##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal year ended
    December 31, 2006oro

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13
    OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934For the transaction period
    from          to   Commission File
    No. 001-31404
 Matrixx Initiatives,
    Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware


87-0482806(State or Other Jurisdiction
    of


(I.R.S. EmployerIncorporation or
    Organization)


Identification No.
)  4742 N. 24th Street
 Suite 455
 Phoenix, AZ 85016
 602-385-8888
 (Address of principal executive
    offices,
 Registrants Telephone
    Number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.001 par value

Nasdaq Global Select Market    Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K, Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ
 þ o
 o þ
  Rule 12b-2 o þ
    March 7, 2007, 10,071,153
  DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.
  Unless otherwise indicated in this
    Form 10-K,
    Matrixx, us, we,
    our, the Company and similar terms refer
    to Matrixx Initiatives, Inc. and its subsidiaries.
    Zicam is a registered trademark of our subsidiary,
    Zicam, LLC, and the Matrixx name and logo are trademarks of the
    Company.




---



##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.


Business

2Item 1A.


Risk
    Factors

8Item 1B.


Unresolved Staff
    Comments

12Item 2.


Properties

12Item 3.


Legal
    Proceedings

13Item 4.


Submission of
    Matters to a Vote of Security Holders

17Supplemental Item.Executive Officers
    of Matrixx

17PART IIItem 5.


Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities

19Item 6.


Selected Financial
    Data

20Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations

20Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk

33Item 8.


Financial
    Statements and Supplementary Data

33Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure

33Item 9A.


Controls and
    Procedures

33Item 9B.


Other
    Information

36PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance

36Item 11.


Executive
    Compensation

36Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters

36Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence

37Item 14.


Principal
    Accountant Fees and Services

37PART IVItem 15.


Exhibits, Financial
    Statement Schedules

38SIGNATURES

63EX-10.4EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  Introduction
  over-the-counter and/or ® ® tm
  Cold Remedy. tm tm tm tm tm .
  Allergy/Sinus. tm
  Cough.
  Multi-Symptom Cold/Flu.
    Form 10-K, Form 10-Q, Form 8-K,
  (602) 385-8888.
 2




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Markets
    and Company Products
  and/or sub-segment
    Product Class

2006


%


2005


%


2004


%Cold Remedy

$
69,046,345



72
%

$
55,292,673



61
%

$
39,249,136



65
%Allergy/Sinus/Nasal Comfort


15,468,683



16
%


20,163,688



23
%


13,357,491



22
%Cough


6,059,285



6
%


6,514,769



7
%


7,624,308



13
%Multi-Symptom Cold/Flu


5,656,467



6
%


8,489,465



9
%


0



n/aTotal Net Sales

$
96,230,780



100
%

$
90,460,595



100
%

$
60,230,935



100
%   Cold
    Remedy
  word-of-mouth
     3




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##### Table of Contents



Allergy/Sinus
      Cough
    Multi-Symptom
    Cold & Flu Relief
   4




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##### Table of Contents



Business
    Strategy
  ®
  Expanding Marketing Efforts for Existing and New
    Products:
  Pursuing Additional Delivery Systems and Expansion into New
    OTC Categories: and/or
  Customers
  out-of-date
  Manufacturing
    and Distribution
     5




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Research
    and Development
    FDA, FTC
    and Other Government Regulation
    ®
  ®
  Environmental
    Matters
   6




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##### Table of Contents



Trademarks,
    Trade Names, and Proprietary Rights
  ® tm ® tm tm ® tm ® ® ® ® ® tm ® tm ® tm ® ® ® ® ® tm ® ® ® ® ® ® ® ®
  Employees
    Seasonality;
    Change of Fiscal Year
      Backlog
   7




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##### Table of Contents



Competition
  over-the-counter
  ITEM 1A.
    RISK
    FACTORS  We may
    fail to compete effectively, particularly against larger more
    established pharmaceutical and health products companies, or low
    cost generic drug manufacturers, causing our business and
    operating results to suffer.
    Our
    business is subject to seasonality that may cause our quarterly
    operating results to fluctuate materially and cause the market
    price of our stock to decline.
      We may
    continue to incur significant costs resulting from product
    liability claims or securities litigation.
   8




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Because
    a significant portion of our business depends substantially on a
    small group of large national retailers, our sales, operating
    margins and income would be adversely affected by any disruption
    of our relationship with these retailers, or any other material
    adverse change in such retailers businesses.
    We
    believe that growth in the
    over-the-counter
    healthcare products market is driven, in part, by factors beyond
    our control, such as media attention and adverse publicity. If
    the factors currently having a positive impact on this market
    disappear or diminish, our sales in this market may
    suffer.
    Our
    future growth will depend in part upon our ability to develop
    and achieve sales of new products.
    Unanticipated
    problems associated with product development and
    commercialization could adversely affect our operating
    results.
    
    we may experience unanticipated or otherwise negative research
    and development results;
    existing or proposed products may be found to be ineffective or
    unsafe, or may otherwise fail to receive required regulatory
    clearances or approvals;
    we may find that existing or proposed products, while effective,
    are uneconomical to commercialize or market;
    we may be unable to produce sufficient product inventories to
    meet customer demand;
    we may experience adverse publicity from product liability
    lawsuits that could materially impact consumer demand;
    existing or proposed products do not achieve broad market
    acceptance;
    existing or proposed products do not attain broad distribution
    or retail shelf space; or 9




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
    proprietary rights held by third parties preclude us from
    developing or marketing existing or proposed products.    The
    inability to provide scientific proof for product claims may
    adversely affect our sales.
    FDA
    and other government regulation may restrict our ability to sell
    our products.
    If we
    are unable to protect our intellectual property or if we
    infringe the intellectual property of others, our financial
    condition and future prospects could be materially
    harmed.
   10




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##### Table of Contents



We do
    not have manufacturing capabilities of our own.
  cost-effective
  We may
    experience product backlogs.
    Loss
    of key personnel could have a material adverse effect on our
    operations and financial results.
    To
    protect against various potential liabilities, we maintain a
    variety of insurance programs. Significant increases in the cost
    or decreases in the availability of such insurance could
    adversely impact our financial condition.
    Our
    Board of Directors is authorized to issue shares of preferred
    stock that could have rights superior to our outstanding shares
    of common stock and, if issued, could adversely impact the value
    of our common stock.
    
