because I was not able to get Torrid personal financial statements, because it was incorporated into Hot Topic annual report as a whole.

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2 EXECUTIVE SUMMARY From doing the research for Torrid annual report, I have determine that Torrid was successful to an degree. I was unable to determine how successful in all, because I was not able to get Torrid personal financial statements, because it was incorporated into Hot Topic annual report as a whole. Hot Topic Inc. is on a fiscal year and ends on the Saturday closest to January 31. Hot topic spent at least 20% more in 2006 than 2005 and was less profitable. Over the next year Hot Topic plans to open approximately 20 new stores. fiscal

3 EXECUTIVE SUMMARY The annual average Hot Topic store volume was $ 0. 9 million in fiscal 2006 compared to $ 1. 0 million in ( Hot Topic Inc. ) Gross margin increased approximately $ million to $ million in fiscal 2006 from $ million in fiscal As a percentage of net sales, gross margin increased to 33. 2% in fiscal 2006 from 32. 6% in fiscal ( Hot Topic Inc. )

4 C.E.O: Elizabeth McLaughlin Home Office is located E. San Jose Ave. City of Industry, California. End of Fiscal year is February 3, 2007 Torrid stores sell apparel, lingerie, shoes and accessories designed for various lifestyles for plus-size females between the ages of 15 and 29. Hot Topic had 131 Torrid stores across the U.S. during fiscal year They also operate via the Internet:

5 Ernst & Young LLP, is Hot Topic Inc. independent Accounting Firm. They were in good standing in accordance to the GAAP. During the Fiscal year of 2007, Hot Topic Inc. was in good standing in reaching sales and were able to keep excellent keep of their financial statements. Torrid is a division under Hot Topic Inc. Hot Topic Inc./ Torrid is on a week basis and ends on the Saturday nearest to January 31.

6 The most recent price of the company s stock was $ The company s stock ranged from a high of $14.83 in the first quarter; to a low of $9.82 in the fourth quarter. Dividend per share was $0.31 Dated March 26, 2007 As a stockholder, I would hold, because the stock market price seems to be steady through out the quarters. I would be careful being that you could lose up to $5 minimum at the most at certain times of the year.

7 Torrid- Hot Topic is a industry designed to cater to the fashion trend of plus size women. ranging from Torrid allows the customers to buy the latest styles without being competitive with the nonplus- size counterpart. They plan to with over the year open at least 20 new stores and close approximately 12 stores. Ages

8 INCOME STATEMENT It s a multi-step Income Statement. Table is on the next slide. Hot Topic was more profitable in 2005, than in Hot Topic spent almost 20% more in 2006 and was less profitable.

9 INCOME STATEMENT. 06 VS. 07

10 BALANCE SHEET GRAPH TABLE Over the fiscal year, Hot Topic is only taking a small percentage of their assets to liabilities. Most coming from Stockholders Equity.

11 STATEMENT OF CASH FLOWS Cash flows from operations in 2006 was 25% more than net income. In 2005, cash flows from operations was 42% more. The company is growing through buying more property (opening of more stores), and Torrid is constantly growing through the new and various fashion lines they constantly put out. Hot Topic Inc. / Torrid is mostly financed through the sales of stocks and investors. Based on Hot Topic Inc. Cash flows, there has been a steady decrease in cash over the past 3 years.

12 ACCOUNTING POLICIES 1. Principles of Consolidation 2. Fiscal Year 3. Use of Estimates 4. Cash and Cash Equivalents: all highly liquid investments with maturities of less than three months when purchased to be cash equivalents. 5. Fair Value of Financial Instruments 6. Short-Term Investments: Short-term investments with maturities in excess of three months consist primarily of interest bearing bonds that are highly liquid, low risk and are available for sale. 7. Inventory: Inventories are valued at the lower of average cost or market, on a weighted average cost basis, using the retail method. Under the retail method, inventory is stated at its current retail selling value, and then is converted to a cost basis by applying an average cost factor that represents the average cost-to-retail ratio based on beginning inventory and the purchase activity for the month. 8. Property and Equipment: Property and equipment are recorded at cost less accumulated depreciation, or in the case of capitalized leases, at the present value of future minimum lease payments. 9. Insurance 10. Revenue Recognition: Revenue is recognized at our retail store locations at the point at which the customer receives and pays for the merchandise at the register. For online sales, revenue is recognized at the time of shipment, which we refer to as the date of purchase by the customer.

13 ACCOUNTING POLICIES CONT. 1. Cost of Goods Sold, Including Buying, Distribution and Occupancy Costs 2. Vendor Allowances 3. Selling, General and Administrative Expenses 4. Gift Cards 5. Store Pre-Opening Costs 6. Shipping and Handling Costs 7. Leases 8. Advertising Costs 9. Income Taxes 10. Long-Lived Assets 11. Stock-Based Compensation 12. Earnings Per Share 13. Accelerated Options 14. Comprehensive Income 15. Off-Balance Sheet Arrangements 16. New Accounting Pronouncements

14 FINANCIAL ANALYSIS LIQUIDITY RATIOS Working Capital for fy 06 was $ 91,267. Fy 05 was $70,623. Current liabilities did not exceed current assets. Current Ratio for fy 06 was 2.63%. Fy 05 was 2.22%.

15 FINANCIAL ANALYSIS PROFITABILITY RATIOS Profit margin: for 2006 there was an profit of $737,932. For 2005, it was $ There was an $35,209 increase from 2005 to Asset turnover for 2006 was 4.72%. For 2005, it was 4.84%. It decrease by.12%, from 2005 to Return on assets for 2006 was.085%. For 2005 it was.15%. There was an.064% decrease. Return on equity for 2006 was.12%. For 2005 it was.22%.

16 PART E. FINANCIAL ANALYSIS SOLVENCY RATIO For the past two years, calculate and comment on: Debt to equity for 2006 was.25%. In 2005 it was.286 %. It decrease by.034 % from 2005 to Meaning that debt went down some in 2006.

17 PART E. FINANCIAL ANALYSIS MARKET STRENGTH RATIOS For the past two years, calculate and comment on: Price/earnings per share for 2006 was $0.31. It drop 19 cents, from the 2005 price at $0.50. There was an average decrease of at least 22 cents for the past four years; starting in 2003, when earnings per share was an dollar. The value of Hot Topic stock and dividends is going down. For fy 06 and fy 05, there was no dividend yield.