##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended November 1, 2008
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 000-50563
 BAKERS FOOTWEAR GROUP, INC.
 (Exact name of registrant as specified in its charter)
 Missouri(State or other jurisdiction of 
incorporation or organization)
    
    43-0577980(I.R.S. Employer Identification No.)2815 Scott Avenue, 
St. Louis, Missouri(Address of principal executive offices)
    
    63103(Zip Code)
 (314) 621-0699  (Registrants telephone number, including area code)
 Not Applicable  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q
 PagePart I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Balance Sheets
    
    
    3Condensed Statements of Operations
    
    
    4Condensed Statement of Shareholders Equity
    
    
    5Condensed Statements of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7-13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14-25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25-26Part II Other InformationItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 6. Exhibits
    
    
    27Signatures
    
    
    28Exhibit Index
    
    
    29EX-31.1 Certification by Chief Executive OfficerEX-31.2 Certification by Principal Financial OfficerEX-32.1 906 Certifications
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 November 3,
    
    
    February 2,
    
    
    November 1,2007
    
    
    2008
    
    
    2008(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    247,518
    
    
    $
    159,671
    
    
    $
    141,559Accounts receivable
    
    
    1,307,162
    
    
    
    1,192,674
    
    
    
    1,350,892Other receivables
    
    
    249,923
    
    
    
    182,999
    
    
    
    62,127Inventories
    
    
    21,634,947
    
    
    
    18,061,941
    
    
    
    27,183,590Prepaid expenses and other current assets
    
    
    1,033,448
    
    
    
    697,174
    
    
    
    1,165,208Prepaid income taxes
    
    
    2,160,169
    
    
    
    1,987,621
    
    
    
    70,406Total current assets
    
    
    26,633,167
    
    
    
    22,282,080
    
    
    
    29,973,782Property and equipment, net
    
    
    45,386,007
    
    
    
    43,810,776
    
    
    
    35,655,340Other assets
    
    
    1,191,508
    
    
    
    1,466,095
    
    
    
    1,044,079Total assets
    
    $
    73,210,682
    
    
    $
    67,558,951
    
    
    $
    66,673,201Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    10,288,561
    
    
    $
    7,082,214
    
    
    $
    7,329,296Accrued expenses
    
    
    9,138,948
    
    
    
    9,162,561
    
    
    
    8,216,855Subordinated secured term loan
    
    
    
    
    
    
    
    
    
    
    5,346,265Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    4,000,000Sales tax payable
    
    
    571,274
    
    
    
    498,510
    
    
    
    631,102Deferred income
    
    
    1,203,143
    
    
    
    1,362,563
    
    
    
    1,152,912Revolving credit facility
    
    
    21,186,579
    
    
    
    11,184,379
    
    
    
    20,249,110Current maturities of capital lease obligations
    
    
    94,149
    
    
    
    57,863
    
    
    
    Total current liabilities
    
    
    42,482,654
    
    
    
    29,348,090
    
    
    
    46,925,540Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    Accrued rent liabilities
    
    
    10,213,248
    
    
    
    10,170,761
    
    
    
    9,930,547Shareholders equity:Preferred stock, $0.0001 par value, 5,000,000
shares authorized, no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000 shares
authorized, 6,655,856 shares outstanding at
November 3, 2007, 6,655,856 shares outstanding at
February 2, 2008 and 7,055,856 shares outstanding
at November 1, 2008
    
    
    665
    
    
    
    665
    
    
    
    705Additional paid-in capital
    
    
    36,923,876
    
    
    
    37,101,923
    
    
    
    38,357,799Accumulated deficit
    
    
    (20,409,761
    )
    
    
    (13,062,488
    )
    
    
    (28,541,390
    )Total shareholders equity
    
    
    16,514,780
    
    
    
    24,040,100
    
    
    
    9,817,114Total liabilities and shareholders equity
    
    $
    73,210,682
    
    
    $
    67,558,951
    
    
    $
    66,673,201
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 3, 2007
    
    
    November 1, 2008
    
    
    November 3, 2007
    
    
    November 1, 2008Net sales
    
    $
    40,293,957
    
    
    $
    41,075,064
    
    
    $
    131,534,432
    
    
    $
    128,180,666Cost of merchandise sold, occupancy, and buying expenses
    
    
    36,784,976
    
    
    
    32,078,177
    
    
    
    103,461,316
    
    
    
    95,054,641Gross profit
    
    
    3,508,981
    
    
    
    8,996,887
    
    
    