    voting rights, including the right to vote as a class on
    particular matters;
    preferences as to dividends and liquidation rights;
    conversion rights;
    anti-dilution protections; and
    redemption rights. 11




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##### Table of Contents



The
    price of our stock may continue to be volatile.
    We
    have agreed to indemnify our officers and directors from
    liability.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES  month-to-month
 12




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS  Litigation
      Product
    Liability Matters
  General.
    December 31,


September 30,


February 28,2005


2006


2007Number of Pending Lawsuits


50



34



25Number of Plaintiffs


427



45



36     Settlement of Arizona Consolidated
    Litigation.
 13




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##### Table of Contents



Cases Dismissed or Pending Dismissal Since
    September 30, 2006 (Federal Courts).
  United States

Named

DateDate Filed

District Court

Plaintiff

DismissedDecember 18, 2003

Northern District of Alabama,
    Middle Division

Sutherland

November 7, 2006May 3, 2004

Middle District of Alabama

Benkwith

January 5, 2007June 17, 2004

Northern District of Texas

Hilton

February 20, 2007October 29, 2004

Central District of California

OHanlon

January 19, 2007
    (appeal pending)November 1, 2005

District of Colorado

Chontos

Settled but not yet
    dismissed.November 9, 2005

Eastern District of Michigan,
    Northern Division

Johnston

January 12, 2007December 19, 2005

Northern District of Alabama,
    Middle Division

Edwards

January 12, 2007December 22, 2005

Western District of Louisiana

Dove

December 11, 2006March 1, 2006

Northern District of Ohio
    (Eastern Division)

Lechner

December 14, 2006     Cases Dismissed or Pending Dismissal Since
    September 30, 2006 (State Courts).
  Named

DateDate Filed

Court

Plaintiff

DismissedNovember 17, 2004

Maricopa County, Arizona

Cappy

January 5, 2007November 23, 2005

Maricopa County, Arizona

Allen

January 5, 2007October 6, 2006

Superior Court of the State of
    California,
    County of Ventura

Navas

Settled but not yet
    dismissed.  14




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##### Table of Contents



Pending Cases as of February 28, 2007 (Federal
    Courts).
  United States

NamedDate Filed

District Court

PlaintiffSeptember 13, 2004

Western District of Kentucky

HansJune 15, 2004

Northern District of Alabama,
    Southern Division

WyattJanuary 14, 2005

District of Oregon

LuschSeptember 23, 2005

Southern District of Florida

DobsonNovember 1, 2005

Northern District of Georgia,
    Atlanta Division

AbernathyNovember 1, 2005

District of Minnesota

RyeNovember 14, 2005

Eastern District of Tennessee

RussellDecember 21, 2005

Eastern District of Michigan

SaldenFebruary 9, 2006

District of New Jersey

FinderApril 13, 2006

Southern District of Ohio

RifeApril 28, 2006

Southern District of Texas,
    Houston Division

SimmsJune 21, 2006

Second Judicial District Court,
    County of
    Bernalillo, New Mexico

OteroJuly 18, 2006

Western District of New York

SawyerNovember 2, 2006

Northern District of Ohio, Western
    Division

Taylor   Pending Cases as of February 28, 2007 (State
    Courts).
  NamedDate Filed

Court

PlaintiffMarch 8, 2004

Maricopa County, Arizona

AbramsenApril 14, 2004

17th Judicial Circuit in and
    for Broward County,
    Florida, General Jurisdiction Division

HoodAugust 20, 2004

Maricopa County, Arizona

AkersJanuary 13, 2005

Fresno County, Central Division,
    California

CashFebruary 24, 2006

County of Niagara, New York

CampbellJune 5, 2006

Oklahoma County, Oklahoma

StarkJune 7, 2006

Morris County, New Jersey

StraccoJuly 7, 2006

County of San Diego,
    California

BrunoJune 16, 2006

Court of Common Pleas of Fayette
    County,
    Pennsylvania

MarvaAugust 30, 2006

Los Angeles Superior Court,
    California

StanleyNovember 3, 2006

Maricopa County, Arizona

Poole   Potential Claimants.
   15




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##### Table of Contents



Companys Position Regarding the
    Allegations.
  Scientific Advisory Board.
      Insurance.
  Litigation
    Reserves
   16




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##### Table of Contents



Securities
    Litigation Matters
  No. CV04-0886 No. 2:04-CV-886.
  Federal
    Trade Commission Inquiry
  ®
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   Executive
    Officers of Matrixx    Carl
    J. Johnson, 58, President and Chief Executive
    Officer
  over-the-counter ®
 17




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##### Table of Contents



William
    J. Hemelt, 53, Executive Vice President, Operations, Chief
    Financial Officer, and Treasurer
    Timothy
    L. Clarot, 52, Vice President of Research &
    Development
    Lynn
    Romero, 42, Vice President of Administration and
    Secretary
    James
    A. Marini, 45, Vice President of Sales
   18




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Market PriceHigh


LowFiscal Year 2005First Quarter

$
12.60


$
9.00Second Quarter

$
12.97


$
9.70Third Quarter

$
14.87


$
10.83Fourth Quarter

$
22.65


$
13.91Fiscal Year 2006First Quarter

$
26.22


$
19.68Second Quarter

$
23.46


$
12.78Third Quarter

$
19.19


$
14.15Fourth Quarter

$
22.96


$
15.49     Dividend
    Policy
    Issuer
    Purchases of Equity Securities
   19




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    2006


2005


2004


2003


2002(000s, except per share data)Net sales

$
96,231


$
90,461


$
60,231


$
43,496


$
23,548Net income

$
4,927


$
3,078


$
4,957


$
3,344


$
4,757Net income per share of common
    stock  basic

$
0.51


$
0.32


$
0.52


$
0.36


$
0.50Net income per share of common
    stock  diluted

$
0.49


$
0.32


$
0.52


$
0.35


$
0.50Dividends per share

$



$



$



$



$
Shares outstanding at year end


9,948



9,600



9,520



9,475



9,441Total assets

$
85,107


$
86,442


$
60,134


$
50,077


$
47,185Long term obligations

$



$



$



$



$
Stockholders equity

$
58,087


$
48,110


$
44,126


$
38,790


$
35,155     ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Executive
    Summary
  over-the-counter and/or ®
    Product Class

