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,
	2016			2015
ASSETS
Current assets
Cash and cash equivalents	$	8,955		$	13,002
Accounts receivable, net of allowances of $537 in 2016 and $568 in 2015		83,086			57,647
Inventories		66,204			45,912
Prepaid expenses and other current assets		3,348			3,142
Income tax receivable		446			1,158
Deferred income tax assets		28,771			10,840
Total current assets		190,810			131,701
Property and equipment,net of accumulated depreciation at $16,079 in 2016 and $10,539 in 2015		18,799			8,309
Goodwill		12,791			-
Intangible assets,net of accumulated amortization at $51,791 in 2016 and $41,803 in 2015		56,868			23,045
Deferred income tax assets		22,617			15,386
Other assets		2,480			1,100
Total assets	$	304,365		$	179,541
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	73,168		$	33,846
Accrued liabilities		10,725			5,068
Preliminary contingent payments		12,139			-
Accrued wages and wage related expenses		4,838			2,261
Sales returns liability		28,289			7,849
Current portion of long-term debt, net of deferred loan costs of $65 in 2016		6,185			-
Revolving line of credit		30,195			-
Total current liabilities		165,539			49,024
Noncurrent portion of long-term debt,net of deferred loan costs of $157 in 2016		15,468			-
Other noncurrent liabilities		513			-
Total liabilities		181,520			49,024
Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized; 33,825 and 33,219 shares issued in 2016 and 2015, respectively		34			33
Additional paid-in capital		92,660			88,983
Accumulated other comprehensive loss		(1,505	)		(1,597	)
Treasury stock, 5,679 common shares in 2016 and 2015, at cost		(35,194	)		(35,194	)
Retained earnings		66,850			78,292
Total stockholders' equity		122,845			130,517
Total liabilities and stockholders' equity	$	304,365		$	179,541

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ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Net sales	$	124,662		$	66,774		$	286,928		$	190,679
Cost of sales		81,516			41,903			189,180			117,894
Gross profit		43,146			24,871			97,748			72,785
Operating expenses:
Advertising and marketing		3,389			2,759			8,578			7,450
Selling, general and administrative		25,607			13,750			70,243			41,014
Loss on disputed mophie purchase price		24,317			-			24,317			-
Transaction costs		145			-			2,467			-
Amortization of definite-lived intangibles		2,398			2,134			9,909			6,403
Total operating expenses		55,856			18,643			115,514			54,867
Income (loss) from operations		(12,710	)		6,228			(17,766	)		17,918
Other expense:
Interest expense		(575	)		(26	)		(1,367	)		(79	)
Other expense		(81	)		(76	)		(272	)		(53	)
Total other income (expense)		(656	)		(102	)		(1,639	)		(132	)
Income (loss) before provision for income taxes		(13,366	)		6,126			(19,405	)		17,786
Income tax (provision) benefit		6,261			(2,387	)		7,963			(7,155	)
Net income (loss)	$	(7,105	)	$	3,739		$	(11,442	)	$	10,631
Earnings (loss) per share:
Basic earnings (loss) per share	$	(0.25	)	$	0.13		$	(0.41	)	$	0.36
Diluted earnings (loss) per share	$	(0.25	)	$	0.13		$	(0.41	)	$	0.36

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ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP

(Unaudited)

Unaudited Supplemental Data

The following information is not a financial measure under generally accepted accounting principals (GAAP). In addition, it should not be construed as an 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, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Net income (loss) in accordance with GAAP	$	(7,105	)	$	3,739		$	(11,442	)	$	10,631
Adjustments:
a.    Stock based compensation expense		1,386			898			3,679			2,708
b.    Depreciation and amortization		4,989			3,455			16,484			9,551
c.    Recovery of reserves on note receivable		-			(639	)		-			(639	)
d.    Other (income) expense		656			102			1,639			132
e.  �� mophie transaction costs		145			-			2,467			-
f.    mophie fair value inventory write-up related to acquisition		(739	)		-			2,586			-
g.    mophie restructuring charges		138			-			1,201			-
h.    mophie employee retention bonus		300			-			500			-
i.    Loss on disputed mophie purchase price		24,316			-			24,316			-
j.    Provision for income taxes		(6,261	)		2,387			(7,963	)		7,155
Adjusted EBITDA	$	17,825		$	9,942		$	33,467		$	29,538

Adjusted Net Income Reconciliation - Three and Six Months Ended June 30, 2016 and 2015

	Three Months Ended					Nine Months Ended
	September 30, 2016			September 30, 2015		September 30, 2016			September 30, 2015
Net income (loss) in accordance with GAAP	$	(7,105	)	$	3,739	$	(11,442	)	$	10,631
Adjustments:
a.    Amortization of mophie acquired intangibles		740			-		4,485			-
b.    mophie transaction costs		145			-		2,467			-
c.    mophie fair value inventory write-up related to acquisition		(739	)		-		2,586			-
d.    mophie restructuring charges		138			-		1,201			-
e.    mophie employee retention bonus		300			-		500			-
f.    Loss on disputed mophie purchase price		24,316			-		24,316			-
g.    Income tax effects		(9,524	)*		-		(13,600	)*		-
Adjusted net income	$	8,271		$	3,739	$	10,513		$	10,631
Adjusted diluted earnings per share	$	0.29		$	0.13	$	0.38		$	0.36
Weighted average number of shares outstanding - diluted		28,125			28,930		27,987			29,451

*For comparative purposes, we applied an annualized statutory tax rate of 38.25% in 2016.

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