##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 Form 10-Q
  þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended June 30, 2010
 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
    
    87-0482806(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    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
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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, 2010 (Unaudited) and March 31, 2010
    
    
    3Condensed Consolidated Statements of
Operations for the three months ended
June 30, 2010 and 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of
Cash Flows for the three months ended
June 30, 2010 and 2009 (Unaudited)
    
    
    5Notes to Condensed Consolidated
Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Securities and Use of Proceeds
    
    
    27Item 6. Exhibits
    
    
    28SIGNATURES
    
    
    29EX-31.1EX-32.1
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MATRIXX
INITIATIVES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 June 30,
    
    March 31,2010
    
    2010ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    28,267,218
    
    
    $
    26,482,499Certificates of deposit
    
    
    
    
    
    
    3,736,525Accounts receivable:Trade, net of allowance for doubtful accounts of $168,139 and $169,720
    
    
    1,617,155
    
    
    
    5,386,044Insurance receivable
    
    
    2,204,000
    
    
    
    Inventories
    
    
    7,007,681
    
    
    
    6,166,809Prepaid expenses
    
    
    1,269,465
    
    
    
    2,230,116Interest receivable
    
    
    820
    
    
    
    3,443Income tax receivable
    
    
    7,220,293
    
    
    
    5,661,554Current deferred tax asset
    
    
    5,265,820
    
    
    
    5,071,475Total Current Assets
    
    
    52,852,452
    
    
    
    54,738,465Property and Equipment, at cost:Office furniture and computer equipment
    
    
    1,575,947
    
    
    
    1,722,176Machine tooling and manufacturing equipment
    
    
    4,415,352
    
    
    
    4,415,352Laboratory furniture and equipment
    
    
    370,355
    
    
    
    486,459Leasehold improvements
    
    
    415,452
    
    
    
    562,7386,777,106
    
    
    
    7,186,725Less accumulated depreciation
    
    
    (3,808,981
    )
    
    
    (3,865,302
    )Net Property and Equipment
    
    
    2,968,125
    
    
    
    3,321,423Other Assets:Deposits
    
    
    636,924
    
    
    
    636,924Other assets
    
    
    40,043
    
    
    
    40,043Patents, net of accumulated amortization of $330,260 and $311,209
    
    
    774,756
    
    
    
    793,807Non-current deferred tax asset
    
    
    1,845,871
    
    
    
    1,934,686Total Other Assets
    
    
    3,297,594
    
    
    
    3,405,460Total Assets
    
    $
    59,118,171
    
    
    $
    61,465,348LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    2,472,919
    
    
    $
    1,007,886Accrued expenses
    
    
    5,233,572
    
    
    
    7,026,708Sales commissions
    
    
    79,857
    
    
    
    188,433Sales returns and allowances
    
    
    1,847,338
    
    
    
    1,420,600Legal liability
    
    
    740,000
    
    
    
    740,000Total Current Liabilities
    
    
    10,373,686
    
    
    
    10,383,627Total Liabilities
    
    
    10,373,686
    
    
    
    10,383,627Commitments 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, 9,399,987 and 9,455,620 shares issued
and outstanding
    
    
    9,400
    
    
    
    9,455Additional paid-in capital
    
    
    38,753,271
    
    
    
    38,657,444Retained earnings
    
    
    9,981,814
    
    
    
    12,414,822Total Stockholders Equity
    
    
    48,744,485
    
    
    
    51,081,721Total Liabilities and Stockholders Equity
    
    $
    59,118,171
    
    
    $
    61,465,348
  3




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MATRIXX
INITIATIVES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
 (Unaudited)
 2010
    
    2009Net sales
    
    $
    3,207,398
    
    
    $
    6,916,237Cost of sales
    
    
    1,332,578
    
    
    
    2,793,062Gross Profit
    
    
    1,874,820
    
    
    
    4,123,175Selling, general and administrative expenses
    
    
    5,313,898
    
    
    
    16,488,637Research and development
    
    
    530,228
    
    
    
    934,393Goodwill impairment
    
    
    
    
    
    
    15,039,836Asset impairments
    
    
    
    
    
    
    8,827,322Loss From Operations
    
    
    (3,969,306
    )
    
