##### 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 May 3, 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
    
    43-0577980(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 2815 Scott Avenue, 
St. Louis, Missouri
    
    63103(Address of principal executive offices)
    
    (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
    
    
    7-12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13-23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II Other InformationItem 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 6. Exhibits
    
    
    24Signatures
    
    
    25Exhibit Index
    
    
    26-27Amendment Number 1 to Loan Documents302 Certification by Chief Executive Officer302 Certification by Principal Financial Officer906 Certifications
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS
FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 May 5, 2007
    
    
    February 2, 2008
    
    
    May 3, 2008(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    159,012
    
    
    $
    159,671
    
    
    $
    161,861Accounts receivable
    
    
    1,514,589
    
    
    
    1,192,674
    
    
    
    1,502,960Other receivables
    
    
    1,081,630
    
    
    
    182,999
    
    
    
    269,557Inventories
    
    
    27,797,169
    
    
    
    18,061,941
    
    
    
    23,611,088Prepaid expenses and other current assets
    
    
    4,085,536
    
    
    
    697,174
    
    
    
    906,986Prepaid income taxes
    
    
    1,403,403
    
    
    
    1,987,621
    
    
    
    1,954,011Deferred income taxes
    
    
    1,975,980
    
    
    
    
    
    
    
    Total current assets
    
    
    38,017,319
    
    
    
    22,282,080
    
    
    
    28,406,463Property and equipment, net
    
    
    51,374,032
    
    
    
    43,810,776
    
    
    
    41,861,317Deferred income taxes
    
    
    724,973
    
    
    
    
    
    
    
    Other assets
    
    
    911,502
    
    
    
    1,466,095
    
    
    
    1,211,561Total assets
    
    $
    91,027,826
    
    
    $
    67,558,951
    
    
    $
    71,479,341Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    10,083,565
    
    
    $
    7,082,214
    
    
    $
    8,926,272Accrued expenses
    
    
    8,596,829
    
    
    
    9,162,561
    
    
    
    8,956,848Subordinated secured term loan
    
    
    
    
    
    
    
    
    
    
    5,770,633Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    4,000,000Sales tax payable
    
    
    674,718
    
    
    
    498,510
    
    
    
    694,532Deferred income
    
    
    1,375,598
    
    
    
    1,362,563
    
    
    
    1,356,373Revolving credit facility
    
    
    19,588,095
    
    
    
    11,184,379
    
    
    
    11,510,954Current maturities of capital lease obligations
    
    
    140,999
    
    
    
    57,863
    
    
    
    29,928Total current liabilities
    
    
    40,459,804
    
    
    
    29,348,090
    
    
    
    41,245,540Subordinated convertible debentures
    
    
    
    
    
    
    4,000,000
    
    
    
    Obligations under capital leases, less current maturities
    
    
    29,928
    
    
    
    
    
    
    
    Accrued rent liabilities
    
    
    10,144,103
    
    
    
    10,170,761
    
    
    
    10,196,677Shareholders 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, 6,492,955 shares outstanding at May 5,
2007, 6,655,856 shares outstanding at February 2,
2008 and 7,005,856 shares outstanding at May 3,
2008
    
    
    649
    
    
    
    665
    
    
    
    700Additional paid-in capital
    
    
    36,763,739
    
    
    
    37,101,923
    
    
    
    37,972,980Retained earnings (accumulated deficit)
    
    
    3,629,603
    
    
    
    (13,062,488
    )
    
    
    (17,936,556
    )Total shareholders equity
    
    
    40,393,991
    
    
    
    24,040,100
    
    
    
    20,037,124Total liabilities and shareholders equity
    
    $
    91,027,826
    
    
    $
    67,558,951
    
    
    $
    71,479,341
  3




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##### Table of Contents



BAKERS
FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedMay 5, 2007
    
    
    May 3, 2008Net sales
    
    $
    49,255,817
    
    
    $
    43,537,503Cost of merchandise sold, occupancy, and buying expenses
    
    
    33,967,776
    
    
    
    32,287,530Gross profit
    
    
    15,288,041
    
    
    
    11,249,973Operating expenses:Selling
    
    
    11,891,940
    
    
    
    10,711,973General and administrative
    
    
    4,564,755
    
    
    
    4,385,266Loss on disposal of property and equipment
    
    
    36,304
    
    
    
    221,860Operating loss
    
    
    (1,204,958
    )
    
    
    (4,069,126
    )Other income (expense):Interest expense
    
    
    (362,124
    )
    
