##### 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 August 1, 2009
 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,
    
    63103St. Louis, Missouri
    
    (Zip Code)(Address of principal executive offices)
 (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
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
  
 INDEX TO FORM 10-Q
 PagePart I Financial InformationItem 1. Financial Statements (Unaudited)
    
    
    3Condensed Balance Sheets
    
    
    3Condensed Statements of Operations
    
    
    4Condensed Statement of Shareholders Equity
    
    
    5Condensed Statements of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibit Index
    
    
    30EX-4.1: Second Lien Credit AgreementEX-4.3: Security AgreementEX-4.6: Registration Rights AgreementEX-4.8: Amendment No.1 to Loan DocumentsEX-4.11: Amendment No.3 to Loan DocumentsEX-10.8: Fourth Amendment to Second Amended LoanEX-31.1: Certification by Chief Executive OfficerEX-31.2: Certification by Chief Financial OfficerEX-32.1: Section 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
 August 2,
    
    
    January 31,
    
    
    August 1,2008
    
    
    2009
    
    
    2009(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    145,075
    
    
    $
    134,676
    
    
    $
    152,733Accounts receivable
    
    
    1,177,205
    
    
    
    1,330,289
    
    
    
    1,089,488Other receivables
    
    
    183,610
    
    
    
    43,090
    
    
    
    150,957Inventories
    
    
    21,559,866
    
    
    
    20,976,352
    
    
    
    18,859,814Prepaid expenses and other current assets
    
    
    971,396
    
    
    
    908,796
    
    
    
    944,640Prepaid income taxes
    
    
    106,415
    
    
    
    118,799
    
    
    
    126,899Total current assets
    
    
    24,143,567
    
    
    
    23,512,002
    
    
    
    21,324,531Property and equipment, net
    
    
    40,165,809
    
    
    
    34,029,666
    
    
    
    30,426,035Other assets
    
    
    1,156,665
    
    
    
    966,524
    
    
    
    1,043,152Total assets
    
    $
    65,466,041
    
    
    $
    58,508,192
    
    
    $
    52,793,718Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    6,694,455
    
    
    $
    7,556,984
    
    
    $
    11,663,031Accrued expenses
    
    
    8,130,141
    
    
    
    8,175,564
    
    
    
    7,027,366Subordinated secured term loan
    
    
    5,876,590
    
    
    
    4,817,282
    
    
    
    3,718,774Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Sales tax payable
    
    
    573,989
    
    
    
    1,032,584
    
    
    
    588,347Deferred income
    
    
    1,179,666
    
    
    
    1,218,687
    
    
    
    1,328,404Revolving credit facility
    
    
    10,923,753
    
    
    
    11,482,862
    
    
    
    8,412,972Current maturities of capital lease obligations
    
    
    10,734
    
    
    
    
    
    
    
    Total current liabilities
    
    
    37,389,328
    
    
    
    38,283,963
    
    
    
    36,738,894Accrued noncurrent rent liabilities
    
    
    10,070,474
    
    
    
    9,774,829
    
    
    
    9,518,101Shareholders 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, 7,055,856 shares outstanding
at August 2, 2008 and January 31, 2009 and
7,382,856 shares outstanding at August 1, 2009
    
    
    705
    
    
    
    705
    
    
    
    738Additional paid-in capital
    
    
    38,203,800
    
    
    
    38,506,784
    
    
    
    39,099,385Accumulated deficit
    
    
    (20,198,266
    )
    
    
    (28,058,089
    )
    
    
    (32,563,400
    )Total shareholders equity
    
    
    18,006,239
    
    
    
    10,449,400
    
    
    
    6,536,723Total liabilities and shareholders equity
    
    $
    65,466,041
    
    
    $
    58,508,192
    
    
    $
    52,793,718
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 2, 2008
    
    
    August 1, 2009
    
    
    August 2, 2008
    
    
    August 1, 2009Net sales
    
    $
    43,568,099
    
    
    $
    43,720,271
    
    
    $
    87,105,602
    
    
    $
    88,696,892Cost of merchandise sold, occupancy, and buying expenses
    
    
    30,688,934
    
    
    
    30,798,164
    
    
    
    62,976,464
    
    
    
    63,078,345Gross profit
    
    
    12,879,165
    
    
    
    12,922,107
    
    
    
    24,129,138
    
    
    
    25,618,547Operating expenses:Selling
    
    
    10,195,159
    
    
    
    10,008,801
    
    
    
    20,907,132
    
    
    
    19,984,624General and administrative
    
    
    4,009,702
    
    
    
    4,058,016
    
    
    
    8,394,968
    
    
    
