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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


(Mark One)

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended: July 26, 2003OR

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from: ______ to

Commission file number: 333-57011

Iron Age Corporation




(Exact name of registrant as specified in its charter)


|                               |  |                       
|------------------------------ |  | ----------------------
|Delaware                       |  | 25-1376723            
|                               |  |                       
|(State or other
jurisdiction   |  | (I.R.S. Employer      
|incorporation or
organization) |  | Identification Number)

Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania 15205




(Address of principal executive offices)
(Zip Code)


(412) 787-4100




(Registrants telephone number, including area code)


Not Applicable.




(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.    Yes [  ]          No [  ] Not Applicable.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    Yes [  ]          No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date. Not Applicable.





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TABLE OF CONTENTS



|                                                   |                                                                                               |                                            |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I - FINANCIAL INFORMATION                    
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Consolidated Balance Sheets               
|                                                   |                                                                                               | Consolidated Statements of Operations     
|                                                   |                                                                                               | Consolidated Statements of Cash Flows     
|                                                   |                                                                                               | Notes to Consolidated Financial Statements
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|PART II OTHER INFORMATION                         
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                   | Item 3. Defaults upon Senior Securities                                                      
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 5. Other Information                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|Letter Waiver to Loan & Security Agreement 6/26/03
|Section 302 Certification by CEO                  
|Section 302 Certification by CFO                  
|Section 906 Certification by CEO                  
|Section 906 Certification by CFO                  



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##### Table of Contents









|                               |  |  |  |  |                                                                                                                 |  |  |   |  | 
|------------------------------ |  |  |  |  | --------------------------------------------------------------------------------------------------------------- |  |  | - |  | 
|PART 1 - FINANCIAL INFORMATION
|Item 1. Financial Statements.  |  |  |  | 
|                               |  |  |  |  | The following financial statements are presented herein:                                                        |  |  |   | 
|                               |  |  |  |  | Consolidated Balance Sheets as of July 26, 2003 and
January 25, 2003                                            |  |  | 3 | 
|                               |  |  |  |  | Consolidated Statements of Operations for the three months and
six months ended July 26, 2003 and July 27, 2002 |  |  | 4 | 
|                               |  |  |  |  | Consolidated Statements of Cash Flows for the six months ended
July 26, 2003 and July 27, 2002                  |  |  | 5 | 
|                               |  |  |  |  | Notes to Consolidated Financial Statements                                                                      |  |  | 6 | 





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Iron Age Corporation




Consolidated Balance Sheets


|                                              |                                                                             |   |                        |          |            |   |         |         |  
|--------------------------------------------- | --------------------------------------------------------------------------- | - | ---------------------- | -------- | ---------- | - | ------- | ------- | -
|                                              |                                                                             |   | July 26                |          | January 25
|                                              |                                                                             |   | 2003                   |          | 2003      
|                                              |                                                                             |   |                        |          |           
|                                              |                                                                             |   | (unaudited)            |          |            |   |        
|                                              |                                                                             |   | (Dollars in Thousands)
|Assets                                        |                                                                             |   |                        |          |            |   |         |        
|Current assets:                               |                                                                             |   |                        |          |            |   |         |        
|                                              | Cash and cash equivalents                                                   |   | $                      | 14       |            |   | $       | 323     |  
|                                              | Accounts receivable, net                                                    |   |                        | 13,518   |            |   |         | 13,548  |  
|                                              | Inventories (Note 2)                                                        |   |                        | 34,510   |            |   |         | 31,671  |  
|                                              | Prepaid expenses                                                            |   |                        | 2,778    |            |   |         | 3,134   |  
|                                              | Deferred income taxes                                                       |   |                        | 685      |            |   |         | 713     |  
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total current assets                          |                                                                             |   | 51,505                 |          |            |   | 49,389  |        
|Note receivable from parent                   |                                                                             |   | 1,654                  |          |            |   | 1,654   |        
|Property and equipment, net                   |                                                                             |   | 12,182                 |          |            |   | 12,681  |        
|Other noncurrent assets                       |                                                                             |   | 171                    |          |            |   | 170     |        
|Intangible assets, net                        |                                                                             |   | 13,045                 |          |            |   | 13,852  |        
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total assets                                  |                                                                             | $ | 78,557                 |          |            | $ | 77,746  |        
|                                              |                                                                             |   |                        |          |            |   |         |        
|Liabilities and stockholders deficit         |                                                                             |   |                        |          |            |   |         |        
|Current liabilities:                          |                                                                             |   |                        |          |            |   |         |        
|                                              | Long-term debt and revolving credit facilities                              |   | $                      | 101,081  |            |   | $       | 97,908  |  
|                                              | Accounts payable                                                            |   |                        | 4,479    |            |   |         | 3,272   |  
|                                              | Accrued expenses                                                            |   |                        | 6,828    |            |   |         | 5,999   |  
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total current liabilities                     |                                                                             |   | 112,388                |          |            |   | 107,179 |        
|Other noncurrent liabilities                  |                                                                             |   | 316                    |          |            |   | 324     |        
|Deferred income taxes                         |                                                                             |   | 4,183                  |          |            |   | 4,205   |        
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total liabilities                             |                                                                             |   | 116,887                |          |            |   | 111,708 |        
|Commitments and contingencies                 |                                                                             |   |                       |          |            |   |        |        
|Holdings Series B redeemable preferred stock |                                                                             |   | 11,115                 |          |            |   | 10,100  |        
|Holdings Series C redeemable preferred stock |                                                                             |   | 9,122                  |          |            |   | 8,193   |        
|Stockholders deficit:                        |                                                                             |   |                        |          |            |   |         |        
|                                              | Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding |   |                        | 1        |            |   |         | 1       |  
|                                              | Additional paid-in capital                                                  |   |                        | 44,466   |            |   |         | 44,466  |  
|                                              | Accumulated deficit                                                         |   |                        | (102,798 | )          |   |         | (96,435 | )
|                                              | Accumulated other comprehensive loss                                        |   |                        | (236     | )          |   |         | (287    | )
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total stockholders deficit                   |                                                                             |   | (58,567                | )        |            |   | (52,255 | )      
|                                              |                                                                             |   |                        |          |            |   |         |        
|Total liabilities and stockholders deficit   |                                                                             | $ | 78,557                 |          |            | $ | 77,746  |        
|                                              |                                                                             |   |                        |          |            |   |         |        

See accompanying notes.

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Iron Age Corporation




Consolidated Statements of Operations (Unaudited)


|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|----------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---------------- |  | ------- | ------ | ------- |  | - | ------ | - |  | - | ------- | -
|                                                                                          |  | Three months ended     |        | Six months ended
|                                                                                          |  | July 26                |        | July 27          |  | July 26 |        | July 27
|                                                                                          |  | 2003                   |        | 2002             |  | 2003    |        | 2002   
|                                                                                          |  |                        |        |                  |  |         |        |        
|                                                                                          |  | (Dollars in Thousands)
|Net sales                                                                                 |  | $                      | 23,733 |                  |  | $       | 23,830 |         |  | $ | 51,214 |   |  | $ | 51,406  |  
|Cost of sales                                                                             |  |                        | 12,048 |                  |  |         | 11,937 |         |  |   | 25,688 |   |  |   | 25,477  |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|Gross profit                                                                              |  |                        | 11,685 |                  |  |         | 11,893 |         |  |   | 25,526 |   |  |   | 25,929  |  
|Selling, general and administrative                                                       |  |                        | 11,307 |                  |  |         | 10,380 |         |  |   | 22,176 |   |  |   | 20,167  |  
|Depreciation                                                                              |  |                        | 718    |                  |  |         | 643    |         |  |   | 1,417  |   |  |   | 1,279   |  
|Amortization of intangible assets                                                         |  |                        | 286    |                  |  |         | 287    |         |  |   | 572    |   |  |   | 579     |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|Operating (loss) income                                                                   |  |                        | (626   | )                |  |         | 583    |         |  |   | 1,361  |   |  |   | 3,904   |  
|Interest expense                                                                          |  |                        | 3,143  |                  |  |         | 2,184  |         |  |   | 5,676  |   |  |   | 4,330   |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|Loss before income taxes and
cumulative effect of change in accounting principle          |  |                        | (3,769 | )                |  |         | (1,601 | )       |  |   | (4,315 | ) |  |   | (426    | )
|Income tax expense (benefit)                                                              |  |                        | 105    |                  |  |         | (294   | )       |  |   | 104    |   |  |   | 106     |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|Loss before cumulative effect of change
in accounting principle                           |  |                        | (3,874 | )                |  |         | (1,307 | )       |  |   | (4,419 | ) |  |   | (532    | )
|Cumulative effect of change in accounting
principle, net of tax effect of $1,718 (Note 3) |  |                        |       |                  |  |         |       |         |  |   |       |   |  |   | (77,510 | )
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  
|Net loss                                                                                  |  | $                      | (3,874 | )                |  | $       | (1,307 | )       |  | $ | (4,419 | ) |  | $ | (78,042 | )
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |        |   |  |   |         |  

See accompanying notes.

