| x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------|

| NEVADA                                                        |   | 20-2559624                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

| 3855 S 500 W, Suite J, Salt Lake City, UT |   | 84115      |
|-------------------------------------------|--------|------------|
| (Address of principal executive offices)  |   | (Zip Code) |

----

| -   | Item 8 – Financial Statements and Supplementary Data |
|---------------|------------------------------------------------------------|

| -   | Item 9A – Controls and Procedures |
|---------------|-----------------------------------------|

----

|   | PART II |
|--------|---------|

| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|---------|---------------------------------------------|

|   Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersZAGG Incorporated: We have audited the accompanying consolidated balance sheet of ZAGG Incorporated and subsidiaries as of December 31, 2010, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ZAGG Incorporated and subsidiaries as of December 31, 2010, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ZAGG Incorporated’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 24, 2011, except for the restatement of the effectiveness of internal control over financial reporting for the material weakness related to the lack of a sufficient number of accounting professionals with the necessary experience and training, which is as of January 27, 2012, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. (signed) KPMG LLPSalt Lake City, UtahMarch 24, 2011, except for the restatement of the effectiveness of internal control over financial reporting, which is as of January 27, 2012. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| CONSOLIDATED BALANCE SHEETS                                                      |
|----------------------------------------------------------------------------------|
|                                                                             |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |
|                                                                             |   | December 31, |   |
|                                                                             |   | 2010 |   |   | 2009 |   |
|                                                                             |   |   |   |   |   |   |
| ASSETS                                                                           |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |
| Current assets                                                                   |   |   |   |   |   |   |
| Cash and cash equivalents                                                        |   | $ | 2,373,293 |   |   | $ | 4,970,756 |   |
| Accounts receivable, net                                                         |   |   | 17,668,612 |   |   |   | 5,450,722 |   |
| Inventories                                                                      |   |   | 17,946,948 |   |   |   | 3,695,840 |   |
| Prepaid expenses and other current assets                                        |   |   | 2,620,308 |   |   |   | 758,835 |   |
| Related party other asset                                                        |   |   | 3,899,910 |   |   |   | 1,152,500 |   |
| Deposit on intangible asset                                                      |   |   | - |   |   |   | 1,151,000 |   |
| Deferred income tax assets                                                       |   |   | 2,195,687 |   |   |   | 255,653 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total current assets                                                             |   |   | 46,704,758 |   |   |   | 17,435,306 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Property and equipment, net                                                      |   |   | 1,496,532 |   |   |   | 887,705 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Deferred income tax assets                                                       |   |   | - |   |   |   | 446,154 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Other assets                                                                     |   |   | 63,310 |   |   |   | 9,688 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Intangible assets, net                                                           |   |   | 9,167,466 |   |   |   | 119,627 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total assets                                                                     |   | $ | 57,432,066 |   |   | $ | 18,898,480 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| LIABILITIES AND EQUITY                                                           |   |   |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Current liabilities                                                              |   |   |   |   |   |   |   |   |
| Notes payable                                                                    |   | $ | 30,923 |   |   | $ | - |   |
| Accounts payable                                                                 |   |   | 12,122,011 |   |   |   | 2,781,425 |   |
| Income taxes payable                                                             |   |   | 8,030,719 |   |   |   | 1,228,899 |   |
| Accrued liabilities                                                              |   |   | 240,454 |   |   |   | 23,562 |   |
| Accrued wages and wage related expenses                                          |   |   | 302,965 |   |   |   | 164,495 |   |
| Deferred revenue                                                                 |   |   | 294,931 |   |   |   | 262,937 |   |
| Sales returns liability                                                          |   |   | 2,067,671 |   |   |   | 550,201 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total current liabilities                                                        |   |   | 23,089,674 |   |   |   | 5,011,519 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Deferred income tax liability                                                    |   |   | 1,561,465 |   |   |   | - |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total liabilities                                                                |   |   | 24,651,139 |   |   |   | 5,011,519 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Equity                                                                           |   |   |   |   |   |   |   |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                             |   |   |   |   |   |   |   |   |
| Common stock, $0.001 par value; 50,000,000 shares authorized;                    |   |   |   |   |   |   |   |   |
| 23,925,763  and 21,711,862 shares issued and outstanding, respectively |   |   | 23,926 |   |   |   | 21,712 |   |
| Additional paid-in capital                                                       |   |   | 15,494,836 |   |   |   | 9,239,285 |   |
| Cumulative translation adjustment                                                |   |   | (59,802 | ) |   |   | (112,039 | ) |
| Retained earnings                                                                |   |   | 14,701,074 |   |   |   | 4,738,003 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                                       |   |   | 30,160,034 |   |   |   | 13,886,961 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Noncontrolling interest                                                          |   |   | 2,620,893 |   |   |   | - |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total equity                                                                     |   |   | 32,780,927 |   |   |   | 13,886,961 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Total liabilities and equity                                                     |   | $ | 57,432,066 |   |   | $ | 18,898,480 |   |

