##### 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 March
    31, 2009oro

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934   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 Incorporation or Organization)

(I.R.S. Employer
    Identification No.)  8515 E. Anderson Drive
 Scottsdale, AZ 85255
 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-T o o
  Regulation S-K, Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filero
    (Do not check if a smaller reporting company)

Smaller reporting company o   Rule 12b-2 o þ




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##### Table of Contents





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.
 2




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##### 



TABLE OF
    CONTENTS
   
 PagePART IItem 1.

Business


4Item 1A.

Risk Factors


10Item 1B.

Unresolved Staff Comments


16Item 2.

Properties


16Item 3.

Legal Proceedings


16Item 4.

Submission of Matters to a Vote of Security Holders


21Supplemental Item. Executive Officers of Matrixx


21PART IIItem 5.

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


22Item 6.

Selected Financial Data


25Item 7.

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


25Item 7A.

Quantitative and Qualitative Disclosures about
    Market Risk


42Item 8.

Financial Statements and Supplementary Data


43Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


43Item 9A.

Controls and Procedures


43Item 9B.

Other Information


45PART IIIItem 10.

Directors, Executive Officers, and Corporate
    Governance


45Item 11.

Executive Compensation


45Item 12.

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


45Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


46Item 14.

Principal Accounting Fees and Services


46PART IVItem 15.

Exhibits and Financial Statement Schedules


47SIGNATURES


74EX-21EX-23.1EX-31.1EX-32.1   3




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  Introduction
  over-the-counter and/or ® ® ® ®
    over-the-counter
    Access to
    Our Filings with the Securities and Exchange
    Commission
  Form 10-K, Form 10-Q, Form 8-K,
  (602) 385-8888.
  Markets
    and Company Products
  and/or sub-segment
 4




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##### Table of Contents



12 Months Ended





12 Months Ended





12 Months EndedProduct Class

March 31, 2009


%


March 31, 2008


%


December 31, 2006


%Cold Remedy

$
79,040,667



71
%

$
68,225,508



68
%

$
69,046,345



72
%Allergy/Sinus


21,889,667



20
%


17,325,720



17
%


15,468,683



16
%Cough & Multi-Symptom


7,306,827



6
%


15,068,495



15
%


11,715,752



12
%Other Cough/Cold


2,192,124



2
%


0



0
%


0



0
%Canada


1,053,546



1
%


0



0
%


0



0
%Antacid


147,356



0
%


352,661



0
%


0



0
%Total Net Sales

$
111,630,188



100
%

$
100,972,384



100
%

$
96,230,780



100
%   Cold
    Remedy
  word-of-mouth
    ®
  Allergy/Sinus
   5




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##### Table of Contents



Cough
    and Multi-Symptom
      Other
    Cough/Cold
  2008 2009
  tm
  Antacid
    Business
    Strategy
  over-the-counter ®
  Expanding Marketing Efforts for Existing and New
    Products:
  Pursuing Additional Delivery Systems and Expansion into New
    OTC Categories:
 6




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over-the-counter and/or
  Customers
  out-of-date,
    Manufacturing
    and Distribution
      tm ®
 7




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##### Table of Contents



Research
    and Development
    FDA, FTC
    and Other Government Regulation
    ®
  ®
   8




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##### Table of Contents



Environmental
    Matters
    Trademarks,
    Trade Names, and Proprietary Rights
  ® tm ® tm tm ® ® ® ® ® tm ® tm ® tm ® ® tm ® ® ® ® ® ® ® ® ® ® ® ® ®
  Employees
   9




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##### Table of Contents



Seasonality;
    Change of Fiscal Year
      Backlog
    Competition
  over-the-counter
  and/or 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.
   10




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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
    face increasing competition from lower-priced, private label and
    branded
    over-the-counter
    products.
  and/or over-the-counter
    We may
    continue to incur significant costs resulting from product
    liability claims or securities litigation.
   11




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Because
    a significant portion of our business depends 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.
  Wal-Mart,
  Our
    entry into international operations exposes us to numerous
    risks.
    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, adverse publicity, and
    regulatory changes.
  over-the-counter
  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; 12




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
    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
    proprietary rights held by third parties may 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 or require us to recall 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.
   13




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Under
    our current business model, we do not have manufacturing
    capabilities of our own.
    We may
    pursue strategic acquisitions of technologies, products, and/or
    brands, which involve a variety of costs, and we may not realize
    the anticipated benefits of such acquisitions.
    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.
   14




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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.    The
    price of our stock may be volatile.
    We
    have agreed to indemnify our officers and directors from
    liability.
   15




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##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES  month-to-month
  ITEM 3.
    LEGAL
    PROCEEDINGS  Litigation
      Product
    Liability Matters
  General.
      
    Rulings by ten different federal courts and one state court that
    the testimony of the plaintiffs experts lacks reliability
    and a sufficient scientific basis for admission into evidence
    (See Favorable Court Rulings Excluding Unreliable Expert
    Testimony below);
    The Companys settlement of the Arizona consolidated
    litigation in 2006 (see Settlement of Arizona Consolidated
    Litigation below);
    A unanimous jury trial verdict in the Companys favor in a
    2008 California court proceeding in the only product liability
    lawsuit against the Company that has gone to trial;
    The Companys reluctance to settle individual claims unless
    the settlement involves no or immaterial payments from the
    Company; and 16




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##### Table of Contents




    The Companys refusal to consider settlement offers for
    individual claims involving any of the Companys current
    products  instead only entertaining settlement
    discussions as to settle claims relating to the single hole pump
    product that received false, adverse publicity and which was
    last sold by the Company in 2005, with the shelf life expiring
    in 2008 (since 2005, our Zicam Cold Remedy nasal gel has been
    delivered only through a multi-hole showerhead
    bottle or through nasal gel swabs).  Litigation Expense.
  Favorable Federal Court Rulings Excluding Unreliable Expert
    Testimony.
  Active Pending Cases as of May 30, 2009 (Federal
    Courts).
  Date Filed

