-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Co2sW52ocFVWi4KKrXqYJOWwmF1iDn1JlKIt8W2XnyZL0wWECkvK0ML3r4XWjc7e a6Z8PDfIJ85dporCHJtO4g== 0001019687-01-501325.txt : 20020413 0001019687-01-501325.hdr.sgml : 20020413 ACCESSION NUMBER: 0001019687-01-501325 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011103 FILED AS OF DATE: 20011218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOT TOPIC INC /CA/ CENTRAL INDEX KEY: 0001017712 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 770198182 STATE OF INCORPORATION: CA FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28784 FILM NUMBER: 1816479 BUSINESS ADDRESS: STREET 1: 18305 EAST SAN JOSE AVENUE CITY: CITY OF INDUSTRY STATE: CA ZIP: 91748 BUSINESS PHONE: 6268394681 MAIL ADDRESS: STREET 1: 18305 EAST SAN JOSE AVENUE CITY: CITY OF INDUSTRY STATE: CA ZIP: 91768 10-Q 1 hottopic_10q-110301.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 3, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- --------------------- COMMISSION FILE NUMBER: 0-28784 HOT TOPIC, INC. --------------- (Exact name of Registrant as specified in Its Charter) CALIFORNIA 77-0198182 - ------------------------ --------------------------------- (State of Incorporation) (IRS Employer Identification No.) 18305 EAST SAN JOSE AVE., CITY OF INDUSTRY, CA 91748 - ---------------------------------------------- ----- (address of principal executive offices) (Zip Code) (Telephone number of registrant) (626) 839-4681 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of the issuer's common stock as of the latest practicable date: Monday December 10, 2001 - 20,807,963 shares, no par value. HOT TOPIC, INC. INDEX TO FORM 10-Q Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited): Consolidated Balance Sheets - November 3, 2001 and February 3, 2001 3 Consolidated Statements of Income for the 13 and 39 weeks ended November 3, 2001 and October 28, 2000 4 Consolidated Statements of Cash Flows for the 39 weeks ended November 3, 2001 and October 28, 2000 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 11 PART II. OTHER INFORMATION 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURE PAGE 12 2 HOT TOPIC, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
November 3, 2001 February 3, 2001 (a) ASSETS Current Assets Cash and cash equivalents $ 47,158,000 $ 51,288,000 Inventory 38,282,000 21,336,000 Prepaid expenses and other 14,729,000 5,552,000 Deferred tax asset 944,000 944,000 ------------- ------------- Total current assets 101,113,000 79,120,000 Leaseholds, fixtures and equipment: Furniture, fixtures and equipment 42,046,000 31,300,000 Leasehold improvements 40,215,000 29,135,000 ------------- ------------- 82,261,000 60,435,000 Less accumulated depreciation 28,147,000 21,270,000 ------------- ------------- Net leaseholds, fixtures and equipment 54,114,000 39,165,000 Deposits and other assets 216,000 101,000 Deferred tax asset 260,000 260,000 ------------- ------------- Total Assets $155,703,000 $118,646,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 12,913,000 $ 6,632,000 Accrued payroll and related expenses 11,292,000 10,093,000 Accrued sales and other taxes payable 1,594,000 1,103,000 Income taxes payable 9,649,000 - Current portion of capital lease obligations 68,000 38,000 ------------- ------------- Total current liabilities 35,516,000 17,866,000 Deferred rent 1,653,000 1,404,000 Capital lease obligations, less current portion 159,000 85,000 Shareholders' equity Common shares, no par value; 50,000,000 shares authorized; 20,799,938 and 20,293,855 issued and outstanding at November 3, 2001 and February 3, 2001, respectively 52,380,000 49,429,000 Retained earnings 65,995,000 49,862,000 ------------- ------------- Total shareholders' equity 118,375,000 99,291,000 ------------- ------------- Total liabilities and shareholders' equity $155,703,000 $118,646,000 ============= ============= (a) - The balance sheet at February 3, 2001 is derived from the audited financial statements at that date. See accompanying notes to consolidated financial statements.