2006


%


2005


%


2004


%Cold Remedy

$
69,046,345



72
%

$
55,292,673



61
%

$
39,249,136



65
%Allergy/Sinus/Nasal Comfort

$
15,468,683



16
%

$
20,163,688



23
%

$
13,357,491



22
%Cough

$
6,059,285



6
%

$
6,514,769



7
%

$
7,624,308



13
%Multi-Symptom Cold/Flu

$
5,656,467



6
%

$
8,489,465



9
%

$
0



n/aTotal Net Sales

$
96,230,780



100
%

$
90,460,595



100
%

$
60,230,935



100
%    20




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##### Table of Contents



year-to-date 2006/2007
    start-up
   21




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##### Table of Contents



Seasonality
    and Quarterly Results
      Quarterly
    Results:
  2006Q1





Q2





Q3





Q4





FY2006


% NS


2006


% NS


2006


% NS


2006


% NS


2006


% NS$000sNet Sales

$
17,676






$
8,206






$
34,121






$
36,227






$
96,230Marketing

$
6,699



38
%

$
1,792



22
%

$
4,136



12
%

$
18,912



52
%

$
31,539



33
%Sales Expense

$
568



3
%

$
336



4
%

$
1,272



4
%

$
1,126



3
%

$
3,302



3
%General & Administrative

$
2,302



13
%

$
3,334



40
%

$
2,925



9
%

$
2,587



7
%

$
11,148



12
%Legal  Product Liability

$
1,123



6
%

$
2,117



26
%

$
1,576



5
%

$
1,141



3
%

$
5,957



6
%Total Op Expenses

$
10,692



61
%

$
7,579



92
%

$
9,909



29
%

$
23,766



65
%

$
51,946



54
%R&D

$
1,127



6
%

$
1,863



23
%

$
1,150



3
%

$
545



2
%

$
4,685



5
%   2005Q1





Q2





Q3





Q4





FY2005


% NS


2005


% NS


2005


% NS


2005


% NS


2005


% NS$000sNet Sales

$
14,982






$
6,255






$
25,203






$
44,022






$
90,461Marketing

$
5,069



34
%

$
1,668



27
%

$
1,981



8
%

$
16,284



37
%

$
25,002



28
%Sales Expense

$
614



4
%

$
431



7
%

$
1,233



5
%

$
3,038



7
%

$
5,316



6
%General & Administrative

$
2,232



15
%

$
1,834



29
%

$
2,277



9
%

$
4,899



11
%

$
11,242



12
%Legal  Product Liability

$
909



6
%

$
596



10
%

$
1,517



6
%

$
9,615



22
%

$
12,637



14
%Total Op Expenses

$
8,823



59
%

$
4,529



73
%

$
7,008



28
%

$
33,836



77
%

$
54,197



60
%R&D

$
500



3
%

$
966



15
%

$
784



3
%

$
1,820



4
%

$
4,069



4
%  22




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##### Table of Contents



2004Q1





Q2





Q3





Q4





FY2004


% NS


2004


% NS


2004


% NS


2004


% NS


2004


% NS$000sNet Sales

$
12,933






$
3,392






$
16,905






$
27,002






$
60,231Marketing

$
4,771



37
%

$
1,216



36
%

$
1,313



8
%

$
9,427



35
%

$
16,726



28
%Sales Expense

$
665



5
%

$
123



4
%

$
862



5
%

$
1,406



5
%

$
3,056



5
%General & Administrative

$
1,981



15
%

$
1,377



41
%

$
1,604



9
%

$
3,347



13
%

$
8,309



14
%Legal  Product Liability

$
0



0
%

$
756



22
%

$
1,650



10
%

$
1,365



5
%

$
3,771



6
%Total Op Expenses

$
7,417



57
%

$
3,471



103
%

$
5,429



32
%

$
15,545



58
%

$
31,862



53
%R&D

$
470



4
%

$
522



15
%

$
354



2
%

$
541



2
%

$
1,887



3
%   Critical
    Accounting Policies and Estimates
        Intangible Assets and Goodwill:
  Income Taxes:
  Revenue Recognition:
 23




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##### Table of Contents



Customer Sales Returns and Allowances:
  Legal Contingencies: Item 3- Accounting for
    Contingencies
  Results
    Of Operations For The Year Ended December 31, 2006 Compared
    To The Year Ended December 31, 2005
    Years Ended December 31,2006


2005Net sales

$
96,230



100
%

$
90,460



100
%Cost of sales


32,445



34



28,201



31Gross profit


63,785



66



62,259



69Operating expenses


51,946



54



54,196



60Research & development


4,685



5



4,069



5Income from operations


7,154



7



3,994



4Interest and other income


502



1



417



Interest expense


117











Income before income taxes


7,539



8



4,411



4Provision for income taxes


2,612



3



1,333



1Net income

$
4,927



5
%

$
3,078



3
%  24




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##### Table of Contents



Net
    Sales
    Cost
    of Sales
    Gross
    Profit
  start-up
  Operating
    Expenses
          Research &
    Development
   25




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##### Table of Contents



Interest &
    Other Income
    Interest
    Expense
    Income
    Before Income Taxes
  year-over-year
  Provision
    for Income Tax Expense
    Net
    Income
   26




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##### Table of Contents



Results
    Of Operations For The Year Ended December 31, 2005 Compared
    To The Year Ended December 31, 2004
    Years Ended December 31,2005


2004Net sales

$
90,460



100
%

$
60,231



100
%Cost of sales


28,201



31



18,405



31Gross profit


62,259



69



41,826



69Operating expenses


54,196



60



31,862



53Research & development


4,069



5



1,887



3Income from operations


3,994



4



8,077



13Interest and other income


417







370



1Interest expense










40



Income before income taxes


4,411



4



8,407



14Provision for income taxes


1,333



1



3,450



6Net income

$
3,078



3
%

$
4,957



8
%   Net
    Sales
    Cost
    of Sales
    Gross
    Profit
    Operating
    Expenses
   27




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##### Table of Contents



Research
    and Development
    Interest &
    Other Income
    Interest
    Expense
    Income
    Before Income Taxes
  year-over-year
  Provision
    for Income Tax Expense
    Net
    Income
    Liquidity
    and Capital Resources
   28




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##### Table of Contents



build-up
       29




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##### Table of Contents



Contractual
    Obligations
    Contractual Cash ObligationsPayments Due by Period as of December 31, 2006Less Than