    8,397,656Loss on disposal of property and equipment
    
    
    31,740
    
    
    
    9,850
    
    
    
    253,600
    
    
    
    294,431Operating loss
    
    
    (1,357,436
    )
    
    
    (1,154,560
    )
    
    
    (5,426,562
    )
    
    
    (3,058,164
    )Other income (expense):Interest expense
    
    
    (723,034
    )
    
    
    (612,318
    )
    
    
    (1,529,782
    )
    
    
    (1,498,898
    )Other, net
    
    
    41,258
    
    
    
    30,235
    
    
    
    43,064
    
    
    
    51,751Loss before income taxes
    
    
    (2,039,212
    )
    
    
    (1,736,643
    )
    
    
    (6,913,280
    )
    
    
    (4,505,311
    )Provision for income taxes
    
    
    222,498
    
    
    
    
    
    
    
    222,498
    
    
    
    Net loss
    
    $
    (2,261,710
    )
    
    $
    (1,736,643
    )
    
    $
    (7,135,778
    )
    
    $
    (4,505,311
    )Net loss per common share
    
    $
    (0.32
    )
    
    $
    (0.24
    )
    
    $
    (1.02
    )
    
    $
    (0.62
    )
  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 January 31, 2009
    
    
    7,055,856
    
    
    $
    705
    
    
    $
    38,506,784
    
    
    $
    (28,058,089
    )
    
    $
    10,449,400Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    405,126
    
    
    
    
    
    
    
    405,126Issuance of common stock
    
    
    250,000
    
    
    
    25
    
    
    
    187,475
    
    
    
    
    
    
    
    187,500Issuance of restricted stock
    
    
    77,000
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,505,311
    )
    
    
    (4,505,311
    )Balance at August 1, 2009
    
    
    7,382,856
    
    
    $
    738
    
    
    $
    39,099,385
    
    
    $
    (32,563,400
    )
    
    $
    6,536,723
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS


(Unaudited)
 Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks EndedAugust 2, 2008
    
    
    August 1, 2009Operating activitiesNet loss
    
    $
    (7,135,778
    )
    
    $
    (4,505,311
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    4,029,245
    
    
    
    3,399,982Accretion of debt discount
    
    
    351,590
    
    
    
    276,492Stock-based compensation expense
    
    
    301,917
    
    
    
    405,126Interest expense recognized for issuing common stock related to
amending the subordinated secured term loan
    
    
    
    
    
    
    187,500Loss on disposal of property and equipment
    
    
    253,600
    
    
    
    294,431Changes in operating assets and liabilities:Accounts receivable
    
    
    14,858
    
    
    
    132,942Inventories
    
    
    (3,497,925
    )
    
    
    2,116,538Prepaid expenses and other current assets
    
    
    (274,222
    )
    
    
    (35,844
    )Prepaid income taxes
    
    
    1,881,206
    
    
    
    (8,100
    )Other assets
    
    
    559,972
    
    
    
    39,965Accounts payable
    
    
    (387,759
    )
    
    
    4,106,047Accrued expenses and deferred income
    
    
    (1,139,838
    )
    
    
    (1,482,718
    )Accrued noncurrent rent liabilities
    
    
    (100,287
    )
    
    
    (256,728
    )Net cash provided by (used in) operating activities
    
    
    (5,143,421
    )
    
    
    4,670,322Investing activitiesPurchase of property and equipment
    
    
    (638,589
    )
    
    
    (207,384
    )Proceeds from sale of property and equipment
    
    
    711
    
    
    
    9Net cash used in investing activities
    
    
    (637,878
    )
    
    
    (207,375
    )Financing activitiesNet advances under revolving credit facility
    
    
    (260,626
    )
    
    
    (3,069,890
    )Proceeds from issuance of subordinated secured term loan and common stock
    
    
    7,025,000
    
    
    
    Costs of issuing subordinated term loan and common stock
    
    
    (325,542
    )
    
    
    Principal payments on subordinated secured term loan
    
    
    (625,000
    )
    
    
    (1,375,000
    )Principal payments under capital lease obligations
    
    
    (47,129
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    5,766,703
    
    
    
    (4,444,890
    )Net decrease in cash and cash equivalents
    
    
    (14,596
    )
    
    
    18,057Cash and cash equivalents at beginning of period
    
    
    159,671
    
    
    
    134,676Cash and cash equivalents at end of period
    
    $
    145,075
    
    
    $
    152,733Supplemental disclosures of cash flow informationCash paid for interest
    
    $
    1,079,004
    
    
    $
    1,162,009
  6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
 1. Basis of Presentation
  Subsequent Events
 2. Liquidity
     7