United States District Court

Named PlaintiffJuly 12, 2007

Eastern District of Washington

BallewFebruary 29, 2008

Middle District of Louisiana

CarterOctober 16, 2008

North District of Georgia

SmithJanuary 7, 2009

Eastern District of Texas

BrandonFebruary 11, 2009

Western District of New York

DiGiulioFebruary 23, 2009

Eastern District of Tennessee

Newman  17




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##### Table of Contents



Active Pending Cases as of May 30, 2009 (State
    Courts).
  Date Filed

Court

Named PlaintiffApril 14, 2004

Florida Fourth District Court of Appeals

HoodJanuary 13, 2005

Fresno County, California

CashNovember 3, 2006

Maricopa County, Arizona

PooleOctober 31, 2007

Maricopa County, Arizona

MedelSeptember 19, 2008

Maricopa County, Arizona

BrooksNovember 11, 2008

Maricopa County, Arizona

McGillFebruary 10, 2009

Cook County, Illinois

ColemanMay 14, 2009

Maricopa County, Arizona

Howes     Cases Dismissed Subsequent to December 31, 2008 (Federal
    Courts).
  Date Filed

United States District Court

Named Plaintiff

Date DismissedJune 30, 2008

Northern District of Indiana

Thompson

April 29, 2009May 16, 2007

Western District of Tennessee

Rose

March 31, 2009March 1, 2007

Middle District, Florida

Evans

February 18, 2009   Cases Dismissed Subsequent to December 31, 2008 (State
    Courts).
  Date Filed

Court

Named Plaintiff

Date DismissedSeptember 8, 2008

Superior Court of Morgan County, Alabama

Bell

January 9, 2009   Settlement of Arizona Consolidated
    Litigation.
  Settlement with Certain Potential
    Claimants.
 18




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##### Table of Contents



Potential Claimants.
    Product
    Liability Litigation Reserves
    Product
    Recall
  tm ®
  No. 2:08-CV-01615-
 19




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##### Table of Contents



No. 1:08-CV-00873-JJF
    Intellectual
    Property Protection
    ®
  Securities
    Litigation Matters
  No. CV04-0886 No. 2:04-CV-886,
 20




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##### Table of Contents



ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Executive
    Officers of Matrixx
    William
    J. Hemelt, 55, Acting President, Chief Operating Officer and
    Chief Financial Officer
  Mr. Hemelt
  Timothy
    L. Clarot, 54, Vice President of Research &
    Development
  Mr. Clarot
  Timothy
    J. Connors, 42, Vice President of Marketing
  Mr. Connors
  Samuel
    Cowley, 49, Executive Vice President, Business Development,
    General Counsel and Secretary
  Mr. Cowley
 21




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##### Table of Contents



James
    A. Marini, 47, Vice President of Sales
  Mr. Marini
 PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Market PriceQuarter Ended

High


LowFiscal Year 2008First Quarter

June 30, 2007

$
21.07


$
15.89Second Quarter

September 30, 2007

$
21.50


$
17.83Third Quarter

December 31, 2007

$
20.43


$
13.78Fourth Quarter

March 31, 2008

$
16.50


$
10.17Fiscal Year 2009First Quarter

June 30, 2008

$
17.20


$
13.22Second Quarter

September 30, 2008

$
18.98


$
14.61Third Quarter

December 31, 2008

$
18.38


$
14.01Fourth Quarter

March 31, 2009

$
19.50


$
13.35     Dividend
    Policy
   22




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##### Table of Contents



Stock
    Performance Graph
    
  PERFORMANCE
    TABLE
  Date3/31/2004


3/31/2005


3/31/2006


3/31/2007


3/31/2008


3/31/2009Matrixx


100.00



126.05



259.42



180.16



162.31



181.82Nasdaq


100.00



100.68



118.72



123.15



114.86



62.23Russell 2000 Growth


100.00



100.87



128.95



130.97



119.26



75.90    23




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##### Table of Contents



Issuer
    Purchases of Equity Securities
    Issuer
    Purchases of Equity Securities
  Total Number ofShares Purchased as


Maximum Number ofTotal Number





Part of Publicly


Shares that May Yet beof Shares


Average Price


Announced Plans or


Purchased Under thePeriod

Purchased(1)


Paid per Share


Programs


Plans or Programs1/01/09-1/31/09


30,800


$
16.85



30,800



969,2002/01/09-2/28/09


48,515


$
17.92



65,471



934,5293/1/09-3/31/09


107,335


$
16.57



153,848



846,152Total


186,650


$
16.97



153,848



846,152     (1)
    
    The Company may repurchase shares from employees and directors
    for payment of applicable tax withholding obligations on the
    vesting of restricted stock awards. Shares are repurchased by
    the Company pursuant to the applicable award agreements and not
    pursuant to publicly-announced share repurchase programs.
    32,802 shares were repurchased by the Company in the fourth
    quarter of fiscal 2009 to satisfy participants tax
    withholding obligations upon the vesting of restricted stock
    awards.     24




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Transition PeriodFiscal Year


Fiscal Year


Three Months


Fiscal Years EndedEnded March 31,


Ended March 31,


Ended March 31,


December 31,2009


2008


2007


2006


2005


2004(000s, except share data)Net sales

$
111,630


$
100,972


$
19,046


$
96,231


$
90,461


$
60,231Net income

$
13,864


$
10,428


$
1,709


$
4,927


$
3,078


$
4,957Net income per share of common stock  basic

$
1.50


$
1.07


$
0.18


$
0.51


$
0.32


$
0.52Net income per share of common stock  diluted

$
1.46


$
1.04


$
0.17


$
0.49


$
0.32


$
0.52Dividends per share

$



$



$



$



$



$
Shares outstanding at period end


9,274



10,175



10,079



9,948



9,600



9,520Total assets

$
91,360


$
78,149


$
71,151


$
85,107


$
86,442


$
60,134Long term obligations

$



$



$



$



$



$
Stockholders equity

$
73,077


$
65,552


$
60,435


$
58,087


$
48,110


$
44,126     ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Executive
    Summary
  over-the-counter and/or ®
 25




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##### Table of Contents



12 Months Ended





12 Months Ended





12 Months EndedMarch 31,





March 31,





December 31,Product Class

2009


%


2008


%


2006


%Cold Remedy

$
79,040,667



71
%

$
68,225,508



68
%

$
69,046,345



72
%Allergy/Sinus


21,889,667



20
%


17,325,720



17
%


15,468,683



16
%Cough & Multi-Symptom


7,306,827



6
%


15,068,495



15
%


11,715,752



12
%Other Cough/Cold


2,192,124



2
%


0



0
%


0



0
%Canada


1,053,546



1
%


0



0
%


0



0
%Antacid


147,356



0
%


352,661



0
%


0



0
%Total Net Sales

$
111,630,188



100
%

$
100,972,384



100
%

$
96,230,780



100
%             year-to-date
   26




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##### Table of Contents



2008 2009
  Seasonality
    and Quarterly Results
      Quarterly
    Results:
  Fiscal
    2009 Ended March 31, 2009
  Twelve$000s