1-3


3-5


AfterTotal


1 Year


Years


Years


5 Years(In thousands of dollars)Long-Term Debt Obligations

$
0


$
0


$
0


$
0


$
0Capital Lease Obligations


0



0



0



0



0Operating Lease Obligations


687



274



315



98



0Purchase Obligations


4,125



4,125



0



0



0Other Long-Term Liabilities
    Reflected on the Companys Balance Sheet under GAAP


0



0



0



0



0Total

$
4,812


$
4,399


$
315


$
98


$
0   Recently
    Issued Accounting Standards
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees.
    Accounting for Uncertainty in Income Taxes Accounting for Income Taxes.
  Fair Value Measurements ,
 30




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##### Table of Contents



Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
    CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK
    FACTORS
  Forward
    Looking Statements
  Form 10-K,
  
    our belief that the reserve for litigation losses will be
    sufficient to resolve the remaining cases;
    our expectations regarding net sales and net income and our
    expectations for the second calendar quarter of 2007;
    our belief that growth in sales of the Cough products will occur;
    our belief that new advertising approaches and public relations
    efforts will continue to build brand awareness;
    our anticipation that we will continue to incur approximately
    $1.0 to $1.5 million in legal expense each quarter as a
    result of the Zicam Cold Remedy product liability and securities
    litigation in which we are engaged;
    our intention to vigorously defend the Zicam Cold Remedy product
    liability and securities litigation claims, our expectation that
    additional product liability lawsuits may be filed against us,
    and our belief that any liability resulting from these or other
    lawsuits, including any adverse publicity, could materially
    impact our financial results;
    our expectation that the trend of growth in sales in future
    periods will continue as we expand consumer awareness and
    acceptance of our entire Zicam brand of products, increase
    distribution, introduce new products, and avoid additional
    adverse publicity;
    our expectation regarding future net income, our belief that
    expenditures for advertising and research and development will
    vary by quarter throughout the year, and our expectation that
    advertising expenses will be heaviest in our first and fourth
    fiscal quarters;
    our expectation of the effect of recently issued accounting
    standards; 31




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##### Table of Contents




    our expectation that our mix of products sold will change due to
    seasonality and varying growth rates within our four market
    categories;
    our expectation of our 10 largest retailers adding new products;
    our expectation of continuing profitability in future years;
    our intention to review our product return reserve provision
    monthly and adjust the reserve amounts as actual product return
    experience continues to develop, and our expectation that a 3.5%
    sales returns allowance will be adequate for our Zicam products;
    our expectation of making income tax payments at our statutory
    rates in future years;
    our expectation that the average unit cost of goods sold and
    gross margin will continue to be affected by the relative mix of
    products sold;
    our expectation that our net income and operating expenses in
    future periods will vary largely in connection with the level of
    our advertising, research and development, and legal expenses;
    our expectation that research and development spending will be
    4% to 5% of annual net sales in subsequent years;
    our expectation that earnings in future periods will be
    significantly impacted by the seasonality of our sales, the
    severity of the cold season, the revenues and expenses
    associated with new products, and the timing and amount of
    advertising, research and development, and legal expenses;
    our belief that our existing capital resources and our credit
    line will be sufficient to fund our operations and capital
    requirements for the next 12 months;
    our expectation regarding reimbursement for legal expense from
    our insurance carriers;
    our having no plans to directly manufacture and store our
    products;
    our expectation that our manufacturers will have produced
    inventory available for sales of products through the
    2007-2008
    cough and cold season;
    our expectation of achieving a higher gross margin in the
    future; and
    our belief that moderate interest rate increases will not have a
    material adverse impact on our results of operations or
    financial position in the foreseeable future.    Form 10-K,
 32




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##### Table of Contents



Form 10-K Form 10-K Form 10-K
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Rules 13a-15 15d-15
 33




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Managements
    Annual Report on Internal Control Over Financial
    Reporting
  rules 13a-15(f) 15d-15(f)
            Form 10-K,
 34




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
    
      35




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##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION  Form 10-K Form 10-K
 PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K
  Form 10-K Form 8-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS   36




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##### Table of Contents



Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number ofNumber of





SecuritiesSecurities to be





RemainingIssued Upon





Available forExercise of


Weighted-Average


Future IssuanceOutstanding


Exercise Price


Under EquityOptions,


of Outstanding


Compensation PlansWarrants,


Options, Warrants,


(Excluding SecuritiesPlan Category

and Rights


and Rights


Reflected in Column (a))(a)


(b)


(c)Equity compensation plans approved
    by security holders


696,235


$
12.25



416,096Equity compensation plans not
    approved by security holders






N/A



N/ATotal


696,235


$
12.25



416,096   ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   37




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of
    Independent Registered Public Accounting Firm


39Consolidated
    Balance Sheets as of December 31, 2006 and 2005


40Consolidated
    Statements of Income for the years ended December 31, 2006,
    2005, and 2004


41Consolidated
    Statements of Changes in Stockholders Equity for the years
    ended December 31, 2006, 2005, and 2004


42Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005, 2004


43Notes to
    Consolidated Financial Statements


44  38




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control 
    Integrated Framework
  
      39




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 DECEMBER 31,
    2006 AND 2005
  2006


2005ASSETSCurrent Assets:Cash and cash equivalents

$
13,947,622


$
12,266,671Accounts receivable:Trade, net of allowance for
    doubtful accounts of $410,696 and $642,915


23,569,252



28,719,382Other receivable


304,775



1,234,886Insurance receivable


1,402,967



4,800,000Inventories


16,785,344



8,803,135Prepaid expenses


754,303



837,877Interest receivable


46,254



124,533Income tax receivable


1,370,277



Deferred tax asset


3,831,188



5,488,704Total Current Assets


62,011,982



62,275,188Property and Equipment, at cost:Office furniture and computer
    equipment


1,304,627



1,209,233Machine tooling and manufacturing
    equipment


5,203,526



616,645Laboratory furniture and equipment


134,889



39,194Leasehold improvements


318,078



178,7576,961,120



2,043,829Less accumulated depreciation


(1,434,078
)


(803,479
)Net Property and Equipment


5,527,042



1,240,350Other Assets:Deposits


205,463



1,008,309Other assets


82,770



57,963Restricted cash


500,000



5,000,000Debt issuance costs, net of
    accumulated amortization of $40,229 and $29,166


