**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**








(Mark
      one)





x
            Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the quarterly period ended June 30, 2007,
                or





o
            Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the transition period from ______________ to
                _____________.





Commission
      File No. 000-52211


**ZAGG
      INCORPORATED**


(Exact
      name of registrant as specified in its charter)





**Nevada**
            **20-2559624**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





**3855
      South 500 West, Suite J**


**Salt
      Lake City, Utah 84115**


(Address
      of principal executive offices with zip code)





**(801)
      263-0699**


(Registrant's
      telephone number, including area code)





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days: **Yes
      x Noo.**





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-25 of the Exchange Act).


**Yes
      o No x**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: **17,943,995
      common shares as of August 7, 2007.**










**ZAGG
      INCORPORATED**


**FORM
      10-QSB**








**TABLE
      OF CONTENTS**





**PART
      I - FINANCIAL INFORMATION**




**Page**Item
                1.
            Financial
                Statements (Unaudited)Condensed
                Balance Sheets - As of June 30, 2007 and December 31, 2006
            3Condensed
                Statements of Operations for the Three and Six Months
                EndedJune
                30, 2007 and 2006
            4Condensed
                Statements of Cash Flows for the Six Months EndedJune
                30, 2007 and 2006
            5Notes
                to Condensed Financial Statements
            7Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            13Item
                3.
            Controls
                and Procedures
            19**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            20Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            20Item
                3.
            Defaults
                Upon Senior Securities
            23Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            23Item
                5.
            Other
                Information
            23Item
                6.
            Exhibits
            23










**ZAGG
      INCORPORATED**


**CONDENSED
      BALANCE SHEETS**


**(Unaudited)**




**June
                  30,**
              
              **December
                  31,****2007**
              
              **2006****ASSETS****Current
                  assets**Cash
              
              $
              993,380
              
              $
              468,382Accounts
                  receivable, net
              
              
              64,427
              
              
              121,149Inventories
              
              
              152,922
              
              
              102,522Prepaid
                  income taxes
              
              
              44,361
              
              
              44,361Prepaid
                  advertising
              
              
              124,076
              
              
              -Prepaid
                  expenses and other current assets
              
              
              182,811
              
              
              31,724Deferred
                  income tax assets
              
              
              16,796
              
              
              19,468Due
                  from employees
              
              
              -
              
              
              3,714**Total
                  current assets**
              
              
              1,578,773
              
              
              791,320**Property
                  and equipment, net**
              
              
              226,629
              
              
              221,474**Deposits
                  and other assets**
              
              
              37,119
              
              
              12,119**Intangible
                  assets**
              
              
              50,054
              
              
              2,340**Total
                  assets**
              
              $
              1,892,575
              
              $
              1,027,253**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Convertible
                  note payable
              
              $
              -
              
              $
              250,000Convertible
                  note payable - officer
              
              
              -
              
              
              100,000Notes
                  payable
              
              
              250,000
              
              
              -Advance
                  on financing transaction
              
              
              800,000
              
              
              -Accounts
                  payable
              
              
              268,994
              
              
              246,691Accrued
                  liabilities
              
              
              9,164
              
              
              33,573Accrued
                  wages and wage related expenses
              
              
              68,272
              
              
              121,728Deferred
                  licensing revenue
              
              
              99,300
              
              
              86,801Sales
                  returns liability
              
              
              15,483
              
              
              32,000**Total
                  current liabilities**
              
              
              1,511,213
              
              
              870,793**Long-term
                  liabilities**Non-current
                  deferred income tax liablility, net
              
              
              12,361
              
              
              12,087**Total
                  liabilities**
              
              
              1,523,574
              
              
              882,880**Stockholders'
                  equity**Common
                  stock, $0.001 par value; 50,000,000 shares authorized;15,168,995
                  and 10,175,000 shares issued and outstanding, respectively
              
              
              15,170
              
              
              10,175Additional
                  paid-in capital
              
              
              655,189
              
              
              117,075Retained
                  (deficit) earnings
              
              
              (301,358
              )
              
              17,123**Total
                  stockholders' equity**
              
              
              369,001
              
              
              144,373**Total
                  liabilities and stockholders' equity**
              
              $
              1,892,575
              
              $
              1,027,253


See
        accompanying notes to condensed financial statements.




3




**ZAGG
      INCORPORATED**


**CONDENSED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**





**Three
                Months Ended**
            
            **Three
                Months Ended**
            
            **Six
                Months Ended**
            
            **Six
                Months Ended****June
                30, 2007**
            
            **June
                30, 2006**
            
            **June
                30, 2007**
            
            **June
                30, 2006****Net
                sales**
            
            $
            804,458
            
            $
            638,253
            
            $
            1,597,306
            
            $
            1,162,511**Cost
                of sales**
            
            
            203,672
            
            
            182,623
            
            
            390,831
            
            
            344,222**Gross
                profit**
            
            
            600,786
            
            
            455,630
            
            
            1,206,475
            
            
            818,289**Operating
                expenses:**Salaries
                and related taxes
            
            
            346,035
            
            
            223,615
            
            
            654,443
            
            
            406,351Consulting
            
            
            2,000
            
            
            -
            
            
            38,500
            
            
            73,750Advertising
                and marketing
            
            
            78,651
            
            
            73,760
            
            
            239,786
            
            
            161,301Other
                selling, general and administrative
            
            
            206,539
            
            
            126,898
            
            
            568,287
            
            
            196,150**Total
                operating expenses**
            
            
            633,225
            
            
            424,273
            
            
            1,501,016
            
            
            837,552**(Loss)
                income from operations**
            
            
            (32,439
            )
            
            31,357
            
            
            (294,541
            )
            
            (19,263
            )**Other
                (expense) income:**Interest
                expense
            
            
            (20,231
            )
            
            -
            
            
            (26,099
            )
            
            -Interest
                and other income
            
            
            3,969
            
            
            6,819
            
            
            4,085
            
            
            6,960**Total
                other (expense) income**
            
            
            (16,262
            )
            
            6,819
            
            
            (22,014
            )
            
            6,960**(Loss)
                ncome before benefit (provision) for income taxes**
            
            
            (48,701
            )
            
            38,176
            
            
            (316,555
            )
            
            (12,303
            )**Income
                tax benefit (expense)**
            
            
            408
            
            
            -
            
            
            (2,310
            )
            
            -**Net
                (loss) income**
            
            
            (48,293
            )
            
            38,176
            
            
            (318,865
            )
            
            (12,303
            )**Basic
                and diluted net (loss) income per common share**
            
            $
            (0.00
            )
            $
            0.00
            
            $
            (0.02
            )
            $
            (0.00
            )**Weighted
                average number of shares outstanding - basic and
                diluted**
            
            
            15,168,995
            
            
            10,000,000
            
            
            14,596,739
            
            
            10,000,000


See
        accompanying notes to condensed financial statements.