    
    (806,748
    )Other, net
    
    
    12,436
    
    
    
    1,806Loss before income taxes
    
    
    (1,554,646
    )
    
    
    (4,874,068
    )Benefit from income taxes
    
    
    (589,472
    )
    
    
    Net loss
    
    $
    (965,174
    )
    
    $
    (4,874,068
    )Basic loss per share
    
    $
    (0.15
    )
    
    $
    (0.70
    )Diluted loss per share
    
    $
    (0.15
    )
    
    $
    (0.70
    )
  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
    
    
    
    
    
    
    
    
    
    
    156,092
    
    
    
    
    
    
    
    156,092Issuance of common stock
    
    
    350,000
    
    
    
    35
    
    
    
    714,965
    
    
    
    
    
    
    
    715,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,874,068
    )
    
    
    (4,874,068
    )Balance at May 3, 2008
    
    
    7,005,856
    
    
    $
    700
    
    
    $
    37,972,980
    
    
    $
    (17,936,556
    )
    
    $
    20,037,124
  5




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##### Table of Contents



BAKERS
FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedMay 5, 2007
    
    
    May 3, 2008Operating activitiesNet loss
    
    $
    (965,174
    )
    
    $
    (4,874,068
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,136,998
    
    
    
    2,041,125Deferred income taxes
    
    
    (313,144
    )
    
    
    Accretion of debt discount
    
    
    
    
    
    
    199,380Stock-based compensation expense
    
    
    192,316
    
    
    
    156,092Loss on disposal of property and equipment
    
    
    36,304
    
    
    
    221,860Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (103,115
    )
    
    
    (396,844
    )Inventories
    
    
    (3,695,163
    )
    
    
    (5,549,147
    )Prepaid expenses and other current assets
    
    
    (3,371,726
    )
    
    
    (209,812
    )Prepaid income taxes
    
    
    (273,766
    )
    
    
    33,610Other assets
    
    
    (7,432
    )
    
    
    466,329Accounts payable
    
    
    1,948,923
    
    
    
    1,844,058Accrued expenses and deferred income
    
    
    (447,632
    )
    
    
    (15,881
    )Accrued rent liabilities
    
    
    728,486
    
    
    
    25,916Net cash used in operating activities
    
    
    (4,134,125
    )
    
    
    (6,057,382
    )Investing activitiesPurchase of property and equipment
    
    
    (2,545,760
    )
    
    
    (313,886
    )Proceeds from disposition of property and equipment
    
    
    19,503
    
    
    
    360Net cash used in investing activities
    
    
    (2,526,257
    )
    
    
    (313,526
    )Financing activitiesNet advances under revolving credit facility
    
    
    6,488,791
    
    
    
    326,575Proceeds from the 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
    
    
    
    
    
    
    (625,000
    )Principal payments under capital lease obligations
    
    
    (76,743
    )
    
    
    (27,935
    )Net cash provided by financing activities
    
    
    6,412,048
    
    
    
    6,373,098Net increase (decrease) in cash and cash equivalents
    
    
    (248,334
    )
    
    
    2,190Cash and cash equivalents at beginning of period
    
    
    407,346
    
    
    
    159,671Cash and cash equivalents at end of period
    
    $
    159,012
    
    
    $
    161,861Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    345,324
    
    
    $
    455,593
  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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3. Issuance of Debt and Common Stock
      8




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##### Table of Contents



Accounting for Contingencies
 4. Revolving Credit Facility
  5. Subordinated Convertible Debentures
  9




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##### Table of Contents



6. Income Taxes
     Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedMay 5, 2007
    
    
    May 3, 2008Current:Federal
    
    $
    (221,712
    )
    
    $
    (1,330,381
    )State and local
    
    
    (54,616
    )
    
    
    (287,145
    )Total current
    
    
    (276,328
    )
    
    
    (1,617,526
    )Deferred:Federal
    
    
    (264,968
    )
    
    
    (209,447
    )State and local
    
    
    (48,176
    )
    
    
    (38,081
    )Total deferred
    
    
    (313,144
    )
    
    
    (247,528
    )Valuation allowance
    
    
    
    
    
    
    1,865,054Total provision for (benefit from) income taxes
    
    $
    (589,472
    )
    
    $
    
 10




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Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedMay 5, 2007
    
    
    May 3, 2008Federal income tax at statutory rate
    
    $
    (544,125
    )
    
    $
    (1,705,924
    )Impact of graduated Federal rates
    
    
    15,546
    
    
    
    48,741State and local taxes, net of federal income taxes
    
    
    (68,762
    )
    
