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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended June 30, 2009
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File number 001-31404
 Matrixx Initiatives, Inc.
  Delaware
(State or other jurisdiction 
of incorporation or organization)
    
    87-0482806
(I.R.S. Employer
Identification Number)
 8515 E. Anderson Drive
Scottsdale, AZ 85255
 (602) 385-8888
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



MATRIXX INITIATIVES, INC.
 FORM 10-Q
 INDEX
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Balance Sheets as of
June 30, 2009 (Unaudited) and March 31, 2009
    
    
    3Condensed Consolidated Statements of
Operations for the three months ended
June 30, 2009 and 2008 (Unaudited)
    
    
    4Condensed Consolidated Statements of
Cash Flows for the three months ended
June 30, 2009 and 2008 (Unaudited)
    
    
    5Notes to Condensed Consolidated
Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures
About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    28PART II
    
 OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Securities and Use of Proceeds
    
    
    28Item 6.
    
    Exhibits
    
    
    29SIGNATURES
    
    
    30EX-31.1EX-32.1
   2




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MATRIXX INITIATIVES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 June 30,
    
    March 31,2009
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    22,416,026
    
    
    $
    25,144,088Certificates of deposit
    
    
    14,985,694
    
    
    
    14,870,717Accounts receivable:Trade, net of allowance for doubtful accounts of $215,578 and $226,180
    
    
    6,257,641
    
    
    
    14,769,485Other receivable
    
    
    58,238
    
    
    
    Insurance receivable
    
    
    75,000
    
    
    
    25,514Inventories
    
    
    6,557,550
    
    
    
    7,740,343Prepaid expenses
    
    
    1,662,822
    
    
    
    2,035,628Interest receivable
    
    
    13,479
    
    
    
    13,867Income tax receivable
    
    
    1,581,581
    
    
    
    1,316,102Current deferred tax asset
    
    
    10,492,848
    
    
    
    1,636,707Total Current Assets
    
    
    64,100,879
    
    
    
    67,552,451Property and Equipment, at cost:Office furniture and computer equipment
    
    
    1,755,671
    
    
    
    1,738,727Machine tooling and manufacturing equipment
    
    
    4,531,181
    
    
    
    4,581,866Laboratory furniture and equipment
    
    
    484,215
    
    
    
    484,215Leasehold improvements
    
    
    549,879
    
    
    
    544,2117,320,946
    
    
    
    7,349,019Less accumulated depreciation
    
    
    (3,475,097
    )
    
    
    (3,219,081
    )Net Property and Equipment
    
    
    3,845,849
    
    
    
    4,129,938Other Assets:Deposits
    
    
    681,979
    
    
    
    2,913,855Other assets
    
    
    30,789
    
    
    
    30,789Debt issuance costs, net of accumulated amortization of $14,395 and $12,596
    
    
    
    
    
    
    1,799Patents, net of accumulated amortization of $761,778 and $725,956
    
    
    850,961
    
    
    
    1,691,505Non-current deferred tax asset
    
    
    2,935,621
    
    
    
    Goodwill
    
    
    
    
    
    
    15,039,836Total Other Assets
    
    
    4,499,350
    
    
    
    19,677,784Total Assets
    
    $
    72,446,078
    
    
    $
    91,360,173LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    3,851,427
    
    
    $
    3,010,728Accrued expenses
    
    
    14,241,792
    
    
    
    9,665,310Sales commissions
    
    
    142,322
    
    
    
    404,899Sales returns and allowances
    
    
    2,010,314
    
    
    
    1,611,052Legal liability
    
    
    765,000
    
    
    
    785,000Total Current Liabilities
    
    
    21,010,855
    
    
    
    15,476,989Deferred tax liability
    
    
    
    
    
    
    2,806,001Total Liabilities
    
    
    21,010,855
    
    
    
    18,282,990Commitments 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, 9,455,620 and 9,273,949 shares issued
    
    
    9,455
    
    
    
    9,274Additional paid-in capital
    
    
    38,267,427
    
    
    
    37,077,316Retained earnings
    
    
    13,158,341
    
    
    