Q1


% NS


Q2


% NS


Q3


% NS


Q4


% NS


Months


% NSNet Sales

$
8,508



100
%

$
33,632



100
%

$
38,702



100
%

$
30,788



100
%

$
111,630



100
%Marketing

$
2,922



34
%

$
3,709



11
%

$
13,209



34
%

$
11,420



37
%

$
31,260



28
%Sales Expense

$
650



8
%

$
1,238



4
%

$
1,025



3
%

$
1,512



5
%

$
4,423



4
%General & Administrative

$
4,147



49
%

$
3,134



9
%

$
4,257



11
%

$
3,799



12
%

$
15,338



14
%Legal  Product Liability

$
743



9
%

$
756



2
%

$
379



1
%

$
306



1
%

$
2,184



2
%Total Op Expenses

$
8,462



99
%

$
8,837



26
%

$
18,870



49
%

$
17,037



55
%

$
53,205



48
%R&D

$
610



7
%

$
1,143



3
%

$
797



2
%

$
684



2
%

$
3,235



3
%  27




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##### Table of Contents



Fiscal
    2008 Ended March 31, 2008
  Twelve$000s

Q1


% NS


Q2


% NS


Q3


% NS


Q4


% NS


Months


% NSNet Sales

$
8,573



100
%

$
28,576



100
%

$
30,802



100
%

$
33,022



100
%

$
100,972



100
%Marketing

$
2,143



25
%

$
3,450



12
%

$
16,177



53
%

$
7,353



22
%

$
29,123



29
%Sales Expense

$
742



9
%

$
872



3
%

$
1,022



3
%

$
1,202



4
%

$
3,838



4
%General & Administrative

$
2,542



30
%

$
3,089



11
%

$
2,400



8
%

$
2,974



9
%

$
11,005



11
%Legal  Product Liability

$
829



10
%

$
421



1
%

$
444



1
%

$
860



3
%

$
2,554



2
%Total Op Expenses

$
6,256



73
%

$
7,832



27
%

$
20,043



65
%

$
12,389



38
%

$
46,520



46
%R&D

$
1,453



17
%

$
995



3
%

$
875



3
%

$
785



2
%

$
4,108



4
%   Critical
    Accounting Policies and Estimates
        Intangible Assets and Goodwill:
  Income Taxes: Accounting for Income
    Taxes
  Revenue Recognition:
 28




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##### Table of Contents



Customer Sales Returns and Allowances:
  Accounts Receivable and Allowance for Doubtful Accounts:
  Legal Contingencies: Accounting for Contingencies,
  Results
    Of Operations For The Fiscal Year Ended March 31, 2009
    Compared To The Fiscal Year Ended March 31, 2008
    Year Ended March 31,2009


2008Net sales

$
111,630



100
%

$
100,972



100
%Cost of sales


32,876



29



34,532



34Gross profit


78,754



71



66,440



66Selling, general and administrative


53,205



48



46,520



46Research & development


3,235



3



4,108



4Income from operations


22,314



20



15,812



16Interest and other income


287







653



Interest expense














Income before income taxes


22,601



20



16,465



16Provision for income taxes


8,737



8



6,037



6Net income

$
13,864



12
%

$
10,428



10
%  29




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##### Table of Contents



Net
    Sales
    Cost
    of Sales
    Gross
    Profit
      Selling,
    General & Administrative (SG&A)
        Research
    and Development
  scale-up
 30




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##### Table of Contents



Interest &
    Other Income
    Income
    Before Income Taxes
    Provision
    for Income Taxes
    Net
    Income
    Results
    Of Operations For The Fiscal Year Ended March 31, 2008
    Compared To The Twelve Months Ended March 31,
    2007
    Year Ended March 31,2008


2007Net sales

$
100,972



100
%

$
97,601



100
%Cost of sales


34,532



34



33,628



34Gross profit


66,440



66



63,973



66Selling, general and administrative


46,520



46



49,984



51Research & development


4,108



4



4,696



5Income from operations


15,812



16



9,293



10Interest and other income


653







531



Interest expense










(117
)


Income before income taxes


16,465



16



9,707



10Provision for income taxes


6,037



6



3,168



3Net income

$
10,428



10
%

$
6,539



7
%  31




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##### Table of Contents



Net
    Sales
    Cost
    of Sales
    Gross
    Profit
    Selling,
    General & Administrative (SG&A)
       32




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##### Table of Contents



Research
    and Development
  scale-up
  Interest &
    Other Income
    Income
    Before Income Taxes
    Provision
    for Income Taxes
    Net
    Income
   33




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##### Table of Contents



Results
    Of Operations For The Three Months Ended March 31, 2007
    Compared To The Three Months Ended March 31, 2006
    Three Months Ended March 31,2007


2006Net sales

$
19,046



100
%

$
17,676



100
%Cost of sales


7,048



37



5,865



33Gross profit


11,998



63



11,811



67Selling, general and administrative


8,730



46



10,693



60Research & development


1,138



6



1,127



6Income (Loss) from operations


2,130



11



(9
)


Interest and other income


203



1



174



1Interest expense














Income before income taxes


2,333



12



165



1Provision for income taxes


624



3



68



Net income

$
1,709



9
%

$
97



1
%   Net
    Sales
    Cost
    of Sales
    Gross
    Profit
    Selling,
    General and Administrative Expenses
   34




---



##### Table of Contents



Research &
    Development
    Interest &
    Other Income
    Income
    Before Income Taxes
    Provision
    for Income Taxes
    Net
    Income
   35




---



##### Table of Contents



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



69Selling, general and administrative


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
%   Net
    Sales
    Cost
    of Sales
    Gross
    Profit
  start-up
  Selling,
    General and Administrative Expenses
   36