4





**ZAGG
      INCORPORATED**


**CONDENSED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**


**Six
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30, 2007**
              
              **June
                  30, 2006****Cash
                  flows from operating activities**Net
                  loss
              
              $
              (318,865
              )
              $
              (12,303
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
              
              
              36,976
              
              
              1,750Deferred
                  income tax (benefit) expense
              
              
              2,946
              
              
              57,730Changes
                  in assets and liabilitiesAccounts
                  receivable
              
              
              56,722
              
              
              87,955Inventory
              
              
              (50,400
              )
              
              (30,299
              )Due
                  from employees
              
              
              3,714
              
              
              (33,138
              )Prepaid
                  advertising
              
              
              (124,076
              )
              
              -Prepaid
                  expenses and other current assets
              
              
              (101,087
              )
              
              (2,507
              )Other
                  assets
              
              
              (25,000
              )
              
              (1,645
              )Accounts
                  payable
              
              
              (24,947
              )
              
              56,148Accrued
                  liabilities
              
              
              (8,716
              )
              
              59,136Accrued
                  wages and wage related expenses
              
              
              (53,456
              )
              
              -Deferred
                  licensing revenues
              
              
              12,499
              
              
              -Sales
                  return liability
              
              
              (16,517
              )
              
              -Net
                  cash (used in) provided by operating activities
              
              
              (610,207
              )
              
              182,827**Cash
                  flows from investing activities**Payments
                  for intangible assets
              
              
              (47,714
              )
              
              (123,466
              )Purchase
                  of property and equipment
              
              
              (42,131
              )
              
              -Net
                  cash used in investing activities
              
              
              (89,845
              )
              
              (123,466
              )**Cash
                  flows from financing activities**Repayments
                  on equipment financing payable
              
              
              -
              
              
              (7,376
              )Proceeds
                  from advance on financing transaction
              
              
              800,000
              
              
              -Proceeds
                  from related party notes payable
              
              
              -
              
              
              30,063Proceeds
                  from notes payable
              
              
              200,000
              
              
              -Payments
                  on convertible note payable - officer
              
              
              (50,000
              )
              
              -Capital
                  contribution
              
              
              -
              
              
              25,000Proceeds
                  from sale of common stock
              
              
              275,050
              
              
              -Net
                  cash provided by financing activities
              
              
              1,225,050
              
              
              47,687**Net
                  (decrease) increase in cash and cash equivalents**
              
              
              524,998
              
              
              107,048**Cash
                  and cash equivalents at beginning of the period**
              
              
              468,382
              
              
              25,661**Cash
                  and cash equivalents at end of the period**
              
              $
              993,380
              
              $
              132,709**Supplemental
                  disclosure of cash flow information**Cash
                  paid during the period for interest
              
              $
              12,605
              
              $
              -Cash
                  paid during the period for income taxes
              
              $
              -
              
              $
              8,796
 See
          accompanying notes to condensed financial statements.


5




**ZAGG
      INCORPORATED**


**CONDENSED
      STATEMENTS OF CASH FLOWS (Continued)**


**(Unaudited)**




**Supplemental
      schedule of noncash investing and financing activities**





**For
      the Six Months Ended June 30, 2007:**





Issued
      714,286 shares of common stock in conversion of convertible note
      payable.





Issued
      147,853 shares of common stock in conversion of convertible note payable -
      officer and accrued interest.





**For
      the Six Months Ended June 30, 2006:**





Capital
      contribution of $25,000.




See
        accompanying notes to condensed financial statements.




6


**ZAGG
        INCORPORATED**
 **Notes
        to Condensed Financial Statements**






**1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





***Basis
      of Presentation*** - The
      accompanying unaudited condensed financial statements of ** ZAGG
      Incorporated (collectively, the “Company” or “ZAGG”) have been prepared by the
      Company pursuant to the rules and regulations of the Securities and Exchange
      Commission (the “SEC”). Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted pursuant to such rules and regulations, although the
      Company believes that the following disclosures are adequate to make the
      information presented not misleading. The Company suggests that these condensed
      financial statements be read in conjunction with the financial statements and
      the notes thereto included in the Company’s 2006 Annual Report on Form
      10-KSB.





These
      condensed financial statements reflect all adjustments (consisting only of
      normal recurring adjustments) that, in the opinion of management, are necessary
      to present fairly the financial position and results of operations of the
      Company for the periods presented.





Operating
      results for the six months ended June 30, are not necessarily indicative of
      the
      results that may be expected for the year ending December 31, 2007.





***Nature
      of Operations*** **-** ****** ZAGG
      Incorporated was incorporated in the State of Utah on March 24, 2005 as
      Protective Solutions, Inc.  On January 30, 2006, the Company amended its
      articles of incorporation and changed its name to ShieldZone Corporation. 
On February 8, 2007 we were acquired by an inactive publicly held company,
      Amerasia Khan Enterprises Ltd. in a transaction accounted for as a
      recapitalization of the Company.  On March 1, 2007, we redomesticated our
      operating subsidiary by reincorporating it in the State of Nevada and on that
      same date we merged that subsidiary into Amerasia Khan Enterprises Ltd, the
      parent, who was the surviving entity.  In connection with the merger we
      changed the name of Amerasia Khan Enterprises Ltd. to ZAGG Incorporated. 
The Company continues to operate the historical business of ShieldZone
      Corporation and may use the ShieldZone name as a trade name.





The
      Company has developed and sells, through the Internet and wholesale distribution
      channels, patent-pending protective shields under the name of the *invisible* SHIELDTM
      for electronic devices and other electronics accessories.





***Business
      Condition*** **** -
      For the
      three months ended June 30, 2007 and 2006, the Company generated revenues of
      $804,458 and $638,253, respectively and incurred a net loss of ($48,293) and
      net
      income of $38,176, respectively. For the six months ended June 30, 2007 and
      2006, the Company generated revenues of $1,597,306 and $1,162,511, respectively
      and incurred net losses of ($318,865) and ($12,303), respectively, and had
      negative cash flow from operating activities of ($610,207) for the six months
      ended June 30, 2007 and positive cash flow from operating activities of $182,827
      for the six months ended June 30, 2006. As of June 30, 2007, the Company had
      stockholders’ equity of $369,001, an accumulated deficit of ($301,358), working
      capital of $67,560, advance on financing transaction of $800,000, accounts
      payable of $268,994, notes payable of $250,000, deferred licensing revenue
      of
      $99,300, accrued wages of $68,272, sales returns liability of $15,483 and
      accrued liabilities of $9,164. Management believes that existing cash, along
      with cash generated from the collection of accounts receivable, the sale of
      products and proceeds from the short-term financing will be sufficient to meet
      the Company’s cash requirements during the next twelve months.





***Revenue
      recognition***





The
      Company follows the guidance of the Securities and Exchange Commission’s Staff
      Accounting Bulletin 104 for revenue recognition.  In general, the Company
      records revenue when persuasive evidence of an arrangement exists or product
      delivery has occurred, the sales price to the customer is fixed or determinable,
      and collectability is reasonably assured.  The Company’s revenue
      is derived from sales of its products to retailers, resellers and end consumers
      and from the sale of distributor license fees. For sales of product, the Company
      records revenue when the product is shipped, net of estimated returns and
      discounts. For license fees, the Company recognizes revenue on a prorated basis
      over the life of the distribution contract.




7




The
      Company follows the guidance of Emerging Issues Task Force (EITF) Issue 01-9
      ``Accounting for Consideration Given by a Vendor to a Customer'' and (EITF)
      Issue 02-16 ``Accounting by a Customer (Including a Reseller) for Certain
      Considerations Received from Vendors.'' Accordingly, any incentives received
      from vendors are recognized as a reduction of the cost of products. Promotional
      products given to customers or potential customers are recognized as a cost
      of
      sales. Cash incentives provided to our customers are recognized as a reduction
      of the related sale price, and, therefore, are a reduction in
      sales.





***Reserve
      for Sales Returns and Warranty Liability***





Our
      return policy generally allows our end users and retailers to return purchased
      products for refund or in exchange for new products within 30 days of end user
      purchase. The Company estimates a reserve for sales returns and records that
      reserve amount as a reduction of sales and as a sales return reserve
      liability. At June
      30, 2007 the sales return liability was $15,483.





The
      Company generally provides the ultimate consumer a warranty with each product
      and accrues warranty expense at the time of the sale based on the Company’s
      prior claims history. Actual warranty costs incurred are charged against the
      accrual when paid. During the three and six months ended June 30, 2007 and
      2006,
      warranty expense and the reserve for warranty liability, respectively, was
      not
      material.





** ***Shipping
      and Handling Costs***





Amounts
      invoiced to customers for shipping and handling are included in sales and were
      $118,198 for the six months ended June 30, 2007 and $113,869 for the six months
      ended June 30, 2006. Actual shipping and handling costs to ship products to
      our
      customers are included in cost of sales and were $160,165 for the six months
      ended June 30, 2007 and $124,186 for the six months ended June 30,
      2006.