15,003



46,262Patents, net of accumulated
    amortization of $413,488 and $283,437


1,724,629



1,774,235Goodwill


15,039,836



15,039,836Total Other Assets


17,567,701



22,926,605Total Assets

$
85,106,725


$
86,442,143LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
15,314,105


$
8,741,651Accrued expenses


5,893,542



7,774,871Sales commission


817,435



2,600,467Sales returns and allowances


2,732,120



3,880,552Legal liability


1,171,500



13,245,000Accrued taxes






882,611Total Current Liabilities


25,928,702



37,125,152Deferred tax liability


1,090,578



1,207,356Total Liabilities


27,019,280



38,332,508Commitments and ContingenciesStockholders Equity:Preferred stock: $.001 par
    value, 2,000,000 shares authorized, none issued or
    outstanding






Common stock: $.001 par value,
    30,000,000 shares authorized, 9,947,752 and
    9,599,529 shares issued and outstanding


9,948



9,599Additional paid in capital


48,484,197



43,433,364Retained earnings


9,989,604



5,062,97658,483,749



48,505,939Less common stock held in treasury,
    at cost (53,800 and 53,800 shares)


(396,304
)


(396,304
)Total Stockholders Equity


58,087,445



48,109,635Total Liabilities and
    Stockholders Equity

$
85,106,725


$
86,442,143    40




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 FOR THE
    YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  2006


2005


2004Net sales

$
96,230,780


$
90,460,595


$
60,230,935Cost of sales


32,445,499



28,201,154



18,404,822Gross Profit


63,785,281



62,259,441



41,826,113Selling, general and
    administrative expenses


51,946,219



54,196,370



31,861,745Research and development


4,684,837



4,069,367



1,886,906Income From Operations


7,154,225



3,993,704



8,077,462Other Income (Expense):Interest and other income


501,845



417,724



369,412Interest expense


(116,639
)






(39,778
)Total Other Income


385,206



417,724



329,634Income Before Provision For Income
    Taxes


7,539,431



4,411,428



8,407,096Provision for income taxes


2,612,803



1,332,936



3,449,625Net Income

$
4,926,628


$
3,078,492


$
4,957,471Net Income Per Share of Common
    Stock:Basic:Weighted Average Number of Common
    Shares Outstanding


9,620,362



9,486,288



9,494,210Net Income Per Share of Common
    Stock

$
.51


$
.32


$
.52Diluted:Weighted Average Number of Common
    Shares Outstanding


9,965,786



9,769,922



9,580,765Net Income Per Share of Common
    Stock

$
.49


$
.32


$
.52    41




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE
    YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  Series A








Additional








TotalPreferred Stock


Common Stock


Paid in


Treasury


Retained


StockholdersShares


Amount


Shares


Amount


Capital


Stock


Earnings


EquityBalance at December 31, 2003





$




9,474,601


$
9,475


$
41,993,189


$
(239,223
)

$
(2,972,987
)

$
38,790,454Issuance of common stock upon
    exercise of stock options










47,334



47



503,892











503,939Repurchase shares of the
    Companys common stock (17,900 shares)






















(157,081
)






(157,081
)Forfeiture of restricted stock
    pursuant to the Companys restricted stock bonus program










(1,737
)


(2
)


(23,349
)










(23,351
)Income tax benefit from the
    exercise of stock options


















54,130











54,130Net income


























4,957,471



4,957,471Balance at December 31, 2004










9,520,198



9,520



42,527,862



(396,304
)


1,984,484



44,125,562Issuance of common stock upon
    exercise of stock options










23,134



23



184,106











184,129Issuance of restricted stock
    pursuant to the Companys restricted stock bonus program










56,197



56



641,052











641,108Income tax benefit from the
    exercise of stock options


















80,344











80,344Net income


























3,078,492



3,078,492Balance at December 31, 2005










9,599,529



9,599



43,433,364



(396,304
)


5,062,976



48,109,635Issuance of common stock upon
    exercise of stock options










244,965



245



2,479,671











2,479,916Issuance of restricted stock
    pursuant to the Companys restricted stock program










103,258



104



1,342,960











1,343,064Income tax benefit from the
    exercise of stock options


















1,077,402











1,077,402Stock option expense pursuant to
    SFAS 123R


















150,800











150,800Net income


























4,926,628



4,926,628Balance at December 31, 2006





$




9,947,752


$
9,948


$
48,484,197


$
(396,304
)

$
9,989,604


$
58,087,445     42




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 FOR THE
    YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  2006


2005


2004Cash Flows From Operating
    Activities:Net income

$
4,926,628


$
3,078,492


$
4,957,471Adjustments to reconcile net
    income to net cash provided (used) by operating activities:Depreciation


630,599



345,761



209,990Amortization


170,691



83,415



60,831Provision for bad debts


(232,219
)


87,675



(46,117
)Deferred income taxes


1,540,738



(88,142
)


3,122,634Common stock issued for
    compensation


2,571,266



641,108



(23,351
)Changes in assets and liabilities:Accounts receivable


6,312,460



(17,655,917
)


(868,398
)Insurance receivable


3,397,033



(4,800,000
)


Interest receivable


78,279



(66,875
)


(57,658
)Income tax receivable


(1,370,277
)






Inventories


(7,982,209
)


(1,561,701
)


(3,973,830
)Prepaid expenses and other


58,767



(8,254
)


(271,796
)Accounts payable


6,572,454



4,042,335



(1,127,532
)Accrued expenses


(4,546,972
)


3,471,133



4,061,446Legal liability


(12,073,500
)


13,245,000



Sales returns and allowances


(1,148,432
)


1,275,292



870,692Net Cash Provided (Used) By
    Operating Activities


(1,094,694
)


2,089,322



6,914,382Cash Flows From Investing
    Activities:Capital expenditures


(4,997,736
)


(1,867,296
)


(241,875
)Deposits and other


802,846



(788,119
)


(7,493
)Restricted cash


4,500,000







5,000,000Net Cash Provided (Used) By
    Investing Activities


305,110



(2,655,415
)


(5,249,368
)Cash Flows From Financing
    Activities:Proceeds from borrowing


4,000,000







2,000,000Principal payments on notes payable


(4,000,000
)






(2,000,000
)Debt issuance costs


(9,381
)


(45,851
)