----

| ZAGG INCORPORATED AND SUBSIDIARIES               |
|--------------------------------------------------|
| CONSOLIDATED STATEMENTS OF OPERATIONS            |
|                                             |   |   |   |   |   |   |   |   |   |
|                                             |   |   |   |   |   |   |   |   |   |
|                                             |   | For the Years Ended December 31, |   |
|                                             |   | 2010 |   |   | 2009 |   |   | 2008 |   |
|                                             |   |   |   |   |   |   |   |   |   |
|                                             |   |   |   |   |   |   |   |   |   |
| Net sales                                        |   | $ | 76,135,025 |   |   | $ | 38,361,747 |   |   | $ | 19,791,603 |   |
| Cost of sales                                    |   |   | 38,738,077 |   |   |   | 16,308,501 |   |   |   | 6,593,718 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                     |   |   | 37,396,948 |   |   |   | 22,053,246 |   |   |   | 13,197,885 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Advertising and marketing                        |   |   | 5,067,377 |   |   |   | 5,845,801 |   |   |   | 3,976,015 |   |
| Selling, general and administrative              |   |   | 15,516,149 |   |   |   | 10,497,394 |   |   |   | 6,842,921 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses                         |   |   | 20,583,526 |   |   |   | 16,343,195 |   |   |   | 10,818,936 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from operations                           |   |   | 16,813,422 |   |   |   | 5,710,051 |   |   |   | 2,378,949 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Other (expense) income:                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                 |   |   | (242,617 | ) |   |   | (231,445 | ) |   |   | (6,022 | ) |
| Interest and other income                        |   |   | 6,593 |   |   |   | 34,833 |   |   |   | 227,223 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other (expense) income                     |   |   | (236,024 | ) |   |   | (196,612 | ) |   |   | 221,201 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before provision for income taxes         |   |   | 16,577,398 |   |   |   | 5,513,439 |   |   |   | 2,600,150 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision                             |   |   | (6,649,740 | ) |   |   | (2,132,010 | ) |   |   | (501,188 | ) |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                       |   |   | 9,927,658 |   |   |   | 3,381,429 |   |   |   | 2,098,962 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss attributable to noncontrolling interest |   |   | 35,414 |   |   |   | - |   |   |   | - |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to stockholders          |   | $ | 9,963,072 |   |   | $ | 3,381,429 |   |   | $ | 2,098,962 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share attributable to stockholders: |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share                         |   | $ | 0.44 |   |   | $ | 0.16 |   |   | $ | 0.11 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share                       |   | $ | 0.41 |   |   | $ | 0.15 |   |   | $ | 0.11 |   |

----

|                                                  |   |         |       |   |    |   |   | Additional |   |   | Retained    |   |   | Cumulative    |       |   | Total          |   |     |     |   |   |       |   |
|-------------------------------------------------------|--------|--------------|------------|--------|---------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|------------|--------|----------------|--------|----------|----------|--------|--------|------------|--------|
|                                                  |   | Common Stock |       |   | Paid-in |   |   | Earnings   |   |   | Translation |   |   | Stockholders' |       |   | Noncontrolling |   |     | Total    |   |
|                                                  |   | Shares       |       |   | Amount  |   |   | Capital    |   |   | (Deficit)   |   |   | Adjustment    |       |   | Equity         |   |     | Interest |   |   | Equity     |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |
| Balances, December 31, 2007                           |   |         | 18,853,995 |   |    | $      | 18,855 |       |   | $      | 4,091,864   |   |   | $             | (742,388   | )      |           | $      | (3,866   | )        |   | $      | 3,364,465  |   |   | $ | - |   |   | $ | 3,364,465 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                 |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Net income                                            |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | 2,098,962  |   |           |   | -        |     |   |   | 2,098,962  |   |   |   | - |   |   |   | 2,098,962 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Foreign currency translation loss                     |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | -          |   |           |   | (102,764 | )        |   |   | (102,764   | )      |   |   | - |   |   |   | (102,764 | ) |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   | 1,996,198  |   |   |   | - |   |   |   | 1,996,198 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Issuance of common stock to employees and consultants |   |         | 210,000    |   |    |   | 210    |       |   |   | 178,229     |   |   |          | -          |   |           |   | -        |     |   |   | 178,439    |   |   |   | - |   |   |   | 178,439 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Issuance of common stock for exercise of warrants     |   |         | 100,000    |   |    |   | 100    |       |   |   | 38,762      |   |   |          | -          |   |           |   | -        |     |   |   | 38,862     |   |   |   | - |   |   |   | 38,862 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Option expense                                        |   |         | -          |   |    |   | -      |       |   |   | 238,763     |   |   |          | -          |   |           |   | -        |     |   |   | 238,763    |   |   |   | - |   |   |   | 238,763 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Balances, December 31, 2008                           |   |         | 19,163,995 |   |    |   | 19,165 |       |   |   | 4,547,618   |   |   |          | 1,356,574  |   |           |   | (106,630 | )        |   |   | 5,816,727  |   |   |   | - |   |   |   | 5,816,727 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                 |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Net income                                            |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | 3,381,428  |   |           |   | -        |     |   |   | 3,381,428  |   |   |   | - |   |   |   | 3,381,428 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Foreign currency translation loss                     |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | -          |   |           |   | (5,409   | )        |   |   | (5,409     | )      |   |   | - |   |   |   | (5,409 | ) |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   | 3,376,019  |   |   |   | - |   |   |   | 3,376,019 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Issuance of common stock to employees                 |   |         | 80,000     |   |    |   | 80     |       |   |   | 282,720     |   |   |          | -          |   |           |   | -        |     |   |   | 282,800    |   |   |   | - |   |   |   | 282,800 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Option exercises                                      |   |         | 634,299    |   |    |   | 633    |       |   |   | 467,881     |   |   |          | -          |   |           |   | -        |     |   |   | 468,514    |   |   |   | - |   |   |   | 468,514 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Warrant exercises                                     |   |         | 1,833,568  |   |    |   | 1,834  |       |   |   | 2,275,071   |   |   |          | -          |   |           |   | -        |     |   |   | 2,276,905  |   |   |   | - |   |   |   | 2,276,905 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Warrant grant                                         |   |         | -          |   |    |   | -      |       |   |   | 221,917     |   |   |          | -          |   |           |   | -        |     |   |   | 221,917    |   |   |   | - |   |   |   | 221,917 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Option expense                                        |   |         | -          |   |    |   | -      |       |   |   | 381,992     |   |   |          | -          |   |           |   | -        |     |   |   | 381,992    |   |   |   | - |   |   |   | 381,992 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Excess tax benefits related to share-based payments   |   |         | -          |   |    |   | -      |       |   |   | 1,062,086   |   |   |          | -          |   |           |   | -        |     |   |   | 1,062,086  |   |   |   | - |   |   |   | 1,062,086 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Balances, December 31, 2009                           |   |         | 21,711,862 |   |    |   | 21,712 |       |   |   | 9,239,285   |   |   |          | 4,738,002  |   |           |   | (112,039 | )        |   |   | 13,886,960 |   |   |   | - |   |   |   | 13,886,960 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Purchase of HzO technology and equipment              |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | -          |   |           |   | -        |     |   |   | -          |   |   |   | 2,656,307 |   |   |   | 2,656,307 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                 |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                     |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | 9,963,072  |   |           |   | -        |     |   |   | 9,963,072  |   |   |   | (35,414 | ) |   |   | 9,927,658 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Foreign currency translation gain                     |   |         | -          |   |    |   | -      |       |   |   | -           |   |   |          | -          |   |           |   | 52,237   |     |   |   | 52,237     |   |   |   | - |   |   |   | 52,237 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   | 10,015,309 |   |   |   | (35,414 | ) |   |   | 9,979,895 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Issuance of common stock to employees                 |   |         | 20,000     |   |    |   | 20     |       |   |   | 42,180      |   |   |          | -          |   |           |   | -        |     |   |   | 42,200     |   |   |   | - |   |   |   | 42,200 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Option exercises                                      |   |         | 524,301    |   |    |   | 524    |       |   |   | 709,753     |   |   |          | -          |   |           |   | -        |     |   |   | 710,277    |   |   |   | - |   |   |   | 710,277 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Warrant exercises                                     |   |         | 1,599,600  |   |    |   | 1,600  |       |   |   | 2,077,879   |   |   |          | -          |   |           |   | -        |     |   |   | 2,079,479  |   |   |   | - |   |   |   | 2,079,479 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Warrant grant                                         |   |         | -          |   |    |   | -      |       |   |   | 292,992     |   |   |          | -          |   |           |   | -        |     |   |   | 292,992    |   |   |   | - |   |   |   | 292,992 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Patent acquisition                                    |   |         | 70,000     |   |    |   | 70     |       |   |   | 1,604,965   |   |   |          | -          |   |           |   | -        |     |   |   | 1,605,035  |   |   |   | - |   |   |   | 1,605,035 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Option expense                                        |   |         | -          |   |    |   | -      |       |   |   | 951,276     |   |   |          | -          |   |           |   | -        |     |   |   | 951,276    |   |   |   | - |   |   |   | 951,276 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Excess tax benefits related to share-based payments   |   |         | -          |   |    |   | -      |       |   |   | 576,506     |   |   |          | -          |   |           |   | -        |     |   |   | 576,506    |   |   |   | - |   |   |   | 576,506 |   |
|                                                  |   |         |       |   |    |   |   |       |   |   |        |   |   |          |       |   |           |   |     |     |   |   |       |   |   |   |   |   |   |   |   |   |
| Balances, December 31, 2010                           |   |         | 23,925,763 |   |    | $      | 23,926 |       |   | $      | 15,494,836  |   |   | $             | 14,701,074 |   |           | $      | (59,802  | )        |   | $      | 30,160,034 |   |   | $ | 2,620,893 |   |   | $ | 32,780,927 |   |