    
    (37,167,013
    )Interest and other income
    
    
    16,398
    
    
    
    47,280Loss Before Income Taxes
    
    
    (3,952,908
    )
    
    
    (37,119,733
    )Income taxes
    
    
    (1,519,900
    )
    
    
    (14,287,481
    )Net Loss
    
    $
    (2,433,008
    )
    
    $
    (22,832,252
    )Net Loss Per Share of Common Stock:Basic and Diluted:Weighted Average Number of Common Shares
Outstanding
    
    
    9,287,580
    
    
    
    9,169,829Net Loss Per Share of Common Stock
    
    $
    (0.26
    )
    
    $
    (2.49
    )
  4




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MATRIXX
INITIATIVES, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
 (Unaudited)
 2010
    
    2009Cash Flows From Operating ActivitiesNet loss
    
    $
    (2,433,008
    )
    
    $
    (22,832,252
    )Adjustments to reconcile net loss to net cash used by operating activities:Depreciation
    
    
    370,664
    
    
    
    256,016Amortization
    
    
    19,051
    
    
    
    37,621Deferred income taxes
    
    
    (105,530
    )
    
    
    (14,597,763
    )Common stock issued for compensation
    
    
    249,592
    
    
    
    1,015,979Asset impairments and abandonments
    
    
    
    
    
    
    24,287,130Changes in assets and liabilities:Accounts receivable
    
    
    3,768,889
    
    
    
    8,511,844Insurance receivable
    
    
    (2,204,000
    )
    
    
    (49,486
    )Interest and other receivables
    
    
    2,623
    
    
    
    (57,850
    )Income tax receivable
    
    
    (1,558,739
    )
    
    
    (265,479
    )Inventories
    
    
    (840,872
    )
    
    
    (2,744,968
    )Prepaid expenses and other
    
    
    960,651
    
    
    
    372,806Accounts payable
    
    
    1,465,033
    
    
    
    840,699Accrued expenses
    
    
    (1,901,712
    )
    
    
    4,313,905Legal liability
    
    
    
    
    
    
    (20,000
    )Sales returns and allowances
    
    
    426,738
    
    
    
    399,262Net Cash Used By Operating Activities
    
    
    (1,780,620
    )
    
    
    (532,536
    )Cash Flows From Investing ActivitiesPurchases of certificates of deposit
    
    
    
    
    
    
    (3,736,525
    )Maturities of certificates of deposit
    
    
    3,736,525
    
    
    
    3,621,548Capital expenditures
    
    
    (17,366
    )
    
    
    (22,612
    )Deposits and other
    
    
    
    
    
    
    (2,232,250
    )Net Cash Provided (Used) By Investing Activities
    
    
    3,719,159
    
    
    
    (2,369,839
    )Cash Flows From Financing Activities:Issuance of common stock
    
    
    
    
    
    
    1,362,219Purchase of treasury stock
    
    
    (153,820
    )
    
    
    (1,187,906
    )Net Cash Provided (Used) By Financing Activities
    
    
    (153,820
    )
    
    
    174,313Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    1,784,719
    
    
    
    (2,728,062
    )Cash and Cash Equivalents at Beginning of Period
    
    
    26,482,499
    
    
    
    25,144,088Cash and Cash Equivalents at End of Period
    
    $
    28,267,218
    
    
    $
    22,416,026Supplemental Disclosure of Cash Flow Information:Cash paid for income taxes
    
    $
    
    
    
    $
    8,000Supplemental Disclosure of Noncash Financing Activities:Retirement of treasury stock
    
    $
    153,820
    
    
    $
    1,187,906
  5




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MATRIXX INITIATIVES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   ®
     6




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        Three Months EndedJune 30,2010
    
    
    2009Net loss applicable to common shareholders
    
    $
    (2,433,008
    )
    
    $
    (22,832,252
    )Weighted average common shares outstanding  Basic
    
    
    9,287,580
    
    
    
    9,169,829Dilutive Securities:Options
    
    
    
    
    
    
    Restricted Stock
    
    
    
    
    
    
    Weighted average common shares outstanding  Diluted
    
    
    9,287,580
    
    
    
    9,169,829Net loss per common share:Basic
    
    $
    (0.26
    )
    
