U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR QUARTERLY PERIOD ENDED: JUNE 30, 2006

Commission File Number: 0-26351

99 CENT STUFF, INC.
(Exact name of registrant as specified in its charter)

Florida 20-0233210
------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

1801 Clint Moore Road
Boca Raton, Florida 33487
------------------- -----
(Address of principal executive offices) (Zip Code)

(561) 999-9815
--------------
(Issuer's Telephone Number)

(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes [X] No [ ].

Indicate by check whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

The number of shares of the registrant's common stock issued and outstanding, as
of July 31, 2006, was 5,833,950 shares.

99 CENT STUFF, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2006

INDEX

Page
PART I - FINANCIAL INFORMATION ----
Item 1 - Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheet
at June 30, 2006 and December 31, 2005.................................... 3

Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2006 and 2005................. 4

Condensed Consolidated Statement of Shareholders' (Deficit)
For the Six Months Ended June 30, 2006.................................... 5

Condensed Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30, 2006 and 2005................. 6

Notes to Condensed Consolidated Financial Statements........................ 7

Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 11

Item 3 - Quantitative and Qualitative Disclosures About Market Risk......... 14

Item 4 - Control and Procedures............................................. 15

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings............................................ 16

Item 1A -Risk Factors................................................. 16

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.. 16

Item 4 - Submission of Matters to a Vote of Security Holders.......... 16

Item 6 - Exhibits and Reports on Form 8-K............................. 16

Signatures............................................................ 17

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

99 CENT STUFF INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amount in Thousands, Except Share Data)
(Unaudited)

June 30, December 31,
2006 2005
---------- ------------

ASSETS
Current assets:
Cash $ -- $ --
Inventory, net 4,864 3,643
Prepaid expenses and other assets 450 505
-------- --------
Total current assets 5,314 4,148
-------- --------

Property and equipment, net 2,905 3,327
-------- --------

Other assets:
Security deposits 162 162
-------- --------

Total assets $ 8,381 $ 7,637
======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Lines of credit $ 5,870 $ --
Cash overdraft 691 81
Accounts payable 4,732 4,149
Accrued expenses 460 834
-------- --------
Total current liabilities 11,753 5,064
-------- --------
Long term liabilities:
Lines of credit -- 5,620
Accounts payable and accrued expenses, related party 9,459 6,804
Shareholder loan payable 5,005 5,005
-------- --------
Total long term liabilities 14,464 17,429
-------- --------

Total liabilities 26,217 22,493
-------- --------
Commitments and contingencies

Shareholders' deficit
Preferred Stock, .01 par value, 5,000,000 shares authorized,
-0- shares issued and outstanding -- --
Common Stock, $.001 par value, 50,000,000 shares authorized,
5,833,950 shares issued and outstanding at June 30, 2006 and
December 31, 2005, respectively 6 6
Additional paid in capital (3,748) (3,847)
Accumulated deficit (14,094) (11,015)
-------- --------
Total shareholders' deficit (17,836) (14,856)
-------- --------

Total liabilities and shareholders' deficit $ 8,381 $ 7,637
======== ========

See the accompanying notes to the condensed consolidated financial statements.

99 CENT STUFF INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2006 2005 2006 2005
-------- -------- -------- --------

Net sales $ 14,973 $ 13,589 $ 30,135 $ 27,074

Cost of goods sold 10,741 10,024 21,813 19,615
-------- -------- -------- --------

Gross profit 4,232 3,565 8,322 7,459

Selling, general and administrative expenses 5,361 4,956 10,569 9,896
-------- -------- -------- --------

Loss from operations (1,129) (1,391) (2,247) (2,437)
-------- -------- -------- --------
Other income (expense):
Other income 18 29 40 46
Interest expense (471) (235) (872) (443)
-------- -------- -------- --------
Total other income (expense) (453) (206) (832) (397)
-------- -------- -------- --------

Loss before income taxes $ (1,582) $ (1,597) $ (3,079) $ (2,834)
Income taxes -- -- -- --
-------- -------- -------- --------
Net loss $ (1,582) $ (1,597) $ (3,079) $ (2,834)
======== ======== ======== ========

Loss per share:
Net loss per share, basic and diluted $ (0.27) $ (0.27) $ (0.53) $ (0.49)

Weighted average number of common and
common equivalent shares outstanding -
basic and diluted 5,834 5,834 5,834 5,834

See the accompanying notes to the condensed consolidated financial statements.

