, conduct allproceedings or negotiations in connection with the action, assume the defense thereof, including settlement negotiations inconnection with the action, and will be responsible for the costs of such defense, negotiations and proceedings. The IndemnifyingParty will have sole control of the defense and settlement of any claims for which it provides indemnification hereunder, providedthat the Indemnifying Party will not enter into any settlement of such claim without the prior approval of the Indemnified Party,which approval will not be unreasonably withheld. The Indemnified Party shall cooperate with the Indemnifying Party in allreasonable respects in connection with the defense of any such action at the expense of the Indemnifying Party. The7CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Indemnified Party shall have the right to retain separate counsel and participate in the defense of the action or claim at its ownexpense.8.6Disclaimer. Except for the express warranties of UTECH in this Section 8, UTECH makes no other warranties, relating tothe Unity Product, including Unity Source Code, express or implied. UTECH disclaims and excludes any and all impliedwarranties, including but not limited to implied warranties of merchantability or fitness for a particular purpose. CUSTOMER willmake no warranty, express or implied, on behalf of UTECH.9.Limitation of Liability.*** IN NO EVENT WILL EITHER PARTY OR ITS AFFILIATES BE LIABLE FOR ANY INDIRECT, PUNITIVE, SPECIAL,INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT(INCLUDING LOSS OF BUSINESS, REVENUE, PROFITS, USE, DATA OR OTHER ECONOMIC ADVANTAGE), HOWEVERCAUSED AND REGARDLESS OF THE THEORY OF LIABILITY, EVEN IF SUCH PARTY HAS BEEN PREVIOUSLY ADVISEDOF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR A MISUSE OF UTECH’S INTELLECTUAL PROPERTY BYCUSTOMER, INCLUDING BUT NOT LIMITED TO A MISUSE OF UTECH’S INTELLECTUAL PROPERTIES IN CONNECTIONWITH VIOLATIONS OF SECTION 2, OR A BREACH OF THE CONFIDENTIALITY OBLIGATIONS UNDER SECTION 4 BY APARTY OR ITS AFFILIATES, EACH PARTY AND THEIR RESPECTIVE AFFILIATES’ TOTAL LIABILITY TO ONE ANOTHERUNDER THIS AGREEMENT IS LIMITED TO THE AMOUNT OF THE FEES PAID OR PAYABLE TO UTECH BY CUSTOMER.10.General Provisions.10.1Assignment. Neither party may assign its rights and obligations under this Agreement, in whole or in part, withoutthe prior written consent of the other party, which consent will not be unreasonably withheld; provided, however, that thisAgreement may be assigned by either party (a) to an entity that acquires all or substantially all of the assets or stock of the party(an “M&A Event”), or (b) to an Affiliate of such party. The parties hereby acknowledge and agree that it shall be reasonable forUTECH to withhold its consent if CUSTOMER’s M&A Event is to occur with a company whose primary business is competitivewith UTECH, or if CUSTOMER’s Affiliate is a company whose primary business is competitive with UTECH. Any attempt toassign this Agreement, without such consent, will be null and of no effect. Subject to the foregoing, this Agreement will bind andinure to the benefit of each party's successors and permitted assigns.10.2Entire Agreement. Following the termination of the Prior Agreement in accordance with Section 3.3, this Agreementand its Exhibits constitutes the entire, final and exclusive understanding and agreement between the parties pertaining to thesubject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions,whether oral or written, of the parties. The provisions of this Agreement may not be amended or supplemented in any way exceptby written agreement executed by both parties hereto.10.3Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State ofCalifornia excluding that body of law known as conflict of laws. The parties expressly agree that the United Nations Conventionon Contracts for the International Sale of Goods will not apply. Any legal action or proceeding arising under this Agreement will bebrought exclusively in the federal or state courts located in the Northern District of California and the parties hereby irrevocablyconsent to the personal jurisdiction and venue therein.10.4Attorneys' Fees. In any suit or proceeding between the parties relating to this Agreement, the prevailing party willhave the right to recover from the other(s) its costs and reasonable fees and expenses of attorneys, accountants, andother professionals incurred in connection with the suit or proceeding, including costs, fees and expenses upon appeal, separatelyfrom and in addition to any other amount included in such judgment. This provision is intended to be severable from the otherprovisions of this Agreement, and shall survive and not be merged into any such judgment.10.5Relationship of parties. The parties have the status of independent contractors, and nothing in this agreement shallbe deemed to place the parties in the relationship of employer-employee, principal-agent, partners or joint venturers, nor to conferon either party any express or implied right, power or authority to enter into any agreement or commitment on behalf of the otherparty, nor to impose any obligation upon the other party.8CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 10.6Force Majeure. Neither party shall be deemed in default of the Agreement to the extent that performance of theirobligations or attempts to cure any breach are delayed or prevented by reason of any act of God, fire, natural disaster, accident,act of government, shortage of materials or supplies or any other cause beyond the control of such party ("Force Majeure").10.7Partial Invalidity. Should any provision of this Agreement be held to be void, invalid or inoperative, the remainingprovisions of this Agreement shall not be affected and shall continue in effect as though such provisions were deleted.10.8Injunctive Relief. The parties acknowledge and agree that in the event of any breach of Sections 2.1-2.6, 4, and 5.2, the non-breaching party will suffer irreparable damage for which it will have no adequate remedy at law. Accordingly, the non-breaching party will be entitled to seek injunctive and other equitable remedies to prevent or restrain, temporarily or permanently,such breach, in addition to any other remedy that such non-breaching may have at law or in equity.10.9Nonexclusive Remedy. Except as expressly set forth in this Agreement, the exercise by either party of any of itsremedies under this Agreement will be without prejudice to its other remedies under this Agreement or otherwise.10.10Notices. Any notice required by this Agreement will be effective and deemed received three (3) days after postingwith the United States Postal Service when mailed by certified mail, return receipt requested, properly addressed and with thecorrect postage, or one (1) day after pick-up by or drop-off to the courier server when sent by overnight courier, properly addressedand prepaid. All communications will be sent to the addresses set forth above or to such other address as may be specified byeither party to the other in accordance with this Section. Either party may change its address for notices under this Agreement bygiving written notice to the other party by the means specified in this Section. A copy of any notice sent to UTECH shall also be sent (and notices shall not be deemed as delivered until such copy is sent) to:Unity Technologies345 Broadway Street, Suite 200San Francisco, CA 94133Attn: General Counsel10.11Export Control. CUSTOMER agrees to comply fully with all relevant export laws and regulations of the UnitedStates (“Export Laws”) to ensure that neither the Unity Product, nor any direct product thereof are: (a) exported