3 HOT TOPIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Third Quarter (13 weeks ended) November 3, 2001 October 28, 2000 --------------------------------- Net Sales $92,080,000 $72,203,000 Cost of goods sold, including buying, distribution and occupancy costs 56,150,000 42,993,000 ----------- ----------- Gross Margin 35,930,000 29,210,000 Selling, general, and administrative expenses 22,694,000 18,045,000 ----------- ----------- Operating Income 13,236,000 11,165,000 Interest income-net 466,000 449,000 ----------- ----------- Income before income taxes 13,702,000 11,614,000 Provision for income taxes 5,195,000 4,297,000 ----------- ----------- Net income $ 8,507,000 $ 7,317,000 =========== =========== Net income per share Basic $ 0.41 $ 0.37 Diluted $ 0.39 $ 0.34 Weighted average shares outstanding Basic 20,736,000 19,795,000 Diluted 22,080,000 21,426,000 See accompanying notes to consolidated financial statements. Nine Months (39 weeks ended) November 3, 2001 October 28, 2000 --------------------------------- Net Sales $226,951,000 $168,759,000 Cost of goods sold, including buying, distribution and occupancy costs 141,384,000 103,494,000 ------------ ------------ Gross Margin 85,567,000 65,265,000 Selling, general, and administrative expenses 61,246,000 46,066,000 ------------ ------------ Operating Income 24,321,000 19,199,000 Interest income-net 1,486,000 1,247,000 ------------ ------------ Income before income taxes 25,807,000 20,446,000 Provision for income taxes 9,674,000 7,565,000 ------------ ------------ Net income $ 16,133,000 $ 12,881,000 ============ ============ Net income per share Basic $ 0.78 $ 0.66 Diluted $ 0.73 $ 0.61 Weighted average shares outstanding Basic 20,581,000 19,656,000 Diluted 22,144,000 21,245,000 See accompanying notes to consolidated financial statements. 4 HOT TOPIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
Year-to-date (39 weeks) ended ----------------------------- November 3, 2001 October 28, 2000 ----------------------------- OPERATING ACTIVITIES: Net income $ 16,133,000 $ 12,881,000 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization 7,955,000 5,848,000 Deferred rent 250,000 223,000 Deferred compensation - 7,000 Loss on disposal of fixed assets 276,000 70,000 Changes in operating assets and liabilities: Inventory (16,947,000) (8,472,000) Prepaid expenses and other (9,176,000) (5,899,000) Accounts payable 6,281,000 3,534,000 Accrued payroll and related expenses 1,198,000 1,010,000 Accrued sales and other taxes payable 491,000 1,064,000 Income taxes payable 9,649,000 2,596,000 ------------- ------------- Net cash provided by operating activities 16,110,000 12,862,000 INVESTING ACTIVITIES: Deposits and Other Assets (115,000) (18,000) Purchases of property and equipment (23,056,000) (13,104,000) ------------- ------------- Net cash (used in) investing activities (23,171,000) (13,122,000) FINANCING ACTIVITIES: Payments on capital lease obligations (20,000) (27,000) Proceeds from exercise of stock options 2,951,000 2,099,000 ------------- ------------- Net cash provided by financing activities 2,931,000 2,072,000 ------------- ------------- (Decrease)/Increase in cash and cash equivalents (4,130,000) 1,812,000 Cash and cash equivalents at the beginning of period 51,288,000 39,550,000 ------------- ------------- Cash and cash equivalents at the end of period $ 47,158,000 $ 41,362,000 ============= ============= SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $ 18,000 $ 24,000 ============= ============= Cash paid during the period for income taxes $ 7,302,000 $ 9,772,000 ============= ============= See accompanying notes to consolidated financial statements. 5
HOT TOPIC, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. Organization and Basis of Presentation: --------------------------------------- Hot Topic, Inc. (together with its subsidiaries, the "Company") is a mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for young men and women principally between the ages of 12 and 22. In the first half of fiscal 2001 (the fiscal year ending February 2, 2002) the Company also launched a second retail concept with the opening of six stores under the trade name Torrid(TM). Torrid offers a selection of apparel, lingerie, shoes and accessories centered around various lifestyles for plus-size young women between the ages of 15 and 30. At the end of the third quarter of fiscal 2001 (November 3, 2001), the Company operated 341 Hot Topic stores in 48 states throughout the United States, six Torrid stores and websites hottopic.com and torrid.com. The information set forth in these financial statements is unaudited except for the February 3, 2001 Balance Sheet. These statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation have been included. The results of operations for the 13 and 39 weeks ended November 3, 2001 are not necessarily indicative of the results that may be expected for the year ending February 2, 2002. For further information, refer