99 CENT STUFF INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amount in Thousands, Except Share Data)
(Unaudited)

Common Stock Additional
---------------------- Paid-In Accumulated
Shares Amount Capital (Deficit) Total
-------- -------- -------- -------- --------

Balance, December 31, 2005 5,834 $ 6 $ (3,847) $(11,015) $(14,856)

Contributed services of chief executive officer -- -- 50 50

Stock option compensation 49 49

Net loss for the six months ended June 30, 2006 -- (3,079) $ (3,079)

-------- -------- -------- -------- --------
Balance, June 30, 2006 5,834 $ 6 $ (3,748) $(14,094) $(17,836)
======== ======== ======== ======== ========

See the accompanying notes to the condensed consolidated financial statements.

99 CENT STUFF INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Amounts in Thousands)
(Unaudited)

June 30,
---------------------
2006 2005
------- -------

Cash flows from operating activities:
Net loss $(3,079) $(2,834)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 484 558
Contributed services of chief executive officer 50 --
Stock option compensation 49 --
(Increase) decrease in:
Prepaid expenses and other assets 55 82
Inventory (1,221) (984)
Security deposits -- (6)
Increase (decrease) in:
Accounts payable 583 785
Accrued expenses (374) 128
Interest accrued on payables, related party 655 312
------- -------
Net cash used in operating activities (2,798) (1,959)
------- -------

Cash flows used in investing activities:
Purchase of property and equipment (62) (723)
------- -------

Cash flows from financing activities:
Increase in accounts payable and accrued expenses,
related party 2,000 3,200
Net change in cash overdraft 610 (115)
Borrowings under lines of credit 5,725 5,825
Repayments under lines of credit (5,475) (6,128)
------- -------
Net cash provided by financing activities 2,860 2,782
------- -------

Net increase in cash -- 100

Cash at the beginning of period -- --
------- -------

Cash at the end of period $ -- $ 100
======= =======

Supplemental cash flow information:
Interest paid $ 193 $ 186
======= =======

See the accompanying notes to the condensed consolidated financial statements.

NOTE 1 - DESCRIPTION OF BUSINESS, RECAPITALIZATION AND BASIS OF PRESENTATION

99 Cent Stuff, Inc. (the "Company") was originally organized under the laws of
the State of Delaware on June 28, 1999 as a limited liability company. In
September 2003, the Company merged with a public shell, iVideoNow, Inc., and
became a C Corporation. The Company is a specialty, single-priced retailer that
primarily targets individuals and small businesses with one-stop shopping for
food, produce, consumable hard lines, health and beauty aids, novelty and
impulse items. The Company was operating retail outlets in eighteen locations at
June 30, 2006. The locations are separately incorporated as limited liability
companies and are wholly owned by the Company. All of the stores are in
southeast Florida.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND LIQUIDITY

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management of the Company, all
adjustments of a normal and recurring nature considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006. For further information, refer
to the financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2005.

At June 30, 2006, the Company had a working capital deficit of $6,400 and
negative net worth of $17,800. At that date the Company had no cash and $100
in borrowing availability.

At June 30, 2006, Mr. Zimmerman the principal shareholder, had advanced an
aggregate of $14,500, which was carried on the balance sheet as accounts payable
and accrued expenses, related party. Interest on these advances accrue at
various rates equal to the prime rate to the prime rate plus 2%.

Although Mr. Zimmerman has provided $2,000 of advances through the six months
ended June 30, 2006, he has not committed to provide any additional capital
during the remainder of 2006 to fund any current period deficits in operating
cash flow. Other than the existing revolving lines of credit, there are not
currently any other borrowing arrangements or commitments for any capital. The
Company is currently seeking additional financing and is in discussions with an
investment banking firm.

The Company is dependent on the above sources of financing to meet its future
obligations. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.