or re-exporteddirectly or indirectly in violation of Export Laws; or (b) used for any purposes prohibited by the Export Laws, including but notlimited to nuclear, chemical, or biological weapons proliferation.11.Signatures.This Agreement is valid if signed in two copies, each party receiving one copy. This Agreement may also be signed in multiplecounterparts, including via facsimile transmission, all of which taken together shall constitute one agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by theirduly authorized representatives.UNITY TECHNOLOGIES APS GLU MOBILE INC. By: /s/ Henrik NielsenBy:/s/ Niccolo De MasiName:Henrik NielsenName:Niccolo De MasiTitle:CFO & COOTitle:CEO9CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Exhibit A Unity Products Unity Pro versions ***The Unity engine and editor that provide an authoring environment with a series of integrated tools, modules, andcomponents which is designed to allow for the creation of interactive content, as well as providing for assetmanagement, project revision and tracking, and team-based production, and all Updates thereto. *** and *** add-ons Optional Unity Pro add-ons that provide the ability to publish on the *** platforms, and all Updates thereto. Unity Source CodeUnity Source Code (as defined in the Agreement) for the *** Pro add-ons described above. CUSTOMER acknowledgesand agrees that, *** Unity Team License An add-on component to the Unity Pro editor which provides tools for development teams to share and developinteractive content while maintaining version control, synchronized projects assets, and other components on a projectby project basis, and all Updates thereto. Unity Web Player UTECH’s client that integrates with browsers or comparable interface for all available platforms that can play backUTECH files, and all Updates thereto. ·10CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Exhibit B CUSTOMER TITLESTitles:CUSTOMER and its Affiliates may develop ***, in accordance with the terms and provisions of this Agreement. Platforms:*** For the avoidance of doubt, CUSTOMER acknowledges and agrees that CUSTOMER and its Affiliates may use theUnity Source Code and create ***.___________________________* If and when Unity Pro for Windows 8 for desktop and tablet becomes commercially available11CONFIDENTIAL *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Exhibit C License Fees and Payment Terms License fee for the Term: USD *** (the “License Fee”) The License Fee entitles CUSTOMER to:·Unity Source Code for ***, including ***, for the duration of the Term ·*** new Unity Pro ***seat licenses*·*** Upgrades of Unity Pro from ***·*** new Team Licenses ***·*** Upgrades of CUSTOMER’s existing Team Licenses ***·*** new Unity *** seat licenses·*** Upgrades of CUSTOMER’s existing Unity *** licenses ***·*** new Unity *** seat licenses·*** Upgrades of CUSTOMER’s existing Unity *** licenses ***·Enterprise Support for the duration of the Initial Term________________________________* Any add-on product licenses must be purchased separately for each developer/seat that requires access to such add-on product, in additionto the Unity Pro license.+ In the event version *** is not commercially available on the Effective Date, UTECH shall deliver to CUSTOMER version *** of the UnityProduct on the Effective Date, and shall Upgrade such licenses as soon as such Upgrade becomes commercially available. The License Fee shall be payable in four (4) installments in accordance with Section 5 of the Agreement as follows: ·$*** due and payable no later than thirty (30) days from the Effective Date of this Agreement (less a credit for***); ·$*** due and payable six (6) month from the Effective Date of this Agreement;·$*** due and payable twelve (12) months from the Effective Date of this Agreement; and·$*** due and payable eighteen (18) months from the Effective Date of this Agreement. During the Initial Term only, CUSTOMER may order additional seat licenses of Unity Products, at a *** discount fromUTECH’s then-current published price list located at https://store.unity3d.com, by placing an order in accordance withSection 5.1 of the Agreement. In the event that UTECH releases Windows Phone 8 add-on versions of the Unity Productduring the Initial Term, the *** discount for seat licenses set forth herein shall apply to the Windows Phone 8 add-onlicenses purchased during the Initial Term. Payment for such additional orders shall be due and payable no later thanthirty (30) days from receipt of invoice, in accordance with Section 5.1 of the Agreement. In the event CUSTOMER wishes to use Unity Source Code for PC/MAC ***: Additional SourceCode Licenses(Unrestricted)*List Price1-2 Titles3-4 Titles5-6 Titles 7+ Titles***************Unity Source Codefor PC/MAC ******************* ***; prices are per Title, per year of source code access; Unity Pro seat licenses must be purchasedseparately (as needed); no use of source code after expiration of the designated source code term 12 +++*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Additional SourceCode Licenses(Restricted Use)*List Price1-2 Titles3-4 Titles5-6 Titles 7+ Titles13 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended ***************14 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Unity Source Codefor PC/MAC ******************* *** prices are per Title, per year of source code access; Unity Pro seat licenses mustbe purchased separately; no use of source code after designated source code term Unity Source Code for PC/MACTransferability Per Title0-6 Months6-12 Months13-24 Months24+ MonthsFeeFeeFeeNoTransferability*** of TitleLicense fee*** of TitleLicense fee*** of TitleLicense fee*** *** Fees: After the Initial Term, should CUSTOMER elect to exercise its option for a ***(as such term is defined inSection 7.1), CUSTOMER shall pay UTECH *** per each ***, payable in full prior to the commencement ofeach *** but no later than thirty (30) days from receipt of UTECH’s invoice in accordance with Section 5.1 ofthe Agreement. Subject to the payment of the *** Fee, during each such *** CUSTOMER and its Affiliates may, ***, and only for versions***, and (2) ***. CUSTOMER acknowledges and agrees that each *** shall not include any *** as set forth in Section *** of the Agreementand further detailed ***. Standard support, consisting of email at support@unity3d.com and access to the online supportforum and Unity Answers knowledge base on the UTECH website may be available, but CUSTOMER understands thateven such support may be limited in the event a new version (***) of the Unity Product has been released. 15 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Exhibit DENTERPRISE SUPPORT AGREEMENTDefinitions: 'Software' means the Unity Products licensed by the CUSTOMER and its Affiliates and for which CUSTOMER haspurchased Support.'Support' means the Enterprise Support Manager Services and Enterprise Support Services as further defined in SectionA “Enterprise Support Terms” of this Support Agreement below.'Support Agreement' means this Enterprise Support Agreement.‘Support Personnel’ means any Unity employee, any agent or other third party authorized by Unity to provide Support.'Support Request' means a question, issue or concern posted on the support website as notified by Unity in the Englishlanguage.