    28,073,116
    
    
    
    33,126,025Operating expenses:Selling
    
    
    11,228,162
    
    
    
    9,931,164
    
    
    
    34,333,266
    
    
    
    30,838,296General and administrative
    
    
    4,753,149
    
    
    
    4,015,896
    
    
    
    13,703,711
    
    
    
    12,410,864Loss on disposal of property and equipment
    
    
    18,205
    
    
    
    67,261
    
    
    
    62,957
    
    
    
    320,861Impairment of long-lived assets
    
    
    2,375,497
    
    
    
    2,609,588
    
    
    
    3,131,169
    
    
    
    2,609,588Operating loss
    
    
    (14,866,032
    )
    
    
    (7,627,022
    )
    
    
    (23,157,987
    )
    
    
    (13,053,584
    )Other income (expense):Interest expense
    
    
    (499,430
    )
    
    
    (767,664
    )
    
    
    (1,263,848
    )
    
    
    (2,297,446
    )Other, net
    
    
    70,880
    
    
    
    51,562
    
    
    
    108,664
    
    
    
    94,626Loss before income taxes
    
    
    (15,294,582
    )
    
    
    (8,343,124
    )
    
    
    (24,313,171
    )
    
    
    (15,256,404
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    691,367
    
    
    
    222,498Net loss
    
    $
    (15,294,582
    )
    
    $
    (8,343,124
    )
    
    $
    (25,004,538
    )
    
    $
    (15,478,902
    )Basic loss per share
    
    $
    (2.35
    )
    
    $
    (1.18
    )
    
    $
    (3.85
    )
    
    $
    (2.20
    )Diluted loss per share
    
    $
    (2.35
    )
    
    $
    (1.18
    )
    
    $
    (3.85
    )
    
    $
    (2.20
    )
  4




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
 (Unaudited)
 Common StockShares
    
    
    
    
    
    AdditionalIssued and
    
    
    
    
    
    
    Paid-In
    
    
    AccumulatedOutstanding
    
    
    Amount
    
    

    Capital
    
    
    Deficit
    

    
    TotalBalance at February 2, 2008
    
    
    6,655,856
    
    
    $
    665
    
    
    $
    37,101,923
    
    
    $
    (13,062,488
    )
    
    $
    24,040,100Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    455,916
    
    
    
    
    
    
    
    455,916Issuance of common stock
    
    
    400,000
    
    
    
    40
    
    
    
    799,960
    
    
    
    
    
    
    
    800,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,478,902
    )
    
    
    (15,478,902
    )Balance at November 1, 2008
    
    
    7,055,856
    
    
    $
    705
    
    
    $
    38,357,799
    
    
    $
    (28,541,390
    )
    
    $
    9,817,114
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks EndedNovember 3, 2007
    
    
    November 1, 2008Operating activitiesNet loss
    
    $
    (25,004,538
    )
    
    $
    (15,478,902
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    6,483,620
    
    
    
    5,973,696Deferred income taxes
    
    
    2,387,809
    
    
    
    Accretion of debt discount
    
    
    
    
    
    
    508,765Stock-based compensation expense
    
    
    351,524
    
    
    
    455,916Loss on disposal of property and equipment
    
    
    62,957
    
    
    
    320,861Impairment of long-lived assets
    
    
    3,131,169
    
    
    
    2,609,588Changes in operating assets and liabilities:Accounts receivable
    
    
    936,019
    
    
    
    (37,346
    )Inventories
    
    
    2,467,059
    
    
    
    (9,121,649
    )Prepaid expenses and other current assets
    
    
    (319,638
    )
    
    
    (468,034
    )Prepaid income taxes
    
    
    (1,030,532
    )
    
    
    1,917,215Other assets
    
    
    76,617
    
    
    
    637,231Accounts payable
    
    
    2,153,919
    
    
    
    247,082Accrued expenses and deferred income
    
    
    (181,412
    )
    
    
    (1,022,765
    )Accrued rent liabilities
    
    
    797,631
    
    
    
    (240,214
    )Net cash used in operating activities
    
    
    (7,687,796
    )
    
    
    (13,698,556
    )Investing activitiesPurchase of property and equipment
    
    
    (4,005,286
    )
    
    
    (714,364
    )Proceeds from sale of property and equipment
    
    
    19,803
    
    
    
    982Net cash used in investing activities
    
    
    (3,985,483
    )
    
    
    (713,382
    )Financing activitiesNet advances under revolving credit facility
    
    
    8,087,275
    
    
    