----

| ZAGG INCORPORATED AND SUBSIDIARIES                                    |
|-----------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                 |
|                                                                  |   |   |   |   |   |   |   |   |   |
|                                                                  |   |   |   |   |   |   |   |   |   |
|                                                                  |   | For the Years Ended December 31, |   |
|                                                                  |   | 2010 |   |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities                                  |   |   |   |   |   |   |   |   |   |
| Net income                                                            |   | $ | 9,927,658 |   |   | $ | 3,381,429 |   |   | $ | 2,098,962 |   |
| Adjustments to reconcile net income to net cash                       |   |   |   |   |   |   |   |   |   |   |   |   |
| provided by (used in) operating activities:                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                                              |   |   | 993,475 |   |   |   | 664,792 |   |   |   | 406,064 |   |
| Excess tax benefits related to share-based payments                   |   |   | (619,534 | ) |   |   | (1,062,086 | ) |   |   | - |   |
| Depreciation and amortization                                         |   |   | 348,177 |   |   |   | 243,119 |   |   |   | 160,269 |   |
| Deferred income taxes                                                 |   |   | (1,481,785 | ) |   |   | 507,943 |   |   |   | 370,347 |   |
| Expense related to issuance of warrants                               |   |   | 292,993 |   |   |   | - |   |   |   | - |   |
| Impairment expense for short term note                                |   |   | - |   |   |   | 438,000 |   |   |   | - |   |
| Gain on asset disposals                                               |   |   | - |   |   |   | - |   |   |   | (12,215 | ) |
| Changes in operating assets and liabilities                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                   |   |   | (12,217,890 | ) |   |   | (1,856,835 | ) |   |   | (3,191,441 | ) |
| Inventories                                                           |   |   | (14,251,108 | ) |   |   | (1,782,543 | ) |   |   | (1,466,253 | ) |
| Related party other asset                                             |   |   | (2,747,410 | ) |   |   | (1,152,500 | ) |   |   | - |   |
| Prepaid expenses and other current assets                             |   |   | (1,861,473 | ) |   |   | (7,758 | ) |   |   | (315,920 | ) |
| Other assets                                                          |   |   | (53,622 | ) |   |   | - |   |   |   | - |   |
| Accounts payable                                                      |   |   | 9,340,585 |   |   |   | 1,155,035 |   |   |   | 1,120,815 |   |
| Income taxes payable                                                  |   |   | 6,801,820 |   |   |   | - |   |   |   | - |   |
| Accrued liabilities                                                   |   |   | 686,338 |   |   |   | 978,643 |   |   |   | 176,940 |   |
| Accrued wages and wage related expenses                               |   |   | 138,470 |   |   |   | 43,383 |   |   |   | 25,575 |   |
| Deferred revenues                                                     |   |   | 31,994 |   |   |   | (103,653 | ) |   |   | 265,679 |   |
| Sales return liability                                                |   |   | 1,517,470 |   |   |   | 259,082 |   |   |   | 267,258 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash (used in) provided by operating activities                   |   |   | (3,153,842 | ) |   |   | 1,706,051 |   |   |   | (93,920 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits on and purchase of intangible assets                         |   |   | (2,116,540 | ) |   |   | (1,230,264 | ) |   |   | (4,904 | ) |
| Short-term loans                                                      |   |   | - |   |   |   | - |   |   |   | (513,000 | ) |
| Proceeds from disposal of equipment                                   |   |   | - |   |   |   | - |   |   |   | 2,994 |   |
| Purchase of property and equipment                                    |   |   | (819,531 | ) |   |   | (574,473 | ) |   |   | (380,102 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used in investing activities                                 |   |   | (2,936,071 | ) |   |   | (1,804,737 | ) |   |   | (895,012 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Payments on debt                                                      |   |   | - |   |   |   | (20,223 | ) |   |   | (21,867 | ) |
| Proceeds from notes payable                                           |   |   | 30,923 |   |   |   | - |   |   |   | - |   |
| Proceeds from exercise of warrants and options                        |   |   | 2,789,756 |   |   |   | 2,967,336 |   |   |   | - |   |
| Excess tax benefits related to share-based payments                   |   |   | 619,534 |   |   |   | 1,062,086 |   |   |   | - |   |
| Proceeds from issuance of common stock and warrants                   |   |   | - |   |   |   | - |   |   |   | 50,000 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by financing activities                             |   |   | 3,440,213 |   |   |   | 4,009,199 |   |   |   | 28,133 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of foreign current exchange rates on cash and cash equivalents |   |   | 52,237 |   |   |   | (5,409 | ) |   |   | (102,764 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                  |   |   | (2,597,463 | ) |   |   | 3,905,104 |   |   |   | (1,063,563 | ) |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of the period                  |   |   | 4,970,756 |   |   |   | 1,065,652 |   |   |   | 2,129,215 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of the period                        |   | $ | 2,373,293 |   |   | $ | 4,970,756 |   |   | $ | 1,065,652 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the period for interest                              |   | $ | 242,617 |   |   | $ | 231,445 |   |   | $ | 6,022 |   |
| Cash paid during the period for taxes                                 |   |   | 710,171 |   |   |   | 551,683 |   |   |   | - |   |