    35,990,593Total Stockholders Equity
    
    
    51,435,223
    
    
    
    73,077,183Total Liabilities and Stockholders Equity
    
    $
    72,446,078
    
    
    $
    91,360,173
  3




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MATRIXX INITIATIVES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(Unaudited)
 2009
    
    2008Net sales
    
    $
    6,916,237
    
    
    $
    8,508,044Cost of sales
    
    
    2,793,062
    
    
    
    3,194,283Gross Profit
    
    
    4,123,175
    
    
    
    5,313,761Selling, general and administrative expenses
    
    
    16,488,637
    
    
    
    8,462,126Research and development
    
    
    934,393
    
    
    
    610,295Asset impairments
    
    
    23,867,158
    
    
    
    Loss From Operations
    
    
    (37,167,013
    )
    
    
    (3,758,660
    )Interest and other income
    
    
    47,280
    
    
    
    107,234Loss Before Benefit From Income Taxes
    
    
    (37,119,733
    )
    
    
    (3,651,426
    )Benefit from income taxes
    
    
    (14,287,481
    )
    
    
    (1,385,569
    )Net Loss
    
    $
    (22,832,252
    )
    
    $
    (2,265,857
    )Net Loss Per Share of Common Stock:Basic and Diluted:Weighted Average Number of Common Shares
Outstanding
    
    
    9,169,829
    
    
    
    9,366,544Net Loss Per Share of Common Stock
    
    $
    (2.49
    )
    
    $
    (.24
    )
  4




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##### Table of Contents



MATRIXX INITIATIVES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(Unaudited)
 2009
    
    2008Cash Flows From Operating ActivitiesNet loss
    
    $
    (22,832,252
    )
    
    $
    (2,265,857
    )Adjustments to reconcile net loss to net cash used by operating activities:Depreciation
    
    
    256,016
    
    
    
    217,295Amortization
    
    
    37,621
    
    
    
    37,622Deferred income taxes
    
    
    (14,597,763
    )
    
    
    77,432Common stock issued for compensation
    
    
    1,015,979
    
    
    
    796,785Asset impairments and abandonments
    
    
    24,287,130
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    8,511,844
    
    
    
    3,941,863Insurance receivable
    
    
    (49,486
    )
    
    
    Interest and other receivables
    
    
    (57,850
    )
    
    
    10,762Income taxes
    
    
    (265,479
    )
    
    
    (3,802,254
    )Inventories
    
    
    (2,744,968
    )
    
    
    (1,335,410
    )Prepaid expenses and other
    
    
    372,806
    
    
    
    (735,002
    )Accounts payable
    
    
    840,699
    
    
    
    1,749,709Accrued expenses
    
    
    4,313,905
    
    
    
    (806,777
    )Legal liability
    
    
    (20,000
    )
    
    
    (5,000
    )Sales returns and allowances
    
    
    399,262
    
    
    
    285,298Net Cash Used By Operating Activities
    
    
    (532,536
    )
    
    
    (1,833,534
    )Cash Flows From Investing ActivitiesPurchases of certificates of deposit
    
    
    (3,736,525
    )
    
    
    Maturities of certificates of deposit
    
    
    3,621,548
    
    
    
    Capital expenditures
    
    
    (22,612
    )
    
    
    (125,788
    )Restricted cash
    
    
    
    
    
    
    500,000Deposits and other
    
    
    (2,232,250
    )
    
    
    12,692Net Cash Provided (Used) By Investing Activities
    
    
    (2,369,839
    )
    
    
    386,904Cash Flows From Financing Activities:Issuance of common stock
    
    
    1,362,219
    
    
    
    221,656Purchase of treasury stock
    
    
    (1,187,906
    )
    
    
    (2,479,096
    )Net Cash Provided (Used) By Financing Activities
    
    
    174,313
    
    
    
    (2,257,440
    )Net Decrease in Cash and Cash Equivalents
    
    
    (2,728,062
    )
    
    
    (3,704,070
    )Cash and Cash Equivalents at Beginning of Period
    
    
    25,144,088
    
    
    