    $
    (2.49
    )Diluted
    
    $
    (0.26
    )
    
    $
    (2.49
    )
 7




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##### Table of Contents



MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   June 30,
    
    
    March 31,2010
    
    
    2010Raw materials and packaging
    
    $
    552,238
    
    
    $
    623,808Finished goods
    
    
    6,455,443
    
    
    
    5,543,001Total
    
    $
    7,007,681
    
    
    $
    6,166,809
  Zicam Cold Remedy Nasal Gel and Cold Remedy Gel Swabs Recall
       8




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Product Liability Matters
 General.
  Our Position and Our Response
 Product Safety
   9




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Product Effectiveness
 Total
Pending Product Liability Lawsuits
 Cases
since March 31, 2010 (Pending in Federal Courts)
 Personal Injury:
 Date Filed
    
    United States District Court
    
    Named Plaintiff4/1/2010
    
    Northern District, Texas
    
    McRae, S.4/5/2010
    
    New Jersey
    
    Martinez, M.4/7/2010
    
    Central District, California
    
    Shapiro, R.4/9/2010
    
    Arizona
    
    Gardner, C.4/9/2010
    
    Western District, Missouri
    
    Smith, R.C.4/22/2010
    
    Southern District, Mississippi
    
    Rochelle, C.4/27/2010
    
    Puerto Rico
    
    Quinones-Rodriguez, L.5/6/2010
    
    South Carolina
    
    Spradley, D.5/20/2010
    
    Eastern District, Tennessee
    
    Lyons, M.5/21/2010
    
    Western District, Michigan
    
    Alisea, I.5/26/2010
    
    Central District, California
    
    Coggins, E5/28/2010
    
    Western District, Missouri
    
    Beatty, D.5/28/2010
    
    Western District, Missouri
    
    Bowers, B.5/28/2010
    
    Western District, Missouri
    
    Wadkins, J.6/3/2010
    
    Eastern District, Missouri
    
    Schwartz, J.6/9/2010
    
    Western District, Tennessee
    
    Terhune, G.6/9/2010
    
    Western District, Tennessee
    
    Childress, J.6/9/2010
    
    Western District, Tennessee
    
    Bell, V.6/14/2010
    
    Western District, Missouri
    
    Goble, K.6/14/2010
    
    Western District, Missouri
    
    Vance, C.6/14/2010
    
    Western District, Missouri
    
    Morgan, S.6/14/2010
    
    Western District, Louisiana
    
    Boozman, M.6/15/2010
    
    Western District, Kentucky
    
    Stokes, S.6/15/2010
    
    Arizona
    
    Johnson, R.6/15/2010
    
    Arizona
    
    Vincent, M.6/15/2010
    
    Arizona
    
    Swindell, J.6/15/2010
    
    Arizona
    
    Tio, R.6/30/2010
    
    Western District, Missouri
    
    Conti, A.6/30/2010
    
    Massachusetts
    
    Surette, R.6/30/2010
    
    Arizona
    
    Kirsch, C.
 10




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Date Filed
    
    United States District Court
    
    Named Plaintiff7/1/2010
    
    Southern District, Ohio
    
    Warrington, J.7/14/2010
    
    Arizona
    
    Barton, J.7/15/2010
    
    Arizona
    
    Holloway, S.7/15/2010
    
    Arizona
    
    Wilhite, J.7/15/2010
    
    Arizona
    
    Ponthieux, S.7/15/2010
    
    Arizona
    
    Murter, J.7/20/2010
    
    Maryland
    
    Carter, C.7/20/2010
    
    Maryland
    
    Davis, L.7/20/2010
    
    Maryland
    
    Floyd, R.7/20/2010
    
    Maryland
    
    Foley, L.7/20/2010
    
    Maryland
    
    Hamilton, A.7/20/2010
    
    Maryland
    
    Jackson, A.7/20/2010
    
    Maryland
    
    Jackson, R.7/20/2010
    
    Maryland
    
    Lipscomb, D.7/20/2010
    
    Maryland
    
    Moore, B.7/20/2010
    
    Maryland
    
    Pilkenton, L.7/20/2010
    
    Maryland
    
    Rentch, B.7/20/2010
    
    Maryland
    
    Saur, M.7/20/2010
    
    Maryland
    
    Short, J.7/27/2010
    
    Arizona
    
    Cochren, M.
 Putative Class Actions for Economic Injury:
 Multi-District Litigation Matters.
 Cases
since March 31, 2010 (Pending in State Courts).
 Personal Injury:
 Date Filed
    