to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended February 3, 2001. NOTE 2. Net Income Per Share: --------------------- The Company computes net income per share pursuant to Statement of Financial Accounting Standards Board No. 128 "Earnings Per Share" (Statement No. 128). Basic net income per share is computed based on the weighted average number of shares outstanding for the period. Diluted net income per share is computed based on the weighted average number of common and potentially dilutive common stock equivalents outstanding for the period. A two-for-one stock split became effective December 27, 2000. All share and per share amounts have been restated to reflect the split. NOTE 3. Impact of Recently Issued Accounting Standards: ----------------------------------------------- In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes the staff's views in applying accounting principles generally accepted in the United States of America to revenue recognition in financial statements. The Company adopted SAB No. 101 in fiscal year 2000. The adoption of SAB No. 101 did not have an impact on the Company's consolidated results of operations or equity. 6 In March 2000, the FASB issued Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving Stock Compensation." FIN No. 44 is an interpretation of Accounting Principal Board's ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Among other matters, FIN No. 44 clarifies the application of APB Opinion No. 25 regarding the definition of employee for purposes of applying APB Opinion No. 25, the criteria for determining whether a plan qualifies as non compensatory and the accounting consequences of modifications to the terms of previously issued stock options or similar awards. The Company adopted the provisions of FIN No. 44 in fiscal 2000. The adoption of FIN No. 44 did not have a material impact on the Company's consolidated results of operations or financial condition. Pursuant to Emerging Issues Task Force Issue 00-10 "Accounting for Shipping and Handling Fees and Costs," cost of sales includes the cost of merchandise, inventory markdowns, inventory shrinkage, inbound freight, distribution and warehousing, payroll for buying personnel, and retail store occupancy costs. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and the Notes related thereto. RESULTS OF OPERATIONS 13 Weeks Ended November 3, 2001 (Third Quarter of Fiscal 2001) Compared to 13 Weeks Ended October 28, 2000 (Third Quarter of Fiscal 2000) - ----------------------------------------------------------- Net sales increased $19,877,000, or 27.5%, to $92,080,000 during the third quarter of fiscal 2001 from $72,203,000 during the third quarter of fiscal 2000. The increased net sales in the third quarter of fiscal 2001 were attributable to an increase in the number of stores, including the six Torrid stores opened during the first and second quarters of fiscal 2001, and to a 2.2% increase in comparable store sales as compared to the corresponding 13 weeks last year. The comparable store sales increase of 2.2% contributed approximately $1,400,000 of the increase in net sales. Net sales for the 115 stores not yet qualifying as comparable stores (109 Hot Topic stores and six Torrid stores) contributed approximately $18,500,000 of the increase in net sales. In the third quarter of fiscal 2000, comparable store sales increased by 15.3%. The Company considers a store comparable after it has been open for 15 full months. If a store is relocated or expanded by more than 15% in total square footage, it is removed from the comparable store base and, similar to new stores, becomes comparable after 15 full months. At the end of the third quarter of fiscal 2001, 232 of the Company's 341 Hot Topic stores were included in the comparable store base, compared to 177 of the 267 stores open at the end of last year's third quarter. The events of September 11, 2001 impacted sales during September. The following table sets forth the comparable store sales percent each week of September. Week ended: Percentage increase/(decrease) in comparable store sales: ----------- --------------------------------------------------------- September 8 3.3% September 15 (12.3) September 22 2.9 September 29 4.3 October 6 4.3 ------------- ---- September Total 0.6% 7 Sales of apparel and tee shirt category merchandise, as a percentage of total net sales, were 55% in the third quarter of fiscal 2001 compared to 53% in the third quarter of fiscal 2000. The increase in apparel was primarily due to increases in sales