    27,932,672Cash and Cash Equivalents at End of Period
    
    $
    22,416,026
    
    
    $
    24,228,602Supplemental Disclosure of Cash Flow Information:Cash paid for income taxes
    
    $
    8,000
    
    
    $
    2.268,000Supplemental Disclosure of Noncash Financing Activities:Retirement of treasury stock
    
    $
    1,187,906
    
    
    $
    7,544,548
  5




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Subsequent Events
 Subsequent Events
  Share-Based Payment,
   6




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##### Table of Contents



MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Earnings Per Share,
  Three Months EndedJune 30,2009
    
    
    2008Net loss applicable to common shareholders
    
    $
    (22,832,252
    )
    
    $
    (2,265,857
    )Weighted average common shares outstanding  Basic
    
    
    9,169,829
    
    
    
    9,366,544Dilutive Securities:Options
    
    
    
    
    
    
    Restricted Stock
    
    
    
    
    
    
    Weighted average common shares outstanding  Diluted
    
    
    9,169,829
    
    
    
    9,366,544Net loss per common share:Basic
    
    $
    (2.49
    )
    
    $
    (0.24
    )Diluted
    
    $
    (2.49
    )
    
    $
    (0.24
    )
   June 30,
    
    
    March 31,2009
    
    
    2009Raw materials and packaging
    
    $
    2,414,667
    
    
    $
    2,618,261Finished goods
    
    
    4,142,883
    
    
    
    5,122,082Total
    
    $
    6,557,550
    
    
    $
    7,740,343
 7




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Business Combinations, Accounting for Costs Associated with Exit or
Disposal Activities,
 Determination of
the Useful Life of Intangible Assets
 Employers Disclosures about
Postretirement Benefit Plan Assets
  Amendments to FASB Interpretation No. 46(R) ),
Consolidation of Variable Interest Entities   an interpretation of ARB No. 51
 8




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles The Hierarchy of Generally Accepted Accounting Principles.
  Cold
Remedy Nasal Gel and Zicam Cold Remedy Gel Swabs Recall
   ChewCaps, RapidMelts® and RapidMelts + C Recall
 ®
  9




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Multi-Symptom Cold & Flu Nighttime Recall
     Product Liability Matters
 General.
 
    
    Rulings by ten different federal courts  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
    
    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
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).
  10




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Our Position and Our Response
 Product Safety
   Product Effectiveness
  11




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Total Pending Product Liability Lawsuits
 Cases since April 1, 2009 (Pending in Federal Courts).
 Personal Injury:
 Date Filed
    