***Stock-based
      compensation***





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), *Share
      Based Payment* (“SFAS
      No. 123R”). SFAS No. 123R establishes the financial accounting and reporting
      standards for stock-based compensation plans. As required by SFAS No. 123R,
      the
      Company recognizes the cost resulting from all stock-based payment transactions
      including shares issued under its stock option plans in the financial statements
      based upon the fair value of such equity instruments granted. As there were
      no
      common stock options granted or outstanding in 2007 or 2006, there was no
      financial effect to the Company upon implementation of SFAS No.
      123R.





Prior
      to
      January 1, 2006, the Company accounted for stock-based employee compensation
      plans (including shares issued under its stock option plans) in accordance
      with
      APB Opinion No. 25 and followed the pro forma net income, pro forma income
      per
      share, and stock-based compensation plan disclosure requirements set forth
      in
      the Statement of Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123”).





***Advertising***





General
      advertising is expensed as incurred. Advertising expenses for the six months
      ended June 30, 2007 were $239,786 and for the six months ended June 30, 2006
      were $161,301. The Company capitalizes expenses related to its direct marketing
      campaign under the guidance of Statement of Position 93-7 *Reporting
      on Advertising Costs* (“SOP
      93-7”). The company has capitalized $124,076 as prepaid advertising related to
      the direct marketing campaign, these costs relate to the production of an
      infomercial spotlighting the invisibleSHIELD product line. The Company plans
      to
      begin the direct marketing campaign during the third quarter of 2007, at which
      time the Company will begin to amortize these prepaid advertising costs as
      prescribed by SOP 93-7.





***Reclassifications***





Certain
      amounts in the 2006 financial statements have been reclassified to conform
      to
      the 2007 presentation.




8




***Recent
      accounting pronouncements*** ****





In
      February, 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities”* (“SFAS
      No. 159”). This Statement provides companies with an option to report selected
      measurement attributes for different assets and liabilities that can create
      artificial volatility in earnings. The Statement’s objective is to reduce both
      complexity in accounting for financial instruments and the volatility in
      earnings caused by measuring related assets and liabilities differently. SFAS
      No. 159 is effective for the Company beginning January 1, 2009. The Company
      is
      currently evaluating the impact of this standard.





The
      Company has reviewed all other recently issued, but not yet adopted, accounting
      standards in order to determine their effects, if any, on its results of
      operation, financial position or cash flows. Based on that review, the Company
      believes that none of these pronouncements will have a significant material
      effect on its current or future earnings or operations.





***Net
      (Loss) Income Per Common Share*** ****





Basic
      net
      (loss) income per share is computed by dividing net (loss) income by weighted
      average number of shares of common stock outstanding during each period. Diluted
      net (loss) income per share is computed by dividing net (loss) income by the
      weighted average number of shares of common stock, common stock equivalents
      and
      potentially dilutive securities outstanding during each period. As of June
      30,
      2007 and 2006, the Company did not have any dilutive securities.





The
      following is a reconciliation of the numerator and denominator used to calculate
      Basic and Diluted EPS for the three and six months ended June 30, 2007 and
      2006:


**Net**
                **Loss**
              
              **Weighted
                  Average**
                **Shares**
              
              **Per Share**
                **Amount**Three
                  months ended June 30, 2007:Basic
                  EPS
              
              $
              (48,293
              )
              
              15,168,995
              
              $
              (0.00
              )Effect
                  of common stock equivalents
              
              
              —
              
              
              —Diluted
                  EPS
              
              $
              (48,293
              )
              
              15,168,995
              
              $
              (0.00
              )Three
                  months ended June 30, 2006:Basic
                  EPS
              
              $
              38,176
              
              
              10,000,000
              
              $
              0.00Effect
                  of common stock equivalents
              
              
              —
              
              
              —Diluted
                  EPS
              
              $
              38,176
              
              
              10,000,000
              
              $
              0.00


**Net**
                **Loss**
              
              **Weighted
                  Average**
                **Shares**
              
              **Per Share**
                **Amount**Six
                  months ended June 30, 2007:Basic
                  EPS
              
              $
              (318,865
              )
              
              14,596,739
              
              $
              (0.02
              )Effect
                  of common stock equivalents
              
              
              —
              
              
              —Diluted
                  EPS
              
              $
              (318,865
              )
              
              14,596,739
              
              $
              (0.02
              )Six
                  months ended June 30, 2006:Basic
                  EPS
              
              $
              (12,303
              )
              
              10,000,000
              
              $
              (0.00
              )Effect
                  of common stock equivalents
              
              
              —
              
              
              —Diluted
                  EPS
              
              $
              (12,303
              )
              
              10,000,000
              
              $
              (0.00
              )





The
      calculation above for the three and six months ended June 30, 2007, excludes
      the
      exercise of the 152,500 outstanding warrants as the exercise of these warrants
      would have an anti-dilutive effect on earnings per share. There were no
      anti-dilutive instruments outstanding for the three or six months ended June
      30,
      2006.




9




**NOTE
      2 - RECAPITALIZATION**





On
      February 8, 2007 (the “recapitalization date”), we executed an Agreement and
      Plan of Merger (the “Merger Agreement”) by and between Amerasia Khan Enterprises
      Ltd. (a public shell), now known as ZAGG Incorporated, and its wholly-owned
      subsidiary, SZC Acquisition Inc., a Nevada corporation (“Subsidiary”) on the one
      hand and ShieldZone Corporation, (“ShieldZone”) a Utah corporation, on the other
      hand. Pursuant to the Merger Agreement, Subsidiary was merged into ShieldZone
      with ShieldZone surviving the merger. In consideration, the stockholders of
      ShieldZone received 10,175,000 shares of Amerasia Khan Enterprises Ltd., now
      known as ZAGG Incorporated, common stock which was approximately 69% of the
      total common shares outstanding just subsequent to the merger but before the
      simultaneous sale of 785,856 common shares for $275,000 ($0.35 per share) and
      conversion of a $250,000 convertible promissory note for 714,286 common shares.
      The Company also issued warrants in conjunction with the sale of the 785,856
      common shares and the raise and conversion of the $250,000 convertible
      promissory note. The Company issued warrants as a fee to purchase 52,500 shares
      of our common stock at an exercise price of $0.35. These warrants may be
      exercised until March 18, 2012, at which time they will expire if not exercised.
      The warrant holders also have piggyback registration rights. In connection
      with
      the merger/recapitalization, the Company is deemed to have issued 4,600,000
      common shares to the original stockholders’ of Amerasia Khan Enterprises Ltd.
      Subsequent to the merger/recapitalization, 1,254,000 shares owned by certain
      original shareholders of Amerasia Khan Enterprises Ltd. were cancelled.





The
      merger was accounted for as a recapitalization of ShieldZone, a Utah corporation
      because on a post-merger basis, the former stockholders of ShieldZone
      Corporation held a majority of the outstanding common stock on a voting and
      fully-diluted basis and had Board and management control. As a result,
      ShieldZone is deemed to be the acquirer for accounting purposes. In March 2007,
      ShieldZone Corporation was merged into its parent, Amerasia Khan Enterprises
      Ltd., now known as ZAGG Incorporated, and the name of the surviving entity,
      Amerasia Khan Enterprises Ltd., was changed to ZAGG Incorporated.





Accordingly
      the balance sheets just subsequent to the recapitalization date consists of
      the
      balance sheets of both companies at historical cost and the statement of
      operations consists of the historical operations of ShieldZone and the
      operations of Amerasia Khan Enterprises Ltd., now known as ZAGG Incorporated,
      from the recapitalization date.





All
      share
      and per share data in the accompanying financial statements have been
      retroactively changed to reflect the effect of the merger and
      recapitalization.





**NOTE
      3** **-** **ACCOUNTS RECEIVABLE, NET**





Accounts
      Receivable at June 30, 2007 and December 31, 2006 was as follows:





**June
                30, 2007**
            
            **December
                31, 2006**Accounts
                receivable
            
            $
            84,620
            
            $
            141,342Less:
                Allowance for doubtful accounts
            
            
            (20,193
            )
            
            (20,193
            )Accounts
                Receivable, net
            
            $
            64,427
            
            $
            121,149





Bad
      debt expense for the six months ended June 30, 2007 was $0.