CASH AND CASH EQUIVALENTS

The Company considers all investments with original maturities of three months
or less and credit and debit card receivables to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist mainly of cash, short-term payables,
borrowings under a line of credit and notes payable. The Company believes that
the carrying amounts approximate fair value, due to their short-term maturities
and current interest rates.

INVENTORY

Inventory is stated at the lower of average cost or market, with cost determined
on a first-in, first-out (FIFO) basis, and consists primarily of merchandise
held for resale. The Company provides an allowance for certain merchandise that
may become obsolete, damaged, or slow moving. The allowance for these items was
$5 at June 30, 2006 and December 31, 2005. The inventory is presented net of the
allowance.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly owned limited liability company
subsidiaries, after eliminations of all material intercompany transactions.

REVENUE RECOGNITION

Revenue is recognized at the point of sale.

PRE-OPENING COSTS

The Company expenses, as incurred, all pre-opening costs related to the opening
of new retail stores.

INCOME TAXES

Deferred Income tax assets and liabilities are computed for the expected future
tax consequences of temporary differences between financial statement and tax
basis of assets and liabilities at the applicable tax rates. A valuation
allowance is provided to reduce tax assets to the amounts expected to be
realized.

OPERATING SEGMENTS

The Company has one business segment, retail operations. The majority of the
product offerings include recognized brand-name consumable merchandise,
regularly available for reorder. The Company had no customers representing more
than 10 percent of net sales. Substantially all of the Company's net sales were
to customers located in the United States.

SHIPPING AND HANDLING COSTS

The Company follows the provisions of Emerging Issues Task Force Issue No. 00
- -10, "Accounting for Shipping and Handling Fees and Costs." Any amounts billed
to third-party customers for shipping and handling is included as a component of
revenue. Shipping and handling costs incurred are included as a component of
cost of sales.

NEW ACCOUNTING PRONOUNCEMENTS

Stock-Based Compensation. Prior to January 1, 2006, the Company accounted for
employee stock-based compensation using the intrinsic value method supplemented
by pro forma disclosures in accordance with APB 25 and SFAS 123 "Accounting for
Stock-Based Compensation" ("SFAS 123"), as amended by SFAS No.148 "Accounting
for Stock-Based Compensation--Transition and Disclosures." Under the intrinsic
value method, the recorded stock-based compensation expense was related to the
amortization of the intrinsic value of stock options issued and other
equity-based awards issued by the Company. Options granted with exercise prices
equal to the grant date fair value of the Company's stock have no intrinsic
value and therefore no expense was recorded for these options under APB 25.
Other equity-based awards for which stock-based compensation expense was
recorded were generally grants of restricted stock awards which were measured at
fair value on the date of grant based on the number of shares granted and the
quoted price of the Company's common stock. Such value was recognized as an
expense over the corresponding service period.

Effective January 1, 2006 the Company adopted SFAS 123R using the modified
prospective approach and accordingly prior periods have not been restated to
reflect the impact of SFAS 123R. Under SFAS 123R, the unvested portion of
stock-based awards granted prior to its adoption will be expensed over the
remaining portion of their vesting period. These awards will be expensed

using the same fair value measurements which were used in calculating pro forma
stock-based compensation expense under SFAS 123. For stock-based awards granted
on or after January 1, 2006, the Company will amortize stock-based compensation
expense on a straight-line basis over the requisite service period, which is
generally a four year vesting period. SFAS 123R requires that the deferred
stock-based compensation on the condensed consolidated balance sheet on the date
of adoption be netted against additional paid-in capital.

For the six months ended June 30, 2006, the Company recorded stock-based
compensation expense of $49 which reduced gross income from operations, and net
income by this amount. For the six months ended June 30, 2005, the Company did
not recognize any stock-based compensation expense. Had the Company recognized
stock-based compensation at fair value for the six months ended June 30, 2005,
net loss and loss per share would have been as follows:

Six Months
Ended June 30,
2005
--------------
Net loss as reported $(2,834)
Pro forma $(2,893)
Earnings per share
As reported $ (0.49)
Pro forma $ (0.50)

In May 2006, the Company revalued 91 thousand stock options to an exercise price
of $1.36, the fair market value on that date. The revaluation affected 22
employees. Total compensation cost recognized for the revaluation was $4, which
is included in total stock-based compensation cost of $49. The original exercise
price on these options varied from $3.00 to $5.30.