    9,064,731Proceeds from issuance of convertible debentures
    
    
    4,000,000
    
    
    
    Debt issuance costs
    
    
    (421,248
    )
    
    
    Proceeds from exercise of stock option
    
    
    938
    
    
    
    Proceeds from exercise of restricted stock
    
    
    7
    
    
    
    Proceeds from issuance of subordinated secured term loan and common stock
    
    
    
    
    
    
    7,025,000Costs of issuing subordinated term loan and common stock
    
    
    
    
    
    
    (325,542
    )Principal payments on subordinated secured term loan
    
    
    
    
    
    
    (1,312,500
    )Principal payments under capital lease obligations
    
    
    (153,521
    )
    
    
    (57,863
    )Net cash provided by financing activities
    
    
    11,513,451
    
    
    
    14,393,826Net decrease in cash and cash equivalents
    
    
    (159,828
    )
    
    
    (18,112
    )Cash and cash equivalents at beginning of period
    
    
    407,346
    
    
    
    159,671Cash and cash equivalents at end of period
    
    $
    247,518
    
    
    $
    141,559Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    73,761
    
    
    $
    Cash paid for interest
    
    $
    1,055,772
    
    
    $
    2,207,314
  6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS


Unaudited
 1. Basis of Presentation
  2. Liquidity
      7




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##### Table of Contents



3. Impairment of Long-Lived assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets
 4. Issuance of Debt and Common Stock
     8




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##### Table of Contents



Accounting for
Contingencies
 5. Revolving Credit Facility
  9




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##### Table of Contents



6. Subordinated Convertible Debentures
   7. Income Taxes
 Accounting for Income Taxes
   10




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##### Table of Contents



Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedNovember 3, 2007
    
    
    November 1, 2008
    
    
    November 3, 2007
    
    
    November 1, 2008Current:Federal
    
    $
    (3,771,429
    )
    
    $
    (1,288,047
    )
    
    $
    (5,602,998
    )
    
    $
    (2,671,151
    )State and local
    
    
    (828,160
    )
    
    
    (311,853
    )
    
    
    (693,033
    )
    
    
    (653,854
    )Total current
    
    
    (4,599,589
    )
    
    
    (1,599,900
    )
    
    
    (6,296,031
    )
    
    
    (3,325,005
    )Deferred:Federal
    
    
    (1,075,041
    )
    
    
    (1,354,271
    )
    
    
    (2,092,623
    )
    
    
    (1,932,449
    )State and local
    
    
    (195,462
    )
    
    
    (246,231
    )
    
    
    (932,358
    )
    
    
    (365,465
    )Total deferred
    
    
    (1,270,503
    )
    
    
    (1,600,502
    )
    
    
    (3,024,981
    )
    
    
    (2,297,914
    )Valuation allowance
    
    
    5,870,092
    
    
    
    3,200,402
    
    
    
    10,012,379
    
    
    
    5,845,417Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    691,367
    
    
    $
    222,498
  Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedNovember 3, 2007
    
    
    November 1, 2008
    
    
    November 3, 2007
    
    
    November 1, 2008Federal income tax at statutory rate
    
    $
    (5,353,104
    )
    
    $
    (2,920,093
    )
    
    $
    (8,509,610
    )
    
    $
    (5,339,741
    )Impact of federal alternative minimum tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,498Impact of graduated Federal rates
    
    
    152,946
    
    
    
    83,431
    
    
    
    243,132
    
    
    
    152,564State and local taxes, net of federal income taxes
    
    
    (676,339
    )
    
    
    (368,944
    )
    
    
    (1,075,170
    )
    
    
    (674,671
    )Permanent differences
    
    
    6,405
    
    
    
    5,204
    
    
    
    20,636
    
    
    
    16,431Valuation allowance
    
    
    5,870,092
    
    
    
    3,200,402
    
    
    
    10,012,379
    
    
    
    5,845,417Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    691,367
    
    
    $
    222,498
   November 3, 2007
    
    
    February 2, 2008
    
    
    November 1, 2008Deferred tax assets:Net operating loss carryforward
    
    $
    5,743,647
    
    
    $
    3,048,240
    
    
    $
    6,947,140Vacation accrual
    
    
    425,861
    
    
    
    392,994
    
    
    
    382,854Inventory
    
    
    1,690,716
    
    
    
    1,379,621
    
    
    
    1,821,079Stock-based compensation
    
    
    580,935
    
    
    
    650,373
    
    
    