Issuance of common stock


2,479,916



184,129



503,939Purchase of treasury stock










(157,081
)Net Cash Provided By Financing
    Activities


2,470,535



138,278



346,858Net Increase (Decrease) in Cash
    and Cash Equivalents


1,680,951



(427,815
)


2,011,872Cash and Cash Equivalents at
    Beginning of Year


12,266,671



12,694,486



10,682,614Cash and Cash Equivalents at End
    of Year

$
13,947,622


$
12,266,671


$
12,694,486Supplemental Disclosure of Cash
    Flow Information:Cash paid during the year for:Interest

$
115,222


$



$
39,778Income taxes


2,021,243



814,164



356,739    43




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization
      Principles
    of Consolidation
    Cash
    and Cash Equivalents
    Accounts
    Receivable and Allowance for Doubtful Accounts
    Inventories
  first-in,
 44




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Marketable
    Securities
    Property
    and Equipment
    Useful LifeClassification

in YearsMachine tooling and manufacturing
    equipment


3-7Office furniture and computer
    equipment


3-5Leasehold improvements


2-3     Long-Lived
    Assets
      Intangible
    Assets
       45




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Revenue
    Recognition
    Stock-Based
    Compensation
  Share-Based
    Payment Accounting
    for Stock-Based Compensation, Accounting for Stock
    Issued to Employees.
   46




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004Net income applicable to common
    shareholders, as reported

$
3,078,492


$
4,957,471Add stock-based employee
    compensation expense included in net earnings, net of tax






Less stock-based employee
    compensation expense determined under fair value based methods
    for all awards, net of related tax effects


1,546,183



1,475,313Proforma Net Income

$
1,532,309


$
3,482,158Net income per share of common
    stock:Basic:As reported

$
0.32


$
0.52Pro forma

$
0.16


$
0.37DilutedAs reported

$
0.32


$
0.52Pro forma

$
0.16


$
0.36     2005

2004Risk-free interest rate

3.66%

3.25%Expected life

5.00 years

4.95 yearsExpected volatility

61.40%

66.44%Expected dividend yield

0%

0%   Comprehensive
    Income
    Shipping
    and Handling Costs
    Income
    Taxes
    Research
    and Development
   47




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Advertising
    Net
    Income Per Share of Common Stock
      Year Ended December 31,2006


2005


2004Net income applicable to common
    shareholders

$
4,926,628


$
3,078,492


$
4,957,471Weighted average common shares
    outstanding  Basic


9,620,362



9,486,288



9,494,210Dilutive securities


345,424



283,634



86,555Weighted average common shares
    outstanding  Diluted


9,965,786



9,769,922



9,580,765Net Income per common share:Basic

$
0.51


$
0.32


$
0.52Diluted

$
0.49


$
0.32


$
0.52   Estimates
    Recently
    Issued Accounting Standards
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes.
  Fair Value Measurements,
 48




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
    Reclassifications
    2.
    Inventories    2006


2005Raw materials and packaging

$
5,209,623


$
3,520,013Finished goods


11,575,721



5,283,122Total

$
16,785,344


$
8,803,135   3.
    Current
    Notes Payable   49




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Reserves    AdditionsBalance at


Charged to





Balance atBeginning of


Costs and





End ofDescription

Period


Expenses


Deductions


PeriodReserves for Sales Returns and
    AllowancesDecember 31, 2004

$
1,734,568


$
8,134,044


$
7,263,352


$
2,605,260December 31, 2005


2,605,260



11,796,458



10,521,166



3,880,552December 31, 2006


3,880,552



14,871,924



16,020,356



2,732,120   AdditionsBalance at


Charged to





Balance atBeginning of


Costs and





End ofDescription

Period


Expenses


Deductions


PeriodAllowance for Doubtful AccountsDecember 31, 2004

$
601,357


$
87,934


$
134,051


$
555,240December 31, 2005


555,240



92,568



4,893



642,915December 31, 2006


642,915



97,286



329,505



410,696   5.
    Income
    Taxes    2006


2005


2004Current:Federal

$
881,511


$
1,107,248


$
204,834State


190,554



394,137



124,157Total


1,072,065



1,501,385



326,991Deferred:Federal


1,137,312



131,506



2,779,584State


403,426



36,943



343,050Total


1,540,738



168,449



3,122,634Total Provision For Income Taxes

$
2,612,803


$
1,332,936


$
3,449,625  50




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2006


2005


2004Federal statutory rate


34
%


34
%


34
%State income taxes, net of federal
    benefits


5



5



5Current year tax credits


(2
)


(11
)


Charitable contributions


(3
)






Valuation allowance










Other






2



2Net operating loss carryover










Total


34
%


30
%


41
%     2006


2005Current deferred tax assetsNet operating loss carryforward

$
1,611,100


$
Reserves and accrued expenses


1,409,300



1,779,400Charitable contributions
    carryforward


463,000



Accrued legal liabilities


451,000



5,099,300Reserve for bad debts


158,100



247,500Research and development credit


140,000



Inventory valuation reserve


138,788



210,504Total current deferred tax assets


4,371,288



7,336,704Current deferred tax liabilitiesAccrued receivable


(540,100
)


(1,848,000
)Net current deferred tax assets


3,831,188



5,488,704Non-current deferred tax assetsRestricted stock compensation


954,300



460,644Other


16,322



Total non-current deferred tax
    assets


970,622



460,644Non-current deferred tax
    liabilitiesAmortization of intangible assets


(1,979,700
)


(1,590,900
)Depreciation


(81,500
)


(77,100
)Total non-current deferred tax
    liabilities


(2,061,200
)


(1,668,000
)Net non-current deferred tax
    liabilities

$
(1,090,578
)

$
(1,207,356
)      51




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  paid-in-capital
    6.
    Preferred
    Stock    7.
    Stockholders
    Equity  Stock
    Repurchase Plan
    Shareholder
    Rights Plan
     52




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Directors
    Restricted Stock Purchase Program
    8.
    Stock
    Options and Warrants  1995
    Stock Option Plan
      WeightedNumber of


AverageShares


Exercise PriceOptions outstanding at
    December 31, 2003


153,000


$
9.73Granted






Exercised


(20,000
)


8.38Cancelled


(58,000
)


12.67Options outstanding at
    December 31, 2004


75,000



7.83Granted






Exercised


(22,000
)