**NOTE
      4** **-** **INVENTORIES**





At
      June 30, 2007 and December 31, 2006 inventories consisted of the
      following:





**June
                30, 2007**
            
            **December
                31, 2006**Finished
                Goods
            
            $
            44,823
            
            $
            67,257Raw
                Materials
            
            
            108,099
            
            
            35,265$
            152,922
            
            $
            102,522





10




**NOTE
        5 - PROPERTY AND EQUIPMENT**
 
 At
        June
        30, 2007 and December 31, 2006, property and equipment consisted of the
        following:




**Useful
                Lives**
            
            **June
                30, 2007**
            
            **December
                31, 2006**Computer
                Equipment and Software
            
            
            3
                to 5 years
            
            $
            84,623
            
            $
            58,790Office
                Equipment
            
            
            3
                to7 years
            
            
            62,606
            
            
            58,407Furniture
                and Fixtures
            
            
            7
                years
            
            
            21,504
            
            
            9,405Automobiles
            
            
            5
                years
            
            
            47,063
            
            
            47,063Leasehold
                improvements
            
            
            1
                to 3.13 years
            
            
            91,637
            
            
            91,637307,433
            
            
            265,302Less
                Accumulated Depreciation
            
            
            
            
            
            (80,804
            )
            
            (43,828
            )$
            226,629
            
            $
            221,474





Depreciation
      expense was $36,976 for the six months ended June 30, 2007 and $1,750 for the
      six months ended June 30, 2006.




**NOTE
      6 - INTANGIBLE ASSETS**





At
      June
      30, 2007, intangible assets consist of legal fees paid in connection with the
      Company’s patent application of $7,935 and the purchase of the Company’s website
      address of $42,119. As of June 30, 2007, the patent had not been granted.
      Accordingly, the Company has not begun to amortize the patent costs and will
      begin amortizing the patent over the legal life of the patent, when the patent
      is granted. The Company has determined that the intangible asset related to
      the
      website address is an indefinite lived intangible and no amortization has been
      recognized.





**NOTE
      7 - STOCKHOLDERS’ EQUITY**





During
      the six months ended June 30, 2007, the Company issued 785,856 shares of its
      common stock in a private placement wherein the Company received $275,050 and
      paid fees of $47,250, 714,286 shares of its common stock in conversion of a
      note
      payable with a face amount of $250,000 and 147,853 shares of its common stock
      in
      conversion of a notes payable in the amount of $50,000.





The
      Company currently does not have any outstanding stock options, a stock option
      plan or an incentive plan. The Board of Directors has reserved 800,000 shares
      of
      common stock for use in such a plan to be established in 2007.





**NOTE
      8 - CONVERTIBLE NOTE PAYABLE - OFFICER**





In
      November 2006, the Company entered into a convertible note with an affiliate
      of
      the Company’s Chief Executive Officer in the original principal amount of
      $100,000. The note was convertible at the holder's option any time up to
      maturity at a conversion price equal to $0.35 per common share. The note was
      due
      on May 15, 2007, bore interest at 20% per year and was unsecured. The common
      shares underlying the note have piggy back registration rights. In March 2007,
      the Company repaid $50,000 of the principal balance of the note. In addition,
      the remaining $50,000 of principal plus accrued interest of $1,749 was converted
      into 147,853 shares of the Company’s common stock.





The
      note
      was a conventional convertible instrument and the Company evaluated the
      conversion feature and determined that there was not a separate derivative
      instrument associated with the note and no derivative liability was recognized.
      The Company determined that there was no beneficial conversion feature
      associated with the note as the conversion price was equal to the deemed market
      value on the date of grant.




11




**NOTE
      9 - CONVERTIBLE NOTE PAYABLE**





On
      December 27, 2006, the Company entered into a Secured Convertible Note Purchase
      Agreement (the “Convertible Note Agreement”). Pursuant to the Convertible Note
      Agreement, the Company issued a convertible note to an unrelated investor in
      the
      original principal amount of $250,000. The note was convertible at the holder's
      option any time up to maturity at a conversion price equal to $0.35 per common
      share. The note was due on March 1, 2007, bore interest at 4% per year, and
      was
      secured by substantially all of the assets of the Company. Interest was payable
      at maturity and was computed on the basis of a 360-day year. In February 2007,
      the note holder converted the principal balance of the note into 714,286 shares
      of the Company’s common stock.





The
      note
      was a conventional convertible instrument and the Company evaluated the
      conversion feature and determined that there was not a separate derivative
      instrument associated with the note and no derivative liability was recognized.
      The Company determined that there was no beneficial conversion feature
      associated with the note as the conversion price was equal to the deemed market
      value on the date of grant.





The
      weighted average interest rate for the two notes discussed above was
      8.57%.





**NOTE
      10 - NOTES PAYABLE**





On
      May 8,
      2007, the Company entered into a promissory note agreement with an unrelated
      third party in the amount of $200,000. The note bears interest at an annual
      percentage rate of 18% and is due and payable on August 15, 2007. The Company
      is
      required to make interest only payments on the first of each month beginning
      June 1, 2007. The Company also issued 100,000 warrants with an exercise price
      of
      $0.50. The warrants expire on May 30, 2012 and are exercisable any time at
      the
      option of the warrant holder. The Company recorded a discount on the note
      payable of $15,031 as that was the value of the warrants as calculated using
      the
      Black-Scholes valuation model. The discount has been amortized as additional
      interest expense in the accompanying statements.





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES**





From
      time
      to time we may become subject to proceedings, lawsuits and other claims in
      the
      ordinary course of business, including proceedings related to environmental
      and
      other matters. Such matters are subject to many uncertainties, and outcomes
      are
      not predictable with assurance.





**NOTE
      12 - SUBSEQUENT EVENTS**





Effective
      July 10, 2007, the Company sold 1,975,000 shares of its common stock and issued
      987,500 warrants with an exercise price of $1.30 to accredited investors for
      aggregate proceeds of $1,975,000, less fees of $177,750. The warrants expire
      on
      July 10, 2012 and are exercisable any time at the option of the warrant holder.
      Pursuant to a registration rights agreement, the Company agreed to file a
      registration statement covering the resale of the common stock and the shares
      of
      common stock underlying the warrants no later than 30 days from the closing
      of
      the offering. The Company also issued an additional 197,500 warrants with an
      exercise price of $1.30 to the placement agent and its designees as a placement
      fee. The Company received $800,000 of these funds prior to June 30, 2007 and
      has
      reflected the receipt of the funds in the accompanying financial statements
      as
      an advance on financing transaction.





On
      July
      24, 2007, the Company issued 800,000 shares of its common stock to employees
      and
      affiliates of the Company under its Stock Option and Stock Grant plan. These
      shares were valued at $1.00 per share and recognized as compensation
      expense.





12





**ITEM
      2.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





***Certain
      statements, other than purely historical information, including estimates,
      projections, statements relating to our business plans, objectives, and expected
      operating results, and the assumptions upon which those statements are based,
      are “forward-looking statements” within the meaning of the Private Securities
      Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933
      and Section 21E of the Securities Exchange Act of 1934. These
      forward-looking statements generally are identified by the words “believes,”
“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and
      similar expressions.*** ***We
      intend such forward-looking statements to be covered by the safe-harbor
      provisions for forward-looking statements contained in the Private Securities
      Litigation Reform Act of 1995, and are including this statement for purposes
      of
      complying with those safe-harbor provisions.*** ***Forward-looking
      statements are based on current expectations and assumptions that are subject
      to
      risks and uncertainties which may cause actual results to differ materially
      from
      the forward-looking statements.*** ***Our
      ability to predict results or the actual effect of future plans or strategies
      is
      inherently uncertain. Factors which could have a material adverse affect on
      our
      operations and future prospects include, but are not limited to: changes in
      economic conditions, legislative/regulatory changes, availability of capital,
      interest rates, competition, and generally accepted accounting principles.
      These
      risks and uncertainties should also be considered in evaluating forward-looking
      statements and undue reliance should not be placed on such statements.*** ***We
      undertake no obligation to update or revise publicly any forward-looking
      statements, whether as a result of new information, future events or otherwise.*** ***Further
      information concerning our business, including additional factors that could
      materially affect our financial results, is included herein and in our other
      filings with the SEC*** .