    United States District Court
    
    Lead Plaintiff6/22/09
    
    District of Arizona
    
    Adams7/2/09
    
    Eastern District of New York
    
    Coleman7/10/09
    
    Eastern District of Texas
    
    Echols7/31/09
    
    Eastern District of Texas
    
    King6/17/09
    
    Northern District of California
    
    Nelson7/6/09
    
    Southern District of Florida
    
    Rhodes3/13/09
    
    Southern District of Texas
    
    Wright
 Putative Class Action for Consumer Fraud:
 Date Filed
    
    United States District Court
    
    Lead Plaintiff8/3/09
    
    Eastern District of Michigan
    
    Buszta7/30/09
    
    Southern District of Florida
    
    Capiro6/25/09
    
    Southern District of Illinois
    
    Fessler7/1/09
    
    Southern District of Florida
    
    Gonzales-Jones7/6/09
    
    Southern District of Mississippi
    
    Hammett7/28/09
    
    Northern District of Georgia
    
    Hand6/18/09
    
    Northern District of Illinois
    
    Hohman*6/22/09
    
    Western District of Missouri
    
    Riepe6/25/09
    
    District of Arizona
    
    Roper6/23/09
    
    Central District of California
    
    Sample
 12




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##### Table of Contents



Date Filed
    
    United States District Court
    
    Lead Plaintiff7/30/09
    
    Northern District of Florida
    
    Sitzes7/2/09
    
    Southern District of California
    
    Tassi6/24/09
    
    Southern District of California
    
    Teperson7/6/09
    
    Eastern District of Arkansas
    
    Thrasher
 
 *
    
    In addition to their claims against the Company, plaintiffs in the Hohman case also make
claims against William J. Hemelt, our Acting President, Chief Financial Office and Chief Operating
Officer; and Carl J. Johnson, our former President and Chief Executive Officer. In accordance with
and subject to the provisions of the Companys Certificate of Incorporation, Messrs. Hemelt and
Johnson will be indemnified by the Company for their expenses incurred in defending this lawsuit
and for any other losses which they may suffer as a result of this lawsuit. (See Securities
Litigation Matters below for a discussion of other cases in which officers have been named and
will receive indemnification from the Company). Cases since April 1, 2009 (Pending in State Courts).
 Personal Injury:
 Date Filed
    
    Court
    
    Lead Plaintiff7/6/09
    
    Middlesex County, Massachusetts
    
    Alt6/19/09
    
    Plymouth County, Massachusetts
    
    Ayotte5/13/09
    
    Maricopa County, Arizona
    
    Howes7/22/09
    
    San Bernardino County, California
    
    Richardson6/25/09
    
    Macon County, Illinois
    
    Rohr6/22/09
    
    Broward County, Florida
    
    Schaffer7/7/09
    
    Honolulu County, Hawaii
    
    Yamasaki
 Putative Class Action for Consumer Fraud:
 Date Filed
    
    Court
    
    Lead Plaintiff6/30/09
    
    St. Louis County, Missouri
    
    West
 Cases Dismissed Subsequent to March 31, 2009 (Federal Courts).
 Date Filed
    
    United States District Court
    
    Named Plaintiff
    
    Date Dismissed6/30/08
    
    Northern District of Indiana
    
    Thompson
    
    4/29/0910/16/08
    
    Northern District of Georgia
    
    Smith
    
    6/11/09
 Cases Dismissed Subsequent to March 31, 2009 (State Courts).
 13




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Date Filed
    
    Court
    
    Named Plaintiff
    
    Date Dismissed3/27/07
    
    Cook County, Illinois
    
    Skender
    
    6/9/096/5/06
    
    Oklahoma City, Oklahoma
    
    Stark
    
    6/10/0911/3/06
    
    Maricopa County, Arizona
    
    Poole
    
    7/28/09
 Settlement with Certain Claimants.
 Potential Claimants.
  Litigation Reserves
  14




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Product Recall Related Litigation
 tm ®
   Intellectual Property Protection
  ®
 15




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Securities Litigation Matters
      16




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 ®
  17




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3 Months Ended June 30,$000s
    
    2009
    
    % NS
    
    2008
    
    % NSNet Sales
    
    $
    6,916
    
    
    
    100
    %
    
    $
    8,508
    
    
    
    100
    %Marketing
    
    $
    3,312
    
    
    
    48
    %
    
    $
    2,922
    
    
    
    34
    %Sales
    
    $
    617
    
    
    
    9
    %
    
    $
    650
    
    
    
    8
    %General & Administrative
    
    $
    12,273
    
    
    
    177
    %
    
    $
    4,147
    
    
    
    48
    %Product Liability Litigation
    
    $
    287
    
    
    
    4
    %
    
    $
    743
    
    
    
    9
    %Total Selling, General, and
Administrative
    
    $
    16,489
    
    
    
    238
    %
    
    $
    8,462
    
    
    
    99
    %Research & Development
    
    $
    934
    
    
    
    14
    %
    
    $
    610
    
    
    
    7
    %Asset Impairments
    
    $
    23,867
    
    
    
    345
    %
    
    $
    
    
    
    
    
    %
  18




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1)
    
    We compare our year-to-date sales and net income performance against our stated annual
goal for each. Due to the FDA action, we withdrew our previous guidance and will revise our
annual goals as we gain insights into consumer purchases of our products in the upcoming
cold season.2)
    
    We monitor our share of the cough and cold market because increased consumer purchases of
our products are an indicator of growth. For the 12 weeks ended July 12, 2009, retail unit
sales of our products (as measured by three outlet syndicated scanner data, not including
our largest customer, Wal-Mart) increased approximately 1% over the comparable period in the
previous year, while the entire cough and cold category increased approximately 1% over the
same period. However, for the four weeks ended July 12, 2009, retail unit sales of our
products declined approximately 25% over the comparable period in the previous year, while
the entire cough and cold category increased approximately 4% over the same period. We
believe the large decrease in the recent four-week period relates to the negative publicity
and recall of our nasal Cold Remedy products.3)
    