of men's and women's bottoms, music-licensed tee-shirts and men's and women's tops. These sales increases were offset in part by decreases in various accessory categories. Gross margin increased $6,720,000 to $35,930,000 during the third quarter of fiscal 2001 from $29,210,000 during the third quarter of fiscal 2000. As a percentage of net sales, gross margin decreased to 39.0% during the third quarter of fiscal 2001 from 40.5% in the third quarter of fiscal 2000. This 1.5% decrease in gross margin as a percentage of net sales is primarily attributable to a 0.5% increase in store occupancy and depreciation expenses related to higher common area maintenance charges along with a degree of leverage lost from slightly lower sales per square foot; a 0.5% increase in distribution expenses associated with higher inventory levels resulting from the seasonal buildup of inventories relating to the upcoming 2001 Holiday season (the third quarter of fiscal 2001 ended on November 3, 2001, one week closer to Thanksgiving than the third quarter of fiscal 2000 which ended October 28, 2000); a 0.3% increase in store depreciation related to the cost of additional point of sale equipment and the slightly lower sales per square foot; and buying expenses were higher by 0.2% as a percentage of sales in the third quarter of 2001 compared to the third quarter of 2000, reflecting additional expenses related to the Torrid staffing. Selling, general and administrative expenses increased $4,649,000 or 25.8% to $22,694,000 during the third quarter of fiscal 2001 from $18,045,000 during the third quarter of fiscal 2000, but decreased as a percentage of net sales to 24.7% in the third quarter of fiscal 2001 from 25.0% in the third quarter of fiscal 2000. The total dollar increase in selling, general and administrative expenses was primarily attributable to an increase in the number of retail stores from 267 at the end of the third quarter of fiscal 2000 to 347 at the end of the third quarter of fiscal 2001 and the corresponding additional payroll and other expenses required to support these additional stores. The decrease as a percentage of net sales was primarily attributable to leveraging headquarters and field management expenses, and lower store operating expenses resulting from management's efforts to control such expenses. This leverage was offset in part by higher selling payroll expense as a percentage of sales. Operating income increased $2,071,000 or 18.5% to $13,236,000 during the third quarter of fiscal 2001 from $11,165,000 during the third quarter of fiscal 2000. As a percentage of net sales, the operating income was 14.4% in the third quarter of fiscal 2001 compared to 15.5% in the third quarter of fiscal 2000. Interest income, net, increased approximately $17,000 to $466,000 in the third quarter of fiscal 2001 from $449,000 in the third quarter of fiscal 2000, principally due to higher average cash balances offset by significantly lower interest rates. 8 39 Weeks Ended November 3, 2001 (First Nine Months of Fiscal 2001) Compared to 39 Weeks Ended October 28, 2000 (First Nine Months of Fiscal 2000) - ------------------------------------------------------------------ Net sales increased $58,192,000, or 34.5%, to $226,951,000 during the first nine months of fiscal 2001 from $168,759,000 during the first nine months of fiscal 2000. The increased net sales in the first nine months of fiscal 2001 were attributable to an increase in the number of stores, and to a 3.9% increase in comparable store sales as compared to the corresponding 39 weeks last year, both of which were offset in part by the impact on sales of the events of September 11, as described above. Net sales for the 115 stores not yet qualifying as comparable stores contributed approximately $52,300,000 of the increase in net sales. The comparable store sales increase of 3.9% contributed approximately $5,900,000 of the increase in net sales. In the first nine months of fiscal 2000, comparable store sales increased by 19.6%. Sales of apparel category merchandise, as a percentage of total net sales, were 53% in the first nine months of fiscal 2001 compared to 51% in the first nine months of fiscal 2000. Gross margin increased approximately $20,302,000 to $85,567,000 during the first nine months of fiscal 2001 from $65,265,000 during the first nine months of fiscal 2000. As a percentage of net sales, gross margin decreased to 37.7% during the first nine months of fiscal 2001 from 38.7% in the first nine months of fiscal 2000. This 