**Overview**




**Recent
      Merger Transactions**





On
      February 8, 2007, Amerasia Khan Enterprises Ltd. (“AKE”) a Nevada corporation
      (the “Registrant”) (nka ZAGG Incorporated) executed an Agreement and Plan of
      Merger (the “Merger Agreement”) by and between the Registrant and its wholly
      owned subsidiary, SZC Acquisition, Inc., a Nevada corporation (“Subsidiary”) on
      the one hand and ShieldZone Corporation, a Utah corporation (“ShieldZone” or
“Target”) on the other hand. Pursuant to the Merger Agreement, ShieldZone merged
      with Subsidiary, with ShieldZone surviving the merger and Subsidiary ceasing
      to
      exist (the “Merger”).





Following
      the Merger, ShieldZone was reincorporated in Nevada as a subsidiary of AKE.
      On
      March 7, 2007, ShieldZone was merged up and into AKE. At that time AKE changed
      its name to ZAGG Incorporated, and the operations of the surviving entity (ZAGG
      Incorporated) are solely that of ShieldZone. As a result of these transactions,
      the historical financial statements of ZAGG Incorporated are the historical
      financial statements of ShieldZone. The fiscal year end of the Company is
      December 31.





For
      purposes of the following discussion and analysis, references to ‘‘we’’,
‘‘our’’, ‘‘us’’ refers to ZAGG
      Incorporated.





**Our
      Business**





We
      custom-design, market and sell a form of protective covering for consumer
      electronic and hand held devices. Our key product “ *invisible* SHIELD”TM
      is made from a protective, film-like covering that was developed originally
      to
      protect the leading edges of rotary blades of military helicopters. We
      determined that this same film product could be configured to fit onto the
      surface of electronic devices and marketed to consumers for use in protecting
      such devices from everyday wear and tear including scratches, scrapes, debris
      and other surface blemishes. The film also permits touch sensitivity, meaning
      it
      can be used on devices that have a touch-screen interface. The *invisible* SHIELD
      film material is highly reliable and durable since it was originally developed
      for use in a high friction, high velocity, aerospace context. The film provides
      long lasting protection for the surface of electronic devices subject to normal
      wear and tear. The film is a form of polyurethane substance, akin to a very
      thin, pliable, flexible and durable clear plastic that adheres to the surface
      and shape of the object it is applied to.




13




***Critical
      Accounting Policies***





The
      discussion and analysis of our financial condition and results of operations
      are
      based on our financial statements, which have been prepared in accordance with
      accounting principles generally accepted in the United States (U.S. GAAP).
      The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and related disclosure of contingent assets and liabilities. On an
      on-going basis, we evaluate our estimates based on historical experience and
      on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions. Significant estimates include the allowance for
      doubtful accounts, inventory valuation allowances, sales returns and warranty
      liability, the useful life of property and equipment and the valuation allowance
      on deferred tax assets.





***Revenue
      recognition***





We
      follow
      the guidance of the Securities and Exchange Commission’s Staff Accounting
      Bulletin 104 for revenue recognition. In general, we record revenue when
      persuasive evidence of an arrangement exists or product delivery has occurred,
      the sales price to the customer is fixed or determinable, and collectability
      is
      reasonably assured. Our revenue
      is derived from sales of our products to retailers, resellers and end consumers
      and from the sale of distributor license fees. For sales of product, we record
      revenue when the product is shipped, net of estimated returns and discounts.
      For
      license fees, we recognize revenue on a prorated basis over the life of the
      distribution contract.





The
      Company follows the guidance of Emerging Issues Task Force (EITF) Issue 01-9
      ``Accounting for Consideration Given by a Vendor to a Customer'' and (EITF)
      Issue 02-16 ``Accounting by a Customer (Including a Reseller) for Certain
      Considerations Received from Vendors.'' Accordingly, any incentives received
      from vendors are recognized as a reduction of the cost of products. Promotional
      products given to customers or potential customers are recognized as a cost
      of
      sales. Cash incentives provided to our customers are recognized as a reduction
      of the related sale price, and, therefore, are a reduction in
      sales.





***Reserve
      for Sales Returns and Warranty Liability***





Our
      return policy generally allows our end users and retailers to return purchased
      products for refund or in exchange for new products within 30 days of end user
      purchase. We estimate a reserve for sales returns and record that reserve amount
      as a reduction of sales and as a sales return reserve liability.





We
      generally provide the ultimate consumer a warranty with each product and accrue
      warranty expense at the time of the sale based on our prior claims history.
      Actual warranty costs incurred are charged against the accrual when paid.





***Recently
      Issued Accounting Pronouncements***





In
      February, 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities”* (“SFAS
      No. 159”). This Statement provides companies with an option to report selected
      measurement attributes for different assets and liabilities that can create
      artificial volatility in earnings. The Statement’s objective is to reduce both
      complexity in accounting for financial instruments and the volatility in
      earnings caused by measuring related assets and liabilities differently. SFAS
      No. 159 is effective for us beginning January 1, 2009. We are currently
      evaluating the impact of this standard.





We
      have
      reviewed all other recently issued, but not yet adopted, accounting standards
      in
      order to determine their effects, if any, on our results of operation, financial
      position or cash flows. Based on that review, we believe that none of these
      pronouncements will have a significant material effect on our current or future
      earnings or operations.




14




**Results
      of Operations**





**THREE
      MONTHS ENDED JUNE 30, 2007 AND 2006**





***Net
      sales***





Net
      sales
      for the quarter ended June 30, 2007 were $804,458 as compared to net sales
      of
      $638,253 for the quarter ended June 30, 2006, an increase of $166,205 or 26%.





The
      significant increase in product sales is mainly attributed to continued strong
      sales of our *invisible* SHIELD
      product with approximately 57% of our product being sold through our website
      to
      retail customers, 24% being sold through mall carts, 13% to wholesale
      distributors and 6% from shipping and handling charges.





***Cost
      of sales***





Cost
      of
      sales includes raw materials, packing materials and shipping costs. For the
      quarter ended June 30, 2007, cost of sales amounted to $203,672 or approximately
      25% of net sales as compared to cost of sales of $182,623 or 28% of net sales
      for quarter ended June 30, 2007. The decrease in cost of sales as a percentage
      of net revenues for the quarter ended June 30, 2007 as compared to the quarter
      ended June 30, 2006 is attributable to better overall pricing on raw materials
      purchases and decreased packaging costs.





***Gross
      profit***





Gross
      profit for the quarter ended June 30, 2007 was $600,786 or approximately 75%
      of
      net sales as compared to $455,630 or approximately 72% of net sales for the
      quarter ended June 30, 2006. The increase in gross profit percentage was
      attributable to decreased costs associated with raw materials and packaging
      and
      changes in sales mix from distributor sales to retail and cart sales. There
      are
      no assurances that we will continue to recognize similar gross profit margin
      in
      the future.





***Operating
      expenses***





Total
      operating expenses for the quarter ended June 30, 2007 were $633,225, an
      increase of $208,952 from total operating expenses for the quarter ended June
      30, 2006 of $424,273. The increases are primarily attributable to the
      following:





·
            For
                the quarter ended June 30, 2007, salaries and related taxes increased
                by
                $122,420 to $346,035 from $223,615 for the quarter ended June 30,
                2006 due
                to the hiring of additional staff to implement our business
                plan.





·
            For
                the quarter ended June 30, 2007, consulting expense was $2,000, an
                increase of $2,000 from the quarter ended June 30, 2006. The increase
                relates to consulting expenses paid to a consultant who assisted
                us in
                opening additional mall carts during the quarter ended June 30,
                2007.