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##### Table of Contents



Research &
    Development
    Interest &
    Other Income
    Interest
    Expense
    Income
    Before Income Taxes
    Provision
    for Income Taxes
    Net
    Income
    Liquidity
    and Capital Resources
   37




---



##### Table of Contents



build-up
         38




---



##### Table of Contents



Contractual
    Obligations
    Contractual
    Cash Obligations
  Payments Due by Period as of March 31, 2009Less than








AfterTotal


1 Year


1-3 Years


3-5 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


1,899



445



879



575



0Purchase Obligations


2,758



2,758



0



0



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


0



0



0



0



0Total

$
4,657


$
3,203


$
879


$
575


$
0   Recently
    Issued Accounting Standards
    No. FAS 142-3, FAS 142-3). FAS 142-3 FAS 142-3 FAS 142-3 FAS 142-3.
   39




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##### Table of Contents



CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  Forward
    Looking Statements
  Form 10-K,
  
    our expectations regarding the costs of the product recalls and
    our belief that the reserve for recall costs will be sufficient;
    our expectations regarding returns of discontinued products and
    increasing distribution of Cold Sore Swabs;
    our expectation regarding continued expansion of the Zicam line
    of products;
    our expectation of introducing new products during the
    2009/2010
    cough/cold season;
    our expectations regarding equity compensation;
    our belief that our bad debt allowance is sufficient;
    our anticipation that we will incur approximately $300,000 to
    $500,000 in legal expense each quarter as a result of the Zicam
    Cold Remedy product liability litigation in which we are engaged;
    our belief that the reserve for litigation losses will be
    sufficient to resolve the remaining cases and our expectation of
    reviewing the adequacy of the same on a quarterly basis;
    our intention to vigorously defend the Zicam Cold Remedy product
    liability, securities and recall-related 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 intention to defend our intellectual property;
    our expectation that we will continue to file for patent
    protection and trademark protection for products that we develop
    and introduce in the future;
    our expectations regarding recovery of recall-related costs and
    associated litigation; 40




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##### Table of Contents




    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, and introduce new products;
    our expectations regarding the effect of recently issued
    accounting standards;
    our expectation of settlement agreements with certain potential
    claimants;
    Our anticipation of the variability of quarterly earnings;
    our expectations regarding environmental expenses;
    our expectation of a loss in the quarter ending June 30;
    our expectation that our mix of products sold will change due to
    seasonality and varying growth rates within the market groups;
    our intention to review our product return reserve provision
    monthly and adjust the reserve amounts as actual product return
    experience continues to develop;
    our expectation of making income tax payments at our statutory
    rates in future years;
    our expectation that SG&A expenses will vary largely in
    relation to the level of our advertising and legal expenditures;
    our expectations regarding the new swab manufacturing line;
    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 and changes in product sales price and costs that
    may occur;
    our expectation that our net income and operating expenses in
    future periods will vary largely in connection with the level of
    our sales, product introductions in new categories, advertising,
    research and development, and legal expenses;
    our expectation that research and development spending will be
    approximately 3% of annual net sales in subsequent years;
    our expectations regarding derivative instruments;
    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 expectation that advertising expense will be highest in our
    third and fourth fiscal quarters;
    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 expectations regarding product sales in the Canadian market
    through a Canadian distributor;
    our belief that our exposure to currency exchange risk is
    minimal;
    our expectations regarding our manufacturers ability to
    timely produce inventory adequate for sales of products;
    our expectations regarding the impact of the recalls on demand
    for Zicam products;
    our expectations that additional reimbursements from insurance
    carriers will be minimal;
    our expectations regarding dividends;
    our expectations regarding future borrowings; and
    our belief that moderate interest rate increases and the current
    economic uncertainties regarding available credit will not have
    a material adverse impact on our results of operations or
    financial position in the foreseeable future.   41




---



##### Table of Contents



Form 10-K,
  Form 10-K Form 10-K Form 10-K
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK       42




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  a)
    Evaluation
    of Disclosure Controls and Procedures  Rules 13a-15 15d-15
  b)
    Managements
    Annual Report on Internal Control Over Financial
    Reporting  rules 13a-15(f) 15d-15(f)
            Form 10-K,
 43




---



##### Table of Contents



REPORT ON
    INTERNAL CONTROL OVER FINANCIAL REPORTING OF INDEPENDENT
    REGISTERED PUBLIC ACCOUNTING FIRM
     Internal
    Control  Integrated Framework
        Internal Control  Integrated Framework
    
      44




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   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    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities


Weighted-Average


Equityto be Issued Upon


Exercise Price of


Compensation PlansExercise of


Outstanding


(Excluding SecuritiesPlan Category

Outstanding Options


Options


Reflected in Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


417,700


$
12.78



249,442Equity compensation plans not approved by security holders






N/A



N/ATotal


417,700


$
12.78



249,442  45




---



##### Table of Contents



ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   46




---



##### 



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a)1. Financial
    Statements
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 Financial Statements

PageReport of Independent Registered Public
    Accounting Firm


48Consolidated Balance Sheets as of March 31,
    2009 and 2008


49Consolidated Statements of Income for the years
    ended March 31, 2009 and 2008, three months ended
    March 31, 2007 and 2006 (Unaudited), and the year ended
    December 31, 2006


50Consolidated Statements of Changes in
    Stockholders Equity for the years ended March 31,
    2009 and 2008, three months ended March 31, 2007 and 2006,
    and the year ended December 31, 2006


51Consolidated Statements of Cash Flows for the
    years ended March 31, 2009 and 2008, three months ended
    March 31, 2007 and 2006 (Unaudited), and the year ended
    December 31, 2006


53Notes to Consolidated Financial Statements


54   47




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control  Integrated Framework
  
      48




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
    MARCH 31, 2009 AND 2008
  2009


2008ASSETSCurrent Assets:Cash and cash equivalents

$
25,144,088


$
27,932,672Certificates of deposit


14,870,717



Accounts receivable:Trade, net of allowance for doubtful accounts of $226,180 and
    $209,377


14,769,485



12,051,847Other receivable






39,363Insurance receivable


25,514



75,000Inventories


7,740,343



11,530,060Prepaid expenses


2,035,628



1,743,521Interest receivable


13,867



73,904Income tax receivable


1,316,102



Deferred tax asset


1,636,707



1,739,490Total Current Assets


67,552,451



55,185,857Property and Equipment, at cost:Office furniture and computer equipment