SFAS 123R requires forfeitures to be estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from initial
estimates. Stock-based compensation expense was recorded net of estimated
forfeitures for the six months ended June 30, 2006 such that expense was
recorded only for those stock-based awards that are expected to vest. Previously
under APB 25 to the extent awards were forfeited prior to vesting, the
corresponding previously recognized expense was reversed in the period of
forfeiture.

In June 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes,"
which prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. In accordance with FIN 48, the Company
must adjust its financial statements to reflect only those tax positions that
are more-likely-than-not to be sustained as of the adoption date. The effective
date of FIN 48 for the Company is January 1, 2007. The adoption of FIN 48 is not
expected to have a material impact on the Company's condensed consolidated
financial statements.

NOTE 3 - RELATED PARTY TRANSACTIONS

At June 30, 2006 and December 31, 2005, the Company was indebted to a
shareholder in the amount of approximately $14,464 and $11,809 respectively, for
funds advanced to the Company. The notes are due December 1, 2007 and bears
interest at various rates that range from 7.75% to 10.25% at June 30, 2006.
Included in the amount owing to a shareholder is $5,005, which is convertible
into Common Stock at the $5.00 per share offering price as stated in the S-1
registration statement filed with the SEC on December 1, 2003.

NOTE 4 - CREDIT FACILITIES

At June 30, 2006, the Company had a $5,500 and a $500 revolving line of credit
with a financial institution that requires quarterly interest payments at the
bank's prime rate minus one percent (7.25% at June 30, 2006). The lines are
secured by a personal guaranty of a shareholder of the Company and are due June
30, 2007. The shareholder is compensated 2% per annum of the total amount
available under the line of credit for the personal guaranty. At June 30, 2006,
the Company owed $5,870 on its revolving lines of credit.

At June 30, 2006, the Company had outstanding irrevocable letters of credit
approximating $524. These letters of credit, which have terms of three months to
one year, collateralize the Company's obligation to third parties for the
purchase of goods or services. The fair value of these letters of credit
approximates contract values based on the nature of the fee arrangements with
the issuing banks, usually 1 to 1.5% of the credit issued.

NOTE 5 - CONTINGENCIES

The Company is involved in various claims and lawsuits arising in the normal
course of business. Management believes that any financial responsibility that
may be incurred in settlement of such claims and lawsuits are not material to
the Company's financial position and results of operations.

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

GENERAL

99 Cent Stuff is a Florida-based single-priced deep-discount retailer
of primarily consumable general merchandise. Our stores offer a wide assortment
of regularly available consumer goods as well as a broad variety of quality,
closeout merchandise. Our product offerings are comprised of brand name
merchandise and closeouts merchandise that may be available for reorder. Every
product is sold for 99 cents or less. We provide our customers value on their
everyday household needs and a positive shopping experience in
customer-service-oriented stores, which are attractively merchandised, brightly
lit and well maintained. We believe that our name-brand focus, along with a
product mix emphasizing value-priced food and beverage and other everyday
household items, increases the frequency of consumer visits and impulse
purchases and reduces some of our exposure to seasonality and economic cycles.
We believe that our format appeals to value-conscious customers in all
socio-economic groups and results in a high volume of sales.

At June 30, 2006, we operated 18 retail stores in south Florida. We
opened our first three stores in 1999, five stores in 2000, two stores in 2001,
one in 2002, four in 2004 and three in 2005. In the past, as part of our
strategy to expand retail operations, we have opened new stores in close
proximity to existing stores so that would be more efficient in distribution,
marketing and branding. We have built corporate and warehouse support staff and
systems that we believe can handle up to 25 stores. As a result of our store
opening costs, and the cost of building our infrastructure, we have recorded
losses since inception.

Our customers use cash, checks and third-party credit and debit cards
to purchase our products. We do not issue private credit cards or make use of
complicated financing arrangements.