    We measure our ability to maintain strong gross margins on our products. During the
quarter ended June 30, 2009, we realized an average gross margin of 60%, compared to the 62%
average gross margin achieved in the quarter ended June 30, 2008. Gross margins on our
existing products vary between 55% and 80%. Average gross margins, in the quarter ended June
30, 2009, were impacted by the aforementioned $1.5 million increase for in-store promotional
activities and were partially offset by the price increase on Cold Remedy and Allergy/Sinus
products that became effective in the second quarter of the prior fiscal year.4)
    
    We evaluate our operating performance by reviewing, over time, our ability to decrease
operating expenses as a percentage of net sales. We evaluate our ability to control
operating expenses on an annual basis due to the seasonal fluctuations in quarterly net
sales. If we realize a lower level of sales in the future due to an inability to sell our
nasal Cold Remedy products, our operating expense as a percentage of sales will increase.5)
    
    We review the distribution and mix of our products by key national retailers. Our ten
largest retail customers account for a substantial majority of our annual sales, and we
encourage our largest customers to carry a mix of our highest-selling products. Retailers
generally reset their cough and cold sections during the third calendar quarter of each
year, at which time they add or discontinue products. We are working with retailers to
establish the mix of Zicam products they will carry in the upcoming cold season.
 19




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Critical Accounting Policies and Estimates
    Intangible Assets and Goodwill:
  Income Taxes
 20




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Revenue Recognition:
 Customer Sales Returns and Allowances:
 Accounts Receivable and Allowance for Doubtful Accounts:
 Legal Contingencies: Accounting for
Contingencies,
 Results of Operations for the Three Months Ended June 30, 2009 Compared to the Three Months
Ended June 30, 2008
  21




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Three Months Ended June 30,2009
    
    
    2008Net sales
    
    $
    6,916,237
    
    
    
    100
    %
    
    $
    8,508,044
    
    
    
    100
    %Cost of sales
    
    
    2,793,062
    
    
    
    40
    
    
    
    3,194,283
    
    
    
    38Gross profit
    
    
    4,123,175
    
    
    
    60
    
    
    
    5,313,761
    
    
    
    62Selling, general and administrative
    
    
    16,488,637
    
    
    
    238
    
    
    
    8,462,126
    
    
    
    99Research & development
    
    
    934,393
    
    
    
    14
    
    
    
    610,295
    
    
    
    19Asset Impairments
    
    
    23,867,158
    
    
    
    345
    
    
    
    
    
    
    
    Loss from operations
    
    
    (37,167,013
    )
    
    
    (537
    )
    
    
    (3,758,660
    )
    
    
    (44
    )Interest and other income
    
    
    47,280
    
    
    
    1
    
    
    
    107,234
    
    
    
    1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes
    
    
    (37,119,733
    )
    
    
    (537
    )
    
    
    (3,651,426
    )
    
    
    (43
    )Benefit from income taxes
    
    
    (14,287,481
    )
    
    
    207
    
    
    
    (1,385,569
    )
    
    
    16Net Loss
    
    $
    (22,832,252
    )
    
    
    (330)
    %
    
    $
    (2,265,857
    )
    
    
    (27)
    %
 Net Sales
  Cost of Sales
  Gross Profit
  Selling, General & Administrative (SG&A)
   22




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##### Table of Contents



Research and Development
  Asset Impairments
  Interest & Other Income
  Loss Before Income Taxes
  Benefit From Income Tax Expense
  Net Loss
  23




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##### Table of Contents



Liquidity and Capital Resources
       24




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##### Table of Contents



Contractual Obligations
  Contractual Cash Obligations(In thousands of dollars)Payments due by Period as of June 30, 2009Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-Term Debt Obligations
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Capital Lease Obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Operating Lease Obligations
    