1.0% decrease in gross margin as a percentage of net sales reflects an increase in store occupancy expenses of 0.5% related to higher common area maintenance charges and a 0.3% increase in distribution expenses associated with higher inventory levels. The Company's merchandise margins, as a percentage of sales, were approximately 0.1% lower in the first nine months of 2001 compared to the first nine months of 2000 principally due to higher planned markdowns in the Company's Torrid stores. Buying expenses were also higher by 0.1% as a percentage of sales in the first nine months of 2001 compared to the first nine months of 2000, reflecting additional expenses related to the Torrid staffing. Selling, general and administrative expenses increased approximately $15,180,000 or 33.0% to $61,246,000 during the first nine months of fiscal 2001 from $46,066,000 during the first nine months of fiscal 2000, but decreased as a percentage of net sales to 27.0% in the first nine months of fiscal 2001 from 27.3% in the first nine months of fiscal 2000. The total dollar increase in selling, general and administrative expenses is primarily attributable to an increase in the number of retail stores from 267 at the end of the third quarter of fiscal 2000 to 347 at the end of the third quarter of fiscal 2001 and the corresponding additional payroll and other expenses to support these additional stores. The decrease as a percentage of net sales was primarily attributable to leveraging headquarters and field management expenses, and lower store operating expense, resulting from management's efforts to control such expenses. This leverage was offset in part by higher selling payroll expense as a percentage of sales. Operating income increased approximately $5,122,000 or 26.7% to $24,321,000 during the first nine months of fiscal 2001 from $19,199,000 during the first nine months of fiscal 2000. As a percentage of net sales, the operating income was 10.7% in the first nine months of fiscal 2001 compared to 11.4% in the first nine months of fiscal 2000. Interest income, net, increased approximately $239,000 to $1,486,000 in the first nine months of fiscal 2001 from $1,247,000 in the first nine months of fiscal 2000, principally due to higher average cash balances somewhat offset by lower interest rates. 9 LIQUIDITY AND CAPITAL RESOURCES Historically, as well as during the first nine months of fiscal 2001, the Company's primary uses of cash have been to finance store openings and purchase merchandise inventories. The Company has historically satisfied its cash requirements principally from cash flows from operations, and, in earlier years, also from proceeds from the sale of equity securities. Cash flows provided by operating activities were $16,110,000 and $12,862,000 in the first nine months of fiscal 2001 and 2000, respectively. The $3,248,000 increase in cash flows provided by operating activities in the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000 was primarily due to an increase in income taxes payable of $7,053,000 due to the timing of income tax payments, an increase in net income of $3,252,000, and an increase in depreciation and amortization of $2,107,000. These increases were offset by an increase in inventories net of accounts payable of ($5,728,000) resulting from the seasonal buildup of inventories relating to the Company's Holiday season, and an increase in prepaid expenses of ($3,277,000) resulting primarily from a $2,500,000 payment in October 2001 of November 2001 store rents. The Company's average store inventories vary throughout the year and increase in advance of the peak selling periods such as back-to-school, Halloween and the Holiday season, which traditionally begins the day after Thanksgiving through the first few days of January. The changes in other items of working capital for the first nine months of fiscal 2001 were consistent with the first nine months of fiscal 2000. Cash flows used in investing activities were ($23,171,000) and ($13,122,000) in the first nine months of fiscal 2001 and 2000, respectively. Cash flows used in investing activities relate primarily to store openings and the purchase of computer hardware and software. The higher capital expenditures during the first nine months of fiscal 2001 versus the first nine months of fiscal 2000 relate primarily to the opening of 19 more new stores (including six new Torrid stores) along with the higher cost per new Hot Topic store associated with the new industrial club design. In addition, the