----

----

----

|                                         |   | For the Year Ended December 31, |    |
|----------------------------------------------|--------|--------------------------------------|---------|
|                                         |   | 2010                                 |    |   | 2009 |   |   | 2008 |   |
| Balance at beginning of year                 |   | $                                    | 685,155 |   |   | $ | 218,936 |   |   | $ | 63,241 |   |
| Additions charged to expense                 |   |                                 | 219,141 |   |   |   | 466,219 |   |   |   | 155,695 |   |
| Write-downs charged against the allowance    |   |                                 | — |   |   |   | — |   |   |   | — |   |
| Recoveries of amounts previously charged off |   |                                 | — |   |   |   | — |   |   |   | — |   |
| Balance at end of year                       |   | $                                    | 904,296 |   |   | $ | 685,155 |   |   | $ | 218,936 |   |

----

|                                                          |   | For the Year Ended December 31, |       |
|---------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                          |   | 2010                                 |       |   | 2009 |   |   | 2008 |   |
| Balance at beginning of year                                  |   | $                                    | 550,201    |   |   | $ | 291,119 |   |   | $ | 23,861 |   |
| Additions charged to expense                                  |   |                                 | 7,047,467  |   |   |   | 2,845,956 |   |   |   | 1,053,587 |   |
| Sales returns and warranty claims charged against the reserve |   |                                 | (5,529,997 | ) |   |   | (2,586,874 | ) |   |   | (786,329 | ) |
| Balance at end of year                                        |   | $                                    | 2,067,671  |   |   | $ | 550,201 |   |   | $ | 291,119 |   |

----

|                                             |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Net income attributable to stockholders          |   | $      | 9,963,072  |   |   | $      | 3,381,429  |   |   | $ | 2,098,962 |   |
|                                             |   |   |       |   |   |   |       |   |   |   |   |   |
| Weighted average shares outstanding              |   |   | 22,518,441 |   |   |   | 20,633,812 |   |   |   | 18,971,399 |   |
| Dilutive effect of stock options and warrants    |   |   | 1,744,052  |   |   |   | 2,355,227  |   |   |   | 293,830 |   |
| Diluted shares                                   |   |   | 24,262,493 |   |   |   | 22,989,039 |   |   |   | 19,265,229 |   |
| Earnings per share attributable to stockholders: |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic                                            |   | $      | 0.44       |   |   | $      | 0.16       |   |   | $ | 0.11 |   |
| Dilutive                                         |   | $      | 0.41       |   |   | $      | 0.15       |   |   | $ | 0.11 |   |