1,738,727



1,560,403Machine tooling and manufacturing equipment


4,581,866



5,330,728Laboratory furniture and equipment


484,215



437,267Leasehold improvements


544,211



514,6747,349,019



7,843,072Less accumulated depreciation


(3,219,081
)


(2,753,222
)Net Property and Equipment


4,129,938



5,089,850Other Assets:Deposits


2,913,855



379,205Other assets


30,789



110,034Restricted cash






500,000Debt issuance costs, net of accumulated amortization of $12,596
    and $5,398


1,799



8,997Patents, net of accumulated amortization of $725,956 and $582,670


1,691,505



1,834,791Goodwill


15,039,836



15,039,836Total Other Assets


19,677,784



17,872,863Total Assets

$
91,360,173


$
78,148,570LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
3,010,728


$
1,307,881Accrued expenses


9,665,310



4,433,841Sales commissions


404,899



533,384Sales returns and allowances


1,611,052



1,271,791Legal liability


785,000



1,100,000Accrued taxes






1,927,025Total Current Liabilities


15,476,989



10,573,922Deferred tax liability


2,806,001



2,022,427Total Liabilities


18,282,990



12,596,349Commitments 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, 9,273,949 and 10,175,412 shares issued


9,274



10,175Additional paid-in capital


37,077,316



50,960,220Retained earnings


35,990,593



22,126,37473,077,183



73,096,769Less common stock held in treasury, at cost (547,769 shares
    in 2008)






(7,544,548
)Total Stockholders Equity


73,077,183



65,552,221Total Liabilities and Stockholders Equity

$
91,360,173


$
78,148,570    49




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
    FOR THE YEARS ENDED MARCH 31, 2009 AND 2008, THE THREE MONTHS
    ENDED MARCH 31, 2007 AND 2006 (UNAUDITED),
    AND THE YEAR ENDED DECEMBER 31, 2006
  Year EndedYears Ended March 31,


Three Months Ended March 31,


December 31,2009


2008


2007


2006


2006(Unaudited)Net sales

$
111,630,188


$
100,972,384


$
19,045,754


$
17,675,959


$
96,230,780Cost of sales


32,875,667



34,532,099



7,047,655



5,865,211



32,445,499Gross Profit


78,754,521



66,440,285



11,998,099



11,810,748



63,785,281Selling, general and administrative expenses


53,205,196



46,520,327



8,730,650



10,692,507



51,946,219Research and development


3,234,874



4,108,354



1,137,671



1,126,846



4,684,837Income (Loss) From Operations


22,314,451



15,811,604



2,129,778



(8,605
)


7,154,225Other Income (Expense):Interest and other income


287,110



653,422



203,374



173,911



501,845Interest expense


















(116,639
)Total Other Income


287,110



653,422



203,374



173,911



385,206Income Before Provision For Income Taxes


22,601,561



16,465,026



2,333,152



165,306



7,539,431Provision for income taxes


8,737,342



6,037,487



623,921



68,546



2,612,803Net Income

$
13,864,219


$
10,427,539


$
1,709,231


$
96,760


$
4,926,628Net Income Per Share of Common Stock:Basic:Weighted Average Number of Common Shares Outstanding


9,268,471



9,704,579



9,749,162



9,565,963



9,620,362Net Income Per Share of Common Stock

$
1.50


$
1.07


$
0.18


$
0.01


$
0.51Diluted:Weighted Average Number of Common Shares Outstanding


9,505,360



10,001,307



10,031,008



10,027,666



9,965,786Net Income Per Share of Common Stock

$
1.46


$
1.04


$
0.17


$
0.01


$
0.49    50




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
    EQUITY
    FOR THE YEARS ENDED MARCH 31, 2009 AND 2008,
    THE THREE MONTHS ENDED MARCH 31, 2007 AND THE YEAR ENDED
    DECEMBER 31, 2006
  Series A








Additional








TotalPreferred Stock


Common Stock


Paid in


Treasury


Retained


StockholdersShares


Amount


Shares


Amount


Capital


Stock


Earnings


EquityBalance 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



58,087,445Issuance of common stock upon exercise of stock options










27,333



27



251,790











251,817Issuance of restricted stock pursuant to the Companys
    restricted stock program










104,232



104



287,819











287,923Income tax benefit from the exercise of stock options


















80,717











80,717Stock option expense pursuant to SFAS 123R


















17,693











17,693Net income


























1,709,231



1,709,231Balance at March 31, 2007










10,079,317



10,079



49,122,216



(396,304
)


11,698,835



60,434,826Issuance of common stock upon exercise of stock options





$




59,767


$
60


$
611,083


$



$



$
611,143Issuance of restricted stock pursuant to the Companys
    restricted stock program










58,760



58



1,294,506











1,294,564Purchase of treasury stock






















(7,463,393
)






(7,463,393
)Retirement of treasury stock










(22,432
)


(22
)


(315,127
)


315,149







Income tax benefit from the exercise of stock options


















231,401











231,401Stock option expense pursuant to SFAS 123R


















16,141











16,141Net income


























10,427,539



10,427,539Balance at March 31, 2008





$




10,175,412


$
10,175


$
50,960,220


$
(7,544,548
)

$
22,126,374


$
65,552,221Issuance of common stock upon exercise of stock options










131,434



132



1,401,403











1,401,535Issuance of restricted stock pursuant to the Companys
    restricted stock program










128,236



128



1,833,928











1,834,056Purchase of treasury stock






















(9,953,920
)






(9,953,920
)Retirement of treasury stock










(1,161,133
)


(1,161
)


(17,497,307
)


17,498,468







Income tax benefit from the exercise of stock options


















379,072











379,072Net income


























13,864,219



13,864,219Balance at March 31, 2009





$




9,273,949


$
9,274


$
37,077,316


$



$
35,990,593


$
73,077,183    51




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 FOR THE
    THREE MONTHS ENDED MARCH 31, 2006
  Series A








Additional








TotalPreferred Stock


Common Stock


Paid In


Treasury


Retained


StockholdersShares


Amount


Shares


Amount


Capital


Stock


Earnings


Equity(Unaudited)Balance 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










117,765



118



1,256,264











1,256,382Issuance of restricted stock pursuant to the Companys
    restricted stock program