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Iron Age Corporation




Consolidated Statements of Cash Flows (Unaudited)


|                                                                                          |                                                                 |                              |         |                        |        |                  |         |        |        |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------- | ------- | ---------------------- | ------ | ---------------- | ------- | ------ | ------ | -
|                                                                                          |                                                                 |                              |         | Six
monthsended        |        | Six months ended
|                                                                                          |                                                                 |                              |         | July 26                |        | July 27         
|                                                                                          |                                                                 |                              |         | 2003                   |        | 2002            
|                                                                                          |                                                                 |                              |         |                        |        |                 
|                                                                                          |                                                                 |                              |         | (Dollars in Thousands)
|Operating activities                                                                      |                                                                 |                              |         |                        |        |                  |         |       
|Net loss                                                                                  |                                                                 | $                            | (4,419  | )                      |        | $                | (78,042 | )     
|Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |                                                                 |                              |         |                        |        |                  |         |       
|                                                                                          | Cumulative effect of change in accounting principle, net of tax |                              |         |                       |        |                  |         | 77,510 |       
|                                                                                          | Depreciation and amortization                                   |                              |         | 2,214                  |        |                  |         | 2,087  |       
|                                                                                          | Amortization of deferred financing fees included in interest    |                              |         | 380                    |        |                  |         | 270    |       
|                                                                                          | Accrual of paid-in-kind interest                                |                              |         | 121                    |        |                  |         |       |       
|                                                                                          | Provision for losses on accounts receivable                     |                              |         | 142                    |        |                  |         | 193    |       
|                                                                                          | Deferred income taxes                                           |                              |         | 6                      |        |                  |         | (480   | )     
|                                                                                          | Stock-based compensation                                        |                              |         |                       |        |                  |         | 132    |       
|Changes in operating assets and liabilities:                                              |                                                                 |                              |         |                        |        |                  |         |       
|                                                                                          |                                                                 | Accounts receivable          |         |                        | (112   | )                |         |        | 657    |  
|                                                                                          |                                                                 | Inventories                  |         |                        | (2,839 | )                |         |        | (1,791 | )
|                                                                                          |                                                                 | Prepaid expenses             |         |                        | 356    |                  |         |        | 881    |  
|                                                                                          |                                                                 | Other noncurrent assets      |         |                        | (31    | )                |         |        | (150   | )
|                                                                                          |                                                                 | Accounts payable             |         |                        | 1,207  |                  |         |        | (23    | )
|                                                                                          |                                                                 | Accrued expenses             |         |                        | 829    |                  |         |        | (123   | )
|                                                                                          |                                                                 | Other noncurrent liabilities |         |                        | (8     | )                |         |        | (33    | )
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|Net cash (used in) provided by operating activities                                       |                                                                 |                              | (2,154  | )                      |        |                  | 1,088   |       
|Investing activities                                                                      |                                                                 |                              |         |                        |        |                  |         |       
|Capitalization of internal use software costs                                             |                                                                 |                              | (162    | )                      |        |                  | (167    | )     
|Purchases of property and equipment                                                       |                                                                 |                              | (981    | )                      |        |                  | (1,543  | )     
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|Net cash used in investing activities                                                     |                                                                 |                              | (1,143  | )                      |        |                  | (1,710  | )     
|Financing activities                                                                      |                                                                 |                              |         |                        |        |                  |         |       
|Borrowings under revolving credit agreement                                               |                                                                 |                              | 53,756  |                        |        |                  | 10,500  |       
|Principal payments on debt                                                                |                                                                 |                              | (51,000 | )                      |        |                  | (9,953  | )     
|Payment of financing costs                                                                |                                                                 |                              | (115    | )                      |        |                  | (149    | )     
|Principal payments on capital leases, net                                                 |                                                                 |                              | 296     |                        |        |                  | 253     |       
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|Net cash provided by financing activities                                                 |                                                                 |                              | 2,937   |                        |        |                  | 651     |       
|Effect of exchange rate changes on cash and cash equivalents                              |                                                                 |                              | 51      |                        |        |                  | 39      |       
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|(Decrease) increase in cash and cash equivalents                                          |                                                                 |                              | (309    | )                      |        |                  | 68      |       
|Cash and cash equivalents at beginning of period                                          |                                                                 |                              | 323     |                        |        |                  | 615     |       
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|Cash and cash equivalents at end of period                                                |                                                                 | $                            | 14      |                        |        | $                | 683     |       
|                                                                                          |                                                                 |                              |         |                        |        |                  |         |       
|Supplemental schedule of noncash investing
and financing activities                       |                                                                 |                              |         |                        |        |                  |         |       
|Dividends and accretion on redeemable preferred stock                                     |                                                                 | $                            | 1,944   |                        |        | $                | 1,655   |       
|Capital lease agreements for equipment                                                    |                                                                 |                              | 459     |                        |        |                  | 400     |       

See accompanying notes.

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Iron Age Corporation




Notes to Consolidated
Financial Statements (Unaudited)


July 26, 2003
(Dollars in thousands)

1.     Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Article 10 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 of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six-month period ended July 26, 2003 are not necessarily
indicative of the results that may be expected for the fiscal year ended
January 31, 2004. For further information, refer to Iron Age Corporations
(Iron Age or the Company) consolidated financial statements and footnotes
thereto for the fiscal year ended January 25, 2003.

Going Concern

The Company was not in compliance with the financial covenants under the Bank
Credit Facility, including the Senior Debt Ratio and Fixed Charge Coverage
Ratio (as defined in the Bank Credit Facility) for the first quarter ended
April 26, 2003. As a result, during the first quarter, the Company requested
that the senior lenders to the Bank Credit Facility (the Lenders) amend the
financial covenants for the first quarter and every other quarter of the fiscal
year ending January 31, 2004 to a level that considering the Companys current
operations and forecasts would make it probable that the Company would be in
compliance with its Bank Credit Facility. On May 12, 2003, the Company and the
Lenders entered into the First Amendment to Loan and Security Agreement and
Limited Waiver (the First Amendment) to the Bank Credit Facility that allowed
the Company to continue to operate under the existing requirements of the Bank
Credit Facility through June 26, 2003. As required by the First Amendment, the
Company retained a financial consultant and a financial advisor to advise the
Company with respect to improving the financial condition of the Company and to
consider alternative financing strategies. Through July 26, 2003, the Company
has incurred approximately $0.6 million in consulting, accounting and legal
services associated with its debt restructuring plan. On June 26, 2003, the
Company and the Lenders agreed to an additional waiver allowing the Company to
continue to operate under the Bank Credit Facility through October 31, 2003,
subject to certain conditions. The Company incurred $0.5 million of waiver and
forbearance fees that have been charged to interest expense for the second
quarter ended July 26, 2003. One condition is for the Company to continue to
maintain a minimum level of excess cash availability of $2.5 million, as agreed
with the Lenders on May 29, 2003. As of September 5, 2003, the Company had
excess cash availability of $3.9

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million. During the 120 day period through October 31, 2003, the Lenders have
waived all other financial covenants. Further, by August 25, 2003, the Company
was required to submit binding agreements and commitments regarding a series of
transactions to reduce indebtedness and improve the financial condition of the
Company, including the exchange of Senior Subordinated Notes for new securities
and replacing the Bank Credit Facility with new senior indebtedness. If the
Company did not submit these binding agreements and commitments, or if the
Lenders did not reasonably approve the terms of the transactions described
above, the Company would have seven business days to provide the Lenders with a
debt restructuring plan for their approval. The Company did not submit such
binding agreements and commitments to the Lenders on August 25, 2003. The
Company, however, timely submitted a preliminary debt restructuring plan to the
Lenders for their review and approval. Further, the Company has commenced
discussions with the holders of its Senior Subordinated Notes (the Note
Holders) with respect to its debt restructuring plan. As of September 9, 2003,
negotiations continue with the Lenders and the Note Holders. The Company
intends to finalize a debt restructuring plan prior to October 31, 2003, to
significantly reduce the amount of the Companys long-term
indebtedness. The tax implications of the debt restructuring will be
dependent on several factors including the terms and consideration of
the debt restructuring and the financial position of the Company
after the debt restructuring. If
such debt restructuring plan is not approved by the Lenders, the waiver shall
expire. Should the Company not be able to fulfill the conditions of the waiver
or not be able to reach an agreement on an additional amendment to the Bank
Credit Facility prior to the expiration of the waiver or not be able to obtain
an additional waiver, the Company would be in default under the Bank Credit
Facility and such default would also constitute an event of default under the
terms of the Senior Subordinated Notes, which would have a material adverse
impact on the Companys reported financial position and results of its
operations. The Companys ability to continue as a going concern is largely
dependent on its ability to maintain its existing financing arrangements to
operate the business.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. However, as discussed above, the Company was
not in compliance with certain financial covenants under the Bank Credit
Facility at the end of the first quarter of the year ending January 31, 2004.
On June 26, 2003, the Company received a waiver of all financial covenants
through October 31, 2003 from the Lenders. The Company is continuing to
negotiate a debt restructuring plan with the Lenders and the Note Holders. As a
result, all of the Companys long-term debt continue to be classified as
current liabilities.

If the debt restructuring plan includes a conversion of the Senior Subordinated
Notes to equity, approximately $1.6 million of unamortized deferred financing
costs, as of July 26, 2003, would be expensed at the conversion date.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plan using the
intrinsic value method under Accounting Principles Board Opinion No. 25. Pro
forma information regarding net income and earnings per share is required by
SFAS No. 148, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted beginning in the
fiscal year subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model.