----

|                                            |   | December 31, |      |
|-------------------------------------------------|--------|--------------|-----------|
|                                            |   | 2010         |      |   | 2009 |   |
|                                            |   |         |      |   |   |   |
| Interest and other receivables                  |   | $            | 97,719    |   |   | $ | 69,459 |   |
| Inventory deposits                              |   |         | 2,277,615 |   |   |   | 360,635 |   |
| Other                                           |   |         | 244,974   |   |   |   | 328,741 |   |
| Total prepaid expenses and other current assets |   | $            | 2,620,308 |   |   | $ | 758,835 |   |

|                  |   | December 31, |       |
|-----------------------|--------|--------------|------------|
|                  |   | 2010         |       |   | 2009 |   |
|                  |   |         |       |   |   |   |
| Finished goods        |   | $            | 7,925,387  |   |   | $ | 778,871 |   |
| Raw materials         |   |         | 10,021,561 |   |   |   | 2,916,969 |   |
|  Total inventory |   | $            | 17,946,948 |   |   | $ | 3,695,840 |   |

|                            |            |   | December 31, |      |
|---------------------------------|-----------------|--------|--------------|-----------|
|                            |            |   | 2010         |      |   | 2009 |   |
|                            | Useful Lives    |   |         |      |   |   |   |
| Computer equipment and software | 3 to 5 years    |   | $            | 587,127   |   |   | $ | 431,923 |   |
| Equipment                       | 3 to10 years    |   |         | 936,638   |   |   |   | 452,473 |   |
| Furniture and fixtures          | 7 years         |   |         | 98,407    |   |   |   | 109,392 |   |
| Automobiles                     | 5 years         |   |         | 176,476   |   |   |   | 93,002 |   |
| Leasehold improvements          | 1 to 4.75 years |   |         | 549,902   |   |   |   | 318,180 |   |
|                            |            |   |         |      |   |   |   |   |   |
|                            |            |   |         | 2,348,550 |   |   |   | 1,404,970 |   |
| Less accumulated depreciation   |            |   |         | (852,018  | ) |   |   | (517,265 | ) |
|                            |            |   |         |      |   |   |   |   |   |
| Net property and equipment      |            |   | $            | 1,496,532 |   |   | $ | 887,705 |   |

----

|                                     |   | December 31, 2010        |   |
|------------------------------------------|--------|--------------------------|--------|
|                                     |   | Weighted                 |   |   |   |   |   |   |   |   |   |   |
|                                     |   | average                  |   |   | Gross |   |   |   |   |   | Net |   |
|                                     |   | amortization             |   |   | carrying |   |   | Accumulated |   |   | carrying |   |
|                                     |   | period                   |   |   | amount |   |   | amortization |   |   | amount |   |
| Intangibles subject to amortization:     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Internet addresses                       |   | 10 yrs                   |   |   | $ | 124,234 |   |   |   | (28,069 | ) |   |   | 96,165 |   |
| Patents                                  |   | 14 yrs                   |   |   |   | 1,835,575 |   |   |   | — |   |   |   | 1,835,575 |   |
| Intangibles not subject to amortization: |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Patent application costs                 |   |                     | N/A    |   |   |   | 47,039 |   |   |   | — |   |   |   | 47,039 |   |
| HzO technology                           |   |                     | N/A    |   |   |   | 7,188,687 |   |   |   | — |   |   |   | 7,188,687 |   |
| Total                                    |   |                     |   |   |   | $ | 9,195,535 |   |   |   | (28,069 | ) |   |   | 9,167,466 |   |
|                                     |   |   December 31, 2009 |   |
|                                     |   | Weighted                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   | average                  |   |   | Gross |   |   |   |   |   |   | Net |   |
|                                     |   | amortization             |   |   | carrying |   |   | Accumulated |   |   | carrying |   |
|                                     |   | period                   |   |   | amount |   |   | amortization |   |   | amount |   |
| Intangibles subject to amortization:     |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Internet addresses                       |   | 10 yrs                   |   |   | $ | 124,234 |   |   |   | (15,646 | ) |   |   | 108,588 |   |
| Intangibles not subject to amortization: |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Patent application costs                 |   |                     | N/A    |   |   |   | 11,039 |   |   |   | — |   |   |   | 11,039 |   |
| Total                                    |   |                     |   |   |   | $ | 135,273 |   |   |   | (15,646 | ) |   |   | 119,627 |   |

| 2011   |   | $      | 200,424   |   |
|--------|--------|--------|-----------|--------|
| 2012   |   |   | 217,525   |   |
| 2013   |   |   | 219,532   |   |
| 2014   |   |   | 222,598   |   |
| 2015   |   |   | 226,616   |   |
|   |   | $      | 1,086,695 |   |

----

| (a) | a first payment of $200,000 by November 11, 2010, and a second payment of $150,000 after December 31, 2010; |
|-----|-------------------------------------------------------------------------------------------------------------|

| (b) | issue to Mason five-year warrants (the “Warrant”) to purchase 750,000 shares of the Company’s restricted Common Stock at an exercise price equal to the closing bid price on November 9, 2010 ($8.53); provided that 500,000 of the 750,000 warrant shares are exercisable only upon the issuance of a patent from the CIP Application with at least one claim that satisfies the Claim Conditions (as defined below); |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | issue to Mason 70,000 shares of the Company’s restricted Common Stock; and |
|-----|----------------------------------------------------------------------------------|

| (d) | grant eShields a fully paid-up, perpetual, non-exclusive license, with limited rights to transfer or sublicense, for the patents and CIP Applications. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a) | pay Mason the sum of $500,000; and |
|-----|------------------------------------|

| (b) | issue to Mason 430,000 shares of the Company’s restricted Common Stock. |
|-----|-------------------------------------------------------------------------------|

----

|                          |   | 2010   |       |   | 2009   |   |        | 2008   |   |
|-------------------------------|--------|--------|------------|--------|--------|--------|-------------|--------|--------|
| Current provision:            |   |   |       |   |   |   |        |   |   |
|  Federal                 |   | $      | (7,057,934 | )      |   | $      | (1,079, 701 | )      |   | $ | — |   |
|  State                   |   |   | (1,073,591 | )      |   |   | (155,456    | )      |   |   | — |   |
|   Total current     |   |   | (8,131,525 | )      |   |   | (1,235,157  | )      |   |   | — |   |
| Deferred (provision) benefit: |   |   |       |   |   |   |        |   |   |   |   |   |
|  Federal                 |   |   | 1,283,142  |   |   |   | (776,631    | )      |   |   | (476,129 | ) |
|  State                   |   |   | 198,643    |   |   |   | (120,222    | )      |   |   | (25,059 | ) |
|   Total deferred    |   |   | 1,481,785  |   |   |   | (896,853    | )      |   |   | (501,188 | ) |
| Total (provision) benefit     |   | $      | (6,649,740 | )      |   | $      | (2,132,010  | )      |   | $ | (501,188 | ) |