    
    (215,547
    )Change in valuation allowance
    
    
    
    
    
    
    1,865,054Permanent differences
    
    
    7,869
    
    
    
    7,676Total provision for (benefit from) income taxes
    
    $
    (589,472
    )
    
    $
    
   May 5, 2007
    
    
    February 2, 2008
    
    
    May 3, 2008Deferred tax assets:Net operating loss carryforward
    
    $
    
    
    
    $
    3,048,240
    
    
    $
    4,665,766Vacation accrual
    
    
    435,538
    
    
    
    392,994
    
    
    
    398,844Inventory
    
    
    1,800,885
    
    
    
    1,379,621
    
    
    
    1,627,809Stock-based compensation
    
    
    518,844
    
    
    
    650,373
    
    
    
    711,249Accrued rent
    
    
    3,956,200
    
    
    
    4,049,924
    
    
    
    4,001,531Total deferred tax assets
    
    
    6,711,467
    
    
    
    9,521,152
    
    
    
    11,405,199Deferred tax liabilities:Property and equipment
    
    
    3,750,071
    
    
    
    2,150,157
    
    
    
    2,115,010Prepaid expenses
    
    
    260,443
    
    
    
    184,606
    
    
    
    238,746Total deferred tax liabilities
    
    
    4,010,514
    
    
    
    2,334,763
    
    
    
    2,353,756Valuation allowance
    
    
    
    
    
    
    (7,186,389
    )
    
    
    (9,051,443
    )Net deferred tax assets
    
    $
    2,700,953
    
    
    $
    
    
    
    $
    
  7. Stock-Based Compensation
  Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedMay 5, 2007
    
    May 3, 2008Options granted
    
    
    132,613
    
    
    
    216,500Weighted-average fair value of options granted
    
    $
    4.99
    
    
    $
    0.93AssumptionsDividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    4.5
    %
    
    
    2.8
    %Expected volatility
    
    
    43% - 46
    %
    
    
    46
    %Expected option life

    5  6 years
    
    6 years
 11




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8. Earnings Per Share
   Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedMay 5, 2007
    
    
    May 3, 2008Numerator:Net loss
    
    $
    (965,174
    )
    
    $
    (4,874,068
    )Numerator for loss per share
    
    
    (965,174
    )
    
    
    (4,874,068
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (965,174
    )
    
    $
    (4,874,068
    )Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    6,493,035
    
    
    
    7,005,856Effect of dilutive securitiesStock options
    
    
    
    
    
    
    Stock purchase warrants
    
    
    
    
    
    
    Convertible debentures
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share  adjusted
weighted average shares and assumed conversions
    
    
    6,493,035
    
    
    
    7,005,856
  9. Fair Value Measurements
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115
 12




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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
       13




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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
 14




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Deferred income taxes
 Accounting for Income Taxes
    Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
 15




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##### Table of Contents



Results of Operations
  Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedMay 5, 2007
    
    May 3, 2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    69.0
    
    
    
    74.2Gross profit
    
    
    31.0
    
    
    
    25.8Selling expense
    
    
    24.1
    
    
    
    24.6General and administrative expense
    
    
    9.3
    
    
    
    10.1Loss on disposal of property and equipment
    
    
    0.1
    
    
    
    0.5Operating loss
    
    
    (2.5
    )
    
    
    (9.4
    )Other income, net
    
    
    
    
    
    
    Interest expense
    
    
    (0.7
    )
    
    
    (1.8
    )Loss before income taxes
    
    
    (3.2
    )
    
    
    (11.2
    )Provision for (benefit from) income taxes
    
    
    (1.2
    )
    
    
    Net loss
    
    
    (2.0
    )%
    
    
    (11.2
    )%
  Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedMay 5, 2007
    
    May 3, 2008Number of stores at beginning of period
    
    
    257
    
    
    
    249Stores opened during period
    
    
    6
    
    
    
    1Stores closed during period
    
    
    (5
    )
    
    
    (1
    )Number of stores at end of period
    
    
    258
    
    
    
    249
 Thirteen Weeks Ended May 3, 2008 Compared to Thirteen Weeks Ended May 5, 2007
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 16




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##### Table of Contents



Interest expense.
 Income tax expense (benefit).
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
     17




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##### Table of Contents



May 5, 2007
    
    February 2, 2008
    
    May 3, 2008Cash
    
    $
    159,012
    
    
    $
    159,671
    
    
    $
    161,861Inventories
    
    
    27,797,169
    
    
    
