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

Exhibit 99.1

ZAGG INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(Unaudited)

	2016			2015
ASSETS
Current assets
Cash and cash equivalents	$	11,604		$	13,002
Accounts receivable, net of allowances of $824 in 2016 and $568 in 2015		83,835			57,647
Inventories		72,769			45,912
Prepaid expenses and other current assets		3,414			3,142
Income tax receivable		2,814			1,158
Deferred income tax assets		23,050			10,840
Total current assets		197,486			131,701
Property and equipment, net of accumulated depreciation at $18,371 in 2016 and $10,539 in 2015		17,755			8,309
Goodwill		12,272			-
Intangible assets, net of accumulated amortization at $55,298 in 2016 and $41,803 in 2015		53,362			23,045
Deferred income tax assets		27,313			15,386
Other assets		2,541			1,100
Total assets	$	310,729		$	179,541
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	85,022		$	33,846
Accrued liabilities		22,216			5,068
Sales returns liability		28,373			7,849
Accrued wages and wage related expenses		6,169			2,244
Deferred revenue		273			17
Line of Credit		31,307			-
Current portion of long-term debt, net of deferred loan costs of $65 in 2016		10,484			-
Total current liabilities		183,844			49,024
Noncurrent portion of long-term debt, net of deferred loan costs of $141 in 2016		9,623			-
Total liabilities		193,467			49,024
Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized; 33,840 and 33,219 shares issued in 2016 and 2015, respectively		34			33
Additional paid-in capital		92,782			88,983
Accumulated other comprehensive income (loss)		(2,114	)		(1,597	)
Treasury stock, 5,831 and 5,679 common shares in 2016 and 2015 respectively, at cost		(36,145	)		(35,194	)
Retained earnings		62,705			78,292
Total stockholders' equity		117,262			130,517
Total liabilities and stockholders' equity	$	310,729		$	179,541

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Twelve Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Net sales	$	114,929		$	78,632		$	401,857		$	269,311
Cost of sales		85,075			49,733			274,255			167,627
Gross profit		29,854			28,899			127,602			101,684
Operating expenses:
Advertising and marketing		3,862			2,986			12,440			10,436
Selling, general and administrative		25,986			15,739			96,229			56,752
Loss on disputed mophie purchase price		-			-			24,317			-
Transaction costs		124			179			2,591			179
Amortization of definite-lived intangibles		3,476			2,051			13,385			8,453
Total operating expenses		33,448			20,955			148,962			75,820
Income (loss) from operations		(3,594	)		7,944			(21,360	)		25,864
Other income (expense):
Interest expense		(484	)		(16	)		(1,851	)		(97	)
Other income (expense)		(76	)		(15	)		(348	)		(69	)
Total other expense, net		(560	)		(31	)		(2,199	)		(166	)
Income (loss) before provision for income taxes		(4,154	)		7,913			(23,559	)		25,698
Income tax benefit (provision)		9			(2,956	)		7,972			(10,111	)
Net income (loss)	$	(4,145	)	$	4,957		$	(15,587	)		15,587
Earnings (loss) per share attributable to stockholders:
Basic earnings (loss) per share	$	(0.15	)	$	0.18		$	(0.56	)	$	0.54
Diluted earnings (loss) per share	$	(0.15	)	$	0.18		$	(0.56	)	$	0.54

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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					Twelve Months Ended
	December 31, 2016			December 31, 2015		December 31, 2016			December 31, 2015
Net income (loss) in accordance with GAAP	$	(4,145	)	$	4,957	$	(15,587	)	$	15,587
Adjustments:
a.  Stock based compensation expense		151			1,185		3,830			3,893
b.  Depreciation and amortization		5,787			3,372		22,270			12,923
c.  Recovery of reserves on note receivable		-			-		-			(639	)
d.  Other (income) expense		560			31		2,199			166
e.  mophie transaction expenses		124			179		2,591			179
f.  mophie fair value inventory write-up related to acquisition		-			-		2,586			-
g. mophie restructuring charges		959			-		2,160			-
h. mophie employee retention bonus		341			-		841			-
i.  Loss on disputed mophie purchase price		-			-		24,317			-
j.  Provision for income taxes		(9	)		2,956		(7,972	)		10,111
Adjusted EBITDA	$	3,768		$	12,680	$	37,235		$	42,220

Adjusted Net Income Reconciliation - Three and Twelve Months Ended December 31, 2016 and 2015

	Three Months Ended					Twelve Months Ended
	December 31, 2016			December 31, 2015		December 31, 2016			December 31, 2015
Net income (loss) in accordance with GAAP	$	(4,145	)	$	4,957	$	(15,587	)	$	15,587
Adjustments:
a. Amortization of mophie acquired intangibles		1,818			-		6,303			-
b. mophie transaction costs		124			-		2,591			-
c. mophie fair value inventory write-up related to acquisition		-			-		2,586			-
d. mophie restructuring charges		959			-		2,160			-
e. mophie employee retention bonus		341			-		841			-
f.  Loss on disputed mophie purchase price		-			-		24,317			-
g. Income tax effects		(1,240	)*		-		(14,840	)*		-
Adjusted net income	$	(2,143	)	$	4,957	$	8,371		$	15,587
Adjusted diluted earnings per share	$	(0.08	)	$	0.18	$	0.30		$	0.54
Weighted average number of shares outstanding - diluted		28,061			28,021		28,006			29,089

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

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