100,188



100



923,871











923,971Stock option expense pursuant to SFAS 123R


















54,967











54,967Net income


























96,760



96,760Balance at March 31, 2006





$




9,817,482


$
9,817


$
45,668,466


$
(396,304
)

$
5,159,736


$
50,441,715    52




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
    FOR THE YEARS ENDED MARCH 31, 2009 AND 2008, THE THREE MONTHS
    ENDED
    MARCH 31, 2007 AND 2006 (UNAUDITED), AND THE YEAR ENDED DECEMBER
    31, 2006
  Three Months Ended


Year EndedYears Ended March 31,


March 31,


December 31,2009


2008


2007


2006


2006(Unaudited)Cash Flows From Operating ActivitiesNet income

$
13,864,219


$
10,427,539


$
1,709,231


$
96,760


$
4,926,628Adjustments to reconcile net income to net cash provided (used)
    by operating activities:Depreciation


1,279,457



1,057,299



491,520



138,429



630,599Amortization


150,484



149,130



40,346



48,448



170,691Provision for bad debts


16,803



(219,654
)


18,335



(277,443
)


(232,219
)Deferred income taxes


886,357



2,484,214



539,333



(9,348
)


1,540,738Common stock issued for compensation


2,213,128



1,542,106



386,333



978,938



2,571,266Changes in assets and liabilities:Accounts receivable


(2,734,441
)


(3,614,627
)


15,598,763



20,667,204



6,312,460Insurance receivable


49,486



2,125,000



(797,033
)






3,397,033Interest receivable


60,037



10,287



(37,937
)


(43,401
)


78,279Other receivable


39,363















Income tax receivable


(1,316,102
)


1,370,277











(1,370,277
)Inventories


3,789,717



3,928,868



1,326,416



(2,723,980
)


(7,982,209
)Prepaid expenses and other


(212,862
)


(1,186,014
)


169,532



81,644



58,767Accounts payable


1,702,847



(1,276,672
)


(12,729,552
)


(4,303,561
)


6,572,454Accrued expenses


3,175,959



3,359,230



(3,175,957
)


(3,459,475
)


(4,546,972
)Legal liability


(315,000
)


55,000



(126,500
)


(12,000,000
)


(12,073,500
)Sales returns and allowances


339,261



(1,119,499
)


(340,830
)


(1,206,721
)


(1,148,432
)Net Cash Provided (Used) By Operating Activities


22,988,713



19,092,484



3,072,000



(2,012,506
)


(1,094,694
)Cash Flows From Investing ActivitiesCapital expenditures


(319,545
)


(800,877
)


(310,750
)


(67,193
)


(4,997,736
)Purchase of certificates of deposit


(14,870,717
)














Deposits and other


(2,534,650
)


(436,586
)


(16,500
)


(38,974
)


802,846Restricted cash


500,000















4,500,000Net Cash Provided (Used) By Investing Activities


(17,224,912
)


(1,237,463
)


(327,250
)


(106,167
)


305,110Cash Flows From Financing Activities:Proceeds from borrowing


















4,000,000Principal payments on notes payable


















(4,000,000
)Debt issuance costs






(14,288
)






(2,939
)


(9,381
)Issuance of common stock


1,401,535



611,143



251,817



1,256,382



2,479,916Purchase of treasury stock


(9,953,920
)


(7,463,393
)










Net Cash Provided (Used) By Financing Activities


(8,552,385
)


(6,866,538
)


251,817



1,253,443



2,470,535Net Increase (Decrease) in Cash and Cash Equivalents


(2,788,544
)


10,988,483



2,996,567



(856,230
)


1,680,951Cash and Cash Equivalents at Beginning of Period


27,932,672



16,944,189



13,947,622



12,266,671



12,266,671Cash and Cash Equivalents at End of Period

$
25,144,088


$
27,932,672


$
16,944,189


$
11,401,441


$
13,947,622Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest

$



$



$



$



$
115,222Income taxes


10,462,000











860,790



2,021,243Supplemental Disclosure of Noncash Financing Activities:Retirement of treasury stock

$
17,498,468


$
315,149


$



$



$
    53




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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
    Change
    of Fiscal Year
    Cash
    and Cash Equivalents
    Accounts
    Receivable and Allowance for Doubtful Accounts
   54




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in,
  Property
    and Equipment
    Classification

Useful Life in YearsMachine tooling and manufacturing equipment


3-7Office furniture and computer equipment


3-5Laboratory furniture and equipment


3-5Leasehold improvements


2-5     Long-Lived
    Assets
      Intangible
    Assets
     55




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Revenue
    Recognition
      Stock-Based
    Compensation
   56




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Comprehensive
    Income
    Shipping
    and Handling Costs
    Income
    Taxes
    Research
    and Development
    Marketing
    and Advertising
    Net
    Income Per Share of Common Stock
   57




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##### Table of Contents



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


Year EndedYears Ended March 31,


March 31,


December 31,2009


2008


2007


2006


2006(Unaudited)Net income applicable to common shareholders

$
13,864,219


$
10,427,539


$
1,709,231


$
96,760


$
4,926,628Weighted average common shares outstanding  Basic


9,268,471



9,704,579



9,749,162



9,565,963



9,620,362Dilutive securities


236,889



296,728



281,846



461,703



345,424Weighted average common shares outstanding  Diluted


9,505,360



10,001,307



10,031,008



10,027,666



9,965,786Net Income per common share:Basic

$
1.50


$
1.07


$
0.18


$
.01


$
0.51Diluted

$
1.46


$
1.04


$
0.17


$
.01


$
0.49   Estimates
    Recently
    Issued Accounting Standards
  Business
    Combinations Accounting for Costs Associated
    with Exit or Disposal Activities,
  No. FAS 142-3, FAS 142-3). FAS 142-3
 58




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FAS 142-3 FAS 142-3 FAS 142-3.
    Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133
  The Hierarchy of Generally Accepted Accounting
    Principles The Meaning of Present
    Fairly in Conformity With Generally Accepted Accounting
    Principles The Meaning of
    Present Fairly in Conformity With Generally Accepted Accounting
    Principles.
  2.
    Inventories    March 31,


March 31,2009


2008Raw materials and packaging

$
2,618,261


$
3,887,906Finished goods


5,122,082



7,642,154Total

$
7,740,343


$
11,530,060   3.
    Current
    Notes Payable   59




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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, 2006