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For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. The Companys pro
forma information follows:

|          |                                                                                            |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  
|--------- | ------------------------------------------------------------------------------------------ |  | ---------------------- | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------ | - |  | - | ------- | -
|          |                                                                                            |  | Three Months Ended     |        | Six Months Ended
|          |                                                                                            |  | July 26,               |        | July 27,         |  | July 26, |        | July 27,
|          |                                                                                            |  | 2003                   |        | 2002             |  | 2003     |        | 2002    
|          |                                                                                            |  |                        |        |                  |  |          |        |         
|          |                                                                                            |  | (Dollars in Thousands)
|Net loss: |                                                                                            |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |        
|          | As reported                                                                                |  | $                      | (3,874 | )                |  | $        | (1,307 | )        |  | $ | (4,419 | ) |  | $ | (78,042 | )
|          | Add: Total stock-based compensation
expense determined under fair value
method, net of tax |  |                        | (4     | )                |  |          | (9     | )        |  |   | (7     | ) |  |   | (18     | )
|          |                                                                                            |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  
|          | Pro forma                                                                                  |  | $                      | (3,878 | )                |  | $        | (1,316 | )        |  | $ | (4,426 | ) |  | $ | (78,060 | )
|          |                                                                                            |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  

2.     Inventories

Inventories consist of the following:

|                                                      |  |          |        |             |  |   |        |  
|----------------------------------------------------- |  | -------- | ------ | ----------- |  | - | ------ | -
|                                                      |  | July 26, |        | January 25,
|                                                      |  | 2003     |        | 2003       
|                                                      |  |          |        |            
|Finished products                                     |  | $        | 32,072 |             |  | $ | 29,625 |  
|Raw materials and work in process                     |  |          | 2,392  |             |  |   | 1,940  |  
|                                                      |  |          |        |             |  |   |        |  
|                                                      |  |          | 34,464 |             |  |   | 31,565 |  
|Less excess of current cost over LIFO inventory value |  |          | (46    | )           |  |   | (106   | )
|                                                      |  |          |        |             |  |   |        |  
|                                                      |  | $        | 34,510 |             |  | $ | 31,671 |  
|                                                      |  |          |        |             |  |   |        |  

3.     Intangible Assets

Effective January 27, 2002, the Company adopted Statement on Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives are no longer amortized but
are subject to annual impairment tests in accordance with the provisions of
SFAS No. 142. While amortization of goodwill is no longer reflected in the
Companys financial statements, amortization related to certain of the
Companys other intangible assets will continue to be recorded.

In connection with the adoption of SFAS No. 142, the Company tested its
goodwill for impairment, which required an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption, January 27,
2002. The Company identified two reporting units, distribution and
manufacturing, and determined the carrying value of those units as of the date
of adoption. Only the distribution reporting unit had related goodwill. The
Company assessed the fair value of the distribution reporting unit and compared
it to the reporting units carrying amount, as computed in Step 1 of the
evaluation. The fair value of the distribution reporting unit in Step 1 of the
evaluation was determined using a 5-year discounted cash flow model. Key
assumptions included managements estimates of future profitability, capital
requirements, a discount rate of 14.6% and a

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terminal growth rate of 2%. Based upon the initial evaluation, Step 2 of the
evaluation was required, as the distribution reporting unit had a carrying
value in excess of its fair value. In conjunction with Step 2, the Company
retained an independent valuation firm to prepare a valuation of the Companys
assets and liabilities. Step 2 requires the implied fair value of goodwill to
be calculated by allocating the fair value of the reporting unit to its
tangible and intangible net assets, other than goodwill. The remaining
unallocated fair value represents the implied fair value of the goodwill.
Management, using the independent valuation firm, determined that all of the
Companys goodwill was impaired at January 27, 2002. Accordingly, the Company
recorded a goodwill impairment charge of $77.5 million, net of tax of $1.7
million, as a cumulative effect of change in accounting for goodwill, for the
first quarter ended April 27, 2002. The goodwill impairment charge had no
effect on cash, the ongoing operation of the Company, the covenants relating to
the Bank Credit Facility or the indentures for the Senior Subordinated Notes.

Amortization for other intangible assets subject to amortization for the three
month and six month periods ended July 26, 2003 and July 27, 2002,
respectively, was $0.3 million and $0.6 million , respectively. Estimated
amortization expense for the fiscal year ending January 31, 2004 and the
succeeding five fiscal years is $1.1 million.

4.     Comprehensive Loss

|                                         |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  
|---------------------------------------- |  | ---------------------- | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------ | - |  | - | ------- | -
|                                         |  | Three Months Ended     |        | Six Months Ended
|                                         |  | July 26,               |        | July 27,         |  | July 26, |        | July 27,
|                                         |  | 2003                   |        | 2002             |  | 2003     |        | 2002    
|                                         |  |                        |        |                  |  |          |        |         
|                                         |  | (Dollars in Thousands)
|Net loss                                 |  | $                      | (3,874 | )                |  | $        | (1,307 | )        |  | $ | (4,419 | ) |  | $ | (78,042 | )
|Foreign currency translation gain (loss) |  |                        | 9      |                  |  |          | (29    | )        |  |   | 51     |   |  |   | 48      |  
|                                         |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  
|Total comprehensive loss                 |  | $                      | (3,865 | )                |  | $        | (1,336 | )        |  | $ | (4,368 | ) |  | $ | (77,994 | )
|                                         |  |                        |        |                  |  |          |        |          |  |   |        |   |  |   |         |  

5.     Financial Information for Subsidiary Guarantors

The payment obligations under the Senior Subordinated Notes issued by the
Company are fully and unconditionally guaranteed by Iron Age Investment Company
(the Subsidiary Guarantor). The Senior Subordinated Notes have not been
guaranteed by Falcon, Canada or Mexico (the Non-Guarantor Subsidiaries).
Separate complete financial statements of the Subsidiary Guarantor are not
presented because management has determined that they would not provide
additional material information that would be useful in assessing the financial
composition of the guarantors and non-guarantors. In accordance with positions
established by the Securities and Exchange Commission, the following financial
information sets forth separately financial information with respect to Iron
Age Corporation (the Parent), the Subsidiary Guarantor and the Non-Guarantor
Subsidiaries. The principal elimination entries eliminate investments in
subsidiaries and certain intercompany balances and transactions.

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Iron Age Corporation
Summarized Financial Information
Balance Sheets

July 26, 2003
(In thousands)

|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|---------------------------------------------------- |  | ------ | ------- | ---------- |  | ------------ | ------ | ------------ |  | ------------ | ------ |  |  | - | ------- | - |  | - | ------- | -
|                                                     |  |        |         |            |  |              |        |              |  | Non-         |        |  |  |   |         |   |  |  
|                                                     |  |        |         |            |  | Guarantor    |        | Guarantor    |  |              |        |  |  |   |         |  
|                                                     |  | Parent |         | Subsidiary |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                                     |  |        |         |            |  |              |        |              |  |             
|ASSETS                                               |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|Cash and cash equivalents                            |  | $      | (160    | )          |  | $            | 12     |              |  | $            | 162    |  |  | $ |        |   |  | $ | 14      |  
|Accounts receivable, net                             |  |        | 21,032  |            |  |              | 1,639  |              |  |              | 6,275  |  |  |   | (15,428 | ) |  |   | 13,518  |  
|Inventories                                          |  |        | 29,281  |            |  |              |       |              |  |              | 5,229  |  |  |   |        |   |  |   | 34,510  |  
|Prepaid expenses                                     |  |        | 2,590   |            |  |              |       |              |  |              | 774    |  |  |   | (586    | ) |  |   | 2,778   |  
|Deferred income taxes                                |  |        |        |            |  |              |       |              |  |              | 109    |  |  |   | 576     |   |  |   | 685     |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL CURRENT ASSETS                                 |  |        | 52,743  |            |  |              | 1,651  |              |  |              | 12,549 |  |  |   | (15,438 | ) |  |   | 51,505  |  
|Note receivable from parent                          |  |        | 1,654   |            |  |              |       |              |  |              |       |  |  |   |        |   |  |   | 1,654   |  
|Property and equipment, net                          |  |        | 10,259  |            |  |              |       |              |  |              | 1,923  |  |  |   |        |   |  |   | 12,182  |  
|Other noncurrent assets                              |  |        | 31,591  |            |  |              | 52,520 |              |  |              | 2      |  |  |   | (83,942 | ) |  |   | 171     |  
|Intangible assets, net                               |  |        | 12,761  |            |  |              |       |              |  |              | 284    |  |  |   |        |   |  |   | 13,045  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL ASSETS                                         |  | $      | 109,008 |            |  | $            | 54,171 |              |  | $            | 14,758 |  |  | $ | (99,380 | ) |  | $ | 78,557  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY       |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   | 
|Long-term debt and revolving
credit facilities       |  | $      | 153,593 |            |  | $            |       |              |  | $            | 3,112  |  |  | $ | (55,624 | ) |  | $ | 101,081 |  
|Accounts payable                                     |  |        | 3,799   |            |  |              |       |              |  |              | 680    |  |  |   |        |   |  |   | 4,479   |  
|Accrued expenses                                     |  |        | 5,592   |            |  |              | 13,406 |              |  |              | 3,866  |  |  |   | (16,036 | ) |  |   | 6,828   |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL CURRENT LIABILITIES                            |  |        | 162,984 |            |  |              | 13,406 |              |  |              | 7,658  |  |  |   | (71,660 | ) |  |   | 112,388 |  
|Other noncurrent liabilities                         |  |        | 316     |            |  |              |       |              |  |              |       |  |  |   |        |   |  |   | 316     |  
|Deferred income taxes                                |  |        | 2,741   |            |  |              |       |              |  |              | 956    |  |  |   | 486     |   |  |   | 4,183   |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL LIABILITIES                                    |  |        | 166,041 |            |  |              | 13,406 |              |  |              | 8,614  |  |  |   | (71,174 | ) |  |   | 116,887 |  
|Holdings Series B redeemable
preferred stock        |  |        |        |            |  |              |       |              |  |              |       |  |  |   | 11,115  |   |  |   | 11,115  |  
|Holdings Series C redeemable
preferred stock        |  |        |        |            |  |              |       |              |  |              |       |  |  |   | 9,122   |   |  |   | 9,122   |  
|TOTAL STOCKHOLDERS (DEFICIT)
EQUITY                 |  |        | (57,033 | )          |  |              | 40,765 |              |  |              | 6,144  |  |  |   | (48,443 | ) |  |   | (58,567 | )
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL LIABILITIES AND
STOCKHOLDERS (DEFICIT) EQUITY |  | $      | 109,008 |            |  | $            | 54,171 |              |  | $            | 14,758 |  |  | $ | (99,380 | ) |  | $ | 78,557  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  