99 Cent Stuff only operates in one business segment, which is retail
operations.

The key to achieving profitability in the value business is to be able
to rapidly purchase goods and be able to pay within terms in order to obtain the
lowest prices. From time to time, due to our lack of operating cash, we were not
able to purchase inventory in the most efficient fashion and we have generally
incurred lower margins than some of our competitors. This has also affected our
revenues. We have been instituting various changes to our buying and
merchandising to increase our gross margins to satisfactory levels.

Our success depends in large part on our ability to locate and purchase
quality closeout and special-situation merchandise at attractive prices. We must
continuously seek out buying opportunities from our existing suppliers and from
new sources. We compete for these opportunities with other wholesalers and
retailers, value, discount and deep-discount chains, mass merchandisers, food
markets, drug chains, club stores and various privately-held companies and
individuals.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our condensed consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts.
The estimates and assumptions are evaluated on an on-going basis and are based
on historical experience and on various other factors that are believed to be
reasonable. Estimates and assumptions include, but are not limited to, fixed
asset lives, intangible assets, income taxes, and contingencies. We base our
estimates on historical experience and on various other assumptions that are

believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect its more significant judgments and
estimates used in the preparation of our financial statements.

Inventory: Our accounting for inventory and cost of goods sold requires
us to estimate the value of such assets and cost of such assets sold and to
continually assess whether such assets are impaired and the cost of goods sold
is presented fairly. We believe that at June 30, 2006 no inventory was impaired.

Further information is provided in Note 2 to the Condensed Consolidated
Financial Statements.

Results of Operations

THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

Net sales. Net sales increased $1.4 million, or 10.2%, to $15.0 million for the
three months ended June 30, 2006 from $13.6 million for the three months ended
June 30, 2005. Same store net sales, for stores open all of both periods,
increased $0.1 million or 1.0% for the three months ended June 30, 2006. The
increase in net sales was primarily due to new store openings in 2005. During
the 2006 period, approximately 27.6% of our sales were of produce, which has a
much higher turnover than the other items sold in our stores. We anticipate that
sales of produce will continue to decrease in the future as a percentage of net
sales due to increased purchasing of higher margin items.

Gross profit. Gross profit, which consists of total sales less cost of sales,
increased $0.7 million, or 18.7% to $4.2 million for the three months ended June
30, 2006 from $3.5 million for the three months ended June 30, 2005. As a
percentage of net sales, gross profit increased to 28.3% in the 2006 period from
26.2% in the 2005 period and was primarily attributable to a change in the
product mix, cost variations and our direct import program.

Selling, general and administrative. Selling, general and administrative
expenses, or SG&A, which include operating expenses and depreciation and
amortization, increased $0.4 million for the three months ended June 30, 2006,
or 8.2%, to $5.4 million from $5.0 million for the three months ended June 30,
2005 and was primarily attributable to increased wages and related benefits of
$0.1 million and increased occupancy costs of $0.3 million. The SG&A includes a
$25 thousand non-cash charge relating to deemed compensation of our principal
shareholder and chief executive officer, who does not receive a cash salary and
$16 thousand of non-cash stock option compensation.

Operating loss. Operating loss decreased to $1.1 million for the three months
ended June 30, 2006 compared to $1.4 million for the three months ended June 30,
2005. As a percentage of net sales, operating loss was 7.5% in 2006 and 10.2% in
2005 and the decrease was primarily attributable to the items discussed above.

Other (income) expense. Interest expense increased $0.2 million or 100.4%, to
$0.5 million for the three months ended June 30, 2006 from $0.3 million for the
three months ended June 30, 2005. The increase was primarily attributable to
increased borrowings and higher interest rates. As a percentage of net sales,
interest expense increased to 3.1% in the 2006 period from 1.7% in the 2005
period.

Net loss. As a result of the items discussed above, net loss was $1.6 million
for the three months ended June 30, 2006 and the three months ended June 30,
2005. As a percentage of net sales, net loss was 10.6% in the 2006 period and
11.8% in the 2005 period.

SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO SIX MONTHS ENDED JUNE 30, 2005

Net sales. Net sales increased $3.1 million, or 11.3%, to $30.1 million for the
six months ended June 30, 2006 from $27.0 million for the six months ended June
30, 2005. Same store net sales, for stores open all of both periods, were the
same for the six months ended June 30, 2006 and 2005. The increase in net sales
was primarily due to new store openings in 2005. During the 2006 period,
approximately 28.2% of our sales were of produce, which has a much higher
turnover than the other items sold in our stores, compared to 28.8% in the 2005
period. We anticipate that sales of produce will continue to decrease in the
future as a percentage of net sales due to increased purchasing of higher margin
items.

Gross profit. Gross profit, which consists of total sales less cost of sales,
increased $0.9 million, or 11.6% to $8.3 million for the six months ended June
30, 2006 from $7.4 million for the six months ended June 30, 2005. As a
percentage of net sales, gross profit was 27.6% in both periods.

Selling, general and administrative. Selling, general and administrative
expenses, or SG&A, which include operating expenses and depreciation and
amortization, increased $0.7 million for the six months ended June 30, 2006, or
6.8%, to $10.6 million from $9.9 million for the six months ended June 30, 2005
aand was primarily attributable to increased wages and related benefits, of $0.6
million and occupancy costs, of $0.7 million, partially offset by a lease
termination fee received, net of wind-down expenses at one of our retail
locations, of $0.2 million and hurricane insurance recovery of $0.1 million. The
SG&A includes a $25 thousand non-cash charge relating to deemed compensation of
our principal shareholder and chief executive officer, who does not receive a
cash salary and $49 thousand of non-cash stock option compensation.

Operating loss. Operating loss decreased $0.2 or 7.8%, to $2.2 million in 2006
for the six months ended June 30, 2006 from $2.4 million for the six months
ended June 30, 2005. As a percentage of net sales, operating loss was 7.5% in
the 2006 period and 9.0% in the 2005 period and the decrease was primarily
attributable to the items discussed above.

Other (income) expense. Interest expense increased $0.4 million, or 96.8%, to
$0.9 million for the six months ended June 30, 2006 from $0.5 million for the
six months ended June 30, 2005. The increase was primarily attributable to
increased borrowings and higher interest rates. As a percentage of net sales,
interest expense increased to 2.9% in the 2006 period from 1.6% in the 2005
period.

Net loss. As a result of the items discussed above, net loss increased $0.3
million, or 21.0%, to $3.1 million for the six months ended June 30, 2006 from
$2.8 million for the six months ended June 30, 2005, but decreased as a
percentage of sales to 10.2% from 10.5%.

LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements result primarily from purchases of inventory,
expenses related to new store openings and working capital requirements for new
and existing stores. We take advantage of closeout and other special-situation
opportunities, which frequently result in volume purchases requirements, and as
a consequence, our cash requirements are not constant or predictable during the
year and can be affected by the timing and size of our purchases.

At June 30, 2006, we had a working capital deficit of $6.4 million, as
the bank loan discussed below has been reclassified as a current liability as
its maturity date is within one year. At that date we had no cash and $0.1
million in borrowing availability.

At June 30, 2006, Raymond Zimmerman, our principal shareholder, had
advanced an aggregate of $14.5 million, which was carried on the balance sheet

as shareholder loan payable and accounts payable and accrued expenses, related
party. Interest was accrued at various rates from the prime rate to the prime
rate plus 2%. Of this amount $5.0 million was converted into an unsecured
convertible note. This note is due December 31, 2007 and bears interest at the
prime rate. The note is convertible into common stock at the option of the
holder at a conversion price equal to $5.00, subject to adjustment. We will have
the right to prepay the note at any time.

Mr. Zimmerman has personally guaranteed our aggregate $6.0 million
lines of credit. As a result of these guarantees, the interest rate on these
lines has been prime minus 1%, which we believe would be several points higher
without the guarantee. These lines of credit do not have any financial covenants
or ratios and the only events of default are standard payment defaults. Mr.
Zimmerman has also guaranteed some of our property leases. The lease guarantees
expire on various dates in 2008. We have been accruing fees of 2% of the lines
of credit and the guaranteed property leases. The accrued fees of $0.2 million
as of June 30, 2006 have been included in the accounts payable and accrued
expenses, related party.