higher capital expenditures were also attributable to the Company's new point of sale equipment installed in all existing stores between March 2001 and October 2001. Cash flows provided by financing activities were $2,931,000 and $2,072,000 in the first nine months of fiscal 2001 and 2000, respectively. This increase was primarily due to the additional proceeds received from the exercise of stock options in the first nine months of fiscal 2001 versus the first nine months of fiscal 2000. The Company believes that its current cash balances and cash generated from operations will be sufficient to fund its operations and planned expansion through at least the next 12 months. QUARTERLY RESULTS AND SEASONALITY The Company's quarterly results of operations may fluctuate materially depending on, among other things, the timing of store openings and related pre-opening and other startup expenses, net sales contributed by new stores, increases or decreases in comparable store sales, releases of new music and music-related products, shifts in timing of certain holidays, changes in the Company's merchandise mix and overall economic conditions. 10 The Company's business is also subject to seasonal influences, with heavier concentrations of sales during the back-to-school, Halloween and Holiday seasons, and other periods when schools are not in session. The Holiday season remains the Company's single most important selling season. The Company believes, however, that the importance of the summer vacation and back-to-school seasons (which affect operating results in the second and third quarters, respectively) and to a lesser extent, the spring break season (which affects operating results in the first quarter) as well as Halloween (which affects operating results in the third quarter), all reduce the Company's dependence on the Holiday selling season. Furthermore, summer vacation, spring break and the back-to-school seasons take place at somewhat different times in different parts of the country, spreading the impact of these events on the Company's sales over a longer period. As is the case with many retailers of apparel, accessories and related merchandise, the Company typically experiences lower first fiscal quarter net sales relative to other quarters. STATEMENT REGARDING FORWARD LOOKING DISCLOSURE Certain sections of this Quarterly Report on Form 10-Q, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. These forward looking statements involve risks and uncertainties, and the Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the sufficiency of the Company's working capital and cash flows from operating activities, the implementation and management of the Company's growth strategy (including the Company's new retail concept Torrid), the demand for the merchandise offered by the Company, the ability of the Company to obtain adequate merchandise supply, the ability of the Company to gauge the fashion tastes of its customers and provide merchandise that satisfies customer demand, the effect of economic conditions, the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic and the effect of competitive pressures from other retailers as well as other risks detailed from time to time in the Company's SEC reports, including the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2001. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 11 PART II. - OTHER INFORMATION Items 1- 5 are not applicable. Item 6 - Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description of Document ------ ----------------------- 3.1 Amended and Restated Articles of Incorporation. (1) 3.2 Amended and Restated Bylaws. (2) 4.1 Reference is made to Exhibits 3.1 and 3.2. 4.2 Specimen stock certificate. (1) (1) Filed as an exhibit to Registrant's Registration Statement on Form SB - 2 (No. 333-5054-LA) and incorporated herein by reference (2) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year ended February 3, 2001 and incorporated herein by reference. (b) Reports on Form 8-K No reports on Form 8-K were filed during the period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hot Topic, Inc. (Registrant) Date: 12/18/01 /s/ Elizabeth M. McLaughlin ----------------------------------------------- Elizabeth M. McLaughlin Chief Executive Officer, President and Director (Principal Executive Officer) Date: 12/18/01 /s/ Jim McGinty ----------------------------------------------- Jim McGinty Chief Financial Officer (Principal Financial and Accounting Officer) 12 -----END PRIVACY-ENHANCED MESSAGE-----