Glu Mobile Inc. (NASDAQ:GLUU) today announced that it has restructured the earnout and bonus obligations for its MIG acquisition by converting the entire $25 million of payments to cash and deferring $11 million of the payments to 2010. The Company also announced that Silicon Valley Bank has entered into a new credit facility with the Company that extends the Company’s $8 million line of credit through December 2010. Today’s announcements, combined with the Company’s previously announced cost reduction initiatives, provide additional working capital flexibility and significantly improves the Company’s liquidity position, while eliminating a significant source of potential dilution to stockholders.

Under the terms of the revised agreement with MIG, there will be no stock issued. All of the $25 million in earnout consideration and bonus obligations will be payable in cash on the following schedule: $14 million will be payable in 2009 in three installments, with $6 million payable on January 15, 2009, $3 million payable on April 1, 2009 and $5 million payable on July 1, 2009. The remaining $11 million will be payable in 2010 in four equal quarterly installments of $2.75 million. The Company issued to the former MIG shareholders secured promissory notes covering these payments, bearing interest at 7% per annum.

The new agreement with Silicon Valley Bank extends the Company’s line of credit, which was originally due to expire in February 2009, through December 2010. The line of credit is subject to a borrowing base equal to 80% of eligible accounts receivable and will bear interest at the rate of Prime plus one percent with a minimum interest rate of five percent.

“The restructuring of the MIG payments and line of credit extension substantially improves Glu’s liquidity. The restructuring of the MIG agreement is a testament to the MIG founders’ commitment to contributing to Glu’s long-term success,” said Greg Ballard, chief executive officer. "With these developments, we can now focus on increasing shareholder value by improving our existing carrier business and building our presence on new high end handsets and platforms that are gaining traction in the mobile market."

“We are very pleased with the spirit of cooperation from the former MIG shareholders and Silicon Valley Bank," said Eric R. Ludwig, senior vice president and chief financial officer. "Combined with our previously announced cost reduction efforts, which will reduce our total non-GAAP operating expenses by approximately 19% from second quarter 2008 levels, we believe that we have the necessary working capital in place to focus on executing our business plan and driving Glu toward positive cash flows from operations in 2009.

The Company also provided preliminary guidance for 2009. As previously reported, the Company expects to be cash flow positive from operations for the year with total operating expenses expected to be approximately $57 million. Revenue for 2009 is expected to be down between 10 and 15 percent from 2008 revenue, primarily due to continuing declines in foreign exchange rates and increasing economic headwinds.

Mr. Ballard commented, “By taking our time to evaluate the emerging platforms and realign our resources, we’ve developed a sound strategy that builds on our approach of launching games in a globally coordinated cross-platform effort. We have already shifted more of our resources to higher end platforms such as iPhone, Android, nGage and Blackberry, which have demonstrated better game adoption rates than the traditional non-smartphone market.”

Mr. Ludwig added, “We have continued to experience declines in foreign exchange rates, which have further impacted the fourth quarter of 2008 and will continue to be a factor in 2009. We also expect to record an incremental tax provision of approximately $250,000 in the fourth quarter of 2008 related to repatriating cash from China. That said, as we look out to our 2009 plan, we believe that our title releases on new platforms will drive increasing revenue from those handsets. We are focused on executing well through these economic and market headwinds and managing our total operating expenses to deliver positive cash flow in 2009.”