“Unity” means Unity Technologies ApS or its Affiliates.A.Enterprise Support Terms:Capitalized words used in this Support Agreement but not defined shall retain the meanings ascribed to them in the UnityTechnologies Software License Agreement, entered into between Unity and Glu Mobile Inc. (“CUSTOMER”) (the“Agreement”).In accordance with the terms of this Support Agreement, Unity will provide CUSTOMER and its Affiliates the followingSupport services during the Initial Term (as defined in Section 7.1 of the Agreement):Enterprise Support Manger Services: Unity will assign to CUSTOMER a designated Enterprise Support Manager(“ESM”). The ESM will be responsible for the following services:a) Coordinating and facilitating Unity Personnel and technical resources as needed to enable (1) a holisticapproach to solution deployment and management, (2) effective and timely communication between Unity andCUSTOMER teams, (3) proactive identification of and resolution of emerging issues, and (4) effectiveprioritization of efforts by considering business impact on CUSTOMER and support priorities.b) Maintaining an understanding and awareness of CUSTOMER’s technical use of Software and engagementand act as a liaison between CUSTOMER and other Unity technical departments as required.c) Escalation management for Critical requests (as further referred to in the Section B below).d) Proactive communication on relevant/ covered product releases, where available.e) *** on-site visits by the ESM (each a “Site Visit”) or another qualified Support engineer, during each twelve(12)-month period during the Term on mutually agreeable dates. Each of the Site Visits will be at least one (1)month apart and will not exceed two (2) days duration. All travel and living expenses associated with the SiteVisit shall be paid for by Unity. CUSTOMER acknowledges and agrees that the16 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Site Visits cannot be carried over to subsequent one (1) year periods; additional on-site visits can be purchasedfor a fee. Support Services: Unity will provide to CUSTOMER the following “Support Services” during the Term:a) Provide ***, based on CUSTOMER’s US location) support service responses for critical issues (Priority 1)affecting any Software products; provide support service responses during regular business hours for non-critical issues (Priority 2-4) affecting any Software. Regular business hours are CUSTOMER-location dependentand defined as:·Europe: 9am through 5pm, Monday to Friday·US: 8am through 4pm, Monday to Friday·Asia: 9am through 5pm Monday to Friday In addition, on up to *** occasions during a *** period, and with *** advance notice, Unity can make ESM andSupport engineers available during weekends to deal with Critical, Urgent and Important Priority (Priority levels 1, 2 and 3) level issues.b) Respond to properly submitted Support Requests concerning installation, activation, license migration,configuration, troubleshooting and/or any other issues which may arise in connection with the Software inaccordance with the response times specified in this Support Agreement; responses to be provided by UnitySupport engineers;c) Undertake commercially reasonable efforts, at Unity's discretion, to provide either work-arounds or to correctfaults in the Software.B. Response Time Objectives: PrioritySeverityInitial Response Time1Critical***2Urgent***3Important***4Minor***·CRITICAL (Priority 1) — the problem results in extremely serious interruptions to development of Titles. Ithas affected, or could affect, the entire CUSTOMER team. Data integrity is compromised or the issue is at riskof causing missed critical project deadlines or deliverables. CUSTOMER shall call its ESM for all critical priority1 issues.·URGENT (Priority 2) — the problem results in serious interruptions to development of Titles. Portions ofthe CUSTOMER team cannot perform important tasks, but the error does not impair essential operations. Majorgame components cannot operate correctly due to issues with the Software or APIs or performance issues areapparent.·IMPORTANT (Priority 3) — the problem causes interruptions in development of Titles. It does not preventoperation of a Title. The error is attributed to malfunctioning or incorrect behavior of the Software. The issue willaffect a pilot or proof-of-concept.17 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended ·MINOR (Priority 4) — the problem results in minimal or no interruptions to development of Titles (nobusiness impact). The issue consists of "how to" questions including issues related to APIs and integration,installation and configuration inquiries, enhancement requests, or documentation questions.For Priority 1 Critical case Support Requests, the response time shall be not more than *** from the time CUSTOMERcontacts Unity. Customer shall:·Initiate all Critical case requests via telephone (to be provided by Unity), such call to be initiated by asenior level developer or producer. ·Reproduce the alleged error.·Provide Unity with a designated contact during the remedy period, either onsite or by pager, to assistwith data gathering, troubleshooting, testing and applying the proposed solution.In the event CUSTOMER does not fulfill the above-referenced requirements, Unity, in its sole and reasonable discretion,may downgrade the priority level of the Support Request.For all Priority level Support Requests, Unity shall undertake commercially reasonable efforts to; a) acknowledge receiptof a Support Request from a technical support contact within the time allotted (“Initial Response Time”) (suchacknowledgements will generally be via the same medium of communication by which the Support Request wasreported); b) provide a short status report to CUSTOMER within a reasonable time after the Support Request isacknowledged; and c) address the Support Request by providing a remedy that could take the form of eliminating thedefect in order to bring the Software into substantial conformity with applicable documentation, providing updates, ordemonstrating how to avoid the effects of the defect with reasonable effort. For Critical and Urgent Support Requests,UTECH shall make commercially reasonable efforts to address the Support Request as set forth in subsection (c) of thisparagraph above within two (2) business days after the Initial Response Time (the “Secondary Response Time”). WhenUTECH is not able to address a Support Request within the Secondary Response Time, then UTECH shall promptlynotify CUSTOMER as to the planned response time for such Support Request, which planned response time shall bereasonable in light of the severity and priority of the applicable Support Request, subject to the limitations described inSection D below. Where CUSTOMER has licensed Unity Source Code, a remedy may also include error & codecorrections, patches, bug fixes, workarounds (i.e. temporary solutions used to complete a task that would not otherwisebe possible due to a problem or limitation in the affected Software), replacement deliveries or any other type of softwareor documentation corrections or modifications. Each party acknowledges that despite a party's reasonable efforts, not allproblems may be solvable.UTECH enterprise Support engineers will investigate each Support Request. Where on-going investigation is required,CUSTOMER will receive regular updates to their Support Request. Additionally, such updates may increase or lower theseverity of the issue, in which case the frequency of updates will change accordingly.If Unity, in its sole and reasonable discretion, determines that remote troubleshooting and investigation techniquesemployed by Unity have been unsuccessful and that on-site support is the most effective way to provide the servicesand deliverables, CUSTOMER will not be charged for such onsite support but will be charged for travel and livingexpenses.Customer shall have unlimited access to Unity’s on-line support resources at http://unity3d.com/support/.CUSTOMER acknowledges and agrees that Unity may, at its reasonable discretion, subcontract the