7.83Cancelled






Options outstanding at
    December 31, 2005


53,000



7.83Granted






Exercised


(53,000
)


7.83Cancelled






Options outstanding at
    December 31, 2006





$
  53




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2001
    Long-Term Incentive Plan
      WeightedNumber of


AverageShares


Exercise PriceOptions outstanding at
    December 31, 2003


292,800


$
8.39Granted


440,000



14.68Exercised


(12,334
)


9.04Cancelled


(14,066
)


12.15Options outstanding at
    December 31, 2004


706,400



12.22Granted


188,000



10.98Exercised


(1,134
)


10.47Cancelled


(5,066
)


17.78Options outstanding at
    December 31, 2005


888,200



11.93Granted






Exercised


(191,965
)


10.76Cancelled






Options outstanding at
    December 31, 2006


696,235


$
12.25Exercisable at December 31,
    2006


649,566


$
12.55Vested or expected to vest


681,234


$
12.34     WeightedAverageShares


Fair ValueOutstanding at January 1, 2006


135,005


$
21.00Granted






Vested


(88,336
)

$
17.06Forfeited/Canceled






Outstanding at December 31,
    2006


46,669


$
15.93      54




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         WeightedAverageShares


Fair ValueOutstanding at January 1, 2006


75,677


$
21.00Granted


103,691


$
21.51Vested


(11,500
)

$
19.79Forfeited / Canceled






Outstanding at December 31,
    2006


167,868


$
15.93         Other
    Stock Option Information
    Options Outstanding


Options ExercisableWeightedAverage


WeightedRemaining


Average





WeightedRange of

Number


Contractual


Exercise


Number


AverageExercise Prices

Outstanding


Life in Years


Price


Exercisable


Exercise Price$ 7.00 - $10.00


283,235



3.39


$
8.36



236,566


$
8.41$10.00 - $13.00


181,000



4.89


$
11.07



181,000


$
11.07$17.00 - $19.00


232,000



4.04


$
17.92



232,000


$
17.92   Compensation
    Expense
  Share-Based Payment Accounting for Stock-Based
    Compensation, Accounting for Stock Issued to Employees.
   55




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Financing
    Warrants
    9.
    Commitments
    and Contingencies  Leases
    Year EndingDecember 31,

Leases2007

$
273,9082008


106,7222009


104,8252010


103,7182011


78,340Total Minimum Lease Payments

$
667,513     Officer
    Indemnification
   56




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Litigation
      Product
    Liability
          Litigation
    Reserves
   57




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Securities
    Litigation Matters
  No. CV04-0886
  10.
    Employee
    Benefit Plan    11.
    Concentration
    of Credit Risk and Major Customers   58




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            2006


2005


2004Wal-Mart


26.3
%


20.5
%


20.3
%Walgreens


12.6
%


14.6
%


12.9
%CVS


12.3
%


*



11.7
%     *
    
    Less than 10%  12.
    Fair
    Value of Financial Instruments    2006


2005Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair ValueFinancial AssetsCash and cash equivalents

$
13,947,622


$
13,947,622


$
12,266,671


$
12,266,671Restricted cash

$
500,000


$
500,000


$
5,000,000


$
5,000,000Financial LiabilitiesLong-term debt














    59




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Selected
    Quarterly Financial Data (Unaudited)    Fiscal Year 2006 Quarters1st


2nd


3rd


4thNet sales

$
17,675,959


$
8,206,133


$
34,121,357


$
36,227,332Gross profit


11,810,748



5,801,426



22,967,447



23,205,681Net income (loss) from operations


(8,606
)


(3,640,175
)


11,908,178



(1,105,172
)Net income (loss) per basic share


0.01



(0.19
)


0.74



(0.05
)Net income (loss) per diluted share


0.01



(0.19
)


0.72



(0.05
)Net income (loss)


96,760



(1,857,796
)


7,150,370



(462,705
)   Fiscal Year 2005 Quarters1st


2nd


3rd


4thNet sales

$
14,981,590


$
6,254,669


$
25,202,624


$
44,021,712Gross profit


10,744,156



4,569,849



17,049,046



29,896,390Net income (loss) from operations


1,421,081



(925,243
)


9,257,141



(5,759,275
)Net income (loss) per basic share


0.09



(0.05
)


0.59



(0.31
)Net income (loss) per diluted share


0.09



(0.05
)


0.58



(0.31
)Net income (loss)


895,558



(504,643
)


5,639,915



(2,952,338
)   Financial Statement Schedules
  Form 10-K.
  Exhibits
  Exhibit No.

Title3
.1

Certificate of Incorporation and
    Amendments thereto of the Registrant (1)3
.2

Bylaws of the Registrant (12)4
.1

Rights Agreement dated as of
    July 22, 2002 by and between the Registrant and Corporate
    Stock Transfer, Inc. (2)10
.1

Confidentiality and
    Non-Competition Agreement among the Registrant, Gel Tech, L.L.C.
    (now Zicam, LLC), Zensano, Inc., Zengen, Inc. and certain other
    individuals (4)10
.2

*2001 Stock Incentive Plan (5)10
.2.1

*Matrixx Initiatives, Inc. 2001
    Long-Term Incentive Plan Grant of Incentive Stock Option (8)10
.2.2

*Matrixx Initiatives, Inc. 2001
    Long-Term Incentive Plan Restricted Stock Program
    Agreement (8)10
.2.3

First Amendment to the Matrixx
    Initiatives, Inc. 2001 Long-Term Incentive Plan Restricted Stock
    Program Agreements between the Registrant and Edward Walsh dated
    October 18, 2006 (14)10
.2.4

First Amendment to the Matrixx
    Initiatives, Inc. 2001 Long-Term Incentive Plan Restricted Stock
    Program Agreements between the Registrant and Edward Faber dated
    October 18, 2006 (14)10
.3

*Summary of Matrixx Initiatives,
    Inc. Director Restricted Stock Purchase Program (3)10
.4

* **Summary of Revised Director
    Compensation Structure for Non-Employee Directors10
.5

Manufacturing Agreement with
    BioZone Laboratories (7)10
.6

Manufacturing Agreement with
    Applied Laboratories, Inc. (9) 60




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Exhibit No.