$
3,880,552


$
14,871,924


$
16,020,356


$
2,732,120March 31, 2007


2,732,120



2,909,400



3,250,230



2,391,290March 31, 2008


2,391,290



15,432,925



16,552,424



1,271,791March 31, 2009


1,271,791



15,148,362



14,809,101



1,611,052   AdditionsBalance at


Charged to





Balance atBeginning of


Costs and





End ofDescription

Period


Expenses


Deductions


PeriodAllowance for Doubtful AccountsDecember 31, 2006

$
642,915


$
97,286


$
329,505


$
410,696March 31, 2007


410,696



18,827



492



429,031March 31, 2008


429,031



20,676



240,330



209,377March 31, 2009


209,377



22,421



5,618



226,180  60




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Income
    Taxes    Year Ended March 31,


Year Ended March 31,


Three Months Ended March 31,


Year Ended Dec. 31,2009


2008


2007


2006


2006(Unaudited)Current:Federal

$
6,299,911


$
2,094,047


$
66,041


$
60,281


$
881,511State


1,355,043



390,167



18,548



8,265



190,554Total


7,654,954



2,484,214



84,589



68,546



1,072,065Deferred:Federal


883,745



3,013,768



504,901







1,137,312State


198,643



539,505



34,431







403,426Total


1,082,388



3,553,273



539,332







1,540,738Total Provision For Income Taxes

$
8,737,342


$
6,037,487


$
623,921


$
68,546


$
2,612,803     Year Ended March 31,


Three Months Ended March 31,


Year Ended Dec. 31,2009


2008


2007


2006


2006(Unaudited)Federal statutory rate


34
%


34
%


34
%


34
%


34
%State income taxes, net of federal benefits


5



5



5



5



5Current period tax credits


(1
)


(1
)










(2
)Charitable contributions






(1
)


(12
)






(3
)Other


1











2



Total


39
%


37
%


27
%


41
%


34
%  61




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008Current deferred tax assetsReserves and accrued expenses

$
998,107


$
718,800Accrued legal liabilities


302,200



423,500Reserve for bad debts


87,100



80,600Inventory valuation reserve


249,300



516,590Net current deferred tax assets

$
1,636,707


$
1,739,490Non-current deferred tax assetsRestricted stock compensation

$
629,200


$
828,500Total non-current deferred tax assets


629,200



828,500Non-current deferred tax liabilitiesAmortization of intangible assets


(2,847,501
)


(2,463,827
)Depreciation


(587,700
)


(387,100
)Total non-current deferred tax liabilities


(3,435,201
)


(2,850,927
)Net non-current deferred tax liabilities

$
(2,806,001
)

$
(2,022,427
)       paid-in-capital
    6.
    Preferred
    Stock   62




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Stockholders
    Equity  Stock
    Repurchase Plan
    Shareholder
    Rights Plan
     63




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Directors
    Restricted Stock Purchase Program
  he/she
  8.
    Stock
    Options  Long-Term
    Incentive Plan
      Weighted-AverageWeighted-


RemainingAverage


Contractual


Aggregate IntrinsicOptions

Shares


Exercise Price


Term


ValueOptions outstanding at March 31, 2008


549,134


$
12.27Granted


Exercised


(131,434
)


10.66Cancelled


Options outstanding at March 31, 2009


417,700


$
12.78



2.04 years


$
1,752,550Exercisable at March 31, 2009


417,700


$
12.78



2.04 years


$
1,752,550      64




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-Average Grant-Shares


Date Fair ValueNonvested at March 31, 2008


201,079


$
17.45Granted


183,743



14.52Vested


(139,553
)


18.08Forfeited


(55,508
)


15.24Nonvested at March 31, 2009


189,761


$
14.79         Other
    Stock Option Information
    Options Outstanding


Options ExercisableWeightedAverage


WeightedRemaining


Average





WeightedRange of

Number


Contractual Life


Exercise


Number


AverageExercise Prices

Outstanding


in Years


Price


Exercisable


Exercise Price$ 7.00 - $ 9.00


124,700



1.38


$
8.28



124,700


$
8.28$10.00 - $12.00


136,000



2.06


$
10.96



136,000


$
10.96$17.00 - $19.00


157,000



1.29


$
17.92



157,000


$
17.92   Compensation
    Expense
  
   65




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##### Table of Contents



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

Leases2010

$
447,0802011


432,8682012


445,8542013


459,2292014


115,649Total Minimum Lease Payments

$
1,900,680     Officer
    Indemnification
    Litigation
    Product
    Liability Matters
  General.
 66




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Litigation Expense.
  Settlement with Certain Potential
    Claimants.
  Potential Claimants.
    Product
    Liability Litigation Reserves
   67




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Product
    Recall
  tm ®
  No. 2:08-CV-01615-SRB
  No. 1:08-CV-00873-JJF
    Intellectual
    Property Protection
   68




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##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ® RAPID-MELT,
  Securities
    Litigation Matters
  No. CV04-0886 No. 2:04-CV-886,
  Third-Party
    Manufacturers
    10.
    Employee
    Benefit Plan    11.
    Concentration
    of Credit Risk and Major Customers   69




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##### Table of Contents



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


Year Ended


3 Months Ended


3 Months Ended


Year EndedMarch 31, 2009


March 31, 2008


March 31, 2007


March 31, 2006


December 31, 2006(Unaudited)Wal-Mart


21.6
%


23.5
%


12.1
%


29.9
%


26.3
%Walgreens


16.8
%


13.3
%


*



*



12.6
%CVS


11.8
%


11.8
%


11.9
%


*



12.3
%     *
    
    Less than 10%  12.
    Fair
    Value of Financial Instruments    March 31, 2009


March 31, 2008Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair ValueFiancial AssetsCash and cash equivalents

$
25,144,088


$
25,144,088


$
27,932,672


$
27,932,672Certificates of deposit

$
14,870,717


$
14,870,717


$



$
Restricted cash

$



$



$
500,000


$
500,000Financial LiabilitiesLong-term debt














    70




---



##### Table of Contents



MATRIXX
    INITIATIVES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Selected
    Quarterly Financial Data (Unaudited)    Fiscal Year 2009 Quarters Ended:June 30, 2008


