2008 Interview with: ZAGG Incorporated (ZAGG-OTC: BB) CFO, Brandon T. O’Brien - featuring: their invisibleSHIELD, is a protective, high-tech film covering, designed for iPods, laptops, cell phones, digital cameras, PDAs, watch faces, GPS systems, gaming devices, and other items. |
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Having Started As An Internet Business 3
Years Ago, ZAGG Has Now Developed Relationships With Major Retailers Such As
Carphone Warehouse In Europe And Best Buy In The United States To Sell Their
Flagship invisibleSHIELD Product
Brandon became our Chief
Financial Officer on February 12, 2007. Prior to assuming his position as
the Chief Financial Officer for the Company, Brandon, served as the Vice
President of Finance at Fonix Corporation, a speech recognition software
company, from January 2003 to January 2007, and as an independent financial
consultant from September 2001 to January 2003. Brandon has extensive
experience in mergers and acquisitions, accounting for financial
transactions with foreign subsidiaries and the application of financial
accounting standards and principles. Brandon has broad experience with both
small micro-cap public companies and with large multinational public
companies.
Brandon is a licensed Certified
Public Accountant and has attained the Certified Management Accountant and
Certified Financial Manager designations. Brandon earned a Bachelor of
Science degree in Accounting from Utah State University in 1995 and a
Masters of Business Administration from the University of Utah in 1996.
Brandon resides with his wife and five children in Farmington, Utah.
ZAGG Inc. designs, manufactures, and
distributes protective clear coverings and accessories for consumer
electronic and hand-held devices, worldwide. ZAGG’s flagship brand, the
invisibleSHIELD, is a protective, high-tech film covering, designed for
iPods, laptops, cell phones, digital cameras, PDAs, watch faces, GPS
systems, gaming devices, and other items. The patent-pending invisibleSHIELD
application is the first scratch protection solution of its kind on the
market, and has sold over one million units. Currently, ZAGG offers over
2,500 precision pre-cut designs with a lifetime replacement warranty through
online channels, resellers, college bookstores, Mac stores and mall kiosks.
The company continues to increase its product lines to offer additional
electronic accessories to its tech-savvy customer base, as well as an
expanded array of invisibleSHIELD products for other industries. Mr. O’Brien: “Our company is three years old. Our main product is the invisibleSHIELD, which is a polyurethane film used to protect cell phones, iPods and handheld electronic devices. When we started, our sales were online and we were mostly involved with early adopters and online communities. We are now expanding from that base to the mass market. We have recently gotten into the Carphone Warehouse, which is the major retailer in the UK and Western Europe. We are also in Best Buy here in the United States. We are going to reach out to the mass market and give them exposure to our product so that we can show them that there is an alternative to bulky silicon or leather cases. They can use the invisibleSHIELD to protect their device, and because it is a clear film, you can’t even tell it is there. It gives customers the best protection available.”
CEOCFO: Will you tell us about the invisibleSHIELD? Mr. O’Brien: “The invisibleSHIELD is a polyurethane film. It was originally developed for the military to protect the leading edge of helicopter blades. During operations like Desert Storm the helicopters in the Middle East were picking up dust, debris, and sand, and it was actually chipping the blades on the helicopter. Therefore, this film was developed to wrap the helicopter blades; it is a very strong and very durable film. We have the exclusive with the manufacturer for the application of protecting hand-held electronics and similar devices. When you purchase the invisibleSHIELD, it comes with an installation kit. It has an adhesive base, and it comes with SHIELDspray, which is a proprietary solution that aids in the application process. You apply the solution to the back of the film and it activates the adhesive, kind of like licking a postage stamp. You then apply the invisibleSHIELD to your device and squeegee out any excess liquid; within 24 hours it completely secured to the device. It not only covers just the screen, but the back and the sides as well. Therefore, you have complete coverage for your device to protect it from getting scratched and damaged. The invisibleSHIELD also has a lifetime guarantee so if there are any problems consumers can return the invisibleSHIELD back to us and we will send out a new one free of charge.”
CEOCFO: What will this protect against? Mr. O’Brien: “It will protect against scratches. When you buy a new device, you don’t want it to pick up scratches and damage, so typically people buy some kind of case to protect it. The invisibleSHIELD is an alternative to a bulky case. Many of the new devices we see now are going to a touch screen, like the iPhone. The manufacturer spent millions of dollars on the aesthetics of these devices to make them look sleek and sharp, so it is a shame to buy a device like that and then cover it with a leather or silicone case. With the invisibleSHIELD, you can’t even tell it is there. It is such a durable plastic that you can slip it right into your pocket with your keys and spare change, and you are not going to scratch your device. Another benefit of the invisibleSHIELD is added grip. These new devices are often slick, so people pull their phones out in a rush when it is ringing, and it slips out of their hands. But the invisibleSHIELD gives a tacky feel to the device so it doesn’t slip out of your hands as easy.”
CEOCFO: How are you now reaching the mass market?
