The Financial Investigator Raises Questions on Zagg

On Tuesday,

commented on cell phone cover maker Zagg

. In a seeming tale of success, the company has gone from revenues of just over $5 million in 2007 to more than $76 million in 2010. Still, The Financial Investigator notes that there is no conceivable barrier to entry into the market. Moreover, there are dozens of competitors in the business of producing cell phone covers. Further, TFI cites inventory growth as a cause for concern, writing, "At the end of the first quarter of 2010, inventories stood at $4.45 million; a year later, the figure was $21.19 million. It even continued to spike after a sharp revenue drop from the fourth quarter last year to this year's first quarter, something that made no sense." Additionally, TFI questioned the acquisition of iPod accessory maker iFrogz, stating, "There are several things that should raise eyebrows about this. The first is the purchase price of $105 million for the maker… [of a commodity] bordering on the realm of 'novelty' gag." Lastly, TFI cites Zagg's questionable management team as a reason for investor concern. TFI writes, "CEO Robert Pederson has repeatedly set up ventures with men who have truly run afoul of the law…[he] invested $3.2 million in something called hZo systems...[hZo's founder] had been barred from the securities industry in 2008 when it was revealed that he had been using customer funds to pay the operating expenses of a private investment." Investors in Zagg may want to take note of TFI's claims. Read more

. Zagg is currently down over 4.30% on today's session, trading near $13.10.