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: March 31, 2005
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 of (IRS Employer
incorporation or organization) Identification No.)
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 an accelerated filer (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 April 30, 2005, was 5,833,950 shares.
99 CENT STUFF, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 2005
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheet (Unaudited) at March 31, 2005 ................. 3
Consolidated Statements of Operations (Unaudited)
For the Three Ended March 31, 2005 and 2004 ............................ 4
Consolidated Statement of Shareholders' (Deficit)
For the Three Months Ended March 31, 2005 .............................. 5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2005 and 2004 ..................... 6
Notes to Consolidated Financial Statements (Unaudited) ................... 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations ................ 10
Item 3 - Control and Procedures .......................................... 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings .......................................... 13
Item 2 - Changes in Securities and Use of Proceeds .................. 13
Item 4 - Submission of Matters to a Vote of Security Holders ........ 14
Item 6 - Exhibits and Reports on Form 8-K ........................... 14
Signatures .......................................................... 15
Certifications ...................................................... 16
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
99 Cent Stuff, Inc.
Balance Sheet
(Amount in Thousands, Except Share Data)
MARCH 31, DECEMBER 31,
2005 2004
-------- --------
(Unaudited)
Current assets:
Cash $ -- $ --
Inventory 3,953 3,771
Prepaid expenses and other assets 579 467
-------- --------
Total current assets 4,532 4,238
-------- --------
Property and equipment, net 3,569 3,396
-------- --------
Other assets:
Security deposits 174 171
-------- --------
Total assets $ 8,275 $ 7,805
======== ========
Current liabilities:
Lines of credit $ 5,523 $ 5,798
Cash overdraft 337 115
Accounts payable 4,193 3,698
Accrued expenses 599 468
-------- --------
Total current liabilities 10,652 10,079
Long term liabilities:
Accounts payable and accrued expenses, related party 7,193 6,059
-------- --------
Total Liabilities 17,845 16,138
-------- --------
Shareholders' Equity:
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 March 31, 2005
and December 31, 2004 6 6
Additional paid-in capital (3,947) (3,947)
Accumulated deficit (5,629) (4,392)
-------- --------
Total shareholders' equity (9,570) (8,333)
-------- --------
Total liabilities and shareholders' equity $ 8,275 $ 7,805
======== ========
See the accompanying notes to the condensed consolidated financial statements
Note: The balance sheet at December 31, 2004 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
3
99 Cent Stuff, Inc
Statement of Operations
For the Three Months Ended March 31, 2005 and 2004
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended March 31,
2005 2004
-------- --------
Net sales $ 13,485 $ 10,787
Cost of goods sold 9,591 7,790
-------- --------
Gross profit 3,894 2,997
Selling, general and administrative expenses 4,940 3,566
-------- --------
Loss from operations (1,046) (569)
-------- --------
Other income (expense):
Other income 17 11
Interest expense (208) (146)
-------- --------
Total other income (expense) (191) (135)
-------- --------
Loss before provision for income taxes (1,237) (704)
Provision for Income Taxes -- --
-------- --------
Net loss $ (1,237) $ (704)
======== ========
Net loss per share, basic and diluted $ (0.21) $ (0.13)