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##### Table of Contents



3. Subordinated Secured Term Loan
  8




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##### Table of Contents



SFAS No.
5, Accounting for Contingencies
 9




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##### Table of Contents



4. Revolving Credit Facility
   5. Subordinated Convertible Debentures
   Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock
 10




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##### Table of Contents



6. Income Taxes
 Accounting for Income Taxes
    Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedAugust 2, 2008
    
    
    August 1, 2009
    
    
    August 2, 2008
    
    
    August 1, 2009Current:Federal
    
    $
    (52,723
    )
    
    $
    (485,007
    )
    
    $
    (1,383,104
    )
    
    $
    (1,063,521
    )State and local
    
    
    (54,856
    )
    
    
    (104,287
    )
    
    
    (342,002
    )
    
    
    (235,163
    )Total current
    
    
    (107,579
    )
    
    
    (589,294
    )
    
    
    (1,725,106
    )
    
    
    (1,298,684
    )Deferred:Federal
    
    
    (368,731
    )
    
    
    (62,890
    )
    
    
    (578,178
    )
    
    
    (358,485
    )State and local
    
    
    (81,153
    )
    
    
    (11,434
    )
    
    
    (119,234
    )
    
    
    (65,179
    )Total deferred
    
    
    (449,884
    )
    
    
    (74,324
    )
    
    
    (697,412
    )
    
    
    (423,664
    )Valuation allowance
    
    
    779,961
    
    
    
    663,618
    
    
    
    2,645,016
    
    
    
    1,722,348Total income tax expense
    
    $
    222,498
    
    
    $
    
    
    
    $
    222,498
    
    
    $
    
  Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedAugust 2, 2008
    
    
    August 1, 2009
    
    
    August 2, 2008
    
    
    August 1, 2009Federal income tax at statutory rate
    
    $
    (713,724
    )
    
    $
    (607,825
    )
    
    $
    (2,419,648
    )
    
    $
    (1,576,859
    )Impact of federal alternative minimum tax
    
    
    222,498
    
    
    
    
    
    
    
    222,498
    
    
    
    Impact of graduated Federal rates
    
    
    20,392
    
    
    
    17,366
    
    
    
    69,133
    
    
    
    45,053State and local taxes, net of federal income taxes
    
    
    (90,181
    )
    
    
    (76,801
    )
    
    
    (305,728
    )
    
    
    (199,242
    )Permanent differences
    
    
    3,552
    
    
    
    3,642
    
    
    
    11,227
    
    
    
    8,700Change in valuation allowance
    
    
    779,961
    
    
    
    663,618
    
    
    
    2,645,016
    
    
    
    1,722,348Total income tax expense
    
    $
    222,498
    
    
    $
    
    
    
    $
    222,498
    
    
    $
    
 11




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##### Table of Contents



August 2, 2008
    
    
    January 31, 2009
    
    
    August 1, 2009Deferred tax assets:Net operating loss carryforward
    
    $
    5,450,787
    
    
    $
    7,332,648
    
    
    $
    8,631,332Vacation accrual
    
    
    377,004
    
    
    
    384,696
    
    
    
    394,056Inventory
    
    
    1,439,736
    
    
    
    1,187,969
    
    
    
    1,032,562Stock-based compensation
    
    
    768,121
    
    
    
    888,235
    
    
    
    1,046,234Accrued rent
    
    
    3,952,312
    
    
    
    3,812,183
    
    
    
    3,712,059Total deferred tax assets
    
    
    11,987,960
    
    
    
    13,605,731
    
    
    
    14,816,243Deferred tax liabilities:Prepaid expenses
    
    
    216,705
    
    
    
    159,717
    
    
    
    218,429Property and equipment
    
    
    1,939,850
    
    
    
    550,008
    
    
    
    (20,540
    )Total deferred tax liabilities
    
    
    2,156,555
    
    
    
    709,725
    
    
    
    197,889Valuation allowance
    
    
    (9,831,405
    )
    
    
    (12,896,006
    )
    
    
    (14,618,354
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
  7. Stock-Based Compensation
   Twenty-six
    
    Twenty-sixWeeks Ended
    
    Weeks EndedAugust 2, 2008
    
    August 1, 2009Options granted
    
    
    310,500
    
    
    
    72,000Weighted-average fair value of options granted
    
    $
    0.86
    
    
    $
    0.33AssumptionsDividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    2.83.7
    %
    
    
    2.2
    %Expected volatility
    
    
    46
    %
    
    
    54
    %Expected option life
    
    6 years
    
    
    6 years
  8. Earnings Per Share
  12




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##### Table of Contents



Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 2, 2008
    
    
    August 1, 2009
    
    
    August 2, 2008
    
    
    August 1, 2009Numerator:Net loss
    
    $
    (2,261,710
    )
    