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Iron Age Corporation
Summarized Financial Information
Statements of Operations

For the three month period ended
July 26, 2003
(In thousands)

|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|----------------------------------- |  | ------ | ------ | ---------- |  | ------------ | ---- | ------------ |  | ------------ | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                    |  |        |        |            |  |              |      |              |  | Non-         |       |   |  |   |        |   |  |  
|                                    |  |        |        |            |  | Guarantor    |      | Guarantor    |  |              |       |   |  |   |        |  
|                                    |  | Parent |        | Subsidiary |  | Subsidiaries |      | Eliminations |  | Consolidated
|                                    |  |        |        |            |  |              |      |              |  |             
|Net sales                           |  | $      | 21,486 |            |  | $            |     |              |  | $            | 5,118 |   |  | $ | (2,871 | ) |  | $ | 23,733 |  
|Cost of sales                       |  |        | 10,759 |            |  |              |     |              |  |              | 4,160 |   |  |   | (2,871 | ) |  |   | 12,048 |  
|Selling, general and administrative |  |        | 10,310 |            |  |              | (44  | )            |  |              | 1,041 |   |  |   |       |   |  |   | 11,307 |  
|Depreciation                        |  |        | 659    |            |  |              |     |              |  |              | 59    |   |  |   |       |   |  |   | 718    |  
|Amortization of intangible assets   |  |        | 276    |            |  |              |     |              |  |              | 10    |   |  |   |       |   |  |   | 286    |  
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|OPERATING (LOSS) INCOME             |  |        | (518   | )          |  |              | 44   |              |  |              | (152  | ) |  |   |       |   |  |   | (626   | )
|Interest expense (income)           |  |        | 3,887  |            |  |              | (742 | )            |  |              | (2    | ) |  |   |       |   |  |   | 3,143  |  
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |        | (4,405 | )          |  |              | 786  |              |  |              | (150  | ) |  |   |       |   |  |   | (3,769 | )
|Income tax (benefit) expense        |  |        | (175   | )          |  |              | 268  |              |  |              | 12    |   |  |   |       |   |  |   | 105    |  
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|NET (LOSS) INCOME                   |  | $      | (4,230 | )          |  | $            | 518  |              |  | $            | (162  | ) |  | $ |       |   |  | $ | (3,874 | )
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  

Iron Age Corporation
Summarized Financial Information
Statements of Operations

For the six month period ended
July 26, 2003
(In thousands)

|                                    |  |        |        |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|----------------------------------- |  | ------ | ------ | ---------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                    |  |        |        |            |  |              |        |              |  | Non-         |        |   |  |   |        |   |  |  
|                                    |  |        |        |            |  | Guarantor    |        | Guarantor    |  |              |        |   |  |   |        |  
|                                    |  | Parent |        | Subsidiary |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                    |  |        |        |            |  |              |        |              |  |             
|Net sales                           |  | $      | 46,852 |            |  | $            |       |              |  | $            | 10,776 |   |  | $ | (6,414 | ) |  | $ | 51,214 |  
|Cost of sales                       |  |        | 23,390 |            |  |              |       |              |  |              | 8,712  |   |  |   | (6,414 | ) |  |   | 25,688 |  
|Selling, general and administrative |  |        | 20,221 |            |  |              | (89    | )            |  |              | 2,044  |   |  |   |       |   |  |   | 22,176 |  
|Depreciation                        |  |        | 1,303  |            |  |              |       |              |  |              | 114    |   |  |   |       |   |  |   | 1,417  |  
|Amortization of intangible assets   |  |        | 552    |            |  |              |       |              |  |              | 20     |   |  |   |       |   |  |   | 572    |  
|                                    |  |        |        |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|OPERATING INCOME                    |  |        | 1,386  |            |  |              | 89     |              |  |              | (114   | ) |  |   |       |   |  |   | 1,361  |  
|Interest expense (income)           |  |        | 7,175  |            |  |              | (1,495 | )            |  |              | (4     | ) |  |   |       |   |  |   | 5,676  |  
|                                    |  |        |        |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |        | (5,789 | )          |  |              | 1,584  |              |  |              | (110   | ) |  |   |       |   |  |   | (4,315 | )
|Income tax (benefit) expense        |  |        | (504   | )          |  |              | 539    |              |  |              | 69     |   |  |   |       |   |  |   | 104    |  
|                                    |  |        |        |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |        |  
|NET (LOSS) INCOME                   |  | $      | (5,285 | )          |  | $            | 1,045  |              |  | $            | (179   | ) |  | $ |       |   |  | $ | (4,419 | )
|                                    |  |        |        |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |        |  

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Iron Age Corporation
Summarized Financial Information
Condensed Statement of Cash Flows

For the six month period ended
July 26, 2003
(In thousands)

|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|------------------------------------------------------------ |  | ------ | ------ | ---------- |  | ------------ | --- | ------------ |  | ------------ | ---- | - |  | - | - |  |  | - | ------ | -
|                                                             |  |        |        |            |  |              |     |              |  | Non-         |      |   |  |   |   |  |  |  
|                                                             |  |        |        |            |  | Guarantor    |     | Guarantor    |  |              |      |   |  |   |   | 
|                                                             |  | Parent |        | Subsidiary |  | Subsidiaries |     | Eliminations |  | Consolidated
|                                                             |  |        |        |            |  |              |     |              |  |             
|CASH FLOWS (USED IN) PROVIDED BY
OPERATING ACTIVITIES        |  | $      | (2,253 | )          |  | $            | (13 | )            |  | $            | 112  |   |  | $ |  |  |  | $ | (2,154 | )
|CASH FLOWS USED IN
INVESTING ACTIVITIES                      |  |        | (1,036 | )          |  |              |    |              |  |              | (107 | ) |  |   |  |  |  |   | (1,143 | )
|CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES                  |  |        | 2,895  |            |  |              |    |              |  |              | 42   |   |  |   |  |  |  |   | 2,937  |  
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS |  |        | 51     |            |  |              |    |              |  |              |     |   |  |   |  |  |  |   | 51     |  
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS             |  | $      | (343   | )          |  | $            | (13 | )            |  | $            | 47   |   |  | $ |  |  |  | $ | (309   | )
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  

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Iron Age Corporation
Summarized Financial Information
Balance Sheets

January 25, 2003
(In thousands)