provision ofSupport, other than the ESM role, to third parties; provided, however, that Unity shall continue to remain primarilyresponsible under the terms of this Support Agreement and shall ensure that such third party service provider provides allSupport Services in accordance with the terms herein and in accordance with best industry standards. In all instancesUnity will use suitably qualified Support Personnel.18 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended C.CUSTOMER Obligations:CUSTOMER shall:a) Use suitable qualified engineers and artists to develop using the Software;b) Use industry recognized development methodologies;c) Provide accurate and complete descriptions of problems and issues;d) Co-operate with Support Personnel where elaboration of an issue is required;e) Provide script, artwork or project folders where needed by Support Personnel, subject to the confidentiality provisionsof the Agreement and any other CUSTOMER confidentiality restrictions; (in the event Unity determines, at its reasonablediscretion, that such script, artwork or project folders are necessary in order to respond to a Support Request, but suchscript, artwork or project files are not provided by CUSTOMER, UTECH shall not be liable for resolution of such SupportRequest); f) Provide development timetables including milestones and deliverables, subject to CUSTOMER confidentialityrestrictions, as necessary to enable Unity to provide timely and efficient Support Services;g) Recognize that Support Services are often a collaborative and iterative process;h) Assign each problem a priority level as set out below;i) Close Support Requests when the issue or problem has been resolved;j) Designate up to ten (10) named qualified, English-speaking, technical support contacts and shall provide contactdetails (in particular e-mail address and telephone number) by means of which the ESM can contact at anytime. CUSTOMER’s designated technical support contacts shall be authorized representative empowered to makenecessary decisions for CUSTOMER or bring about such decisions without undue delay;k) Share Support responses between members of the team;m) Assess Support responses for suitability to the CUSTOMER and respond in a timely fashion when the response isnot suitable.D.Limitations:Unity's obligation to provide Support Services shall extend only to the most recent version of the Software andCUSTOMER acknowledges and agrees that Support shall be limited for any prior version of the Software, but Unity willprovide support of prior versions to the extent the provision of such support is commercially reasonable and notburdensome.Support Requests sent to Unity using methods other than that defined by Support Request site will be handled in amanner of Unity's choosing and will not qualify for the response times set out above.CUSTOMER may require to lock down on a particular version of Software. In the event that CUSTOMER will requestprior permission to lock down, and if granted by Unity, then Unity shall provide Support to CUSTOMER only for thatlocked down version. When errors or malfunctions exist in the locked down version that have been fixed in later versions,Unity shall have no obligation to continue to fix the locked down version.19 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Unity shall neither provide Support to end users of the CUSTOMER's Titles nor to sub-contractors working forCUSTOMER.Unity will have no obligation to provide support services of any kind for problems in the operation or performance of theSoftware to the extent caused by any of the following (each, a “CUSTOMER-Generated Error”): (a) if Unity can showthat the problem is caused by third party software or hardware products or use of the Unity Product in conjunctiontherewith or (b) CUSTOMER’s use of the Software other than as authorized in this Agreement. If Unity determines that itis necessary to perform Support Services for a problem in the operation or performance of the Software that is caused bya CUSTOMER-Generated Error, then Unity will notify CUSTOMER thereof as soon as Unity is aware of suchCUSTOMER-Generated Error and Unity will have the right to invoice CUSTOMER at Unity's then-current time andmaterials rates for all such Support Services performed by Unity and CUSTOMER will pay Unity within thirty (30) days ofthe date of such invoices. Where resolution to a Support Request requires an extended time period in to provide the final response, Unity shallprovide regular updates to CUSTOMER at reasonable intervals in light of the severity and priority for the applicableSupport Request.Unity does not warrant or guarantee that the final response times set out above in this Support Agreement will be met, orthat claimed or actual defects or malfunctions in the Software will in fact be corrected. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, UNITY EXPRESSLY DISCLAIMS ALLWARRANTIES TERMS OR CONDITIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOTLIMITED TO ANY IMPLIED WARRANTIES TERMS AND CONDITIONS OF MERCHANTABILITY, SATISFACTORYQUALITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, WITH RESPECT TO ANYSUPPORT.CUSTOMER EXPRESSLY UNDERSTANDS AND AGREES THAT UNITY AND ITS SUBSIDIARIES, HOLDINGCOMPANIES AND OTHER AFFILIATES SHALL NOT BE LIABLE TO CUSTOMER UNDER ANY THEORY OFLIABILITY (WHETHER CONTRACT, TORT INCLUDING NEGLIGENCE OR OTHERWISE) FOR ANY DIRECT,INDIRECT, INCIDENTAL, SPECIAL CONSEQUENTIAL OR EXEMPLARY DAMAGES THAT MAY BE INCURRED BYCUSTOMER THROUGH THE PROVIDED SUPPORT, INCLUDING ANY LOSS OF DATA, GOODWILL, BUSINESSREPUTATION OR OTHER INTANGIBLE LOSS WHETHER OR NOT LICENSOR OR ITS REPRESENTATIVES HAVEBEEN ADVISED OF OR SHOULD HAVE BEEN AWARE OF THE POSSIBILITY OF ANY SUCH LOSSES ARISING. 20 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended AMENDMENT TOUNITY TECHNOLOGIES SOFTWARE LICENSE AGREEMENT This amendment (“Amendment”) dated as of October 29, 2014 (“Amendment Effective Date”) betweenUnity Technologies ApS, a Danish corporation with its principal place of business at Vendersgade 28, DK-1363 Copenhagen, Denmark (“UTECH”) and Glu Mobile Inc., a Delaware corporation with its principalplace of business at 500 Howard Street, Suite 300, San Francisco, CA 94105 (“CUSTOMER”). RECITALSWHEREAS, the parties have entered into a Unity Technologies Software License Agreement(“Agreement”) on October 29, 2012, where UTECH licensed certain Unity Products and Unity SourceCode to CUSTOMER.WHEREAS, the Initial Term of the Agreement will expire on October 29, 2014, and CUSTOMER herebyelects to renew the Agreement (in accordance with the terms of this Amendment), allowing CUSTOMER tocontinue to use those Unity Products and Unity Source Code listed in the current Exhibit C and purchasethose described in the revised Exhibit C to this Amendment (as attached hereto as “Attachment A,”“Revised Exhibit C”) throughout the Renewed Term (as defined below). NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, theparties agree as follows:AGREEMENT1.Definitions: Upon the Amendment Effective Date, Section 1 of the Agreement will beamended to include the following revised definitions:“1.7 “Unity Source Code” means the source code for *** duringthe Initial Term, and the applicable Upgrades and their Updates (if any) during theRenewed Term and any Extension Period, as each term is defined in Section 7.1). 1.8“Unity Source Code for PC/MAC” means the source codefor *** during the Initial Term, and the applicable Upgrades and their Updates (if any)during the Renewed Term and any Extension Period, as each term is defined inSection 7.1). 