    $
    (1,736,643
    )
    
    $
    (7,135,778
    )
    
    $
    (4,505,311
    )Numerator for loss per share
    
    
    (2,261,710
    )
    
    
    (1,736,643
    )
    
    
    (7,135,778
    )
    
    
    (4,505,311
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (2,261,710
    )
    
    $
    (1,736,643
    )
    
    $
    (7,135,778
    )
    
    $
    (4,505,311
    )Denominator:Denominator for basic earnings per share 
weighted average shares
    
    
    7,052,559
    
    
    
    7,382,856
    
    
    
    7,025,361
    
    
    
    7,273,318Effect of dilutive securitiesStock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
 adjusted weighted average shares and assumed
conversions
    
    
    7,052,559
    
    
    
    7,382,856
    
    
    
    7,025,361
    
    
    
    7,273,318
  Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities
 9. Fair Value Measurements
 Fair Value Measurements
 10. Commitments and Contingencies
  13




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##### Table of Contents



11. Fair Value of Financial Instruments
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments
 August 2, 2008CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    145,075
    
    
    $
    145,075Revolving credit facility
    
    
    10,923,753
    
    
    
    10,923,753Subordinated secured term loan
    
    
    5,876,590
    
    
    
    5,826,557Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,089,098Capital lease obligations, including current maturities
    
    
    10,734
    
    
    
    10,734
 January 31, 2009CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    134,676
    
    
    $
    134,676Revolving credit facility
    
    
    11,482,862
    
    
    
    11,482,862Subordinated secured term loan
    
    
    4,817,282
    
    
    
    4,786,652Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,227,463
 August 1, 2009CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    152,733
    
    
    $
    152,733Revolving credit facility
    
    
    8,412,972
    
    
    
    8,412,972Subordinated secured term loan
    
    
    3,718,774
    
    
    
    3,697,626Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,391,276
  12. Subsequent Event
  14




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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 for the fiscal year ended January
31, 2009. 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
      15




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##### Table of Contents



Critical Accounting Policies
   Merchandise inventories
  16




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##### Table of Contents



Store closing and impairment charges
 Accounting for
the Disposal of Long-Lived Assets
 Stock-based compensation expense
 Share-Based Payment
 Deferred income taxes
 Accounting for Income Taxes
    17




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##### Table of Contents



Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
 Results of Operations
  Thirteen
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedAugust 2,
    
    August 1,
    
    August 2,
    
    August 1,2008
    
    2009
    
    2008
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    70.4
    
    
    
    70.4
    
    
    
    72.3
    
    
    
    71.1Gross profit
    
    
    29.6
    
    
    
    29.6
    
    
    
    27.7
    
    
    
    28.9Selling expense
    
    
    23.4
    
    
    
    22.9
    
    
    
    24.0
    
    
    
    22.5General and administrative expense
    
    
    9.2
    
    
    
    9.3
    
    
    
    9.6
    
    
    
    9.5Loss on disposal of property and equipment
    
    
    0.1
    
    
    
    
    
    
    
    0.3
    
    
    
    0.4Operating loss
    
    
    (3.1
    )
    
    
    (2.6
    )
    
    
    (6.2
    )
    
    
    (3.5
    )Other income, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    (1.7
    )
    
    
    (1.5
    )
    
    
    (1.8
    )
    
    
    (1.7
    )Loss before income taxes
    
    
    (4.7
    )
    
    
    (4.0
    )
    
    
    (7.9
    )
    
    
    (5.1
    )Provision for income taxes
    
    
    0.5
    
    
    
    
    
    
    
    0.3
    
    
    
    Net loss
    
    
    (5.2
    )%
    
    
    (4.0
    )%
    
    
    (8.2
    )%
    
    
    (5.1
    )%
  Thirteen
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedAugust 2,
    
    August 1,
    
    August 2,
    
    August 1,2008
    
    2009
    
    2008
    
    2009Number of stores at beginning of period
    
    
    249
    
    
    
    239
    
    
    
    249
    
    
    
    239Stores opened during period
    
    
    0
    
    
    
    2
    
    
    
    1
    
    
    
    3Stores closed during period
    
    
    (6
    )
    
    
    (1
    )
    
    
    (7
    )
    
    
    (2
    )Number of stores at end of period
    
    
    243
    
    
    
    240
    
    
    
    243
    
    
    
    240
 Thirteen Weeks Ended August 1, 2009 Compared to Thirteen Weeks Ended August 2, 2008
 Net sales.
 Gross profit.
 Selling expense.
 18