======== ========
Weighted average number of common and
common equivalent shares outstanding -
basic and diluted 5,834 5,487
======== ========
See the accompanying notes to the condensed consolidated financial statements
4
99 Cent Stuff, Inc.
Consolidated Statements of Shareholders' (Deficit)
For the Year Ended December 31, 2004 and the Three Months Ended March 31, 2005
(Amount in Thousands)
Common Stock
-----------------------------
Additional
Capital Accumulated
Shares Amount Paid-In (Deficit) Total
--------- -------- -------- -------- --------
Balance, December 31, 2004 5,834 $ 6 $ (3,947) $ (4,392) $ (8,333)
Net loss for the three months ended March 31, 2005 (1,237) (1,237)
--------- -------- -------- -------- --------
Balance, March 31, 2005 5,834 $ 6 $ (3,947) $ (5,629) $ (9,570)
========= ======== ======== ======== ========
See the accompanying notes to the condensed consolidated financial statements
5
99 Cent Stuff, Inc.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2005 and 2004
(Amounts in Thousands)
(Unaudited)
March 31,
2005 2004
------- -------
Cash flows from operating activities:
Net loss $(1,237) $ (704)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 316 219
Interest accrued on payables, related party 134 94
(Increase) decrease in:
Prepaid expenses and other assets (112) 146
Inventory (182) (543)
Security deposits (3) --
Increase (decrease) in:
Accounts payable 495 163
Accrued expenses 131 (251)
------- -------
Net cash used in operating activities (458) (876)
------- -------
Cash flows used in investing activities:
Purchase of property and equipment (489) (167)
------- -------
Cash flows from financing activities:
Increase in accounts payable and accrued expenses,
related party 1,000 --
Change in cash overdraft 222 198
Borrowings under lines of credit 2,325 4,553
Repayments under lines of credit (2,600) (7,028)
Sale of common stock, net of expenses -- 3,294
------- -------
Net cash provided by financing activities 947 1,017
------- -------
Net increase (decrease) in cash -- (26)
Cash at beginning of year -- --
------- -------
Cash at end of year $ -- $ (26)
======= =======
Supplemental cash flow information:
Interest paid $ 118 $ 61
======= =======
See the accompanying notes to the condensed consolidated financial statements
6
99 CENT STUFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1 - DESCRIPTION OF BUSINESS
99 Cent Stuff LLC (the "Company") was organized under the laws of the State of
Delaware on September 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 at 16 locations at March
31,2005. The locations are separately incorporated as limited liability
companies and are wholly owned by the Company. All of the stores are in
southeast Florida. The Company's ability to provide quality merchandise at the
99 cents price point is subject to certain economic factors, which are beyond
the Company's control, including inflation. Inflation could have a material
adverse effect on the Company's business and results of operations, especially
given the constraints on the Company to pass on any incremental costs due to
price increases or other factors. A sustained trend of significant inflationary
pressure could require the Company to abandon its single price point of 99 cents
per item, which could have a material adverse effect on the Company's business
and results of operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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 consisting of a normal and recurring nature considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 2005 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2005. 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, 2004.
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.
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 of merchandise held for
resale. The Company provides an allowance for certain merchandise that may
become totally obsolete or damaged. At March 31, 2005 and December 31, 2004, the
allowance for these items was $5.
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.
7
99 CENT STUFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary limited liability companies, 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.
Operating Segments
The Company has one business segment, which is our 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.
Earnings Per Share
Basic net earnings (loss) per common share are computed by dividing net
earnings(loss) applicable to common shareholders by the weighted-average number
of common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period. In periods when losses are reported, the
weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive.
NOTE 3 - RELATED PARTY TRANSACTIONS
At March 31, 2005 and December 31, 2004, the Company had a long-term note
payable of $7,193 and $6,059, respectively, for funds advanced from a
shareholder of the Company. The note is due December 31, 2006 and bears interest
at the prime rate (5.75% at March 31, 2005). Included in the amount owing to a
shareholder is $5,005, which is convertible into common stock at the option of
the holder at a conversion price equal to $5.00 per share.
NOTE 4 - CREDIT FACILITIES
At March 31, 2005, the Company had a $3,500, $2,000 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 (4.75% at March 31, 2005). The line is
secured by a personal guarantee of a shareholder of the Company and is due June
30, 2005. The shareholder is compensated 2% per annum of the total amount
available under the line of credit for the personal guaranty of this facility.
At March 31, 2005, the Company owed $5,523 on its revolving lines of credit. In
March 2005, the bank agreed to extend the maturity of the lines of credit from
June 2005 to June 2007.
8
99 CENT STUFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
At March 31, 2005, the Company had outstanding irrevocable letters of credit
approximating $230. These letters of credit have terms of three months to one
year and 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.
NOTE 6 - FINANCIAL ANALYSIS AND LIQUIDITY
As of March 31, 2005, the Company had a working capital deficit of $6,100 and
negative net worth of $9,570. From inception on September 28, 1999 to February
2004, the Company was principally funded from loans and capital contributions
provided by the principal shareholder and by bank loans personally guaranteed by
the principal shareholder. Capital requirements result primarily from purchases
of inventory, expenses related to new store openings and working capital
requirements for new and existing stores. The Company takes advantage of
closeouts and other special-situation inventory purchasing opportunities, and as
a consequence, cash requirements are not constant or predictable during the year
and can be affected by the timing and size of the inventory purchases. The
Company had negative cash flow from operations during the three months ended
March 31, 2005.