    18,061,941
    
    
    
    23,611,088Total current assets
    
    
    38,017,319
    
    
    
    22,282,080
    
    
    
    28,406,463Property and equipment, net
    
    
    51,374,032
    
    
    
    43,810,776
    
    
    
    41,861,317Total assets
    
    
    91,027,826
    
    
    
    67,558,951
    
    
    
    71,479,341Revolving credit facility
    
    
    19,588,095
    
    
    
    11,184,379
    
    
    
    11,510,954Subordinated convertible debentures
    
    
    
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    
    
    
    
    
    
    
    
    5,770,633Total current liabilities
    
    
    40,459,804
    
    
    
    29,348,090
    
    
    
    41,245,540Total shareholders equity
    
    
    40,393,991
    
    
    
    24,040,100
    
    
    
    20,037,124Net working capital
    
    
    (2,442,485
    )
    
    
    (7,066,010
    )
    
    
    (12,839,077
    )Unused borrowing capacity*
    
    
    1,944,165
    
    
    
    1,455,865
    
    
    
    2,459,244
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
  18




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Investing activities
   Financing activities
  Issuance of Debt and Common Stock
     19




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Accounting for Contingencies
 Revolving Credit Facility
  20




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Subordinated Convertible Debentures
    21




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2005 Private Placement of Common Stock and Warrants
    IPO Warrants
  22




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Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    5 YearsLong-term debt obligations(1)
    
    $
    14,225,667
    
    
    $
    3,391,281
    
    
    $
    6,256,997
    
    
    $
    4,577,389
    
    
    $
    Capital lease obligations (2)
    
    
    48,864
    
    
    
    48,864
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations (3)
    
    
    172,399,040
    
    
    
    25,286,326
    
    
    
    47,132,429
    
    
    
    42,006,571
    
    
    
    57,973,715Purchase obligations (4)
    
    
    31,182,675
    
    
    
    30,694,992
    
    
    
    308,183
    
    
    
    179,500
    
    
    
    Total
    
    $
    217,856,246
    
    
    $
    59,421,463
    
    
    $
    53,697,609
    
    
    $
    46,763,460
    
    
    $
    57,973,715
 
 (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 payment obligations relating to our point of sale hardware and software leases.(3)
    
    Includes minimum payment obligations related to our store leases.(4)
    
    Includes merchandise on order and payment obligations relating to store construction and
miscellaneous service contracts. Recent Accounting Pronouncements
  Effect of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures.
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##### Table of Contents



Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  On June 9, 2008 we received a staff deficiency letter from The Nasdaq Stock Market indicating that
we have not met a listing standard for continued listing on the Nasdaq Global Market. If we are
unable to comply with this listing standard within 90 calendar days we may be subject to delisting,
which could cause our stock to be subject to additional volatility and illiquidity.
   
 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
  24




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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) 25




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    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.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)).10.1
    
    Amended Employment Agreement dated February 3, 2008 by and
among the Company and Lawrence L. Spanley, Jr. (incorporated
by reference to Exhibit 10.3 to the Companys Current Report
on Form 8-K dated February 1, 2008 (File No. 000-50563)).10.2
    
    Letter to Peter Edison outlining 2008 bonus levels
(incorporated by reference to Exhibit 10.4 to the Companys
Current Report on Form 8-K filed on March 17, 2008 (File No.
000-50563)).10.3
    
    Letter to Stan Tusman outlining 2008 bonus levels
(incorporated by reference to Exhibit 10.5 to the Companys
Current Report on Form 8-K filed on March 17, 2008 (File No.
000-50563)).
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##### Table of Contents



Exhibit No.
    
    Description10.4
    
    Letter to Mark Ianni outlining 2008 bonus levels (incorporated
by reference to Exhibit 10.6 to the Companys Current Report
on Form 8-K filed on March 17, 2008 (File No. 000-50563)).10.5
    
    Letter to Joe Vander Pluym outlining 2008 bonus levels
(incorporated by reference to Exhibit 10.7 to the Companys
Current Report on Form 8-K filed on March 17, 2008 (File No.
000-50563)).10.6
    
    Summary of March 11, 2008 stock option grants for executive
officers (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on March 17, 2008
(File No. 000-50563)).10.7
    
    Summary of base salaries for specified executive officers
(incorporated by reference to Exhibit 10.25 to the Companys
Annual Report on Form 10-K filed on May 2, 2008 (File No.
000-50563)).11.1
    
    Statement regarding computation of per share earnings
(incorporated by reference from Note 8 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).
 27