|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|---------------------------------------------------- |  | ------ | ------- | ---------- |  | ------------ | ------ | ------------ |  | ------------ | ------ |  |  | - | ------- | - |  | - | ------- | -
|                                                     |  |        |         |            |  |              |        |              |  | Non-         |        |  |  |   |         |   |  |  
|                                                     |  |        |         |            |  | Guarantor    |        | Guarantor    |  |              |        |  |  |   |         |  
|                                                     |  | Parent |         | Subsidiary |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                                     |  |        |         |            |  |              |        |              |  |             
|ASSETS                                               |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|Cash and cash equivalents                            |  | $      | 183     |            |  | $            | 25     |              |  | $            | 115    |  |  | $ |        |   |  | $ | 323     |  
|Accounts receivable, net                             |  |        | 22,249  |            |  |              | 31     |              |  |              | 6,119  |  |  |   | (14,851 | ) |  |   | 13,548  |  
|Inventories                                          |  |        | 27,679  |            |  |              |       |              |  |              | 4,171  |  |  |   | (179    | ) |  |   | 31,671  |  
|Prepaid expenses                                     |  |        | 2,233   |            |  |              |       |              |  |              | 829    |  |  |   | 72      |   |  |   | 3,134   |  
|Deferred income taxes                                |  |        |        |            |  |              |       |              |  |              | 99     |  |  |   | 614     |   |  |   | 713     |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL CURRENT ASSETS                                 |  |        | 52,344  |            |  |              | 56     |              |  |              | 11,333 |  |  |   | (14,344 | ) |  |   | 49,389  |  
|Note receivable from parent                          |  |        | 1,654   |            |  |              |       |              |  |              |       |  |  |   |        |   |  |   | 1,654   |  
|Property and equipment, net                          |  |        | 10,554  |            |  |              |       |              |  |              | 2,127  |  |  |   |        |   |  |   | 12,681  |  
|Other noncurrent assets                              |  |        | 31,586  |            |  |              | 52,520 |              |  |              | 6      |  |  |   | (83,942 | ) |  |   | 170     |  
|Intangible assets, net                               |  |        | 13,578  |            |  |              |       |              |  |              | 274    |  |  |   |         |   |  |   | 13,852  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL ASSETS                                         |  | $      | 109,716 |            |  | $            | 52,576 |              |  | $            | 13,740 |  |  | $ | (98,286 | ) |  | $ | 77,746  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY       |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   | 
|Long-term debt and revolving
credit facilities       |  | $      | 150,410 |            |  | $            |       |              |  | $            | 3,145  |  |  | $ | (55,647 | ) |  | $ | 97,908  |  
|Accounts payable                                     |  |        | 2,788   |            |  |              | 1      |              |  |              | 483    |  |  |   |        |   |  |   | 3,272   |  
|Accrued expenses                                     |  |        | 5,019   |            |  |              | 12,855 |              |  |              | 2,918  |  |  |   | (14,793 | ) |  |   | 5,999   |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL CURRENT LIABILITIES                            |  |        | 158,217 |            |  |              | 12,856 |              |  |              | 6,546  |  |  |   | (70,440 | ) |  |   | 107,179 |  
|Other noncurrent liabilities                         |  |        | 324     |            |  |              |       |              |  |              |       |  |  |   |        |   |  |   | 324     |  
|Deferred income taxes                                |  |        | 2,744   |            |  |              |       |              |  |              | 955    |  |  |   | 506     |   |  |   | 4,205   |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL LIABILITIES                                    |  |        | 161,285 |            |  |              | 12,856 |              |  |              | 7,501  |  |  |   | (69,934 | ) |  |   | 111,708 |  
|Holdings Series B redeemable
preferred stock        |  |        |        |            |  |              |       |              |  |              |       |  |  |   | 10,100  |   |  |   | 10,100  |  
|Holdings Series C redeemable
preferred stock        |  |        |        |            |  |              |       |              |  |              |       |  |  |   | 8,193   |   |  |   | 8,193   |  
|TOTAL STOCKHOLDERS (DEFICIT)
EQUITY                 |  |        | (51,569 | )          |  |              | 39,720 |              |  |              | 6,239  |  |  |   | (46,645 | ) |  |   | (52,255 | )
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  
|TOTAL LIABILITIES AND
STOCKHOLDERS (DEFICIT) EQUITY |  | $      | 109,716 |            |  | $            | 52,576 |              |  | $            | 13,740 |  |  | $ | (98,286 | ) |  | $ | 77,746  |  
|                                                     |  |        |         |            |  |              |        |              |  |              |        |  |  |   |         |   |  |   |         |  

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Iron Age Corporation
Summarized Financial Information
Statements of Operations

For the three month period ended
July 27, 2002
(In thousands)

|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|----------------------------------- |  | ------ | ------ | ---------- |  | ------------ | ---- | ------------ |  | ------------ | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                    |  |        |        |            |  |              |      |              |  | Non-         |       |   |  |   |        |   |  |  
|                                    |  |        |        |            |  | Guarantor    |      | Guarantor    |  |              |       |   |  |   |        |  
|                                    |  | Parent |        | Subsidiary |  | Subsidiaries |      | Eliminations |  | Consolidated
|                                    |  |        |        |            |  |              |      |              |  |             
|Net sales                           |  | $      | 21,833 |            |  | $            |     |              |  | $            | 5,190 |   |  | $ | (3,193 | ) |  | $ | 23,830 |  
|Cost of sales                       |  |        | 10,608 |            |  |              |     |              |  |              | 4,522 |   |  |   | (3,193 | ) |  |   | 11,937 |  
|Selling, general and administrative |  |        | 9,550  |            |  |              | (35  | )            |  |              | 865   |   |  |   |       |   |  |   | 10,380 |  
|Depreciation                        |  |        | 586    |            |  |              |     |              |  |              | 57    |   |  |   |       |   |  |   | 643    |  
|Amortization of intangible assets   |  |        | 276    |            |  |              |     |              |  |              | 11    |   |  |   |       |   |  |   | 287    |  
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|OPERATING INCOME (LOSS)             |  |        | 813    |            |  |              | 35   |              |  |              | (265  | ) |  |   |       |   |  |   | 583    |  
|Interest expense (income)           |  |        | 2,966  |            |  |              | (785 | )            |  |              | 3     |   |  |   |       |   |  |   | 2,184  |  
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|(LOSS) INCOME BEFORE INCOME TAXES   |  |        | (2,153 | )          |  |              | 820  |              |  |              | (268  | ) |  |   |       |   |  |   | (1,601 | )
|Income tax (benefit) expense        |  |        | (613   | )          |  |              | 279  |              |  |              | 40    |   |  |   |       |   |  |   | (294   | )
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  
|NET (LOSS) INCOME                   |  |        | (1,540 | )          |  |              | 541  |              |  |              | (308  | ) |  |   |       |   |  |   | (1,307 | )
|                                    |  |        |        |            |  |              |      |              |  |              |       |   |  |   |        |   |  |   |        |  

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Iron Age Corporation
Summarized Financial Information
Statements of Operations

For the six month period ended
July 27, 2002
(In thousands)

|                                                                                          |  |        |         |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |         |  
|----------------------------------------------------------------------------------------- |  | ------ | ------- | ---------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                                                          |  |        |         |            |  |              |        |              |  | Non-         |        |   |  |   |        |   |  |  
|                                                                                          |  |        |         |            |  | Guarantor    |        | Guarantor    |  |              |        |   |  |   |        |  
|                                                                                          |  | Parent |         | Subsidiary |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                                                                          |  |        |         |            |  |              |        |              |  |             
|Net sales                                                                                 |  | $      | 47,348  |            |  | $            |       |              |  | $            | 10,594 |   |  | $ | (6,536 | ) |  | $ | 51,406  |  
|Cost of sales                                                                             |  |        | 22,987  |            |  |              |       |              |  |              | 9,026  |   |  |   | (6,536 | ) |  |   | 25,477  |  
|Selling, general and administrative                                                       |  |        | 18,465  |            |  |              | (72    | )            |  |              | 1,774  |   |  |   |       |   |  |   | 20,167  |  
|Depreciation                                                                              |  |        | 1,165   |            |  |              |       |              |  |              | 114    |   |  |   |       |   |  |   | 1,279   |  
|Amortization of intangible assets                                                         |  |        | 552     |            |  |              |       |              |  |              | 27     |   |  |   |       |   |  |   | 579     |  
|                                                                                          |  |        |         |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |         |  
|OPERATING INCOME (LOSS)                                                                   |  |        | 4,179   |            |  |              | 72     |              |  |              | (347   | ) |  |   |       |   |  |   | 3,904   |  
|Interest expense (income)                                                                 |  |        | 5,892   |            |  |              | (1,569 | )            |  |              | 7      |   |  |   |       |   |  |   | 4,330   |  
|                                                                                          |  |        |         |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |         |  
|(LOSS) INCOME BEFORE INCOME TAXES
AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |  |        | (1,713  | )          |  |              | 1,641  |              |  |              | (354   | ) |  |   |       |   |  |   | (426    | )
|Income tax (benefit) expense                                                              |  |        | (541    | )          |  |              | 558    |              |  |              | 89     |   |  |   |       |   |  |   | 106     |  
|                                                                                          |  |        |         |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |         |  
|(LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE                  |  |        | (1,172  | )          |  |              | 1,083  |              |  |              | (443   | ) |  |   |       |   |  |   | (532    | )
|Cumulative effect of change in
Accounting principle, net of tax of $1.7 million           |  |        | (76,772 | )          |  |              |       |              |  |              | (738   | ) |  |   |       |   |  |   | (77,510 | )
|                                                                                          |  |        |         |            |  |              |        |              |  |              |        |   |  |   |        |   |  |   |         |  
|NET (LOSS) INCOME                                                                         |  | $      | (77,944 | )          |  | $            | 1,083  |              |  | $            | (1,181 | ) |  | $ |       |   |  | $ | (78,042 | )

Iron Age Corporation
Summarized Financial Information
Condensed Statement of Cash Flows

For the year six month period
ended July 27, 2002
(In thousands)

|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|------------------------------------------------------------ |  | ------ | ------ | ---------- |  | ------------ | --- | ------------ |  | ------------ | ---- | - |  | - | - |  |  | - | ------ | -
|                                                             |  |        |        |            |  |              |     |              |  | Non-         |      |   |  |   |   |  |  |  
|                                                             |  |        |        |            |  | Guarantor    |     | Guarantor    |  |              |      |   |  |   |   | 
|                                                             |  | Parent |        | Subsidiary |  | Subsidiaries |     | Eliminations |  | Consolidated
|                                                             |  |        |        |            |  |              |     |              |  |             
|CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES        |  | $      | 1,292  |            |  | $            | (21 | )            |  | $            | (183 | ) |  | $ |  |  |  | $ | 1,088  |  
|CASH FLOWS USED IN
INVESTING ACTIVITIES                      |  |        | (1,534 | )          |  |              |    |              |  |              | (176 | ) |  |   |  |  |  |   | (1,710 | )
|CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES                  |  |        | 627    |            |  |              |    |              |  |              | 24   |   |  |   |  |  |  |   | 651    |  
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS |  |        | 39     |            |  |              |    |              |  |              |     |   |  |   |  |  |  |   | 39     |  
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  
|INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS             |  | $      | 424    |            |  | $            | (21 | )            |  | $            | (335 | ) |  | $ |  |  |  | $ | 68     |  
|                                                             |  |        |        |            |  |              |     |              |  |              |      |   |  |   |   |  |  |   |        |  

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

General

The following discussions should be read in conjunction with the accompanying
Consolidated Financial Statements for the period ended July 26, 2003, and the
Companys audited consolidated financial statements and Annual Report on Form
10-K for the fiscal year ended January 25, 2003.

