However, I just can’t help but think the overall market is inflated currently and we may see a general downturn in the next couple of months. Our political leaders may be calling a bottom of the economy here but we can’t ignore the facts of unemployment (approaching 10%), savings rates are now increasing which impacts consumer spending, tighter credit, foreclosures still to come through 2011, and finally continual de-leveraging of credit card/commercial debt (with correlating defaults).

Zagg has done well despite the market’s overall hiccups, however, that’s not to say it will not be impacted going forward since the price is still trading at higher trailing P/E levels. It will take a steady mind to ignore the volatility to come and just trust that Zagg’s future earnings power is what will point us upward.

ZAGG continues to bear good news, earning $0.05 per diluted share in 2Q’09 compared to $0.01 fully diluted in 2Q’08. Earnings guidance provided by the company for 2009 is $38 million in revenue and $0.22 earnings per share.

2Q Developments:

• Recently the company submitted an application for a NASDAQ listing, requiring one additional independent board member. The outlook is that the formal listing will be finalized near the end of Q3’09, which will lift restrictions for many larger investors. CEO Robert Pedersen II commented that “many [institutional investors] of which I have spoken to are just waiting –biting at the bit- for the opportunity to invest in Zagg.”
• Best Buy has allowed the company to have a dedicated wall space branded for the invisible shield. The fixtures have shipped to over 1,000 stores, and an installation service will be provided.
• Radio Shack is now carrying ZAGG shields for an MP3 player and several phones.
• Media Market, Europe’s largest retailer consumer electronics, will carry ZAGG products at 300 of its stores throughout Germany. Media Market has 2,000 locations.
• ZAGG is in talks with AT&T, Sprint, T-Moblie, and Verizon wireless. Each company is evaluating the invisible shield.
• The joint venture ZAGG Japan will begin operations in 4Q’09. Discussions have already started with major Japanese consumer electronics manufacturers.

New Products:

• ZAGGskins, by popular demand, will allow buyers to customize their products with their own uploaded designs.
• Zsparq is a portable charger and power supply for the traveler. On a full charge it can recharge the iPhone four times –very nice.
• Second generation ZAGG audio products (Zrock and Zbuds) are sporting improved design and operations.
• ZAGGbox is known only in name. This is one of two mystery products that is slotted for 4Q’09, and is said by management to be a “game changer.”

AppSpace is still functioning as a private beta version with 10-15% of the highlights complete, but is progressing in line with management’s expectations. The program’s learning system is expected to give it an edge over the competition through the ability to provide desired apps based on the user’s profile and behavior. Management made clear that they have no intention of resting on past accomplishments. ZAGG continues to move forward at a frenzied pace.

Zagg Corp. (BB: ZAGG)
Last Price	Change	Open	Day High	52-Week High
5.10	0.05   (0.97%)	5.25	5.25	7.91
	Volume	Previous Close	Day Low	52-Week Low
	58,400	5.15	5.00	0.60

The three most common methods is FIFO (first-in, first-out), LIFO* (last-in, last-out), and average cost. If a company uses FIFO while costs are increasing throughout the year then gross (profit) margins will increase. The opposite is also true; if costs are decreasing then the gross margin will decrease. Example: XYZ Corp. buys widgets for $1 each to make a product that it will sell for $2. Costs decrease and XYZ is forced to sell the same product for $1.50 while the cost of widgets is now .50. Under FIFO, XYZ must count the older, more expensive widgets in making the cheaper product, which in turn decreases profit margins and net income.

LIFO is believed to better match expenses with the period in which they are incurred. Generally, it will increase net income when costs are low. If different cost layers of inventory are accumulated under LIFO, then liquidation of those layers in a downturn will produce lower taxes and a lower net income.

The point to take away is that depending on the strength of the economy and the type of business, inventory valuation methods can be used to enhance or diminish net income.

*Although growing in popularity LIFO is not permitted under International Financial Reporting Standards (IFRS), so some companies use LIFO for U.S. inventories and FIFO for others.