1.10 “Upgrades” means an upgrade to the Unity Products fromthe licensed version to a new version, ***.”The reference in Exhibit A to “*** is deemed to refer, upon the Amendment Effective Date, to the newerUpgrades and their respective Updates as and when provided to CUSTOMER during the Term. 21 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 2.Term:Section 7.1 of the Agreement shall be deleted in its entirety and replaced with thefollowing: “This Agreement will commence on the Effective Date and will continue in effect forconsecutive a periods of two (2) years (the “Initial Term”) and three (3) consecutiveyears thereafter (the “Renewed Term”), expiring at 11:59 p.m. California time onOctober 28, 2017 unless this Agreement is earlier terminated pursuant to Section 7.2of the Agreement or the Term is extended at CUSTOMER’s option as specifiedhereunder. Upon expiration of the Renewed Term, the term for the Unity Source Codelicense for *** (whichever version has been distributed to CUSTOMER as ofOctober 28, 2017), and the Unity Source Code for PC/MAC license and any Updatesthereto may be renewed for three additional one (1) year periods (each a “ExtensionPeriod(s)”) by providing UTECH at least thirty (30) days prior written notice of itsintention to renew prior to the end of the Renewed Term or Extension Periods, asapplicable, subject to CUSTOMER’s payment of the fees set forth in Exhibit C inaccordance with the payment provisions set forth in Section 5.1. For the purposes ofclarification, UTECH shall deliver Updates (if any) during each Extension Period, andEnterprise Support will not be provided during a Extension Period unless separatelypurchased by CUSTOMER. The Initial Term, Renewed Term and ExtensionPeriod(s) are collectively referred to herein as the “Term.”” Enterprise Support:As of the Amendment Effective Date, Section 3.1 of the Agreement will bedeleted in its entirety and replaced with the following: “3.1 Enterprise Support. Subject to payment of the applicable licensefees set forth in Revised Exhibit C and subject to the terms and conditionsof this Agreement, UTECH shall provide CUSTOMER and its Affiliateswith enterprise level support during the Renewed Term in accordance withthe terms set forth in Revised Exhibit D. In the event CUSTOMER doesnot purchase an Enterprise License during a Extension Period,CUSTOMER will have access to the online forums and “Unity Answers”knowledge based on the UTECH web site and may emailsupport@unityed.com for answers to license key questions.” 4.Exhibit C: Upon the Amendment Effective Date, Exhibit C of the Agreementwill be deleted in its entirety provided that the parties acknowledge and agree that CUSTOMER maycontinue using the Unity Products described in such Exhibit C and replaced with Attachment A(Revised Exhibit C) as attached to the Amendment. 5.Exhibit D:Upon the Amendment Effective Date, Exhibit D of the Agreement will be deleted inits entirety, and replaced with Attachment B (Revised Exhibit D) as attached to the Amendment. 22 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 6.Alpha & Beta Access: Notwithstanding any provision to the contrary in this Amendment or theAgreement, UTECH will include CUSTOMER and its Affiliates (solely with respect to major studios)in the alpha and beta feedback groups (at any time during the applicable testing periods as solelydetermined by UTECH) for up-coming new and updates to releases and features in Unity Productsand other Unity services, . 7.General:Except as explicitly modified herein, all terms and conditions and provisions of theAgreement shall continue in full force and effect. In the event of any inconsistency or conflictbetween the Agreement and this Amendment, the terms conditions and provisions of thisAmendment shall govern and control. All initially capitalized terms used and not otherwise definedherein shall have the meaning ascribed to them in the Agreement. This Amendment may beexecuted in one or more counterparts and transmitted by facsimile or email as a PDF, TIFF or otherimage files, each transmission of which is deemed an original, and all of which, when take together,constitute one and the same instrument.IN WITNESS WHEREOF, the parties by their duly authorized representatives have executed thisAmendment as of the Amendment Effective Date. UNITY TECHNOLOGIES ApSGLU MOBILE INC. By: /s/ Lars Runov By: /s/ Scott Leichtner Name: Lars Runov Name: Scott Leichtner Title: Managing Director Title: Vice President and General CounselDate: December 16, 2014 Date: December 15, 2014 23 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Attachment AREVISED EXHIBIT C (Applicable during the Renewed Term and Extension Periods, if any) A.Fees and Product-Specific License Terms (exclusive of the Enterprise License UnityProducts and Support pricing) Development Tools SeatLicense* Unit List Price (No Discount)Pricing (***% Discount)***$***$******$***$******$***$******$***$****Prices are per end user/developer; all *** licenses purchased during the Renewed Term may be aggregated forthe purpose of the volume discount set forth above.Prices will be effective on the date CUSTOMER makes the first payment of the Enterprise License (defined inSection B below). In addition to the seat licenses covered in Section B below, CUSTOMER may order additional seat licenses of such additional UnityProducts at the prices specified above under the column “Pricing (***% Discount”) by placing an order in accordance with Section 5.1of the Agreement. Payment for such additional orders shall be due and payable no later than thirty (30) days from receipt ofinvoice, in accordance with Section 5.1 of the Agreement. Unity Source Code License (applicable during Extension Periods) Unit List Price*(per year) PC/MAC/Mobile$****Prices are per year for *** Titles of source code access. Mobile will include ***)Each Extension Period is one year; a maximum of 3 Extension Periods are available to CUSTOMER. 24 $$ ##*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended B.ENTERPRISE LICENSE & PRICING ENTERPRISE LICENSEDevelopment ToolsRenewedTerm TotalTotal***Up to *** seatlicenses***Up to *** seatlicenses***Up to *** seatlicenses***Up to *** seatlicensesSource Code Licenses******Development Tools & Source Code $*** @ $*** per year SupportEnterprise Support***25 * $#*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Enterprise Support $***@ $*** per year TOTAL ENTERPRISE LICENSE(“Enterprise Term License Fee”)$***Includes all Updates and Upgrades (as such terms are defined in the Agreement, asamended). Includes *** during the Renewed Term. “Renewed Term” is defined as three (3) years. With regard to the Enterprise License, the aggregatetotal seat licenses shall not exceed *** for any tool at any time of the Renewed Term; provided,however, that CUSTOMR may purchase additional seat licenses at the prices set forth in Section Aof this Revised Exhibit C. The Enterprise Support does not include Chinese language support. If CUSTOMER elects toengage Chinese language Enterprise Support services (subject to Revised Exhibit D), thenCUSTOMER will pay UTECH an additional $*** per year to receive such services. Enterprise Term License Fee shall be paid as follows: (1) $*** payable within thirty (30) days of execution of this Amendment and receipt of the Unityinvoice; and(2) $*** upon the first year anniversary of the Amendment Effective Date (i.e., 12 months from theAmendment Effective Date). 26 ## * $###*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Attachment BRevised Exhibit DENTERPRISE SUPPORT AGREEMENTDefinitions:'Software' means the Unity Products licensed by the CUSTOMER and its Affiliates and for which they havepurchased Support.'Support' means the support service as further defined in this Support Agreement.'Support Agreement' means this Enterprise Support Agreement.