Mr. O’Brien:
“We are on the internet and our stores there are still very strong. We find
that people are just not familiar with the product, so we have a task ahead
of us with strong reinvesting in marketing and making people aware. Our
historical distribution, though, is on the internet. We also have kiosks in
different malls across the US. We started here in Utah, so we are strong
here in Utah, and southern California. We also have mall carts in Washington
State, Oregon, Arizona, Nevada, Idaho, and now we are starting to expand and
we have seen it really catch on. We are expanding into Pennsylvania, Texas,
and the Jacksonville, Florida area. We license our mall carts, so the owners
pay us a license fee in order to sell the invisibleSHIELD exclusively in a
geographic area, typically a mall.
CEOCFO: You are going to be involved with Best Buy and Wal-Mart, tell me about those. Mr. O’Brien: “We started on the internet, so we wanted to maintain that and have a strong presence on the web. We currently have over 2,500 different SKUs, so we manufacture and create the invisibleSHIELD specific for whatever device consumers have. You are not going to go to Wal-Mart or Best Buy and have them carry out 2,500 SKUs. Obviously, they are only going to carry a few SKUs, but they are going to carry the most popular designs. With Best Buy, they are going to carry five different SKUs and then the mass market is more familiar with the product. It is a process of working with the sales people at the different locations so they understand the product and can sell it to the consumer. We have found that once someone purchases our product – say they buy it for their iPod – they are quick to realize that it will work on their laptop computer, digital camera, and cell phone. We have repeat sales to our customers. In addition, electronic devices have become disposable. You typically use a cell phone for eight to twelve months and then get a new model. If someone purchased the invisibleSHIELD for their last cell phone, and are happy with it, then ours is the first accessory they are going to purchase for their new cell phone. It was a matter of figuring out how to get our message out to everyone, so that they know what kind of products we offer; and that has been working with the big retailers so far. We have been very strong on walmart.com and we just completed our first shipment to Best Buy last week. The other significant major retailer is Carphone Warehouse, who has over 2,000 locations in the UK and Western Europe. We started over there a month ago in 800 stores and they are looking to expand that and roll it out to all of their locations.”
CEOCFO:
What about the manufacturing and the inventory side; how do you handle that
as you grow?
CEOCFO: What is the financial picture like at Zagg? Mr. O’Brien: “We are three years old. In our first year, we did about $700 thousand in revenue and the second year we did just under $2.8 million. Last year we were at $5.1 million, and this year we project to be over $10 million and we are well on our way to achieving that. We currently have a growth margin of around 70% so we are able to do a lot of the financing internally with a few sales of our product. We did complete a pipe offering last year in connection with our reverse merger, as well as raising $2.8 million, so with those funds we were able to facilitate the growth of the company.”
CEOCFO: For potential investors, what is ahead and why should they be paying attention now? Mr. O’Brien: “We are currently trading at around .70 cents a share, and our company has never been stronger. We have a lot of potential and growth opportunities ahead of us. We feel like we are just starting to break through to the mass market with our Best Buy and Carphone Warehouse agreements. We are working with other distributors, as well, that we feel will come online within the next few months and we will be able to get into more of those areas. We are now focusing on the electronics industry with our invisibleSHIELD product, but there are many other applications we could explore once we are able to focus our resources on other alternatives. The accessory case industry itself is a $38 billion industry annually, so all you need is a small piece of that. We have seen great successes with getting into these retailers, showing them that there is this alternative out there, and getting people excited about a piece of plastic.”
CEOCFO: What should people remember most about ZAGG?
Mr.
O’Brien: “We
are a fast-growth company. We are innovative and quick to market. When
manufacturers release a new device, it typically takes months for case
manufacturers to develop something and get it out to market. We can get an
invisibleSHIELD out to market within a day. Once a new device comes out, we
get the device, create our design, and can be very quick to market. In
addition, we have over 2,500 SKUs and we don’t have to carry a lot of
inventory, so we can develop an invisibleSHIELD for whatever device somebody
has. We are just starting to break through and we have such great potential.
We have had a lot of positive feedback from the media and from our
customers, who are very excited about the product and about the
opportunities out there for ZAGG. We had a lot of existing customers come on
as shareholders of the company when we went public, which shows that they
are excited about the process ahead for us.” |
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“Our company is three years old. Our main product is the invisibleSHIELD, which is a polyurethane film used to protect cell phones, iPods and handheld electronic devices. When we started, our sales were online and we were mostly involved with early adopters and online communities. We are now expanding from that base to the mass market. We have recently gotten into the Carphone Warehouse, which is the major retailer in the UK and Western Europe. We are also in Best Buy here in the United States. We are going to reach out to the mass market and give them exposure to our product so that we can show them that there is an alternative to bulky silicon or leather cases. They can use the invisibleSHIELD to protect their device, and because it is a clear film, you can’t even tell it is there. It gives customers the best protection available.” - Brandon T. O’Brien |
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