|                                     |   | 2010   |       |   | 2009   |   |       | 2008   |   |
|------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Tax at statutory rate (34%)              |   | $      | (5,636,316 | )      |   | $      | (1,838,699 | )      |   | $ | (884,051 | ) |
| State tax, net of federal tax benefit    |   |   | (555,941   | )      |   |   | (178,462   | )      |   |   | (85,805 | ) |
| Non-deductible expense and other         |   |   | (198,451   | )      |   |   | (114,849   | )      |   |   | (6,582 | ) |
| Domestic production activities deduction |   |   | 587,230    |   |   |   | —    |   |   |   | — |   |
| Return to provision adjustment           |   |   | (436,335   | )      |   |   | —    |   |   |   | — |   |
| Interest and penalties                   |   |   | (201,148   | )      |   |   | —    |   |   |   | — |   |
| Federal 38% rate bracket surcharge       |   |   | (208,779   | )      |   |   | —    |   |   |   | — |   |
| Utilization of NOL carryforward          |   |   | —    |   |   |   | —    |   |   |   | 475,250 |   |
|                                     |   | $      | (6,649,740 | )      |   | $      | (2,132,010 | )      |   | $ | (501,188 | ) |

----

|                                        |   | 2010   |      |   | 2009   |   |
|---------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Deferred tax assets:                        |   |   |      |   |   |   |
|   Allowance for doubtful accounts |   | $      | 337,302   |   |   | $      | 255,563 |   |
|   Deferred revenue                |   |   | 48,338    |   |   |   | — |   |
|   Net operating loss carryforward |   |   | 45,307    |   |   |   | 3,151 |   |
|   Loss from foreign subsidiary    |   |   | —   |   |   |   | 80,254 |   |
|   Inventories                     |   |   | 1,044,573 |   |   |   | 27,761 |   |
|   Stock-based compensation        |   |   | 234,420   |   |   |   | 191,659 |   |
|   Sales returns accrual           |   |   | 765,474   |   |   |   | 205,225 |   |
| Total deferred tax assets                   |   |   | 2,475,414 |   |   |   | 763,613 |   |
| Deferred tax liabilities:                   |   |   |      |   |   |   |
|   Property and equipment          |   |   | 313,605   |   |   |   | 61,896 |   |
|   Intangible assets               |   |   | 1,527,587 |   |   |   | — |   |
| Total gross deferred tax liabilities        |   |   | 1,841,192 |   |   |   | 61,896 |   |
| Net deferred tax assets                     |   | $      | 634,222   |   |   | $      | 701,717 |   |

| Deferred tax assets, net – current                  |   | $      | 2,195,687  |   |   | $      | 255,563 |   |
|-----------------------------------------------------------|--------|--------|------------|--------|--------|--------|---------|--------|
| Deferred tax (liabilities) assets,net – non-current |   |   | (1,561,465 | )      |   |   | 446,154 |   |
| Net deferred tax assets                                   |   | $      | 634,222    |   |   | $      | 701,717 |   |

----

|                    |   | 2010      |   |   | 2009      |   |   | 2008      |   |
|-------------------------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|
| Expected dividend yield |   |      | 0.0    | %      |      |   | 0.0    | %         |   |   | 0.0 | % |
| Risk-free interest rate |   |      | 1.20   | %      |      |   | 1.31   | %         |   |   | 2.05 | % |
| Expected term (years)   |   | 3.5 years |   |   | 3.5 years |   |   | 3.7 years |   |
| Expected volatility     |   |      | 95.83  | %      |      |   | 90.52  | %         |   |   | 73.95 | % |

----

|                                                  |   |      Options |   |   |    Weighted-AverageExercise Price |   |   | Weighted-AverageRemainingContractual Term |   |   |    AggregateIntrinsic Value |   |
|-------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------------------|--------|--------|-------------------------------------------|--------|--------|---------------------------------------|--------|
|                                                  |   | (In thousands)                   |   |   | (Per share)                                 |   |   | (In years)                                |   |   | (In thousands)                        |   |
| Outstanding at December 31, 2009                 |   |                             | 2,113  |   |                                        | $      | 1.39   |                                      |   |   | 3.8                                   |   |   |   |   |
| Granted                                               |   |                             | 892    |   |                                        |   | 2.86   |                                      |   |   |                                  |   |   |   |   |
| Exercised                                             |   |                             | (524   | )      |                                        |   | 1.34   |                                      |   |   |                                  |   |   |   |   |
| Forfeited/expired                                     |   |                             | (127   | )      |                                        |   | 1.69   |                                      |   |   |                                  |   |   |   |   |
| Outstanding at December 31, 2010                 |   |                             | 2,354  |   |                                        | $      | 1.94   |                                      |   |   | 3.3                                   |   |   | $ | 13,358 |   |
| Vested and expected to vest at December 31, 2010 |   |                             | 2,206  |   |                                        | $      | 1.92   |                                      |   |   | 3.3                                   |   |   | $ | 12,581 |   |
| Exercisable at December 31, 2010                 |   |                             | 381    |   |                                        | $      | 1.00   |                                      |   |   | 2.7                                   |   |   | $ | 2,523 |   |