Results of Operations
Three Months ended July 26, 2003 compared to
Three Months ended July 27, 2002

Net Salesfor the three months ended July 26, 2003 (second quarter 2004) were
$23.7 million compared to $23.8 million for the comparable three month period
ended July 27, 2002 (second quarter 2003), a decrease of $0.1 million, or
0.4%. The decrease in net sales was primarily attributable to (a) a decrease in
the Companys domestic retail business line (retail stores and shoemobiles) of
$0.2 million, or 1.1%, related to the general condition of the economy and (b)
a decrease of $0.3 million related to the impact of a large customer order that
occurred in second quarter 2003 and did not reoccur in second quarter 2004.
The decrease in net sales was partially offset by an increase of $0.3 million,
or 23.1%, in the Companys Canadian retail business line, from customers who
purchase from the Companys retail stores and shoemobiles, reflecting an
improvement in the Canadian market for the Companys products and an
improvement in exchange rates.

Gross Profitwas $11.7 million for second quarter 2004 and $11.9 million for
second quarter 2003, a decrease of $0.2 million, or 1.7%. The decrease in
gross profit was primarily related to decreased net sales as discussed above
and to general changes in product mix and the impact of competitive pricing
strategies. As a percentage of net sales, gross profit for second quarter 2004
decreased to 49.2%, from 49.7% for second quarter 2003.

Selling, General and Administrative Expenseswere $11.3 million for second
quarter 2004 and $10.4 million for second quarter 2003, an increase of $0.9
million, or 8.7%. The increase in selling, general and administrative expenses
was primarily related to the effect of increases in professional fees relating
to legal, accounting and consulting services, including $0.6 million associated
with the Companys debt restructuring plan, and employee related cost
increases, including salaries and wages.

Operating Lossfor second quarter 2004 was $0.6 million compared to operating
income of $0.6 million for second quarter 2003. The decrease in operating
income was primarily related to the increase in selling, general and
administrative expenses.

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Interest Expensefor second quarter 2004 was $3.1 million compared to $2.2
million for second quarter 2003, an increase of $0.9 million, or 40.9 %.
Interest expense for second quarter 2004 primarily increased due to
approximately $0.5 million of waiver and forbearance fees charged by the senior
lenders under the Bank Credit Facility. Interest expense for second quarter
2004 also increased due to increased borrowings and to the effect of higher
interest rates, including default interest of approximately $0.1 million
related to the June 26, 2003 Letter Waiver to the Loan and Security Agreement
associated with the Bank Credit Facility. The default interest rate of an
additional 3.0% will apply to all borrowings and letters of credit under the
Bank Credit Facility through October 31, 2003.

Income Tax Expensefor second quarter 2004 was $0.1 million compared to an
income tax benefit of $0.3 million for second quarter 2003.

At July 26, 2003, the Company had available foreign, state and federal net
operating loss carryforwards of approximately $1.2 million, $20.7 million and
$5.6 million, respectively, which expire in various years through 2023.

Six Months ended July 26, 2003 compared to
Six Months ended July 27, 2002

Net Salesfor the six months ended July 26, 2003 (first half 2004) were $51.2
million compared to $51.4 million for the comparable six month period ended
July 27, 2002 (first half 2003), a decrease of $0.2 million, or 0.4%. The
decrease in net sales was primarily attributable to the continued softness in
the general economic environment, including increased unemployment in the
manufacturing sector. The decrease in net sales is specifically related to (a)
a decrease of $0.4 million, or 5.8%, in the Companys industrial direct mail
order business line, (b) a decrease in the Companys consumer direct mail order
business line of $0.2 million, or 8.0% and (c) a decrease in the Companys
domestic retail business line (retail stores and shoemobiles) of $0.2 million,
or 0.4%. The decrease in net sales was partially offset by an increase of $0.6
million, or 20.7%, in the Companys international retail business line,
primarily Canada, from customers who purchase from the Companys retail stores
and shoemobiles, reflecting an improvement in the Canadian market for the
Companys products and an improvement in exchange rates.

Gross Profitwas $25.5 million for first half 2004 and $25.9 million for first
half 2003, a decrease of $0.4 million, or 1.5%. The decrease in gross profit
was related to decreased net sales as discussed above and to general changes in
product mix and the impact of competitive pricing strategies. As a percentage
of net sales, gross profit for first half 2004 was 49.8%, a decrease of 0.6%
from first half 2003.

Selling, General and Administrative Expenseswas $22.2 million for first half
2004 and $20.2 million for first half 2003, an increase of $2.0 million, or
9.9%. The increase in selling, general and administrative expenses was
primarily related to the effect of employee related cost increases, including
salaries and wages, increases in insurance costs related to more expensive
insurance markets, increases in operating costs related to the shoemobiles,
including fuel increases, and increases in professional fees relating to legal,
accounting and consulting services,
including $0.6 million associated with the Companys debt restructuring plan.

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Operating Incomefor first half 2004 was $1.4 million, or 2.7% of net sales,
compared to $3.9 million, or 7.6% of net sales, for first half 2003. The
decrease in operating income was primarily related to the increase in selling,
general and administrative expenses as discussed above.

Interest Expensefor first half 2004 was $5.7 million compared to $4.3 million
for first half 2003, an increase of $1.4 million, or 32.6%.
Interest expense for second quarter 2004 increased due to
approximately $0.5 million of waiver and forbearance fees charged by
the senior lenders under the Bank Credit Facility. Interest expense
for first half 2004 also increased due to increased borrowings and to the
effect of higher interest rates, including default interest of approximately
$0.1 million related to the June 26, 2003 Letter Waiver to Loan and Security
Agreement associated with the Bank Credit Facility. The default interest rate
of an additional 3.0% will apply to all borrowings and letters of credit under
the Bank Credit Facility through October 31, 2003.

Income Tax Expensefor first half 2004 and first half 2003 was $0.1 million.

At July 26, 2003, the Company had available foreign, state and federal net
operating loss carryforwards of approximately $1.2 million, $20.7 million and
$5.6 million, respectively, which expire in various years through 2023.

Cumulative Effect of Change in Accounting Principlewas $77.5 million, net of
tax of $1.7 million, for first half 2003. On January 27, 2002, the Company
adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and
Other Intangible Assets. In connection with the adoption of SFAS No. 142, the
Company tested its goodwill for impairment, which required an assessment of
whether there was an indication that goodwill was impaired as of the date of
adoption. Management, using an independent valuation firm, determined that all
of the Companys goodwill was impaired at January 27, 2002. The Company
recorded the goodwill impairment charge as a cumulative effect of change in
accounting for goodwill.

Liquidity and Capital Resources

Contractual Obligations and Commercial Commitments

|                                   |  |                        |         |                  |  |           |         |           |  |               |       |  |  |   |     |  |  |   |   | 
|---------------------------------- |  | ---------------------- | ------- | ---------------- |  | --------- | ------- | --------- |  | ------------- | ----- |  |  | - | --- |  |  | - | - | 
|                                   |  | Payments Due by Period
|                                   |  | (Thousands of Dollars)
|                                   |  | Total                  |         | Less than 1 year |  | 1-3 years |         | 4-5 years |  | After 5 years
|                                   |  |                        |         |                  |  |           |         |           |  |              
|Contractual
Obligations:           |  |                        |         |                  |  |           |         |           |  |               |       |  |  |   |     |  |  |   |   | 
|Long-Term Debt                     |  | $                      | 99,768  |                  |  | $         | 99,768  |           |  | $             |      |  |  | $ |    |  |  | $ |  | 
|Capital Lease Obligations          |  |                        | 1,313   |                  |  |           | 1,313   |           |  |               |      |  |  |   |    |  |  |   |  | 
|Operating Leases                   |  |                        | 5,379   |                  |  |           | 2,442   |           |  |               | 2,702 |  |  |   | 235 |  |  |   |  | 
|Unconditional Purchase Obligations |  |                        | 10,755  |                  |  |           | 10,755  |           |  |               |      |  |  |   |    |  |  |   |  | 
|Other Long-Term Obligations        |  |                        |        |                  |  |           |        |           |  |               |      |  |  |   |    |  |  |   |  | 
|Total Contractual Cash Obligations |  | $                      | 117,215 |                  |  | $         | 114,278 |           |  | $             | 2,702 |  |  | $ | 235 |  |  | $ |  | 