·
            For
                the quarter ended June 30, 2007, marketing and advertising expenses
                were
                $78,651, an increase of $4,891 as compared to $73,760 for the quarter
                ended June 30, 2006. This increase is attributable to an increase
                in our
                marketing efforts as we roll out product and implement our business
                plan.
                The primary marketing expenditures continue to be in web advertising
                and
                search engine optimization. We also spent approximately $19,000 during
                the
                quarter to redesign our consumer packaging. We expect our marketing
                and
                advertising expenses to increase as our revenues increase and expect
                to
                spend increased funds on adverting and promotion of our products
                as well
                as sales training. During fiscal 2007, we intend to significantly
                expand
                our marketing efforts related to our
                products.




15


·
            For
                the quarter ended June 30, 2007, other selling, general and administrative
                expenses were $206,539 as compared to $126,898 for the quarter ended
                June
                30, 2006, an increase of $79,641. The increase was attributable to
                the
                increase in operations as we implement our business plan and is summarized
                below:





**Three
                Months**
              **Ended**
              **June
                30, 2007**
            
            **Three
                Months**
              **Ended**
              **June
                30, 2006**Professional
                fees
            
            $
            14,669
            
            $
            3,512Contract
                labor
            
            
            19,732
            
            
            12,510Insurance
            
            
            15,188
            
            
            6,985Depreciation
            
            
            19,010
            
            
            750Rent
            
            
            33,871
            
            
            12,399Travel
                and entertainment
            
            
            23,689
            
            
            7,350Telephone
                and utilities
            
            
            10,468
            
            
            7,154Printing
                expenses
            
            
            9,952
            
            
            11,769Office
                supplies
            
            
            10,122
            
            
            17,290Credit
                card and bank fees
            
            
            20,123
            
            
            8,452Promotion
            
            
            537
            
            
            27,676Other
            
            
            29,178
            
            
            11,051Total
            
            $
            206,539
            
            $
            126,898





***(Loss)
      income from operations***





We
      reported loss from operations of ($32,439) for the quarter ended June 30, 2007
      as compared to income from operations of $31,357 for the quarter ended June
      30,
      2006, a decrease of $63,796. The loss from operations for the quarter ended
      June
      30, 2007 as compared to income from operations the quarter ended June 30, 2006
      is primarily attributable to overall cost increases associated with executing
      our business plan including increased salaries and related taxes of $122,420,
      increased rent expense of $21,472, increased travel and entertainment expense
      of
      $16,339 and increased professional fees of $11,157, partially offset by
      decreased promotion expense of $27,159 and decreased office supplies expense
      of
      $7,168.





***Other
      income (expense)***





For
      the
      quarter ended June 30, 2007, total other expense was ($16,262) compared to
      other
      income of $6,819 for the quarter ended June 30, 2006. The decrease is primarily
      attributed to interest expense related to the notes payable of ($5,200),
      amortization of the discount on notes payable of ($15,031) and reduced interest
      income.





***Net
      (loss) income***





As
      a
      result of these factors, we reported a net loss of ($48,293) or ($0.00) per
      share for the quarter ended June 30, 2007 as compared to net income of $38,176
      or $0.00 per share for the quarter ended June 30, 2006.





**SIX
      MONTHS ENDED JUNE 30, 2007 AND 2006**





***Net
      sales***





Net
      sales
      for the six months ended June 30, 2007 were $1,597,306 as compared to net sales
      of $1,162,511 for the six months ended June 30, 2006, an increase of $434,795
      or
      37%.





The
      significant increase in product sales is mainly attributed to continued strong
      sales of our *invisible* SHIELD
      product with approximately 59% of our product being sold through our website
      to
      retail customers, 20% being sold through mall carts, 14% to wholesale
      distributors and 7% from shipping and handling charges.




16




***Cost
      of sales***





Cost
      of
      sales includes raw materials, packing materials and shipping costs. For the
      six
      months ended June 30, 2007, cost of sales amounted to $390,831 or approximately
      24% of net sales as compared to cost of sales of $344,222 or 29% of net sales
      for six months ended June 30, 2007. The decrease in cost of sales as a
      percentage of net revenues for the quarter ended June 30, 2007 as compared
      to
      the quarter ended June 30, 2006 is attributable to better overall pricing on
      raw
      materials purchases and decreased packaging costs.





***Gross
      profit***





Gross
      profit for the six months ended June 30, 2007 was $1,206,475 or approximately
      76% of net sales as compared to $818,289 or approximately 71% of net sales
      for
      the six months ended June 30, 2006. The increase in gross profit percentage
      was
      attributable to decreased costs associated with raw materials and packaging
      and
      changes in sales mix from distributor sales to retail and cart sales. There
      are
      no assurances that we will continue to recognize similar gross profit margin
      in
      the future.





***Operating
      expenses***





Total
      operating expenses for the six months ended June 30, 2007 were $1,501,016,
      an
      increase of $663,464 from total operating expenses for the six months ended
      June
      30, 2006 of $837,552. The increases are primarily attributable to the
      following:





·
            For
                the six months ended June 30, 2007, salaries and related taxes increased
                by $248,092 to $654,443 from $406,351 for the six months ended June
                30,
                2006 due to the hiring of key management personnel and additional
                staff to
                implement our business plan.





·
            For
                the six months ended June 30, 2007, consulting expense was $38,500,
                a
                decrease of $35,250 from the expense recognized for the six months
                ended
                June 30, 2006 of $73,750. The decrease is primarily due to approximately
                $63,000 that was paid to a consultant who then became our president
                in
                2006, partially offset by expenses incurred related to the hiring
                of key
                personnel during the six months ended June 30, 2007 of $24,000 and
                payments to a consulting firm for website optimization of
                $10,000.





·
            For
                the six months ended June 30, 2007, marketing and advertising expenses
                were $239,786, an increase of $78,485 as compared to $161,301 for
                the six
                months ended June 30, 2007. This increase is attributable to an increase
                in our marketing efforts as we roll out product and implement our
                business
                plan. The primary marketing expenditures continue to be in web advertising
                and search engine optimization. We also spent approximately $28,000
                on
                television advertising and $19,000 during the quarter to redesign
                our
                consumer packaging. We expect our marketing and advertising expenses
                to
                increase as our revenues increase and expect to spend increased funds
                on
                adverting and promotion of our products as well as sales training.
                During
                fiscal 2007, we intend to significantly expand our marketing efforts
                related to our products.





·
            For
                the six months ended June 30, 2007, other selling, general and
                administrative expenses were $568,287 as compared to $196,150 for
                the six
                months ended June 30, 2006. The increase was attributable to the
                increase
                in operations as we implement our business plan and is summarized
                below:




17




**Six
                Months**
              **Ended**
              **June
                30, 2007**
            
            **Six
                Months**
              **Ended**
              **June
                30, 2006**Professional
                fees
            
            $
            222,445
            
            $
            4,887Contract
                labor
            
            
            40,230
            
            
            7,801Insurance
            
            
            28,162
            
            
            10,293Depreciation
            
            
            36,975
            
            
            1,750Rent
            
            
            54,992
            
            
            22,842Travel
                and entertainment
            
            
            39,048
            
            
            15,162Telephone
                and utilities
            
            
            23,267
            
            
            14,576Printing
                expenses
            
            
            19,651
            
            
            17,525Office
                supplies
            
            
            24,140
            
            
            25,484Credit
                card and bank fees
            
            
            36,013
            
            
            23,443Promotion
            
            
            14,445
            
            
            28,168Other
            
            
            28,919
            
            
            24,219Total
            
            $
            568,287
            
            $
            196,150





***(Loss)
      income from operations***





We
      reported loss from operations of ($294,541) for the six months ended June 30,
      2007 as compared to loss from operations of ($19,263) for the six months ended
      June 30, 2006, a decrease of $275,278. The increased loss from operations in
      for
      the six months ended June 30, 2007 as compared to the six months ended June
      30,
      2006 primarily attributable to overall cost increases associated with executing
      our business plan and professional fees incurred as a result of the
      recapitalization transaction of $217,558.