    Court
    
    Named Plaintiff4/1/2010
    
    Maricopa County, AZ
    
    Alston, B.4/19/2010
    
    Maricopa County, AZ
    
    Miller, R.4/19/2010
    
    Maricopa County, AZ
    
    Maxfield, W.4/19/2010
    
    Maricopa County, AZ
    
    Colbert, D.5/4/2010
    
    Maricopa County, AZ
    
    Maaskant, P.5/11/2010
    
    Maricopa County, AZ
    
    Brooks, D.5/13/2010
    
    San Francisco County, CA
    
    Parson, J.6/14/2010
    
    Maricopa County, AZ
    
    Dubois, S.6/18/2010
    
    Maricopa County, AZ
    
    Krupp, D.6/18/2010
    
    Maricopa County, AZ
    
    Harrison, L.6/18/2010
    
    Maricopa County, AZ
    
    Goad, S.6/22/2010
    
    Maricopa County, AZ
    
    Lewotsky, L.6/22/2010
    
    Maricopa County, AZ
    
    McCloy, M.7/8/2010
    
    Maricopa County, AZ
    
    Michaels, A.7/9/2010
    
    St. Clair County, IL
    
    MacDonald, C.7/21/2010
    
    Kootenai County, ID
    
    Richmond, J.7/23/2010
    
    Jerome County, ID
    
    Huettig, L.7/26/2010
    
    Maricopa County, AZ
    
    Allen, R.7/28/2010
    
    Asotin County, WA
    
    Hill, S.
 11




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Putative Class Actions for Economic Injury:
 Settlement with Certain Claimants.
 Potential Claimants.
  Litigation Reserves
 12




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Securities Litigation Matters
    Shareholder Derivative Lawsuits
  13




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
     Related Legal Matters  Informal Inquiries
  14




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Legal Expense


15




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MATRIXX INITIATIVES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
 Total GainsLevel 1
    
    Level 2
    
    Level 3
    
    (Losses)$000sGoodwill
    
    
    
    
    
    
    
    
    
    
    ($15,040
    )
    
    
    ($15,040
    )Deposits
    
    
    
    
    
    
    ($4,284
    )
    
    
    
    
    
    
    ($4,284
    )Patent
    
    
    
    
    
    
    ($616
    )
    
    
    
    
    
    
    ($616
    )
    Cash, cash equivalents, accounts payable and accounts receivable
 Certificates of Deposit: c
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  16




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3 Months Ended June 30,$000s
    
    2010
    
    
    % NS
    
    
    2009
    
    
    % NSNet Sales
    
    $
    3,208
    
    
    
    100
    %
    
    $
    6,916
    
    
    
    100
    %Marketing
    
    $
    2,594
    
    
    
    81
    %
    
    $
    3,312
    
    
    
    48
    %Sales
    
    $
    544
    
    
    
    17
    %
    
    $
    617
    
    
    
    9
    %General & Administrative
    
    $
    2,513
    
    
    
    78
    %
    
    $
    12,273
    
    
    
    177
    %Legal -Product Liability
& Regulatory
    
    $
    (337
    )
    
    
    (11
    )%
    
    $
    287
    
    
    
    4
    %Total Selling, General,
and Administrative
    
    $
    5,314
    
    
    
    165
    %
    
    $
    16,489
    
    
    
    238
    %Research & Development
    
    $
    530
    
    
    
    17
    %
    
    $
    934
    
    
    
    14
    %Goodwill & Asset
Impairments
    
    $
    0
    
    
    
    0
    %
    
    $
    23,867
    
    
    
    345
    %
  17




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##### Table of Contents



1)
    