|                               |  |                                            |       |                  |  |           |       |           |  |               |   |  |  |   |   |  |  |   |   | 
|------------------------------ |  | ------------------------------------------ | ----- | ---------------- |  | --------- | ----- | --------- |  | ------------- | - |  |  | - | - |  |  | - | - | 
|                               |  | Amount of Commitment Expiration Per Period
|                               |  | (Thousands of Dollars)                    
|                               |  | Total                                      |       | Less than 1 year |  | 1-3 years |       | 4-5 years |  | After 5 years
|                               |  |                                            |       |                  |  |           |       |           |  |              
|Other Commercial Commitments:  |  |                                            |       |                  |  |           |       |           |  |               |   |  |  |   |   |  |  |   |   | 
|Lines of Credit                |  | $                                          | 2,000 |                  |  | $         | 2,000 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 
|Guarantees                     |  |                                            |      |                  |  |           |      |           |  |               |  |  |  |   |  |  |  |   |  | 
|Standby Repurchase Obligations |  |                                            |      |                  |  |           |      |           |  |               |  |  |  |   |  |  |  |   |  | 
|Other Commercial Commitments   |  |                                            |      |                  |  |           |      |           |  |               |  |  |  |   |  |  |  |   |  | 
|Total Commercial Commitments   |  | $                                          | 2,000 |                  |  | $         | 2,000 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 

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Sources and Uses of Cash

The Companys primary cash needs are working capital, capital expenditures and
debt service. The Company has financed cash requirements primarily through
internally generated cash flow and funds borrowed under credit facilities.

Net cash used in operating activities was $2.2 million for first half 2004, an
decrease of $3.2 million as compared to net cash provided by operating
activities of $1.1 million for first half 2003. The decrease in cash provided
by operating activities in first half 2004 from first half 2003 is primarily
the result of the general decline in the Companys results of operations,
increased interest expense and an increase in inventory. Inventory levels for
first half 2004, reflect the timing of inventory received and the introduction
of several new styles to meet planned customer demands.

The Companys investing activities for first half 2004 consisted of capital
expenditures of approximately $1.0 million for improvements in retail stores,
shoemobiles and equipment and approximately $0.1 million for the acquisition of
software for internal use. The Companys investing activities for first half
2003 consisted of capital expenditures of approximately $1.5 million for
improvements in retail stores, shoemobiles and equipment and approximately $0.2
million for the acquisition of software for internal use.

The Companys financing activities for first half 2004, primarily under the
Bank Credit Facility, were net borrowings of $2.9 million. Financing
activities for first half 2004 included the scheduled principal payments of
approximately $0.5 million on Term Loan A and Term Loan B. The Companys
financing activities for first half 2003, primarily under the previous bank
credit facility, were net borrowings of $0.6 million. Financing activities for
first half 2003 included the scheduled principal payments of approximately $3.1
million on a term loan under the previous bank credit facility.

The Companys total working capital as of July 26, 2003 was a deficit of $60.9
million. At January 25, 2003, working capital was a deficit of $57.8 million.
The deficit was related to the reclassification of all of the Companys
long-term debt as current liabilities.

Cash flow from operations for first half 2004 was sufficient to cover debt
service requirements under the Bank Credit Facility. The Companys ability to
make scheduled payments of principal, or to pay the interest or premium (if
any) on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations, management believes that cash flow from operations and available
cash, together with available borrowings by the Company under the Bank Credit
Facility, will not be adequate to meet the Companys anticipated future
requirements for working capital, budgeted capital expenditures and scheduled
payments of principal and interest on its indebtedness

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through fiscal 2004. The Company has commenced discussions with the senior
lenders under the Bank Credit Facility and the holders of its Senior
Subordinated Notes with respect to its debt restructuring plan. As of
September 9, 2003, negotiations have not been completed. The Company intends to
finalize a restructuring plan prior to October 31, 2003, which would
significantly reduce the amount of the Companys long-term indebtedness. As a
result, there can be no assurance that the Companys business will generate
sufficient cash flow from operations or that future borrowing will be available
under the Bank Credit Facility in an amount sufficient to enable the Company to
service its indebtedness, including the Senior Subordinated Notes, or to make
capital expenditures.

Long-term debt

As of July 26, 2003, the Companys debt consists of its 9 7/8% Senior
Subordinated Notes due 2008 (the Senior Subordinated Notes), a $50.0 million
Loan and Security Agreement (the Bank Credit Facility) and certain other
debt.

On September 23, 2002, Holdings, the Company and Falcon, entered into the Bank
Credit Facility with a financial institution and another lender. The Bank
Credit Facility consists of a $38.0 revolving credit facility (the Revolving
Credit Facility), including a $2.0 million letter of credit subfacility, and
two term loans: Term Loan A of up to an aggregate of $1.0 million and Term Loan
B of up to an aggregate of $3.0 million. In addition, the Bank Credit Facility
includes a third term loan, Term Loan C, of up to an aggregate of $12.0
million. Availability under the Bank Credit Facility is governed by a
borrowing base determined by advance rates against the inventory and accounts
receivable of the Company and Falcon.

The Revolving Credit Facility and the Term Loan C are due in full on September
23, 2007. The outstanding balances of the Term Loan A and the Term Loan B are
due in installments through September 23, 2007. Term Loan A, Term Loan B and
the Revolving Credit Facility bear interest at either the prime rate or LIBOR,
at the option of Holdings, plus an applicable margin. As of July 26, 2003,
outstanding borrowings on the Revolving Credit Facility at prime rate plus a
margin of 4.50% and LIBOR plus a margin of 6.75% are approximately $1.8 million
and $17.5 million, respectively. As of July 26, 2003, borrowings of
approximately $0.8 million for Term Loan A are at prime rate plus a margin of
4.50%. As of July 26, 2003, borrowings on Term Loan B at prime rate plus a
margin of 6.25% and LIBOR plus a margin of 8.50% are approximately $0.4 million
and $2.0 million, respectively. The interest rate for Term Loan C is 16.25%,
including 5.00% paid-in-kind. As of July 26, 2003, outstanding borrowings For
Term Loan C, including paid-in-kind interest, approximate $12.2 million. The
Company pays a 0.375% commitment fee on the undrawn amounts of the Revolving
Credit Facility. The Company pays a 5.00% letter of credit fee on any
outstanding Letters of Credit. All margins on outstanding borrowings and
letters of credit reflect the default rate of interest of an additional 3.0%

At closing, the Company drew the entire amount of Term Loan A, Term Loan B and
Term Loan C and approximately $14.2 million on the Revolving Credit Facility,
to refinance its previous bank credit facility of approximately $27.6 million,
including accrued interest, and to pay certain financing fees and expenses. In
connection with the refinancing of Holdings previous bank credit facility, The

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Company wrote-off approximately $0.2 million, net of tax of approximately $0.1
million, of unamortized debt issuance costs remaining from its previous bank
credit facility.

The Company incurred approximately $2.2 million in capitalizable debt issuance
costs in connection with the Bank Credit Facility which are being amortized
over its term.

The Company had borrowing availability of approximately $2.7 million under the
Revolving Credit Facility as of July 26, 2003.

The Companys other debt of $1.3 million consists of capital leases.

The Senior Subordinated Notes are fully and unconditionally guaranteed on an
unsecured, senior subordinated basis by each Domestic Restricted Subsidiary
that is a Material Subsidiary (as such terms are defined in the indenture for
the Senior Subordinated Notes (the Senior Subordinated Notes Indenture))
(whether currently existing, newly acquired or created). Each such subsidiary
guaranty (a Subsidiary Guaranty) will provide that the subsidiary guarantor,
as primary obligor and not merely as surety, will irrevocably and
unconditionally guarantee on an unsecured, senior subordinated basis the
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of the Company under the Senior
Subordinated Notes Indenture and the Senior Subordinated Notes, whether for
payment of principal or of interest on the Senior Subordinated Notes, expenses,
indemnification or otherwise. As of January 25, 2003, Iron Age Investment
Company, one of the Companys Domestic Restricted Subsidiaries became a
Material Subsidiary, and therefore was required to provide a Subsidiary
Guaranty with respect to the Senior Subordinated Notes. As of July 26, 2003,
none of Iron Ages other Domestic Restricted Subsidiaries became a Material
Subsidiary and were not required to provide a Subsidiary Guaranty with respect
to the Senior Subordinated Notes.

Debt Covenants

The Companys Bank Credit Facility, which is guaranteed by Holdings, requires
the Company to maintain certain financial ratios. The Bank Credit Facility also
limits the Companys ability to incur additional indebtedness, restricting the
amount of capital expenditures that may be incurred, and limiting transactions
with affiliates. The Bank Credit Facility also limits the Companys ability to
engage in mergers or acquisitions, sell certain assets, pay dividends or
repurchase its stock. The Bank Credit Facility is secured by a first priority
security interest in substantially all of the Companys assets. The Companys
domestic and Canadian subsidiaries are required to guarantee its obligations
under the Bank Credit Facility. If the Company defaults on this debt, due to
cross-default provisions in the indenture for the Senior Subordinated Notes,
this debt would also be in default.

