ZAGG (ZAGG) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
	September 30,			December 31,
	2014			2013
ASSETS
Current assets
Cash and cash equivalents	$	7,104		$	15,031
Accounts receivable, net of allowances of $2,567 in 2014 and $2,540 in 2013		55,104			46,591
Inventories		35,254			44,539
Prepaid expenses and other current assets		3,287			2,403
Income tax receivable		6,075
Deferred income tax assets		6,851			7,917
Total current assets		113,675			116,481
Property and equipment, net of accumulated depreciation at $7,579 in 2014 and $5,778 in 2013		6,296			5,004
Intangible assets, net of accumulated amortization at $30,786 in 2014 and $23,431 in 2013		33,864			41,219
Deferred income tax assets		12,993			11,377
Note receivable		801			801
Other assets		483			588
Total assets	$	168,112		$	175,470
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	32,129		$	15,207
Income taxes payable		—			6,359
Accrued liabilities		5,127			2,608
Accrued wages and wage related expenses		1,787			891
Deferred revenue		43			159
Sales returns liability		7,400			7,872
Total current liabilities		46,486			33,096
Revolving line of credit		813			17,543
Total liabilities		47,299			50,639
Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized;
32,642 and 32,331 shares issued in 2014 and 2013, respectively		33			32
Additional paid-in capital		84,565			82,807
Accumulated other comprehensive income (loss)		(657	)		93
Note receivable collateralized by stock		(348	)		(348	)
Treasury stock, 2,312 and 1,756 common shares in 2014 and 2013 respectively, at cost		(12,485	)		(9,997	)
Retained earnings		49,705			52,244
Total stockholders' equity		120,813			124,831
Total liabilities and stockholders' equity	$	168,112		$	175,470

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ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

		Three Months Ended						Nine Months Ended
		September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Net sales	$	60,013		$	49,869		$	159,170		$	152,538
Cost of sales		50,849			27,768			115,441			89,904
Gross profit		9,164			22,101			43,729			62,634
Operating expenses:
Advertising and marketing		1,377			2,340			4,763			6,593
Selling, general and administrative		11,971			10,904			34,776			35,014
Amortization of definite-lived intangibles		2,427			2,421			7,282			7,169
Total operating expenses		15,775			15,665			46,821			48,776
Income (loss) from operations		(6,611	)		6,436			(3,092	)		13,858
Other income (expense):
Interest expense		(40	)		(120	)		(124	)		(490	)
Loss from equity method investment in HzO		—			(612	)		—			(1,836	)
Other income and (expense)		90			(89	)		204			(136	)
Total other income (expense)		50			(821	)		80			(2,462	)
Income (loss) before provision for income taxes		(6,561	)		5,615			(3,012	)		11,396
Income tax benefit (provision)		2,242			(2,431	)		473			(4,562	)
Net income (loss)	$	(4,319	)		3,184		$	(2,539	)		6,834
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.14	)	$	0.10		$	(0.08	)	$	0.22
Diluted earnings (loss) per share	$	(0.14	)	$	0.10		$	(0.08	)	$	0.22

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ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP

(Unaudited)

Unaudited Supplemental Data

The following are not financial measures under generally accepted accounting principals (GAAP).  In addition, they should not be construed as alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address.  We present this financial information because we believe that it is helpful to some investors as a measure of our operations.  We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.

Adjusted EBITDA Reconciliation

	Three Months Ended					Nine Months Ended
	September 30, 2014			September 30, 2013		September 30, 2014			September 30, 2013
Net income (loss) in accordance with GAAP	$	(4,319	)	$	3,184	$	(2,539	)	$	6,834
Adjustments:
a. Stock based compensation expense		506			793		1,677			3,162
b. Depreciation and amortization		3,123			2,947		9,195			9,160
c. Impairment of investment in private company		-			-		-			591
d. Other (income) expense		(50	)		821		(80	)		2,462
e. Provision for income taxes		(2,242	)		2,431		(473	)		4,562
Adjusted EBITDA	$	(2,982	)	$	10,176	$	7,780		$	26,771

Pro forma Net Income (Loss) Reconciliation		Three Months Ended						Nine Months Ended
		September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Net income (loss) in accordance with GAAP	$	(4,319	)	$	3,184		$	(2,539	)	$	6,834
Adjustments:
a. Stock based compensation expense		506			793			1,677			3,162
b. Amortization of intangibles		2,448			2,441			7,347			7,224
c. Other (income) expense excluding cash interest expense and loss on equity method investment		(73	)		119			(155	)		46
d.Loss on equity method investment		-			612			-			1,836
e.Impairment of investment in private company		-			-			-			591
f. Income tax effects		(1,102)	*		(1,283	)		(3,392)	*		(4,216	)
Pro forma net income (loss)	$	(2,540	)	$	5,866		$	2,938		$	15,477
Pro forma diluted earnings (loss) per share	$	(0.08	)	$	0.19		$	0.10		$	0.49
Weighted average number of shares outstanding - diluted		30,312			31,466			30,380			31,493
* For comparative purposes, we applied an annualized statutory tax rate of 38.25%

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