‘Support Personnel’ means any Unity employee, any agent or other third party authorized by Unity toprovide Support.'Support Request' means a question, issue or concern posted on the support website as notified by Unityin the English language.“Unity” means Unity Technologies ApS or its Affiliates.A.Enterprise Support Terms:Capitalized words used in this Support Agreement but not defined herein shall retain the meanings ascribedto them in the Unity Technologies Software License Agreement, as amended, entered into between UnityTechnologies ApS (“Unity”) and Glu Mobile Inc. (“CUSTOMER”) (the “Agreement”).In accordance with the terms of this Support Agreement, Unity will provide CUSTOMER and its Affiliates thefollowing Support services during each year of the Renewed Term (as defined in Section 7.1 of theAgreement):Enterprise Support Manger Services: Unity will assign to CUSTOMER a designated Enterprise SupportManager (“ESM”). The ESM will be responsible for the following services:a) Coordinating and facilitating Unity Support Personnel and technical resources as needed toenable (1) a holistic approach to solution deployment and management, (2) effective and timelycommunication across Unity and CUSTOMER teams, (3) proactive identification and resolution ofemerging issues, and (4) effective prioritization of efforts by considering business impact onCUSTOMER and support priorities.b) Maintaining an understanding and awareness of CUSTOMER’s technical use of the Software andengagement within the account and act as a liaison between CUSTOMER and other Unity technicaldepartments as required.c) Escalation management for Critical requests (as further referred to in Section B below).d) Proactive communication on relevant/covered product releases, where available, and Updatesand Upgrades.27 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended e) *** onsite visits, consisting of up to two (2) consecutive days for each visit, every 12 months atthe offices of CUSTOMER for project reviews where a ESM will go onsite to review, analyze,provide feedback and provide best practices and advice for the CUSTOMER’s project (“ProjectReviews”). Each of the Project Reviews must be at least one (1) month apart and will not exceedtwo (2) days duration. All travel and living expenses associated with the Project Reviews shall bepaid for by Unity. CUSTOMER acknowledges and agrees that Project Reviews cannot be carriedover to subsequent one (1) year periods; additional on-site visits can be purchased for a fee.Support Services: Unity will provide to CUSTOMER the following “Support Services” during the Term:a) Provide ***, based on Unity’s location) support service responses for critical issues (Priority 1)affecting any Software products; provide support service responses during regular business hoursfor non-critical issues (Priority 2-4) affecting any Software products. Regular business hours areCUSTOMER-location dependent and are defined as follows:·Europe (Moscow, Russia): 9 a.m. – 5 p.m., Monday through Friday·US & Canada: 8 a.m. through 4 p.m., Monday through Friday·Asia: 9 a.m. through 5 p.m. Monday through Friday, provided that Support will not beprovided in the Chinese language unless CUSTOMER pays Unity the additional fee listed inthe Revised Exhibit C for Support in Chinese local language. In addition, on up to *** occasions during a *** Support period, and with *** advance notice, Unity canmake ESM and Support engineers (English speaking only, unless CUSTOMER pays for Chineselanguage support) available during weekends to deal with Critical, Urgent and Important Priority(Priority levels 1, 2 and 3) level issues. b) Respond to properly submitted Support Requests concerning installation, activation, licensemigration, configuration, troubleshooting and/or any other issues which may arise in connection withthe Software submitted to Unity in accordance with the response times specified in this SupportAgreement; responses to be provided by Unity Support engineers;c) Undertake commercially reasonable efforts, at Unity's discretion, to provide either work-aroundsor to correct faults in the Software.Consulting Services: CUSTOMER may purchase additional onsite consultancy services from Unity at a***% discount on the then current rates published on Unity’s web site athttps://store.unity3d.com/products/support. B.Response Time Objectives:PrioritySeverityInitial Response Time1Critical***2Urgent***3Important***28 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended 4Minor***·CRITICAL (Priority 1) — the problem results in extremely serious interruptions to developmentof Titles. It has affected, or could affect, the entire CUSTOMER team. Data integrity iscompromised or the issue is at risk of causing missed critical project deadlines or deliverables.CUSTOMER shall call its ESM for all critical priority 1 issues.·URGENT (Priority 2) — the problem results in serious interruptions to development of Titles.Portions of the CUSTOMER team cannot perform important tasks, but the error does not impairessential operations. Major game components cannot operate correctly due to issues with theSoftware or APIs or performance issues are apparent.·IMPORTANT (Priority 3) — the problem causes interruptions in development of Titles. It doesnot prevent operation of a Title. The error is attributed to malfunctioning or incorrect behavior of theSoftware. The issue will affect a pilot or proof-of-concept.·MINOR (Priority 4) — the problem results in minimal or no interruptions to development ofTitles (no business impact). The issue consists of "how to" questions including issues related toAPIs and integration, installation and configuration inquiries, enhancement requests, ordocumentation questions.For Priority 1 Critical case Support Requests, CUSTOMER shall:·Initiate all Critical case requests via telephone (to be provided by Unity), such call to be initiated by asenior level developer or producer.·In addition to the telephone request, file a Support Request via the Support website provided toCUSTOMER by Unity upon activation of Support services, which shall include an accurate andcomplete description of the problem and issues.·Reproduce the alleged error.·Provide Unity with a designated contact during the remedy period, either onsite or byemail/text/pager, to assist with data gathering, troubleshooting, testing and applying the proposedsolution.In the event CUSTOMER does not fulfill its obligations as described below in Section C , Unity, in its solediscretion, may downgrade the priority level of the Support Request.With respect to all Priority level Support Requests, Unity shall undertake reasonable efforts to (a)acknowledge receipt of a Support Request from a technical support contact within the time allotted(“Initial Response Time”); this will generally be via the same medium of communication by which theSupport Request was reported; b) provide a short status report to CUSTOMER within a reasonable timeafter the Support Request is acknowledged; c) address the Support Request by providing a remedy thatcould take the form of eliminating the defect in order to bring the Software into substantial conformity withapplicable documentation, providing updates, or demonstrating how to avoid the effects of the defect withreasonable commercial effort. For Critical and Urgent Support Requests, Unity shall make commerciallyreasonable efforts to address the Support Requests as set forth in the immediately subsection (c) of thisparagraph within two (2) business days after the Initial Response Time (the “Secondary Response Time”).When Unity is not able to address a Support Request within the Secondary Response