Historically, the Company has not met its debt covenants and has had to amend
its credit agreements or receive waivers from its lending institutions. The
Company was not in compliance with the financial covenants under the Bank
Credit Facility, including the Senior Debt Ratio and Fixed Charge Coverage
Ratio (as defined in the Bank Credit Facility) for the first quarter ended
April 26, 2003. In addition, based upon forecasted net income and cash flows,
the Company determined that it would not likely be able to make the interest
payment on the Senior

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Subordinated Notes that is due on November 1, 2003. As a result, during the
first quarter, the Company requested that the senior lenders to the Bank Credit
Facility (the Lenders) amend the financial covenants for the first quarter
and every other quarter of the year ending January 31, 2004 to a level that
considering the Companys current operations and forecasts would make it
probable that the Company would be in compliance with its Bank Credit Facility.
On May 12, 2003, the Company and the Lenders entered into the First Amendment
to Loan and Security Agreement and Limited Waiver (the First Amendment) to
the Bank Credit Facility that allowed the Company to continue to operate under
the existing requirements of the Bank Credit Facility through June 26, 2003. As
required by the First Amendment, the Company retained a financial consultant
and a financial advisor to advise the Company with respect to improving the
financial condition of the Company and to consider alternative financing
strategies. On June 26, 2003, the Company and the Lenders agreed to an
additional waiver allowing the Company to continue to operate under the Bank
Credit Facility through October 31, 2003, subject to certain conditions. One
condition is for the Company to continue to maintain a minimum level of excess
cash availability of $2.5 million, as agreed with the Lenders on May 29, 2003.
As of September 5, 2003, the Company had excess cash
availability of $3.9
million. During the 120 day period through October 31, 2003, the Lenders have
waived all other financial covenants. Further, by August 25, 2003, the Company
was required to submit binding agreements and commitments regarding a series of
transactions to reduce indebtedness and improve the financial condition of the
Company, including the exchange of Senior Subordinated Notes for new securities
and replacing the Bank Credit Facility with new senior indebtedness. If the
Company did not submit these binding agreements and commitments, or if the
Lenders did not reasonably approve the terms of the transactions described
above, the Company would have seven business days to provide the Lenders with a
debt restructuring plan for their approval. The Company did not submit such
binding agreements and commitments to the Lenders on August 25, 2003. The
Company, however, timely submitted a preliminary debt restructuring plan to the
Lenders for their review and approval. Further, the Company has commenced
discussions with the holders of its Senior Subordinated Notes (the Note
Holders) with respect to its debt restructuring plan. Through July 26, 2003,
the Company has incurred approximately $0.6 million in consulting, accounting
and legal services associated with its debt restructuring plan. As of
September 9, 2003, negotiations continue with the Lenders and the Note Holders.
The Company intends to finalize a debt restructuring plan prior to October 31,
2003, to significantly reduce the amount of the Companys long-term
indebtedness. The tax implications of the debt restructuring will be
dependent on several factors including the terms and consideration of
the debt restructuring and the financial position of the Company
after the debt restructuring. If such debt restructuring plan is not approved by the Lenders,
the waiver shall expire. Should the Company not be able to fulfill the
conditions of the waiver or not be able to reach an agreement on an additional
amendment to the Bank Credit Facility prior to the expiration of the waiver or
not be able to obtain an additional waiver, the Company would be in default
under the Bank Credit Facility and such default would also constitute an event
of default under the terms of the Senior Subordinated Notes, which would have a
material adverse impact on the Companys reported financial position and
results of its operations. As a result, all of the Companys long-term debt
continue to be classified as current liabilities. The Companys ability to
continue as a going concern is largely dependent on its ability to maintain its
existing financing arrangements to operate the business.

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Recently Issued Accounting Standards

On May 15, 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS No. 150 establishes standards for
classifying and measuring as liabilities certain financial instruments that
embody obligations of the issuer and have characteristics of both liabilities
and equity. SFAS No. 150 must be applied immediately to instruments entered
into or modified after May 31, 2003 and to all other instruments that exist as
of the beginning of the first interim financial reporting period beginning
after June 15, 2003. Application to pre-existing instruments should be
recognized as the cumulative effect of a change in accounting principle. The
Company evaluated the provisions of SFAS No. 150, and concluded that Holdings
Series B and Series C Redeemable Preferred Stock does not require
reclassification as a liability as the redemption provisions of these
instruments is contingent upon a Change of Control or Public Offering, as
defined in the indenture governing the Senior Subordinated Notes.

Inflation and Changing Prices

The Companys sales and costs are subject to inflation and price fluctuations.
However, they historically have not, and in the future are not expected to
have, a material adverse effect on the Companys results of operations.

Forward Looking Statements

When used in this quarterly report, the words believes, anticipates,
expects, intends, and similar expressions are used to identify forward
looking statements. Such statements are subject to risks and uncertainties
which could cause actual results to differ materially from those projected. The
Company wishes to caution readers that the following important factors and
others in some cases have affected and in the future could affect the Companys
actual results and could cause the Companys actual results to differ
materially from those expressed in any forward statements made by the Company:
(i) economic conditions in the safety shoe market, (ii) availability and terms
of credit and debt arrangements, (iii) increase in interest rates, (iv) cost of
raw materials, (v) inability to maintain state-of-the-art manufacturing
facilities, (vi) heightened competition, including intensification of price and
service competition, the entry of new competitors and the introduction of new
products by existing competitors, (vii) inability to capitalize on
opportunities presented by industry consolidation, (viii) loss or retirement of
key executives, (ix) loss or disruption of the Companys relationships with its
major suppliers, including the Companys largest supplier in China and (x)
inability to grow by acquisition of additional safety shoe distributors or to
effectively consolidate operations of businesses acquired.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company is exposed to market risk primarily from changes in interest rates
and foreign exchange rates.

The following discussion of the Companys exposure to various market risks
contains forward looking statements that are subject to risks and
uncertainties. These projected results have been prepared utilizing certain
assumptions considered reasonable in the circumstances and in light of
information currently available to the Company. Nevertheless, because of the
inherent unpredictability of interest rates and foreign currency translation
rates, actual results could differ materially from those projected in such
forward looking statements.

Interest Rates

At July 26, 2003, the Company had fixed-rate debt totaling $78.5 million in
principal amount and having a fair value of $46.0 million. These instruments
bear interest at a fixed rate and, therefore, do not expose the Company to the
risk of earnings loss due to changes in market interest rates. However, the
fair value of these instruments would decrease (to the holder) by approximately
$4.6 million if interest rates were to increase by 10% from their levels at
July 26, 2003 (i.e., an increase from the weighted average interest rate of
10.9% to a weighted average interest rate of 11.9%).

At July 26, 2003, the Company had variable-rate debt totaling $22.6 million in
principal amount and having a fair value of $22.6 million. These borrowings
are under the Bank Credit Facility. If interest rates were to increase by 10%
from their levels at July 26, 2003, the Company would incur additional annual
interest expense of approximately $0.2 million.

Foreign Exchange Rates

Information relating to the sensitivity to foreign currency exchange rate
changes is omitted as foreign exchange exposure risk has not materially changed
from that disclosed in the Companys Annual Report on Form 10-K for the year
ended January 25, 2003.




Item 4. Controls and Procedures.

Within the 90 days prior to the date of filing this Quarterly Report on Form
10-Q, the Company carried out an evaluation, under the supervision and with the
participation of its disclosure committee and management, including the
President (Chief Executive Officer) and the Treasurer (Chief Financial
Officer), of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and
15d-15(e). Based upon that evaluation, the President (Chief Executive Officer)
and the Treasurer (Chief Financial Officer) concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Companys periodic SEC filings.
Subsequent to the date of that evaluation, there have been no significant
changes in the Companys internal controls or in
other factors that could significantly affect internal controls, nor were any
corrective actions required with regard to significant deficiencies and
material weaknesses.

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PART II OTHER INFORMATION




Item 1. Legal Proceedings.

None.




Item 2. Changes in Securities and Use of Proceeds.

None.




Item 3. Defaults upon Senior Securities.

None.




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

None.




Item 5. Other Information.

None.




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

(a) Exhibit Index.

|      |  |                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------
|10.72 |  | Letter Waiver to Loan and Security Agreement dated June 26, 2003.                                                             
|      |  |                                                                                                                               
|31.1  |  | Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      |  |                                                                                                                               
|31.2  |  | Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|      |  |                                                                                                                               
|32.1  |  | Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|      |  |                                                                                                                               
|32.2  |  | Certification by CFO pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

(b) Reports on Form 8-K.

A report on Form 8-K was filed on June 27, 2003 to disclose a new waiver
under the Companys existing Loan and Security Agreement, as discussed
elsewhere on this quarterly report on Form 10-Q.

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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.

|                         |  |                      |  |                               
|------------------------ |  | -------------------- |  | ------------------------------
|                         |  | IRON AGE CORPORATION
|                         |  |                      |  |                               
|                         |  | By:                  |  | /s/Bart R. Huchel             
|                         |  |                      |  |                               
|                         |  |                      |  | Name: Bart R. Huchel          
|                         |  |                      |  | Title:  Vice President-Finance
|                         |  |                      |  | Chief Financial Officer and   
|Dated: September 9, 2003 |  |                      |  | Treasurer                     
|                         |  |                      |  | (Principal financial and      
|                         |  |                      |  | accounting officer)           

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