Sept. 30, 2008


Dec. 31, 2008


March 31, 2009Net sales

$
8,508,044


$
33,631,906


$
38,702,412


$
30,787,826Gross profit


5,313,761



23,252,991



27,497,755



22,690,014Net income (loss) from operations


(3,758,660
)


13,272,899



7,831,223



4,968,989Net income (loss) per basic share


(0.24
)


0.89



0.52



0.34Net income (loss) per diluted share


(0.24
)


0.86



0.50



0.33Net income (loss)


(2,265,857
)


8,241,882



4,751,445



3,136,749   Fiscal Year 2008 Quarters Ended:June 30, 2007


Sept. 30, 2007


Dec. 31, 2007


March 31, 2008Net sales

$
8,573,428


$
28,575,748


$
30,801,567


$
33,021,641Gross profit


5,738,074



18,999,407



19,741,404



22,001,400Net income (loss) from operations


(1,971,194
)


10,172,715



(1,176,811
)


8,786,894Net income (loss) per basic share


(0.11
)


0.65



(0.07
)


0.60Net income (loss) per diluted share


(0.11
)


0.63



(0.07
)


0.59Net income (loss)


(1,062,906
)


6,409,228



(635,161
)


5,715,568  71




---



##### Table of Contents



(a)2. Financial
    Statement Schedules
  Form 10-K.
  (a)3. Exhibits
  Exhibit No.

Title3
.1

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

Bylaws of the Registrant(11)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

*Form of Matrixx Initiatives, Inc. 2001 Long-Term Incentive Plan
    Grant of Incentive Stock Option(7)10
.2.2

*Form of Matrixx Initiatives, Inc. 2001 Long-Term Incentive Plan
    Restricted Stock Program Agreement(14)10
.2.3

Form of Matrixx Initiatives, Inc. 2001 Long-Term Incentive Plan
    Restricted Stock Program Agreement (Directors)(13)10
.2.4

Amended and Restated 2001 Long-Term Incentive Plan Restricted
    Stock Program Agreement between the Registrant and Samuel C.
    Cowley(16)10
.3

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

Manufacturing Agreement with BioZone Laboratories(6)10
.5

Amended and Restated Credit Agreement dated September 27,
    2005 among the Registrant, Zicam, LLC and Comerica Bank(9)10
.6.1

Amendment Number One to Amended and Restated Credit Agreement
    and Waiver dated March 9, 2006 among the Registrant, Zicam
    LLC and Comerica Bank(15)10
.6.2

Amendment Number Two to Amended and Restated Credit Agreement
    dated June 27, 2007 among the Registrant, Zicam LLC and
    Comerica Bank(15)10
.6.3

Replacement Secured Promissory Note dated June 27, 2007
    among the Registrant, Zicam, LLC and Comerica Bank(15)10
.6.4

Amended and Restated Security Agreement dated September 27,
    2005 among the Registrant, Zicam, LLC and Comerica Bank(9)10
.6.5

Security Agreement and Collateral Assignment of Limited
    Liability Company Interests dated September 27, 2005
    between Registrant and Comerica Bank(9)10
.6.6

Amended and Restated Intellectual Property Security Agreement
    dated September 27, 2005 between Registrant and Comerica
    Bank(9)10
.6.7

Amended and Restated Intellectual Property Security Agreement
    dated September 27, 2005 between Zicam, LLC and Comerica
    Bank(9)10
.6.8

Security Agreement dated June 27, 2007 between Matrixx Oral
    Care, LLC and Comerica Bank(15)10
.7

Form of Amended and Restated Change of Control Agreement between
    Registrant and Registrants Executive Officers(16)10
.8

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(10)10
.9

Settlement Agreement dated January 19, 2006 among the
    Registrant and the various plaintiffs in the consolidated
    products liability litigation(12)10
.10

Separation Agreement dated December 8, 2008 among
    Registrant and Carl J. Johnson(17)10
.11

Settlement Agreement and Mutual Release dated December 8,
    2008 between the Registrant and Carl J. Johnson(17) 72




---



##### Table of Contents



Exhibit No.

Title10
.12

*Insurance Agreement dated October 18, 2006 between the
    Registrant and William J. Hemelt(13)10
.13

Summary of Chairmans Fee Arrangement, approved
    October 21, 2008(16)21


**Subsidiaries of the Registrant23
.1

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

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

***Certification of CEO and CFO pursuant to 18 U.S.C.
    Section 1350     *
    
    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,
    filed June 18, 2002,
    file number 000-27646.(2)
    
    Incorporated by reference to the Registrants registration
    statement on
    Form 8-A,
    filed July 23, 2002, file number
    000-31404.(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 8-K
    filed October 28, 2004,
    file  number 001-31404.(7)
    
    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 8-K
    filed November 7, 2005,
    file number 001-31404.(10)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed November 3, 2005,
    file number 001-31404.(11)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed July 25, 2006, file number
    001-31404.(12)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed January 19, 2006,
    file number 001-31404.(13)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the period ended September 30, 2006, file number
    001-31404.(14)
    
    Incorporated by reference to the Registrants Report on
    Form 8-K
    filed May 13, 2008, file number
    001-31404.(15)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the period ended June 30, 2007, file number
    001-31404.(16)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the period ended September 30, 2008, file number
    001-31404.(17)
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the period ended December 31, 2008, file number
    001-31404. 73




---



##### Table of Contents



SIGNATURES      By:
    /s/  William
    Hemelt   
    Signature

Title

Date/s/  William
    C. EganWilliam
    C. Egan

Chairman of the Board of Directors

June 5, 2009/s/  L.
    White Matthews, IIIL.
    White Matthews, III

Director

June 5, 2009/s/  Michael
    A. ZeherMichael
    A. Zeher

Director

June 5, 2009/s/  Samuel
    C. CowleySamuel
    C. Cowley

Director, Executive Vice President Business Development, General
    Counsel & Secretary

June 5, 2009/s/  John
    M. ClaytonJohn
    M. Clayton

Director

June 5, 2009/s/  Lori
    BushLori
    Bush

Director

June 5, 2009/s/  William
    J. HemeltWilliam
    J. Hemelt

Acting President, Chief Operating Officer and Chief Financial
    Officer (Principal Financial Officer & Principal
    Accounting Officer)

June 5, 2009