ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value amounts)

(Unaudited)

		March 31, 2020		December 31, 2019
ASSETS
Current assets:
	Cash and cash equivalents	$	14,150	$	17,801
	Accounts receivable, net of allowances of $1,655 and $1,143	83,746		142,804
	Income tax receivable	2,330		—
	Inventories	93,556		144,944
	Prepaid expenses and other current assets	4,719		6,124
Total current assets		198,501		311,673
Property and equipment, net of accumulated depreciation of $12,717 and $14,159		15,247		18,019
Intangible assets, net of accumulated amortization of $99,176 and $95,632		58,418		63,110
Deferred income tax assets, net		23,148		22,657
Operating lease right of use assets		9,208		9,636
Goodwill		24,920		43,569
Other assets		200		567
Total assets		$	329,642	$	469,231
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	50,854	$	87,303
	Income tax payable	—		5,266
	Sales returns liability	30,571		43,853
	Accrued wages and wage related expenses	6,785		6,328
	Accrued liabilities	12,771		15,164
	Current portion of operating lease liabilities	2,583		2,099
Total current liabilities		103,564		160,013
Line of credit		99,540		107,140
Operating lease liabilities		9,674		10,599
Total liabilities		212,778		277,752
Stockholders’ equity:
	Common stock, $0.001 par value; 100,000 shares authorized; 36,884 and 36,610 shares issued	37		37
	Treasury stock, 7,055 and 7,055 common shares at cost	(50,455)		(50,455)
	Additional paid-in capital	117,552		116,533
	Accumulated other comprehensive loss	(1,351)		(1,631)
	Retained earnings	51,081		126,995
Total stockholders’ equity		116,864		191,479
Total liabilities and stockholders’ equity		$	329,642	$	469,231

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended
	March 31, 2020		March 31, 2019
Net sales	$	90,981	$	78,750
Cost of sales	109,923		54,928
Gross (loss) profit	(18,942)		23,822
Operating expenses:
Advertising and marketing	4,426		4,585
Selling, general and administrative	32,593		31,586
Transaction costs	345		247
Impairment of goodwill	18,649		—
Loss (gain) on disposal of intangible assets and equipment	3,683		(2)
Amortization of intangible assets	3,544		4,466
Total operating expenses	63,240		40,882
Loss from operations	(82,182)		(17,060)
Other income (expense):
Interest expense	(1,534)		(1,010)
Other income (expense)	2		(516)
Total other expense	(1,532)		(1,526)
Loss before provision for income taxes	(83,714)		(18,586)
Income tax benefit	8,159		4,162
Net loss	$	(75,555)	$	(14,424)
Loss per share attributable to stockholders:
Basic loss per share	$	(2.54)	$	(0.50)
Diluted loss per share	$	(2.54)	$	(0.50)

ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP

(Amounts in thousands)

(Unaudited)

UNAUDITED SUPPLEMENTAL DATA
The following Adjusted EBITDA, Adjusted gross profit and Adjusted gross profit margin are not financial measures prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In addition, they should not be construed as an alternative to any other measures of performance determined in accordance with U.S. 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 they fail to address. We present this financial information because we believe that these measures are helpful to some investors as a measure of our operations. We caution investors that non-U.S. 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
		March 31, 2020		March 31, 2019
Net loss in accordance with U.S. GAAP		$	(75,555)	$	(14,424)
Adjustments:
a.	Stock-based compensation expense	1,294		1,185
b.	Depreciation and amortization	5,376		6,057
c.	Other expense, net	1,532		1,526
d.	Transaction costs	345		247
e.	BRAVEN employee retention bonus	—		47
f.	Former CFO retention bonus	—		110
g.	Inventory step-up amount in connection with acquisition of HALO	—		431
h.	Severance expense	528		—
i.	March 2020 inventory write-down	44,833		—
j.	Impairment of goodwill	18,649		—
k.	Loss (gain) on disposal of intangible assets and equipment	3,683		—
l.	Income tax benefit	(8,159)		(4,162)
Total Adjustments		68,081		5,441
Adjusted EBITDA		$	(7,474)	$	(8,983)

ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP

(Amounts in thousands, except per share amounts)

(Unaudited)

GROSS PROFIT RECONCILIATION		Three Months Ended
		March 31, 2020			March 31, 2019
Gross (loss) profit in accordance with U.S. GAAP		$	(18,942)		$	23,822
Adjustment:
	March 2020 inventory write-down	44,833			—
Adjusted gross profit		$	25,891		$	23,822
Adjusted gross profit margin		28		%	30		%