----

|                    |   | 2010       |   |   | 2009      |   |
|-------------------------|--------|------------|--------|--------|-----------|--------|
| Expected dividend yield |   |       | 0.0    | %      |      |   | 0.0 | % |
| Risk-free interest rate |   |       | 1.91   | %      |      |   | 0.17 | % |
| Expected term (years)   |   | 4.46 years |   |   | 0.2 years |   |
| Expected volatility     |   |       | 88.88  | %      |      |   | 66.65 | % |

|                                                  |   |      Warrants |   |   |    Weighted-AverageExercise Price |   |   | Weighted-AverageRemainingContractual Term |   |   |    AggregateIntrinsic Value |   |
|-------------------------------------------------------|--------|-----------------------------------|--------|--------|---------------------------------------------|--------|--------|-------------------------------------------|--------|--------|---------------------------------------|--------|
|                                                  |   | (In thousands)                    |   |   | (Per share)                                 |   |   | (In years)                                |   |   | (In thousands)                        |   |
| Outstanding at December 31, 2009                 |   |                              | 2,736  |   |                                        | $      | 1.80   |                                      |   |   | 2.7                                   |   |   |   |   |
| Granted                                               |   |                              | 350    |   |                                        |   | 6.83   |                                      |   |   |                                  |   |   |   |   |
| Exercised                                             |   |                              | (1,600 | )      |                                        |   | 1.30   |                                      |   |   |                                  |   |   |   |   |
| Forfeited/expired                                     |   |                              | (175   | )      |                                        |   | 6.40   |                                      |   |   |                                  |   |   |   |   |
| Outstanding at December 31, 2010                 |   |                              | 1,311  |   |                                        | $      | 3.14   |                                      |   |   | 2.5                                   |   |   | $ | 5,879 |   |
| Vested and expected to vest at December 31, 2010 |   |                              | 1,311  |   |                                        | $      | 3.14   |                                      |   |   | 2.5                                   |   |   | $ | 5,879 |   |
| Exercisable at December 31, 2010                 |   |                              | 1,303  |   |                                        | $      | 3.14   |                                      |   |   | 2.5                                   |   |   | $ | 5,837 |   |

|             |   |              |    |   | Fair Value Measurements Using: |   |
|------------------|--------|-------------------|---------|--------|--------------------------------|--------|
|             |   | December 31, 2010 |    |   | Level 1 Inputs                 |   |   | Level 2 Inputs |   |   | Level 3 Inputs |   |
|             |   |              |    |
| Cash equivalents |   | $                 | 416,312 |   |                           | $      | 416,312 |   |   |   | — |   |   |   | — |   |

|             |   |              |      |   | Fair Value Measurements Using: |   |
|------------------|--------|-------------------|-----------|--------|--------------------------------|--------|
|             |   | December 31, 2009 |      |   | Level 1 Inputs                 |   |   | Level 2 Inputs |   |   | Level 3 Inputs |   |
|             |   |              |      |
| Cash equivalents |   | $                 | 4,085,193 |   |                           | $      | 4,085,193 |   |   |   | — |   |   |   | — |   |

----

| 2011  |   | $      | 431,709   |   |
|-------|--------|--------|-----------|--------|
| 2012  |   |   | 298,178   |   |
| 2013  |   |   | 315,537   |   |
| 2014  |   |   | 326,037   |   |
| 2015  |   |   | 190,667   |   |
| Total |   | $      | 1,562,129 |   |

----

|          |   | 2010   |   |   | 2009   |   |   | 2008 |   |
|---------------|--------|--------|--------|--------|--------|--------|--------|------|--------|
| United States |   |   | 83     | %      |   |   | 85     | %    |   |   | 83 | % |
| Europe        |   |   | 12     | %      |   |   | 8      | %    |   |   | 10 | % |
| Other         |   |   | 5      | %      |   |   | 7      | %    |   |   | 7 | % |

----

|                                                 |   | Year ended December 31, 2010 |       |
|------------------------------------------------------|--------|------------------------------|------------|
|                                                 |   | First Quarter                |       |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |   | Year |   |
| Net sales                                            |   | $                            | 8,775,559  |   |   | $ | 15,058,783 |   |   | $ | 23,055,763 |   |   | $ | 29,244,920 |   |   | $ | 76,135,025 |   |
| Operating income                                     |   |                         | 1,331,792  |   |   |   | 3,224,278 |   |   |   | 6,153,296 |   |   |   | 6,104,056 |   |   |   | 16,813,422 |   |
| Net income attributable to stockholders              |   |                         | 791,076    |   |   |   | 1,911,040 |   |   |   | 3,859,092 |   |   |   | 3,401,864 |   |   |   | 9,963,072 |   |
| Earnings per share attributable to stockholders: (1) |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   | $                            | 0.04       |   |   | $ | 0.09 |   |   | $ | 0.17 |   |   | $ | 0.14 |   |   | $ | 0.44 |   |
| Diluted                                              |   |                         | 0.03       |   |   |   | 0.08 |   |   |   | 0.16 |   |   |   | 0.13 |   |   |   | 0.41 |   |
| Weighted average common shares:                      |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   |                         | 21,719,274 |   |   |   | 22,061,570 |   |   |   | 22,565,300 |   |   |   | 23,702,509 |   |   |   | 22,518,441 |   |
| Diluted                                              |   |                         | 23,370,610 |   |   |   | 23,536,603 |   |   |   | 24,029,177 |   |   |   | 25,446,561 |   |   |   | 24,262,493 |   |

|                                                 |   | Year ended December 31, 2009 |       |
|------------------------------------------------------|--------|------------------------------|------------|
|                                                 |   | First Quarter                |       |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |   | Year |   |
| Net sales                                            |   | $                            | 8,090,951  |   |   | $ | 9,214,971 |   |   | $ | 9,728,528 |   |   | $ | 11,327,297 |   |   | $ | 38,361,747 |   |
| Operating income                                     |   |                         | 1,603,892  |   |   |   | 1,863,110 |   |   |   | 1,471,288 |   |   |   | 771,791 |   |   |   | 5,710,051 |   |
| Net income attributable to stockholders              |   |                         | 1,028,240  |   |   |   | 1,194,264 |   |   |   | 908,081 |   |   |   | 250,844 |   |   |   | 3,381,429 |   |
| Earnings per share attributable to stockholders: (1) |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   | $                            | 0.05       |   |   | $ | 0.06 |   |   | $ | 0.04 |   |   | $ | 0.01 |   |   | $ | 0.16 |   |
| Diluted                                              |   |                         | 0.05       |   |   |   | 0.05 |   |   |   | 0.04 |   |   |   | 0.01 |   |   |   | 0.15 |   |
| Weighted average common shares:                      |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                |   |                         | 19,185,642 |   |   |   | 20,062,839 |   |   |   | 21,540,033 |   |   |   | 21,701,829 |   |   |   | 20,633,812 |   |
| Diluted                                              |   |                         | 19,869,440 |   |   |   | 22,614,394 |   |   |   | 24,252,718 |   |   |   | 23,852,584 |   |   |   | 22,989,039 |   |