    828,181Accrued rent
    
    
    3,983,167
    
    
    
    4,049,924
    
    
    
    3,897,741Total deferred tax assets
    
    
    12,424,326
    
    
    
    9,521,152
    
    
    
    13,876,995Deferred tax liabilities:Prepaid expenses
    
    
    173,620
    
    
    
    184,606
    
    
    
    147,665Property and equipment
    
    
    2,238,327
    
    
    
    2,150,157
    
    
    
    697,524Total deferred tax liabilities
    
    
    2,411,947
    
    
    
    2,334,763
    
    
    
    845,189Valuation allowance
    
    
    (10,012,379
    )
    
    
    (7,186,389
    )
    
    
    (13,031,806
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
 11




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##### Table of Contents



8. Stock-Based Compensation
  Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks EndedNovember 3, 2007
    
    November 1, 2008Options granted
    
    
    272,613
    
    
    
    310,500Weighted-average fair value of options granted
    
    
    3.59
    
    
    
    $0.86AssumptionsDividends
    
    
    0%
    
    
    
    0%Risk-free interest rate
    
    
    4.25%  4.5%
    
    
    
    2.8  3.7%Expected volatility
    
    
    43%  46%
    
    
    
    46%Expected option life
    
    5  6 years
    
    6 years
 9. Earnings (Loss) Per Share
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 3, 2007
    
    
    November 1, 2008
    
    
    November 3, 2007
    
    
    November 1, 2008Numerator:Net loss
    
    $
    (15,294,582
    )
    
    $
    (8,343,124
    )
    
    $
    (25,004,538
    )
    
    $
    (15,478,902
    )Numerator for loss per share
    
    
    (15,294,582
    )
    
    
    (8,343,124
    )
    
    
    (25,004,538
    )
    
    
    (15,478,902
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (15,294,582
    )
    
    $
    (8,343,124
    )
    
    $
    (25,004,538
    )
    
    $
    (15,478,902
    )Denominator:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator
for basic earnings (loss) per share 
weighted average shares
    
    
    6,498,190
    
    
    
    7,055,856
    
    
    
    6,494,753
    
    
    
    7,035,526Effect of dilutive securitiesStock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
 adjusted weighted average shares and assumed
conversions
    
    
    6,498,190
    
    
    
    7,055,856
    
    
    
    6,494,753
    
    
    
    7,035,526
  12




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##### Table of Contents



10. Fair Value Measurements
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115
 11. Recent Accounting Pronouncements
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) Accounting for Convertible
Debt and Debt issued with Stock Purchase Warrants
 Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entitys Own Stock
 12. Contingencies
  13




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Companys unaudited condensed
financial statements and notes thereto provided herein and the Companys audited financial
statements and notes thereto in our annual report on Form 10-K. The following Managements
Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements. The factors that might cause such a difference
also include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item
1. Business  Cautionary Note Regarding Forward-Looking Statements and Risk Factors and under
Item 1. Business  Risk Factors and those discussed elsewhere in our Annual Report on Form 10-K
and related notes thereto and elsewhere in this quarterly report.
 Overview
       14




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##### Table of Contents



Critical Accounting Policies
   Merchandise inventories
  Store closing and impairment charges
 Accounting for
the Disposal of Long-Lived Assets
  Stock-based compensation expense
 Share-Based Payment
 15




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##### Table of Contents



Deferred income taxes
 Accounting for Income Taxes
    Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
 16




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##### Table of Contents



Results of Operations
  Thirteen
    
    Thirteen
    
    Thirty-
    
    Thirty-Weeks
    
    Weeks
    
    nine Weeks
    
    nine WeeksEnded
    
    Ended
    
    Ended
    
    EndedNovember 3,
    
    November 1,
    
    November 3,
    
    November 1,2007
    
    2008
    
    2007
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    91.3
    
    
    
    78.1
    
    
    
    78.7
    
    
    
    74.2Gross profit
    
    
    8.7
    
    
    
    21.9
    
    
    
    21.3
    
    
    
    25.8Selling expense
    
    
    27.9
    
    
    
    24.2
    
    
    
    26.1
    
    
    
    24.1General and administrative expense
    
    
    11.8
    
    
    
    9.8
    
    
    
    10.4
    
    
    
    9.7Loss on disposal of property and equipment
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Impairment of long-lived assets
    
    
    5.9
    
    
    
    6.3
    
    
    
    2.4
    
    
    
    2.0Operating loss
    
    
    (36.9
    )
    