    We review our sales and net income performance against our annual goal for each. In
fiscal 2011, the Company will focus on growing sales in our core Cold Remedy and
Allergy/Sinus franchise and offsetting declines in our symptom relief and other cough/cold
products. For fiscal 2011, the Company anticipates revenue increasing 3% to 5% above the
$67.3 million achieved in fiscal 2010. We anticipate expense for litigation will be between
$1.3 million and $1.8 million per quarter (prior to insurance reimbursement) in fiscal
2011. In addition, we expect to report net income between $2.0 and $3.0.2)
    
    We monitor sales of our products at retail because increased consumer purchases of our
products are an indicator of growth. For the rolling 52 weeks ended June 13, 2010, retail
unit sales (as measured by three outlet syndicated scanner data, not including our largest
customer, Wal-Mart and excluding nasal Cold Remedy) of our oral Cold Remedy products
increased approximately 10% while sales of our allergy and congestion products declined
approximately 13% over the comparable period in the previous year, while the entire cough
and cold category was relatively unchanged. Recent consumer consumption data comparing
4-week year-over-year trends following last years withdrawal of nasal Cold Remedy products
to the same period of this year, shows growth of 5% for oral Cold Remedy and 7% for
allergy/congestion products.3)
    
    We measure our ability to maintain strong gross margins on our products. During the
quarter ended June, 2010, we realized an average gross margin of 58%, compared to the 60%
average gross margin achieved in the prior year. Gross margins on our existing products
generally vary between 65% and 80%. Due to the level of in-store promotional activity,
relative to the low level of unit sales that occurred in the quarter, our average selling
price per unit declined 5% in the quarter ended June 30, 2010, compared to the quarter
ended June 30, 2009. This decline in average sales price affected gross margin for the
quarter.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. We anticipate fiscal 2011 operating expenses will decline as a percentage of sales
compared to the prior fiscal year.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 expect our ten largest retailers
to have a net increase in Zicam oral Cold Remedy products on shelf during this years cold
season. Although retailers are increasing the number of our products they sell, they are
also increasing the number of store brand products that directly compete with our Zicam
offerings. Store brand products are generally sold at a substantial discount to branded
products. Store brand versions of our products may adversely affect our mix of products at
retail as well as our sales levels.
 18




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Critical Accounting Policies and Estimates
    Legal Contingencies.
 Intangible Assets and Goodwill.
  19




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Income Taxes.
 Revenue Recognition.
 Sales Adjustments.
   Accounts Receivable and Allowance for Doubtful Accounts.
 Product Recalls.
 20




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Results of Operations for the Three Months Ended June 30, 2010 Compared to the Three Months
Ended June 30, 2009
  Three Months Ended June 30,2010
    
    
    2009Net sales
    
    $
    3,208
    
    
    
    100
    %
    
    $
    6,916
    
    
    
    100
    %Cost of sales
    
    
    1,333
    
    
    
    42
    
    
    
    2,793
    
    
    
    40Gross profit
    
    
    1,875
    
    
    
    58
    
    
    
    4,123
    
    
    
    60Selling, general and administrative
    
    
    5,314
    
    
    
    166
    
    
    
    16,489
    
    
    
    238Research & development
    
    
    530
    
    
    
    17
    
    
    
    934
    
    
    
    14Goodwill Impairment
    
    
    0
    
    
    
    
    
    
    
    15,040
    
    
    
    217Asset Impairments
    
    
    0
    
    
    
    
    
    
    
    8,827
    
    
    
    127Loss from
operations
    
    
    (3,969
    )
    
    
    (124
    )
    
    
    (37,167
    )
    
    
    (537
    )Interest and other income
    
    
    16
    
    
    
    1
    
    
    
    47
    
    
    
    1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes
    
    
    (3,953
    )
    
    
    (123
    )
    
    
    (37,120
    )
    
    
    (537
    )Income taxes
    
    
    (1,520
    )
    
    
    (47
    )
    
    
    (14,287
    )
    
    
    (207
    )Net Loss
    
    $
    (2,433
    )
    
    
    (76
    )%
    
    $
    (22,832
    )
    
    
    (330
    )%
 Net Sales
   Cost of Sales
  Gross Profit
  21




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##### Table of Contents



Selling, General & Administrative (SG&A)
   Research and Development
  Goodwill and Asset Impairments
  Interest & Other Income
  Income (Loss) Before Income Taxes
  22