Time, then Unity shallpromptly notify CUSTOMER as to the planned time29 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended for such Support Request, which response time shall be reasonable in light of the severity and priority of theapplicable Support Request and subject to the limitations described below in Section D. WhereCUSTOMER has licensed Unity Source Code, remedy may also include error corrections, patches, bugfixes, workarounds (i.e. temporary solutions used to complete a task that would not otherwise be possibledue to a problem or limitation in the affected Software), replacement deliveries or any other type of softwareor documentation corrections or modifications. Each party acknowledges that despite a party's reasonableefforts, not all problems may be solvable.Unity enterprise Support engineers will investigate the Support Request. Where on-going investigation isrequired, CUSTOMER will receive regular updates to their Support Request. Additionally, such updatesmay increase or lower the severity of the issue, in which case the frequency of updates will changeaccordingly.If Unity, in its sole discretion, determines that remote troubleshooting and investigation techniques employedby Unity have been unsuccessful and that on-site support is the most effective way to provide the servicesand deliverables, CUSTOMER will not be charged for such on-site support but will be charged for travel andliving expenses, provided, however, that Unity shall provide estimates of such costs in advance forCUSTOMER’s approval.CUSTOMER shall have unlimited access to Unity’s on-line support resources at http://unity3d.com/learn/.CUSTOMER acknowledges and agrees that Unity may at its discretion subcontract the provision ofSupport, other than the ESM role, to third parties; provided, however, that Unity shall continue to remainprimarily responsible under the terms of this Support Agreement and shall ensure that such third partyservice provider provides all agreed support in accordance with the terms herein and in accordance withbest industry standards. In all instances Unity will use suitably qualified Support Personnel.C.CUSTOMER Obligations:CUSTOMER shall:a) Use suitable qualified engineers and artists to develop using the Software;b) Use industry recognized development methodologies;c) Provide accurate and complete descriptions of problems and issues by submitting a Support Requestvia the Support website provided to CUSTOMER by Unity upon activation of Support services unlessotherwise instructed by Unity;d) Cooperate with Support Personnel where elaboration of an issue is required;e) Provide script, artwork or project folders where needed by Support Personnel, subject to theconfidentiality provisions of the Agreement and any other CUSTOMER confidentiality restrictions;f) Provide development timetables including milestones and deliverables subject to CUSTOMERconfidentiality restrictions as necessary to enable Unity to provide timely and efficient Support;30 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended g) Recognize that Support 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 up to *** named qualified, English-speaking, technical support contacts and provide contactdetails (in particular e-mail address and telephone number) by means of which the ESM can contact at anytime. CUSTOMER’s designated technical support contacts shall be authorized representative empoweredto make necessary decisions for CUSTOMER or bring about such decisions without undue delay;k) Share Support responses between members of the team;l) Assess Support responses for suitability to the CUSTOMER and respond in a timely fashion when theresponse is not suitable.D.Limitations:Unity's obligation to provide Support shall extend only to the most recent version of the Software and, for atleast *** after an Upgrade, provide Support for the immediately prior version of the Software, and provideSupport for any other prior versions of the Software licensed to CUSTOMER pursuant to the Agreement tothe extent Support of prior versions is commercially reasonable and not burdensome. Support does not include any on-site or telephone support except as otherwise provided in this SupportAgreement. CUSTOMER may purchase consulting and/or training services at the hourly rate (to bediscounted by ***%) as described above this Exhibit D, Section A. The results and proceeds of any Unity-provided training and consulting services, including any and all training materials, created or provided byUnity during such consulting and/or training services shall be deemed to be the intellectual property of Unity,and Unity shall grant to CUSTOMER a non-exclusive, royalty-free license to use such training materials,only to the extent necessary to enable CUSTOMER to exercise all of the rights granted to CUSTOMER inconnection with the Support services and usage of the licenses granted to it pursuant to the Agreement.Unity and Support Personnel will accept, attend to and work on up to a maximum of *** concurrent SupportRequests from CUSTOMER. Any additional Support Requests can be submitted only after existing SupportRequests have been resolved and closed. CUSTOMER can adjust the order of the submitted SupportRequests by setting priority levels via written notice to Unity or through mutual negotiations. Support Requests sent to Unity using methods other than that defined by the Support Request site will behandled in a manner of Unity's choosing and will not qualify for the initial response times set out above.All members of CUSTOMER teams with access to the Support website will be able to view the full contentsof all Support Requests submitted on behalf of CUSTOMER. CUSTOMER acknowledges that no provisionshall be made for restricted-access Support Requests.31 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended CUSTOMER may lock down on a particular version of Software. In the event that CUSTOMER requestsprior permission to lock down, and if permission is granted by Unity, Unity shall provide Support toCUSTOMER only for that locked down version. When errors or malfunctions exist in the locked downversion that have been fixed in later versions, Unity shall have no obligation to continue to fix the lockeddown version.Unity shall neither provide Support to end users of the CUSTOMER's product, nor to sub-contractorsworking for CUSTOMER. No more than *** members of CUSTOMER teams shall at any one time beauthorized by Unity to contact Unity Support Personnel with Support Requests. CUSTOMER shalldesignate up to *** named individual members of CUSTOMER’s team (collectively, “CUSTOMERPersonnel”) as direct contacts for Support Personnel. For the avoidance of doubt, only designatedCUSTOMER Personnel may submit Support Requests. Unity will have no obligation to provide support services of any kind for problems in the operation orperformance of the Software to the extent caused by any of the following (each, a “CUSTOMER-Generated Error”): (a) if Unity can show that the problem is caused by third party software or hardwareproducts or use of the Software in conjunction therewith or (b) CUSTOMER’s use of the Software other thanas authorized in this Agreement. If Unity determines that it is necessary to perform Support services for aproblem in the operation or performance of the Software that is caused by a CUSTOMER-Generated Error,then Unity will notify CUSTOMER thereof as soon as Unity is aware of such CUSTOMER-Generated Errorand Unity will have the right to invoice CUSTOMER at Unity's then-current time and materials rates for allsuch support services performed by Unity and CUSTOMER will pay Unity within thirty (30) days of the dateof such invoices. Where resolution to a problem requires extended time in to provide the final response, Unity shall provideregular and frequent updates to CUSTOMER at reasonable intervals in light of the severity and priority forthe applicable Support Request.Unity does not warrant or guarantee that the claimed or actual defects or malfunctions in the Software will infact be corrected. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, UNITY AND ITS AFFILIATESEXPRESSLY DISCLAIM ALL WARRANTIES TERMS OR CONDITIONS OF ANY KIND, WHETHEREXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTIES TERMSAND CONDITIONS OF MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR APARTICULAR PURPOSE AND NON-INFRINGEMENT, WITH RESPECT TO ANY SUPPORT. CUSTOMER EXPRESSLY UNDERSTANDS AND AGREES THAT UNITY AND AFFILIATES SHALLNOT BE LIABLE TO CUSTOMER UNDER ANY THEORY OF LIABILITY (WHETHER CONTRACT,TORT INCLUDING NEGLIGENCE OR OTHERWISE) FOR ANY DIRECT, INDIRECT, INCIDENTAL,SPECIAL CONSEQUENTIAL OR EXEMPLARY DAMAGES THAT MAY BE INCURRED BY CUSTOMERTHROUGH THE PROVIDED SUPPORT, INCLUDING ANY LOSS OF DATA, GOODWILL, BUSINESSREPUTATION OR OTHER INTANGIBLE LOSS WHETHER OR NOT UNITY OR ITSREPRESENTATIVES HAVE BEEN ADVISED OF OR SHOULD HAVE BEEN AWARE OF THEPOSSIBILITY OF ANY SUCH LOSSES ARISING. 32 *Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended AMENDMENT #2 TOUNITY TECHNOLOGIES SOFTWARE LICENSE AGREEMENTThis second amendment (“Amendment #2”) dated as of December 18, 2014 (“Amendment #2 EffectiveDate”) between Unity Technologies ApS, a Danish corporation with its principal place of business atVendersgade 28, DK-1363 Copenhagen, Denmark (“UTECH”) and Glu Mobile Inc., a Delawarecorporation with its principal place of business at 500 Howard Street, Suite 300, San Francisco, CA 94105(“CUSTOMER”). RECITALSWHEREAS, the parties have entered into a Unity Technologies Software License Agreement on October29, 2012, as amended on October 29, 2014 (“Amendment”)(collectively, the “Agreement”), whereUTECH licensed certain Unity Products and Unity Source Code to CUSTOMER.WHEREAS, UTECH has agreed to issue a discount to CUSTOMER, in exchange of modifying the paymentschedule to the Enterprise Term License Fee set forth in the Amendment. NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and forother good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, theparties agree as follows:AGREEMENT1.Payment Schedule to the Revised Exhibit C: With respect to the Enterprise Term LicenseFee set forth in Section B of the Revised Exhibit C to the Amendment, UTECH shall issue a one-time only discount in the amount of *** (“Discount”) applicable only to the first payment of theEnterprise Term License Fee referenced in footnote “ (1)”; provided, however, that in order toreceive the Discount, UTECH must receive such first payment by or on December 31, 2014. Forclarity, after applying the Discount the amount of the Enterprise Term License Fee’s first paymentshall be $***. If UTECH does not receive such payment by or on December 31, 2014, then theDiscount will not be applied to the Enterprise Term License Fee’s first payment, and CUSTOMERshall pay the full amount of $***. The Enterprise Term License Fee’s second payment is unaffectedby this Amendment #2. 2.Unity Accounts Receivable: The mailing address for UTECH set forth in Section 5.4 of theAgreement is deleted and replaced with the following: “Unity Technologies ApS795 Folsom Street, Suite 200San Francisco, CA 94107”3.General:Except as explicitly modified herein, all terms and conditions and provisions of theAgreement shall continue in full force and effect. In the event of any inconsistency or conflictbetween the Agreement and this Amendment #2, the terms conditions and provisions of thisAmendment #2 shall govern and control. All initially capitalized terms used and not otherwisedefined herein shall have the meaning ascribed to them in the Agreement. This33 ##*Confidential Treatment has been requested forthe marked portions of this exhibit pursuantto Rule 24b-2 of the Securities Act of 1934, as amended Amendment #2 may be executed in one or more counterparts and transmitted by facsimile or emailas a PDF, TIFF or other image files, each transmission of which is deemed an original, and all ofwhich, when take together, constitute one and the same instrument.IN WITNESS WHEREOF, the parties by their duly authorized representatives have executed thisAmendment #2 as of the Amendment #2 Effective Date. UNITY TECHNOLOGIES ApSGLU MOBILE INC. By: /s/ Lars Runov By: /s/ Scott Leichtner Name: Lars Runov Name: Scott Leichtner Title: Managing Director Title: Vice President and General CounselDate: December 19, 2014 Date: December 18, 2014 34 Exhibit 21.01 GLU MOBILE INC. Subsidiaries as of March 13, 2015 State or Other Jurisdiction of Incorporation or Name of Subsidiary Organization Beijing Qinwang Technology Co. Ltd. People’s Republic Of China Beijing Zhangzhong MIG Information Technology Co. Ltd. People’s Republic Of China Cie Games LLC Delaware, USA Glu Games Inc. Delaware, USA Glu Mobile K.K. Japan Glu Mobile Korea Limited Korea Glu Mobile Limited United Kingdom Glu Mobile Limited Hong Kong Glu Mobile (Russia) Ltd. United Kingdom Glu Mobile Technology (Beijing) Co. Ltd. People’s Republic Of China Glu Toronto Inc. (f/k/a Blammo Games Inc.) Ontario, Canada Griptonite, Inc. Washington, USA Griptonite Games Inc. Delaware, USA Griptonite Games India Private Limited India Maverick Mobile Entertainment (Beijing) Limited People’s Republic Of China PlayFirst, Inc. Delaware, USA We have omitted certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute asignificant subsidiary as of December 31, 2014.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 and 333-194604) andin the Registration Statements on 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 March 13, 2015 relating to the financial statements and the effectiveness ofinternal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP San Jose, California March 13, 2015 EXHIBIT 31.01 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE SECURITIESEXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Niccolo M. de Masi, certify that: 1.I have reviewed this Annual Report on Form 10-K of Glu Mobile Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 13, 2015/s/ Niccolo M. de Masi Niccolo M. de Masi 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 THESECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Eric R. Ludwig, certify that: 1.I have reviewed this Annual Report on Form 10-K of Glu Mobile Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 13, 2015 /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 OFFICERPURSUANT TO 18 U.S.C. §1350 The undersigned, Niccolo M. de Masi, 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, 2014 of the Company (the “Report”) fully complieswith 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 ofoperations of the Company. Date: March 13, 2015By: /s/ Niccolo M. de MasiNiccolo M. de Masi President and Chief Executive Officer (Principal Executive Officer)  EXHIBIT 32.02 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO §18 U.S.C. SECTION 1350 The undersigned, Eric R. Ludwig, the Executive Vice President, Chief Operating Officer and Chief Financial Officer of GluMobile 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, 2014 of the Company (the “Report”) fully complieswith 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 ofoperations of the Company. Date: March 13, 2015 By: /s/ Eric R. LudwigEric R. LudwigExecutive Vice President, Chief Operating Officerand Chief Financial Officer (Principal Financial Officer) 

Continue reading text version or see original annual report in PDF format above