    
    (18.6
    )
    
    
    (17.6
    )
    
    
    (10.2
    )Other income, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    (1.2
    )
    
    
    (1.8
    )
    
    
    (1.0
    )
    
    
    (1.8
    )Loss before income taxes
    
    
    (38.0
    )
    
    
    (20.3
    )
    
    
    (18.5
    )
    
    
    (11.9
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.2Net loss
    
    
    (38.0
    )%
    
    
    (20.3
    )%
    
    
    (19.0
    )%
    
    
    (12.1
    )%
  Thirteen
    
    Thirteen
    
    Thirty-
    
    Thirty-Weeks
    
    Weeks
    
    nine Weeks
    
    nine WeeksEnded
    
    Ended
    
    Ended
    
    EndedNovember 3,
    
    November 1,
    
    November 3,
    
    November 1,2007
    
    2008
    
    2007
    
    2008Number of stores at beginning of period
    
    
    257
    
    
    
    243
    
    
    
    257
    
    
    
    249Stores opened during period
    
    
    0
    
    
    
    1
    
    
    
    6
    
    
    
    2Stores closed during period
    
    
    0
    
    
    
    (3
    )
    
    
    (6
    )
    
    
    (10
    )Number of stores at end of period
    
    
    257
    
    
    
    241
    
    
    
    257
    
    
    
    241
 Thirteen Weeks Ended November 1, 2008 Compared to Thirteen Weeks Ended November 3, 2007
 Net sales.
 Gross profit.
 Selling expense.
 17




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General and administrative expense.
 Impairment of long-lived assets Accounting for the
Disposal of Long-Lived Assets
 Interest expense.
 Income tax expense.
 Net loss
 Thirty-nine Weeks Ended November 1, 2008 Compared to Thirty-nine Weeks Ended November 3, 2007
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 18




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##### Table of Contents



Income tax expense.
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
      19




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##### Table of Contents



November 3, 2007
    
    February 2, 2008
    
    November 1, 2008Cash
    
    $
    247,518
    
    
    $
    159,671
    
    
    $
    141,559Inventories
    
    
    21,634,947
    
    
    
    18,061,941
    
    
    
    27,183,590Total current assets
    
    
    26,633,167
    
    
    
    22,282,080
    
    
    
    29,973,782Property and equipment, net
    
    
    45,386,007
    
    
    
    43,810,776
    
    
    
    35,655,340Total assets
    
    
    73,210,682
    
    
    
    67,558,951
    
    
    
    66,673,201Revolving credit facility
    
    
    21,186,579
    
    
    
    11,184,379
    
    
    
    20,249,110Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    
    
    
    
    
    
    
    
    5,346,265Total current liabilities
    
    
    42,482,654
    
    
    
    29,348,090
    
    
    
    46,925,540Total shareholders equity
    
    
    16,514,780
    
    
    
    24,040,100
    
    
    
    9,817,114Net working capital
    
    
    (15,849,487
    )
    
    
    (7,066,010
    )
    
    
    (16,951,758
    )Unused borrowing capacity*
    
    
    1,441,896
    
    
    
    1,455,865
    
    
    
    1,392,559
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
   20




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##### Table of Contents



Investing activities
   Financing activities
  Issuance of Debt and Common Stock
      21




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##### Table of Contents



Accounting for Contingencies
 Revolving Credit Facility
  22




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Subordinated Convertible Debentures
     23




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##### Table of Contents



2005 Private Placement of Common Stock and Warrants
    IPO Warrants
  Off-Balance Sheet Arrangements
  24




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##### Table of Contents



Contractual Obligations
  Payments due by PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    More than 5 YearsLong-term debt obligations (1)
    
    $
    13,770,014
    
    
    $
    3,993,507
    
    
    $
    5,390,174
    
    
    $
    4,386,333
    
    
    $
    Operating lease obligations (2)
    
    
    157,925,823
    
    
    
    24,455,917
    
    
    
    45,864,338
    
    
    
    39,807,492
    
    
    
    47,798,076Purchase obligations (3)
    
    
    34,059,775
    
    
    
    33,737,659
    
    
    
    262,283
    
    
    
    59,833
    
    
    
    Total
    
    $
    205,755,612
    
    
    $
    62,187,083
    
    
    $
    51,516,795
    
    
    $
    44,253,658
    
    
    $
    47,798,076
 
 (1)
    
    Includes payment obligations relating to our subordinated convertible debentures and to our
subordinated secured term loan. These instruments are classified as current liabilities on our
balance sheet.(2)
    