Title10
.7

Amended and Restated Credit
    Agreement dated September 27, 2005 among the Registrant,
    Zicam, LLC and Comerica Bank (10)10
.7.1

Amended and Restated Secured
    Promissory Note dated September 27, 2005 among the
    Registrant, Zicam, LLC and Comerica Bank (10)10
.7.2

Amended and Restated Security
    Agreement dated September 27, 2005 among the Registrant,
    Zicam, LLC and Comerica Bank (10)10
.7.3

Security Agreement and Collateral
    Assignment of Limited Liability Company Interests among
    Registrant and Comerica Bank (10)10
.7.4

Amended and Restated Intellectual
    Property Security Agreement among Registrant and Comerica Bank
    (10)10
.7.5

Amended and Restated Intellectual
    Property Security Agreement dated September 27, 2005 among
    Zicam, LLC and Comerica Bank (10)10
.8

Form of Change of Control
    Agreement between Registrant and Registrants Executive
    Officers (16)10
.9

Asset Purchase Agreement dated as
    of October 31, 2005 by and among Viridian Packaging
    Solutions, LLC, Beutlich, L.P., Frederic J. Beutlich and Zicam
    Swab Products, LLC (11)10
.10

Settlement Agreement dated
    January 19, 2006 among the Registrant and the various
    plaintiffs in the consolidated products liability
    litigation (13)10
.11

Amended and Restated Employment
    Agreement dated October 18, 2006 among Registrant and Carl
    J. Johnson (14)10
.12

Insurance Agreement dated
    October 18, 2006 between the Registrant and William J.
    Hemelt (14)21


Subsidiaries of the
    Registrant (6)23
.1

**Consent of Mayer Hoffman McCann
    P.C., independent registered public accounting firm31
.1

**Certification of CEO Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

**Certification of CFO Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

***Certification of CEO pursuant
    to 18 U.S.C. Section 135032
.2

***Certification of CFO pursuant
    to 18 U.S.C. Section 135099
.1

Court order barring opposing party
    expert testimony for a lack of reliability and scientific basis
    in Hans, et al. vs. Matrixx Initiatives, Inc.,
    et al., filed September 13, 2004 in United States
    District Court for the Western District of Kentucky (15)99
.2

Court order barring opposing party
    expert testimony for a lack of reliability and scientific basis
    in Sutherland vs. Matrixx Initiatives, Inc., et al.,
    filed December 18, 2003 in United States District Court for
    the Northern District of Alabama, Middle Division (15)99
.3

Court order barring opposing party
    expert testimony for a lack of reliability and scientific basis
    in Benkwith et al. vs. Matrixx Initiatives, Inc.,
    et al., filed May 3, 2004 in United States
    District Court for the Northern District of Alabama, Middle
    Division (15)99
.4

Court order barring opposing party
    expert testimony for a lack of reliability and scientific basis
    in OHanlon, et al. vs. Matrixx Initiatives, Inc.,
    et al., filed October 29, 2004 in United States
    District Court for the Northern District of Alabama, Middle
    Division(15)99
.5

Press Release Reaffirming Safety
    of Intranasal Zicam-Cold Remedy Gel (15)     *
    
    Indicates management compensatory contract, plan or arrangement.**
    
    Filed with this
    Form 10-K.***
    
    Furnished with this
    Form 10-K.(1)
    
    Incorporated by reference to the Registrants Amendment
    No. 1 to Form
    8-A, file
    No. 000-27646,
    as filed on June 18, 2002. 61




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (2)
    
    Incorporated by reference to the Registrants registration
    statement on
    Form 8-A,
    filed July 23, 2002, file number
    000-27646.(3)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the quarter ended June 30, 2006, file number
    001-31404.(4)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed December 14, 2001, file number
    000-27646.(5)
    
    Incorporated by reference to the Registrants definitive
    proxy statement on Schedule 14A, filed April 8, 2005,
    file number
    001-31404.(6)
    
    Incorporated by reference to the Registrants Report on
    Form 10-K
    for the fiscal year ended December 31, 2003, file number
    001-31404.(7)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed October 28, 2004, file number
    001-31404.(8)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed February 11, 2005 file number
    001-31404.(9)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the quarter ended September 9, 2004 file number
    001-31404.(10)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed November 7, 2005, file number
    001-31404.(11)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed November 3, 2005, file number
    001-31404.(12)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed July 25, 2006.(13)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed January 19, 2006, file number
    001-31404.(14)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the period ending September 30, 2006, file number
    001-31404.(15)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed January 26, 2007, file number
    001-31404.(16)
    
    Incorporated by reference to the Registrants Report on
    Form 10-K
    for the period ending December 31, 2005, file number
    001-31404. 62




---



##### Table of Contents



SIGNATURES      By:
    /s/  Carl
    J. Johnson       Signature

Title

Date/s/  Edward
    E. FaberEdward
    E. Faber

Chairman of the Board of Directors

March 14, 2007/s/  Carl
    J. JohnsonCarl
    J. Johnson

President, Chief Executive Officer
    and Director

March 14, 2007/s/  William
    C. EganWilliam
    C. Egan

Director

March 14, 2007/s/  Edward
    J. WalshEdward
    J. Walsh

Director

March 14, 2007/s/  L.
    White
    Matthews, IIIL.
    White Matthews, III

Director

March 14, 2007/s/  Michael
    A. ZeherMichael
    A. Zeher

Director

March 14, 2007/s/  Samuel
    C. CowleySamuel
    C. Cowley

Director

March 14, 2007/s/  John
    M. ClaytonJohn
    M. Clayton

Director

March 14, 2007/s/  Lori
    BushLori
    Bush

Director

March 14, 2007/s/  William
    J. HemeltWilliam
    J. Hemelt

Executive Vice President,
    Chief Financial Officer
    (Principal Financial Officer & Principal Accounting
    Officer), and Treasurer

March 14, 2007  63




---



##### Table of Contents



Exhibit Index
  Exhibit No.

Title10
.4

**Summary of Revised
    Director Compensation Structure for Non-Employee Directors23
.1

**Consent of Mayer Hoffman
    McCann P.C., independent registered public accounting firm31
.1

**Certification of CEO
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231
.2

**Certification of CFO
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
.1

***Certification of CEO pursuant
    to 18 U.S.C. Section 135032
.2

***Certification of CFO pursuant
    to 18 U.S.C. Section 1350     **
    
    Filed with this
    Form 10-K.***
    
    Furnished with this
    Form 10-K. 64