The Company utilized the offering proceeds and advances from its principal
shareholder primarily for opening new stores, increasing inventory and to fund
cash-flow deficits from operations. It is possible that the Company may be
required to raise additional financing in some future period through public or
private financings, strategic relationships or other arrangements if the Company
is unable to achieve increased operating margins. A decrease in operating cash
flow from current levels would greatly reduce the availability of funds and
would force the Company to obtain additional capital. The Company 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's
management believes that its current working capital financing, commitments from
its principal shareholder, together with continuing improvements in operating
results, will be sufficient to meet operating and capital needs for the
remainder of 2005.
9
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 name brand, consumable 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 at 99 cents, including extra value savings of two or three items
for 99 cents. 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 March 31, 2005, we operated 16 retail stores in south Florida. We
opened our first three stores in 1999, five stores in 2000, two stores in 2001
one in 2002 and four in 2004 and one 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 start-up
costs, operating costs and these expenses, 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 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
10
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. 99 Cent Stuff believes the
following critical accounting policies affect its more significant judgments and
estimates used in the preparation of the financial statements.
Revenue recognition: Revenue is recognized at the point of sale.
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 March 31, 2005 no inventory was
impaired.
Further information is provided in Note 2 to the Consolidated Financial
Statements.
Results of Operations
Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004
Net sales. Net sales increased $2.7 million, or 25.0%, to $13.5 million for the
three months ended March 31, 2005 from $10.8 million for the three months ended
March 31, 2004. Same store net sales, for stores open all of both periods,
decreased $0.5 million in 2005, or 4.8%, compared to the prior year. The
increase in net sales was primarily due to new store openings in the second half
of 2004 and January 2005. Of the 4.8% decrease in same store sales, 2.1% is
attributable to two less sales days in 2005 (leap year in 2004 and Easter Sunday
fell in the first quarter this year and the second quarter last year). The
remaining decrease in same store sales was primarily due to our planned strategy
to remerchandise our stores with higher margin goods and therefore we decreased
inventory shipments to our stores of lower margin items to allow us to
effectuate this conversion. We anticipate completing this project by the end of
the second quarter and expect to then see the negative trend in some store sales
reverse itself. During the 2005 period, approximately 30.8% of our sales were of
produce, which has a much higher turnover than other items sold in our stores.
We anticipate that sales of produce will decrease as a percentage of net sales
due to increased purchasing of higher margin items.
Gross profit. Gross profit, which consists of net sales less cost of goods sold,
increased $0.9 million, or 29.9%, to $3.9 million for the three months ended
March 31, 2005 from $3.0 million for the three months ended March 31, 2004. As a
percentage of net sales, gross profit increased to 28.9% in the 2005 period from
27.8% in 2004 and was primarily attributable to a change in the product mix and
cost variations, partially offset by increased sales in produce, which generally
has lower margins.
Selling, general and administrative. Selling, general and administrative
expenses, or SG&A, which include operating expenses and depreciation and
amortization, increased $1.3 million, or 38.5%, to $4.9 million for the three
months ended March 31, 2005 from $3.6 million for the three months ended March
31, 2004 and was primarily attributable to increased wages and related benefits
of $0.5 million, occupancy costs of $0.5 million, insurance expense of $0.1
million, and depreciation and amortization of $0.1 million.
Operating loss. Operating loss increased $0.4 million, or 83.8%, to $1.0 million
for the three months ended March 31, 2005 from $0.6 million for the three months
ended March 31, 2004. As a percentage of net sales, operating loss was 7.8% in
2005 and 5.3% in 2004 and the increase is primarily attributable to the items
discussed above.
Other (income) expense. Interest expense increased $0.1 million, or 42.5%, to
$0.2 million for the three months ended March 31, 2005 from $0.1 million for the
three months ended March 31, 2004. The increase is primarily attributable to
increased borrowings and higher interest rates. As a percentage of net sales,
interest expense increased 0.1%, to 1.5% in 2005 from 1.4% in 2004.
11
Net loss. As a result of the items discussed above, net loss increased $0.5
million, or 75.7%, to $1.2 million for the three months ended March 31, 2005
from $0.7 million for the three months ended March 31, 2004.
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.