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##### Table of Contents



Income Taxes
  Net Income (Loss)
  Liquidity and Capital Resources
      23




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##### Table of Contents



Contractual Obligations
  Contractual Cash Obligations(In thousands of dollars)Payments due by Period as of June 30, 2010Less 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
    
    
    1,348
    
    
    
    436
    
    
    
    912
    
    
    
    0
    
    
    
    0Purchase Obligations
    
    
    1,727
    
    
    
    1,727
    
    
    
    0
    
    
    
    0
    
    
    
    0Other Long-Term Liabilities Reflected on the
Companys Balance Sheet under GAAP
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    3,075
    
    
    $
    2,163
    
    
    $
    912
    
    
    $
    0
    
    
    $
    0
 24




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##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 Forward Looking Statements
  
    
    our belief that we will not record additional recall charges;
    
    our belief that reserves for customer programs are adequate and proper;
    
    our expectation regarding continued expansion of the Zicam line of products;
    
    our expectation of achieving fiscal 2011 revenue in the $69.3 million to $70.7 million
range;
    
    our expectation of achieving fiscal 2011 net income in the $2.0 million to $3.0 million
range;
    
    our belief that our allowance for uncollectible accounts is adequate;
    
    our expectation that ongoing legal expense will be between $1.3 million and $1.8
million per quarter;
    
    our expectation that any federal consumer fraud and personal injury matter filed in the
future will be transferred and consolidated pursuant to the MDL transfer process, subject
to the plaintiffs opportunity to object;
    
    our intention to vigorously defend the Zicam Cold Remedy product liability and
securities litigation claims, our expectation that additional product liability lawsuits
may be filed against us, and our belief that any liability resulting from these or other
lawsuits, including any adverse publicity, could materially impact our financial results;
    
    our expectations regarding litigation reserves;
    
    our expectation of utilizing deferred tax assets;
    
    our expectation that sales in future periods will be affected by the recall of our
nasal Cold Remedy products;
    
    our expectations regarding the effect of accounting standard updates;
    
    our expectation that retailers will add new or different Zicam products;
    
    our expectations regarding store brand competition;
    
    our intention to review our product return reserve provision regularly and adjust the
reserve amounts if actual product returns differ materially from our reserve estimates;
    
    our expectation of making income tax payments at our statutory rates in future years;
    
    our expectation that operating expenses in fiscal 2011 will decline as a percentage of
sales compared to fiscal 2010;
 25




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##### Table of Contents




    
    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 with 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 expectations regarding derivative instruments;
    
    our belief that we will not repurchase shares of common stock in the open market;
    
    our expectations regarding the amount of advertising expense and that advertising
expense will be highest in our third and fourth fiscal quarters;
    
    our intention of focusing promotional and marketing support on Zicam oral Cold Remedy
and nasal congestion products during the 2010/2011 cold season;
    
    our belief that focusing on consumer consumption of our oral Cold Remedy products will
allow us to grow the Zicam brand;
    
    our belief that our existing capital resources are sufficient to fund our operations
and capital requirements for the next 12 months;
    
    our expectations regarding our manufacturers ability to timely produce inventory
adequate for sales of products through the 2010/2011 cough and cold season;
    
    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 and that we are not subject in
any material way to other forms of market risk.
    26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 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
  27




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##### Table of Contents



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 Programs4/01/10-4/30/10
    
    
    8,531
    
    
$
    5.07

    
    0
    
    931,6245/01/10-5/31/10
    
    
    22,673
    
    
$
    4.88

    
    0
    
    931,6246/1/10-6/30/10
    
    
    0
    
    

    

    
    0
    
    931,624Total
    
    
    31,204
    
    
$
    4.93

    
    0
    
    931,624
 
 (1)
    
    The Company repurchased 31,204 shares of common stock, with an aggregate value of $153,820 from
employees in satisfaction of their applicable tax withholding obligations on the vesting of
restricted stock awards. Shares so surrendered are repurchased pursuant to the applicable award
agreements and not pursuant to publicly-announced share repurchase programs.  
 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. 28




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SIGNATURES
  Matrixx Initiatives, Inc./s/ William J. HemeltWilliam HemeltChief Executive Officer and
Principal Financial OfficerAugust 4, 2010 29