***Other
      income (expense)***





For
      the
      six months ended June 30, 2007, total other expense was ($22,014) compared
      to
      other income of $6,960 for the six months ended June 30, 2006. The decrease
      is
      primarily attributed to interest expense related to the convertible debt of
      ($5,868), interest on notes payable of ($5,200) and accretion of the discount
      on
      notes payable of ($15,031).





***Net
      (loss) income***





As
      a
      result of these factors, we reported a net loss of ($318,865) or ($0.02) per
      share for the six months ended June 30, 2007 as compared to a net loss of
      ($12,303) or ($0.00) per share for the six months ended June 30, 2006.





**Liquidity
      and Capital Resources**





Liquidity
      is the ability of a company to generate funds to support its current and future
      operations, satisfy its liabilities and otherwise operate on an ongoing basis.





At
      June
      30, 2007, we had a cash balance of $993,380.





Our
      working capital position increased by $147,033 to working capital of $67,560
      at
      June 30, 2007 from a working capital deficit of ($79,473) at December 31, 2006.
      This increase in working capital is primarily attributable to the overall
      increased current assets including cash of $524,998, prepaid expenses of
      $151,087, increased prepaid advertising of $124,076 and increased inventories
      of
      $50,400 partially offset by decreased accounts payable of $56,722 and deferred
      income tax assets of $2,762 combined with the overall increase in current
      liabilities of $640,420 primarily attributable to the advance on financing
      transaction of $800,000 and increased notes payable of $250,000 partially offset
      by decreased note payable of $250,000, decreased convertible note payable -
      officer of $100,000 and decreased wages payable of $53,456.




18




Net
      cash
      used in operating activities for the six months ended June 30, 2007 was
      ($610,207) as compared to cash provided by operating activities of $182,827
      for
      the six months ended June 30, 2006. For the six months ended June 30, 2007,
      net
      cash used in operating activities was attributable primarily to our net loss
      of
      ($318,865), increased prepaid advertising of $124,076, increased prepaid
      expenses and other current assets of $101,087, decreased accrued wages and
      wage
      related expenses of $53,456, increased inventory of $50,400, increased other
      assets of $25,000, decreased accounts payable of $24,947, decreased sales
      returns liability of $16,517 and decreased accrued liabilities of $8,716,
      partially offset by collection of accounts receivable of $56,722, non-cash
      depreciation expense of $36,976 and increased deferred licensing revenues of
      $12,499.





Net
      cash
      used in investing activities for the six months ended June 30, 2007 was
      ($89,845) attributable to the purchase of property and equipment of $42,131
      and
      payments for intangible assets of $47,714





Net
      cash
      provided by financing activities was $1,225,050 for the six months ended June
      30, 2007. Net cash provided by financing activities for the six months ended
      June 30, 2007 was attributable to the advance on financing transaction of
      $800,000, proceeds from the sale of common stock of $275,050 and proceeds from
      notes payable of $200,000, partially offset by repayments of convertible debt
      -
      officer of $50,000.





We
      reported a net increase in cash for the six months ended June 30, 2007 of
      $524,998.





We
      currently have no material commitments for capital expenditures. Other than
      working capital and loans, we presently have no other alternative source of
      working capital. We want to build an additional manufacturing line and upgrade
      our manufacturing facilities and technologies, in order to expand our products.
      We do not have sufficient working capital to fund the additional line and
      upgrade our manufacturing facilities and technologies as well as providing
      working capital necessary for our ongoing operations and obligations. We will
      need to raise additional working capital to complete this project. We may seek
      to raise additional capital through the sale of equity securities. No assurances
      can be given that we will be successful in obtaining additional capital, or
      that
      such capital will be available in terms acceptable to our company.





On
      July
      10, 1007, we completed a private placement offering wherein we raised $1,975,000
      less fees of $177,750. We issued 1,975,000 shares of our common stock and
      987,500 warrants to purchase our common stock at an exercise price of $1.30
      per
      share. These warrants are exercisable at the warrant holder’s option any time up
      through July 10, 2012.





**Off
      Balance Sheet Arrangements**





As
      of
      July 30, 2007, there were no off balance sheet arrangements.





**Item
      3.**  **Controls and Procedures**





We
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures (as defined in Exchange Act Rules
      13a-15(e) and 15d-15(e)) as of June 30, 2007. This evaluation was carried out
      under the supervision and with the participation of our Chief Executive Officer,
      Mr. Robert G. Pedersen II, and Chief Financial Officer, Mr. Brandon T. O’Brien.
      Based upon that evaluation, our Chief Executive Officer and Chief Financial
      Officer concluded that, as of June 30, 2007, our disclosure controls and
      procedures are effective. There have been no changes in our internal controls
      over financial reporting during the quarter ended June 30, 2007.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act are recorded, processed, summarized and
      reported, within the time periods specified in the SEC's rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed in
      our
      reports filed under the Exchange Act is accumulated and communicated to
      management, including our Chief Executive Officer and Chief Financial Officer,
      to allow timely decisions regarding required disclosure.




19




Limitations
      on the Effectiveness of Internal Controls





Our
      management does not expect that our disclosure controls and procedures or our
      internal control over financial reporting will necessarily prevent all fraud
      and
      material error. Our disclosure controls and procedures are designed to provide
      reasonable assurance of achieving our objectives and our Chief Executive Officer
      and Chief Financial Officer concluded that our disclosure controls and
      procedures are effective at that reasonable assurance level. Further, the design
      of a control system must reflect the fact that there are resource constraints,
      and the benefits of controls must be considered relative to their costs. Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that all control issues and instances of fraud,
      if any, within the Company have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the internal control. The design
      of
      any system of controls also is based in part upon certain assumptions about
      the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions.
      Over time, control may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may deteriorate.





**PART
      II - OTHER INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





The
      Company is not presently party to any legal proceedings. We are not aware of
      any
      pending legal proceeding to which any of our officers, directors, or any
      beneficial holders of 5% or more of our voting securities are adverse to us
      or
      have a material interest adverse to us.





**Item
      2.**   **Unregistered
      Sales of Equity Securities and Use of Proceeds**





We
      have
      sold or issued the following securities not registered under the Securities
      Act
      by reason of the exemption afforded under Section 4(2) of the Securities Act
      of
      1933 (the “Act”), during the last three years. Except as stated below, no
      underwriting discounts or commissions were payable with respect to any of the
      following transactions. The offer and sale of the following securities was
      exempt from the registration requirements of the Securities Act under Rule
      506
      insofar as (1) except as stated below, each of the investors was accredited
      within the meaning of Rule 501(a); (2) the transfer of the securities were
      restricted by the company in accordance with Rule 502(d); (3) there were no
      more
      than 35 non-accredited investors in any transaction within the meaning of Rule
      506(b), after taking into consideration all prior investors under Section 4(2)
      of the Securities Act within the twelve months preceding the transaction; and
      (4) none of the offers and sales were effected through any general solicitation
      or general advertising within the meaning of Rule 502(c).





At
      March
      24, 2005 (inception), ShieldZone issued 10,000,000 shares of common stock to
      its
      founder for $1,000.





ShieldZone
      entered into a distribution agreement with a distributor (the “Distributor”) in
      March 2006. On December 12, 2006, under a settlement type purchase agreement
      the
      Company agreed to issue to the Distributor 75,000 of its common shares, $13,000
      cash plus portion of payment due from a customer for which the Distributor
      was
      the Company’s distributor in order to early cancel the distribution agreement.
      The shares were valued and expensed at $26,250 or $0.35 per share which was
      a
      contemporaneous sale price in a private transaction where a former officer
      sold
      a portion of his common shares of the Company.





In
      July
      2006, ShieldZone sold 100,000 common shares for $75,000 or $0.75 per share.
      The
      shares were issued pursuant to an exemption from registration provided by Rule
      506 of Regulation D, as they were issued without any form of general
      solicitation or general advertising and the purchaser qualified as an accredited
      investor and accepted the shares for his personal account and not with a view
      towards distribution.