| (1) |   | The earnings per share calculations for each of the quarters were based upon the weighted average number of shares outstanding during each period, and the sum of the quarters may not be equal to the full year earnings per common share amounts. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mr. Harmer, Teleportall, and certain of their affiliates delivered a promissory note (the “Note”) dated March 23, 2011 to the Company in the original principal amount of $4,125,902 which accrues interest at the rate of LIBOR plus 4% per annum (adjusted quarterly) payable as follows: (i) interest only payments (a) on September 23, 2011, and thereafter (b)  on or before the last day of each calendar quarter, (ii) 50% of the net profits of each ZAGGbox sale by Teleportall and its affiliates to be applied, first, to accrued interest and, second, to the principal balance of the Note, and (iii) the unpaid balance due in full on March 23, 2013. The principal amount of the Note is the aggregate amount of the payments made by the Company to Teleportall and the internal cost of the ZAGGbox project incurred by the Company.  The Note is secured by certain real property, interests in entities that own real property and restricted securities. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Teleportall and the Company entered into a License Agreement on March 23, 2011 under which the Company licensed to Teleportall the use of certain ZAGG names and marks to sell and distribute the ZAGGbox product.  Teleportall shall pay ZAGG a 10% royalty on net sales of ZAGGboxes per calendar quarter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Teleportall and ZAGG entered into a non-exclusive Commission Agreement on March 23, 2011, under which Teleportall may make introductions of many ZAGG products in all countries where ZAGG does not currently have exclusive dealing agreements in respect of the marketing, distribution or sale of its products.  The Commission Agreement is for a term of two (2) years; provided that (a) the Commission Agreement shall automatically terminate concurrent with any uncured default under the Note, and (b) the term may be extended for an additional term on reasonable terms if Teleportall’s introductions during the initial term result in the purchase of no less than $25,000,000 of ZAGG products during the initial term.  Payment terms of the Commission Agreement are as follows: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | 10.0% commission payments on orders received by the Company from retailers and distributors first introduced to the company by Teleportall during the first 60 days after the introduction is made (the “Load-in Period”) to be split 50/50 between cash to Teleportall and principal payments on the Note. However, all commission payments will be paid to ZAGG if Teleportall is in breach of the terms of the Note or any other agreements between the parties; and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | 3.0% commission on all orders within the first 24 months after the Load-in Period, and 2.0% thereafter, from any orders generated in the countries where Teleportall is paid a commission under the terms set forth in the preceding bullet point (excluding the United States) regardless of Teleportall’s involvement in ZAGG’s receipt of the order for 5 years. The 3.0% and 2.0% commissions will be split 50/50 between cash to Teleportall and principal payments on the Note. |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ITEM 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

| 1.   | Disclosure Controls and Procedures |
|----------------|------------------------------------|

| 2.   | Changes in Internal Control Over Financial Reporting |
|----------------|------------------------------------------------------|

| 3.   | Management’s Report on Internal Control Over Financial Reporting |
|----------------|------------------------------------------------------------------------|

| ·   | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our consolidated financial statements. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Inherent Limitations on Effectiveness of Controls |
|----------------|---------------------------------------------------|

----

| 5.   | Report of Independent Registered Public Accounting Firm |
|----------------|---------------------------------------------------------|

----

|   | ZAGG INC |   |
|--------|----------|--------|
|   |     |   |

| Dated:           January 27, 2012 | By:    | /s/ ROBERT G. PEDERSEN II                                          |   |
|------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                                     |   | Robert G. Pedersen IICEO and Chairman(Principal Executive Officer) |   |

| Dated:           January 27, 2012 | By:    | /s/ ROBERT G. PEDERSEN II                                                                                                                                                                  |   |
|------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                     |   | Robert G. Pedersen IICEO and Chairman(Principal Executive Officer)                                                                                                                         |   |
|                                                                                     |   |                                                                                                                                                                                       |   |
| Dated:           January 27, 2012 | By:    | /s/ BRANDON T. O’BRIEN                                                                                                                       |   |
|                                                                                     |   | Brandon T. O’BrienChief Financial Officer(Principal Accounting and Financial Officer)                                                                                                |   |
|                                                                                     |   |                                                                                                                                                                                       |   |
| Dated:           January 27, 2012 | By:    | /s/ ED EKSTROM                                                |   |
|                                                                                     |   | Ed EkstromDirector                                                                                                                                                                         |   |
|                                                                                     |   |                                                                                                                                                                                       |   |
| Dated:           January 27, 2012 | By:    | /s/ SHU UEYAMA                                                |   |
|                                                                                     |   | Shu UeyamaDirector                                                                                                                                                                         |   |
|                                                                                     |   |                                                                                                                                                                                       |   |
| Dated:           January 27, 2012 | By:    | /s/ RANDY HALES                                                    |   |
|                                                                                     |   | Randy HalesPresident, Chief Operating Officer & Director                                                                                                                               |   |
|                                                                                     |   |                                                                                                                                                                                       |   |
| Dated:           January 27, 2012 | By:    | /s/ CHERYL LARABEE                             |   |
|                                                                                     |   | Cheryl LarabeeDirector                                                                                                                                                                     |   |