    
    1,771
    
    
    
    423
    
    
    
    885
    
    
    
    463
    
    
    
    0Purchase Obligations
    
    
    2,618
    
    
    
    2,618
    
    
    
    0
    
    
    
    0
    
    
    
    0Other Long-Term Liabilities Reflected on the
Companys Balance Sheet under GAAP
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    4,389
    
    
    $
    3,041
    
    
    $
    885
    
    
    $
    463
    
    
    $
    0
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 Forward Looking Statements
  
    
    our belief that the reserve for recall costs will be sufficient;
    
    our expectations regarding the impact of the recall on demand for Zicam products;
    
    our expectation of introducing new products during the 2009/2010 cold season;
    
    our expectations regarding returns of discontinued products;
    
    our expectation regarding continued expansion of the Zicam line of products;
    
    our expectation of not achieving our fiscal 2010 sales and income goals;
    
    our expectation that legal expense will increase;
    
    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;
 25




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##### Table of Contents




    
    our expectations regarding litigation reserves;
    
    our belief that our allowance for uncollectible accounts is adequate;
    
    our expectation that sales in future periods may be affected by the recall of our nasal
Cold Remedy products;
    
    our expectations regarding the effect of recently issued accounting standards;
    
    our expectation that our mix of products sold will change due to seasonality and varying
growth rates within the market groups;
    
    our expectation that retailers will replace, at least in part, discontinued or recalled
items with new or different Zicam products;
    
    our expectation that sales to retailers will closely mirror retails sales of our products
to consumers;
    
    our intention to review our product return reserve provision regularly 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 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 sales, advertising, research and development,
and legal expenses;
    
    our expectations regarding derivative instruments;
    
    our expectation that operating results in future periods will be significantly impacted by the FDA warning letter,
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 are sufficient to fund our operations and
capital requirements for at least the next 12 months;
    
    our expectations regarding our manufacturers ability to timely produce inventory adequate
for sales of products through the 2009/2010 cough and cold season;
    
    our belief that Capricorn is responsible for costs we incurred in connection with the
recall of certain lots that Capricorn manufactured;
    
    our belief that our exposure to currency exchange risk is minimal; and
    
    our belief that moderate interest rate increases and current uncertainties regarding the
availability of credit will not have a material adverse impact on our results of operations
or financial position in the foreseeable future.
  26




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
    27




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Item 4. Controls and Procedures
  
 PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Securities and Use of Proceeds
  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 Programs4/01/09-4/30/09
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    846,1525/01/09-5/31/09
    
    
    64,703
    
    
    $
    18.36
    
    
    
    0
    
    
    
    846,1526/1/09-6/30/09
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    846,152Total
    
    
    64,703
    
    
    $
    18.36
    
    
    
    0
    
    
    
    846,152
 
 (1)
    
    The Company may repurchase shares from employees and directors as payment of applicable tax
withholding obligations on the vesting of restricted stock awards or exercise of options. Shares
so surrendered are repurchased pursuant to the applicable award agreements and not pursuant to
publicly announced share repurchase programs. 64,703 shares, with an
aggregate value of $1,187,906,  were repurchased by the Company in the
first quarter of fiscal 2010 to satisfy participants tax withholding obligations upon the vesting
of stock awards or exercise of options. 28




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##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Title3.01
    
    Articles of Incorporation and Amendments thereto of the registrant (1)3.02
    
    Bylaws of the registrant (2)4.01
    
    Rights Agreement dated as of July 22, 2002 by and between the registrant and
Corporate Stock Transfer, Inc. (3)31.1*
    
    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
 
 *
    
    Filed with this Report on Form 10-Q.**
    
    Indicates management compensatory contract, plan or arrangement.(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 Report on Form 8-K, filed July 25,
2006, file number 001-31404.(3)
    
    Incorporated by reference to the Registrants Registration Statement on Form 8-A,
filed July 23, 2002, file number 001-31404. 29




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SIGNATURES
  Matrixx Initiatives, Inc./s/  William J. HemeltWilliam HemeltActing President, Chief Operating Officer, 
     and Chief Financial Officer
     August 10, 2009 30