    Includes minimum payment obligations related to our store leases.(3)
    
    Includes merchandise on order and payment obligations relating to store construction and
miscellaneous service contracts. Recent Accounting Pronouncements
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) Accounting for Convertible
Debt and Debt issued with Stock Purchase Warrants
 Determining Whether an Instrument (or Embedded Feature)
is Indexed to an Entitys Own Stock
 Effect of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures.
 25




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##### Table of Contents



Internal Control Over Financial Reporting.
 26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 6. EXHIBITS
  27




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##### Table of Contents



SIGNATURES
   BAKERS FOOTWEAR GROUP, INC.
(Registrant)By:
    /s/ Peter A. EdisonPeter A. EdisonChairman of the Board, Chief Executive Officer

and President (Principal Executive Officer)Bakers Footwear Group, Inc.
(On behalf of the Registrant)By:
    /s/ Charles R. Daniel, IIICharles R. Daniel, IIIVice President  Finance,

Controller,  Treasurer, and Secretary

(Principal Financial Officer and

Principal Accounting Officer) 28




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description of Exhibit3.1
    
    
    Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Companys
Annual Report on Form 10-K for the fiscal year ended January
3, 2004 filed on April 2, 2004 (File No. 000-50563)).3.2
    
    
    Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Companys Annual Report on Form 10-K for
the fiscal year ended January 3, 2004 filed on April 2, 2004
(File No. 000-50563)).4.1
    
    
    Second Lien Credit Agreement dated February 1, 2008 (Loan
Agreement) by and among the Company, and Private Equity
Management Group, Inc. and the Lender named therein
(incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K dated February 1, 2008 (File No.
000-50563)).4.2
    
    
    Note evidencing amounts borrowed by the Company under the Loan
Agreement (incorporated by reference to Exhibit 4.2 to the
Companys Current Report on Form 8-K dated February 1, 2008
(File No. 000-50563)).4.3
    
    
    Security Agreement dated February 1, 2008 by and among the
Company, Private Equity Management Group, Inc. and the Lender
named therein (incorporated by reference to Exhibit 4.3 to the
Companys Current Report on Form 8-K dated February 1, 2008
(File No. 000-50563)).4.4
    
    
    Subordination Agreement dated February 1, 2008 by and among
the Company, Bank of America, N.A. and Private Equity
Management Group, Inc., in its capacity as administrative
agent for the Lender named therein (incorporated by reference
to Exhibit 4.4 to the Companys Current Report on Form 8-K
dated February 1, 2008 (File No. 000-50563)).4.5
    
    
    Subordination Agreement dated February 1, 2008 by and among
the Company, Private Equity Management Group, Inc., in its
capacity as administrative agent for the Lender named therein,
and the subordinated creditors named therein (incorporated by
reference to Exhibit 4.5 to the Companys Current Report on
Form 8-K dated February 1, 2008 (File No. 000-50563)).4.6
    
    
    Registration Rights Agreement dated February 1, 2008 by and
among the Company and Private Equity Management Group, Inc.
(incorporated by reference to Exhibit 4.6 to the Companys
Current Report on Form 8-K dated February 1, 2008 (File No.
000-50563)).4.7
    
    
    Fee Letter dated February 1, 2008 between Private Equity
Management Group, Inc. and the Company (incorporated by
reference to Exhibit 4.7 to the Companys Current Report on
Form 8-K dated February 1, 2008 (File No. 000-50563)).4.8
    
    
    Amendment Number 1 to Loan Documents dated May 9, 2008 by and
among the Company, Private Equity Management Group, Inc. and
the Lender named therein (incorporated by reference to Exhibit
4.8 to the Companys Quarterly Report on Form 10-Q for the
quarter year ended May 3, 2008 filed on June 17, 2008 (File
No. 000-50563)).4.9
    
    
    Letter of Consent delivered to the Company and Private Equity
Management Group, Inc. by Bank of America, N.A. (incorporated
by reference to Exhibit 4.3 to the Companys Current Report on
Form 8-K dated May 8, 2008 (File No. 000-50563)).11.1
    
    
    Statement regarding computation of per share earnings
(incorporated by reference from Note 9 to the unaudited
interim financial statements included herein).31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, executed by Chief
Executive Officer).31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, executed by Principal
Financial Officer).32.1
    
    
    Section 1350 Certifications (pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Chief Executive
Officer and the Principal Financial Officer).
 29