20




On
      December 27, 2006, ShieldZone issued a Secured Convertible Promissory Note
      in
      the principal amount of $250,000 to an accredited investor. The Note is
      convertible into shares of the Company’s common stock at a conversion price per
      share of $0.35. The Note was issued pursuant to an exemption from registration
      provided by Rule 506 of Regulation D, as it was issued without any form of
      general solicitation or general advertising and the purchaser qualified as
      an
      accredited investor and accepted the Note and underlying shares for its personal
      account and not with a view towards distribution. The holders of the note
      converted the outstanding principal balance into 714,286 shares of the Company’s
      common stock on February 8, 2007. These shares have piggyback registration
      rights.





Empire
      Financial Group (“Empire”) acted as placement agent with respect to the offering
      and Empire or its designees will receive a cash fee equal to $47,250 and
      warrants to purchase 52,500 shares of the Company’s common stock at an exercise
      price of $0.35 per share. The warrant shares are subject to equitable adjustment
      for stock splits, stock dividends and similar events, and have “piggyback”
registration rights.





On
      February 8, 2007, the Company issued and sold 785,856 shares of Common Stock
      to
      accredited investors. The shares were sold at a price per share of $0.35. These
      shares have piggy back registration rights. The shares were issued pursuant
      to
      an exemption form registration provided by Rule 506 of Regulation D, as they
      were issued without any form of general solicitation or general advertising
      and
      the purchases qualified as accredited investors and accepted the shares for
      their personal accounts and not with a view towards distribution.





On
      February 8, 2007, the Company and Amerasia Khan Enterprises Ltd. a Nevada
      corporation (“AKE”) (nka Zagg Incorporated), a publicly held entity, executed an
      Agreement and Plan of Merger (the “Merger Agreement”) by and between AKE and its
      wholly owned subsidiary, SZC Acquisition Corp., a Nevada corporation
      (“Subsidiary”) on the one hand and ShieldZone Corporation, a Utah corporation on
      the other hand. Pursuant to the Merger Agreement ShieldZone merged with the
      Subsidiary, with ShieldZone Corporation surviving the merger (the “Merger”). In
      consideration, the shareholders of ShieldZone were issued 10,175,000 shares
      of
      the common stock of AKE. Shareholders holding 3,941,765 of these shares claim
      to
      have piggyback registration rights in AKE. The issuance of the shares in
      connection with the Merger was made pursuant to an exemption form registration
      provided by Rule 506 of Regulation D, as they were issued without any form
      of
      general solicitation or general advertising and the purchasers qualified as
      accredited investors and accepted the shares for their personal accounts and
      not
      with a view towards distribution.





During
      the quarter ended March 31, 2007, the Company repaid $50,000 of the principal
      balance of a $100,000 note issued in November 2006 to an affiliate of the
      Company’s Chief Executive Officer, and the remaining $50,000 of principal plus
      accrued interest of $1,749 was converted into 147,853 shares of Common Stock.
      These shares have piggy back registration rights. The shares were issued
      pursuant to an exemption form registration provided by Rule 506 of Regulation
      D,
      as they were issued without any form of general solicitation or general
      advertising and the purchases qualified as accredited investors and accepted
      the
      shares for their personal accounts and not with a view towards
      distribution.





On
      July
      10, 2007, the Company sold (i) 1,975,000 shares of our common stock, and (ii)
      five-year warrants to purchase 987,500 shares of common stock at an exercise
      price of $1.30 per share, pursuant to a Securities Purchase Agreement among
      our
      company and certain institutional investors (the “Purchasers”) signatory
      thereto. We received aggregate gross proceeds of approximately $1,975,000 from
      the sale of the common stock and warrants. The common stock and warrants were
      offered solely to “accredited investors” in reliance on the exemption from
      registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
      and/or Rule 506 of Regulation D promulgated thereunder.





Under
      the
      applicable agreements, the Purchasers are entitled to certain contractual
      benefits, which are summarized as follows:





1.
            The
                right to participate in any subsequent financing of the Company in
                the
                next twelve months;




2.
            Except
                  for certain exempt issuances, restrictions on the Company’s ability to
                  issue securities 90 days following an effective registration statement
                  on
                  behalf of the
                  Purchasers.




21




3.
            For
                as long as any Purchaser holds Company securities, restrictions on
                the
                Company’s ability to issue securities that are convertible into common
                stock at some future or variable price;





4.
            For
                twelve months, restrictions on the Company’s ability to undertake a
                reverse or forward stock split of its common stock;





5.
            For
                two years and except for certain exempt issuances, the right to certain
                anti-dilution provisions;





6.
            The
                right to rescind in the event the Company fails to meet certain deadlines.


Further
        under the Securities Purchase Agreement, the Company is permitted to issue
        common shares that are exempt from the above restrictions in certain instances,
        including issuances to employees, officers or directors of the Company pursuant
        to any stock or option plan, and a general allowance of common stock and
        warrants equal to $2 million in the aggregate, raised no later than August
        9,
        2007.




Empire
      Financial Group (“Empire”) acted as placement agent with respect to the offering
      and will receive a cash fee equal to $177,750 and warrants to purchase 197,500
      shares of the Company’s common stock at an exercise price of $1.30 per share.
      The warrant shares are subject to equitable adjustment for stock splits, stock
      dividends and similar events, and have “piggyback” registration rights.




Pursuant
      to a Registration Rights Agreement, the Company agreed to file an initial
      registration statement covering the resale of the common stock and the shares
      of
      common stock underlying the warrants no later than 30 days from the closing
      of
      the offering and to have such registration statement declared effective no
      later
      than 120 days from the closing of the offering. If the Company does not timely
      file the registration statement or cause it to be declared effective by the
      required dates, then each investor in the offering shall be entitled to
      liquidated damages equal to 2% of the aggregate purchase price paid by such
      investor for the securities, and an additional 2% for each month that the
      Company does not file the registration statement or cause it to be declared
      effective. The Company is also subject to the same penalties for failure to
      perform the following acts in their respective timeframes:




1.
            File
                with the Securities and Exchange Commission (the “Commission”) a
                pre-effective amendment within ten trading days after the receipt
                of
                comments from the Commission;





2.
            File
                with the Commission a request for acceleration with five trading
                days of
                the date the Commission notifies the Company orally or in writing
                that the
                registration statement will not be reviewed or subject to further
                review;





3.
            Fail
                to notify the Purchasers within one trading day of when the Company
                requests effectiveness of the registration statement;





4.
            Fail
                to file a final prospectus within one trading day after effectiveness;





5.
            Fail
                to maintain an effective registration statement for more than ten
                consecutive calendar days or more than an aggregate of fifteen calendar
                days in a twelve month period; and





6.
            Fail
                to register all of the common stock and the shares of common stock
                underlying the warrants pursuant to one or more registration statements
                on
                or before December 28, 2007.





On
      July
      24, 2005, the Company issued 800,000 shares of common stock to employees and
      affiliates under its Stock Option and Stock Grant plan.





22




**Item
      3.**  **Defaults
      Upon Senior Securities**





None.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





No
      matters have been submitted to our security holders for a vote, through the
      solicitation of proxies or otherwise, during the six months ended June 30,
      2007.





**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits**





a.
            Exhibits:
                The following Exhibits are filed with this Form 10-QSB pursuant to
                Item
                601(a) of Regulation S-K:





Exhibit
                No.
            
            Description
              of
              Exhibit31.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant toSection
                302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant toSection
                302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S. C. Section 1350, as
                adopted
                pursuant toSection
                906 of the Sarbanes-Oxley Act of 2002.32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S. C. Section 1350, as
                adopted
                pursuant toSection
                906 of the Sarbanes-Oxley Act of
                2002.





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.






**ZAGG
              INCORPORATED**Date: August
              7, 2007
            
            **/s/ Robert
              G. Pedersen II**Robert
              G. Pedersen II,President
              and Chief Executive Officer




Date: August
              7, 2007
            
            **/s/ Brandon
              T. O’Brien**Brandon
              T. O’Brien,Chief
                Financial Officer
              (Principal
                Financial Officer)





23