From inception on June 28, 1999 until the first closing of our public
offering February 2004, we were funded principally from loans provided by
Raymond Zimmerman, our principal shareholder and bank loans personally
guaranteed by Mr. Zimmerman, and did not have other external sources of
financing. Virtually all of our fixed assets, including fixtures and equipment,
were purchased using advances made to 99 Cent Stuff from Mr. Zimmerman. In
September 2004, we had utilized all of the proceeds of the offering and borrowed
$0.5 million from Mr. Zimmerman to fund fourth quarter growth. In November 2004
we borrowed an additional $250,000, $0.5 million in January 2005 and $0.5
million in April 2005. These amounts bear interest at the prime rate plus 2% and
are payable on January 1, 2007.
At March 31, 2005, we had negative working capital of $6.1 million,
primarily due to the existing bank loans being due in 2005. At that date we had
no cash and $0.5 million in borrowing availability.
At March 31, 2005, Mr. Zimmerman had advanced an aggregate of $7.2
million, which was carried on the balance sheet as accounts payable and accrued
expenses, related party. Interest was accrued at a rate equal to the prime rate.
Of this amount $5.0 million was converted into an unsecured convertible note.
This note was originally due December 1, 2005 and has been extended to December
31, 2006 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. In
2003, notes payable of $14.6 million was converted into 4,750,000 shares of
common stock as part of the merger with iVideoNow.
Mr. Zimmerman has personally guaranteed our aggregate $6.0 million
lines of credit with Bank of America. 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 2007. We have been accruing fees
of 2% of the lines of credit and the guaranteed property leases. The accrued
fees of $0.1 million as of March 31, 2005 have been included in the accounts
payable and accrued expenses, related party.
At March 31, 2005, approximately $0.5 million was available under these
lines. In February and March 2004, we paid down the lines by approximately $3.4
million from the proceeds of the public offering, but over the remainder of the
year an additional $3.6 million was borrowed to fund expansion and operations.
In March 2005, the bank agreed to extend the maturity of the loans from June
2005 to June 2007. In addition Mr. Zimmerman has agreed to fund up to an
additional $3.5 million during 2005 for any operating shortfalls.
Net cash used by operations was $0.5 million for the three months ended
March 31, 2005 and $0.9 million for the three months ended March 31, 2004. Net
cash used by operations during the 2005 period included a net loss of $1.2
million, depreciation of $0.3 million, and increase in inventory of $0.2
million, of accounts payable of 0.5 million and accrued interest, related party
12
of $0.1 million. Net cash used by operations during the 2004 period included a
net loss of $0.7 million, depreciation of $0.2 million an increase in
inventories of $0.5 million and an increase in accounts payable of $0.1 million,
offset by a decrease in accrued expenses of $0.3 million. Inventory was
increased during the period as proceeds from the offering were used to increase
inventory levels in all stores and to provide inventory for the new stores
opened in 2004.
Net cash used in investing activities for purchases of property and
equipment was $0.5 million for the three months ended March 31, 2005 and $0.2
million for the three months ended March 31, 2004. The increase was principally
attributable to new store openings.
Net cash provided by financing activities was $0.9 million for the
three months ended March 31, 2005, primarily due to $2.3 million of borrowings
under a line of credit offset by repayments of $2.6 million, increases in cash
overdrafts of $0.2 million and increases in accounts payable and accrued
interest, related party of $1.0 million. Net cash provided by financing
activities was $1.0 million for the three months ended March 31, 2004, primarily
due to $3.3 million from the sale of common stock in the public offering, $4.5
million of borrowings under a line of credit offset by repayments of $7.0
million. Net cash provided by financing activities reflects increases in
borrowings under a line of credit personally guaranteed by Mr. Zimmerman in the
amount of $0.1 million in the 2005 period and $2.4 million during the 2004
period. We used all of the proceeds of the public offering in 2004.
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 2005 as compared to the rate at March
31, 2005, our total interest expense for 2005 would increase $0.1 million based
on the outstanding balance at March 31, 2005. 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.
Disclosure controls and procedures are designed 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 time
periods specified in the Securities and Exchange Commission's rules.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the Company's
internal controls subsequent to the date of the evaluation.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN 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
Not applicable
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 by 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
14
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
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Raymond Zimmerman, President
Dated: May 5, 2005