At June 30, 2006, approximately $0.1 million was available under our
credit lines. In March 2005, the bank agreed to extend the maturity of the loans
from June 2005 to June 2007. Mr. Zimmerman agreed to fund up to an additional
$3.5 million during 2005 for any operating cash flow shortfalls and funded $4.9
million during the year. As a result, in 2005 these loans were reclassified to
long-term liabilities. As of June 30, 2006 the loans have been reclassified as
short-term liabilities.

Although Mr. Zimmerman has provided $2.0 million of advances through
August 10, 2006, he is not obligated to provide any additional capital during
the remainder of 2006 to fund any current period deficits in operating cash
flow. Other than the existing lines of credit, there are not currently any other
borrowing arrangements or commitments for any capital. We may not be able to
raise additional funds when needed, or on acceptable terms, or at all. Also, any
additional equity financings may be dilutive to shareholders, and debt
financing, if available, may involve restrictive covenants.

The Company is dependent on the above sources of financing to meet its
future obligations. These factors raise substantial doubt about the Company's
ability to continue as a going concern.

Net cash used by operations was $2.8 million for the six months ended
June 30, 2006 and $2.0 million for the six months ended June 30, 2005. Net cash
used by operations during the 2006 period included a net loss of $3.1 million,
depreciation of $0.5 million, an increase in inventory of $1.2 million, a
decrease in accrued expenses of $0.4 million partially offset by an increase in
accounts payable of $0.6 million. Net cash used by operations during the 2005
period included a net loss of $2.8 million, depreciation of $0.6 million, an
increase in inventory of $1.0 million and an increase in accounts payable of
$0.8 million.

Net cash used in investing activities for purchases of property and
equipment was $0.1 million for the six months ended June 30, 2006 and $0.7
million for the six months ended June 30, 2005. No new stores were opened in the
2006 period.

Net cash provided by financing activities was $2.9 million for the six
months ended June 30, 2006, primarily due to an increase in accounts payable and
accrued expenses, related party of $2.0 million, the net increase in borrowings
under the line of credit by $0.3 million and an increase of $0.6 million of cash
overdrafts. Net cash provided by financing activities was $2.8 million for the
six months ended June 30, 2005, primarily due to an increase in accounts payable
and accrued expenses, related party of $3.2 million and a net decrease of
borrowings of $0.3 million under a line of credit.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are subject to risks resulting from interest rate fluctuations since
interest on our borrowings under the bank facility are based on variable rates.
If the prime rate were to increase 1.0% in 2006 as compared to the rate at June
30, 2006, our total interest expense for 2006 would increase $0.2 million based

on the outstanding balance at June 30, 2006. We do not hold any derivative
instruments and do not engage in hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with
the participation of the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
"disclosure controls and procedures" (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), as of the end of the period covered by this report. Based upon the
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed in Company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the required time periods and is accumulated and communicated to
management, including its principal executive officer and principal financial
officer as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company's internal controls or in
other factors during the period covered by the report that have materially
affected, or are reasonably likely to materially affect the Company's internal
controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable

ITEM 1A. RISK FACTORS

There have been no material changes in the Company's risk factors as
disclosed in the Company's annual report in Form 10-K for the year ended
December 31, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -

(a) Exhibits

31.1 Certification of Raymond Zimmerman, President and Chief Executive
Officer pursuant to Rule 13a-14(a) and Rule 15d-14 (a), promulgated
under the Securities Exchange Act of 1934, as amended.
31.2 Certification of Barry Bilmes, Chief Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14 (a), promulgated under the Securities
Exchange Act of 1934, as amended.
32.1 Certification Pursuant to 18 U.S.C. Section 1350 of Raymond Zimmerman,
Chief Executive Officer
32.2 Certification Pursuant to 18 U.S.C. Section 1350 by Barry Bilmes,
Chief Financial Officer

(b) Reports on Form 8-K

Not applicable

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

99 CENT STUFF, INC.

By: /s/ Raymond Zimmerman
-----------------
Raymond Zimmerman, President

Dated: August 11, 2006