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##### Table of Contents



General and administrative expense.
 Interest expense.
 Income tax expense.
 Net loss
 Twenty-six Weeks Ended August 1, 2009 Compared to Twenty-six Weeks Ended August 2, 2008
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Interest expense.
 Income tax expense.
 Net loss
 Seasonality and Quarterly Fluctuations
  19




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Liquidity and Capital Resources
       20




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##### Table of Contents



August 2, 2008
    
    January 31, 2009
    
    August 1, 2009Cash
    
    $
    145,075
    
    
    $
    134,676
    
    
    $
    152,733Inventories
    
    
    21,559,866
    
    
    
    20,976,352
    
    
    
    18,859,814Total current assets
    
    
    24,143,567
    
    
    
    23,512,002
    
    
    
    21,324,531Property and equipment, net
    
    
    40,165,809
    
    
    
    34,029,666
    
    
    
    30,426,035Total assets
    
    
    65,466,041
    
    
    
    58,508,192
    
    
    
    52,793,718Revolving credit facility
    
    
    10,923,753
    
    
    
    11,482,862
    
    
    
    8,412,972Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    5,876,590
    
    
    
    4,817,282
    
    
    
    3,718,774Total current liabilities
    
    
    37,389,328
    
    
    
    38,283,963
    
    
    
    36,738,894Total shareholders equity
    
    
    18,006,239
    
    
    
    10,449,400
    
    
    
    6,536,723Net working capital
    
    
    (13,245,761
    )
    
    
    (14,771,961
    )
    
    
    (15,414,363
    )Unused borrowing capacity*
    
    
    1,737,378
    
    
    
    736,030
    
    
    
    896,903
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
  21




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##### Table of Contents



Investing activities
   Financing activities
  Revolving Credit Facility
     22




---



##### Table of Contents



Subordinated Secured Term Loan
        23




---



##### Table of Contents



Subordinated Convertible Debentures
   24




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##### Table of Contents



2005 Private Placement of Common Stock and Warrants
    IPO Warrants
  25




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##### Table of Contents



Off-Balance Sheet Arrangements
  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)
    
    $
    10,833,335
    
    
    $
    3,676,493
    
    
    $
    2,964,731
    
    
    $
    4,192,111
    
    
    $
    Operating lease obligations (2)
    
    
    144,320,896
    
    
    
    24,944,125
    
    
    
    44,939,346
    
    
    
    37,816,267
    
    
    
    36,621,158Purchase obligations (3)
    
    
    24,066,033
    
    
    
    23,958,033
    
    
    
    108,000
    
    
    
    
    
    
    
    Total
    
    $
    179,220,264
    
    
    $
    52,578,651
    
    
    $
    48,012,077
    
    
    $
    42,008,378
    
    
    $
    36,621,158
 
 (1)
    
    Includes principal and interest 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
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments
 Subsequent Events
 Impact of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures.
 26




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##### Table of Contents



Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 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 5. OTHER INFORMATION.
 Item 1.01. Entry into a Material Definitive Agreement.
  Amendment to Subordinated Term Loan.
  27




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##### Table of Contents



Amendment to Senior Credit Facility.
       Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
  
 Item 8.01. Other Events.
 We expect to transfer from the Nasdaq Global Market to the Nasdaq Capital Market.
   ITEM 6. EXHIBITS
  28




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##### Table of Contents



SIGNATURES
   BAKERS FOOTWEAR GROUP, INC.(Registrant)By:
    
    /s/ Peter A. EdisonPeter A. Edison
Chairman 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, III
Executive Vice President and Chief Financial Officer,
Controller, Treasurer, and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
 29




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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.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 filed on February 4, 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.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
filed on February 4, 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 filed on February 4, 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.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 filed on February 4, 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 filed on May 9, 2008 (File No. 000-50563)).4.10
    
    Amendment Number 2 to Loan Documents dated April 9, 2009 by
and among the Company, Private Equity Management Group, Inc.
and the Lender named therein (incorporated by reference to
Exhibit 4.10 to the Companys Current Report on Form 8-K filed
on April 15, 2009 (File No. 000-50563)).4.11
    
    Amendment Number 3 to Loan Documents dated September 8, 2009
by and among the Company, Private Equity Management Group,
Inc. and the Lender named therein.10.1
    
    Second Amended and Restated Loan and Security Agreement dated
as of August 31, 2006 by and between Bank of America, N.A. and
the Company (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on September 7,
2006 (File No. 000-50563)).10.2
    
    Amended and Restated Revolving Credit Note dated as of August
31, 2006 by and between Bank of America, N.A. and the Company
(incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed on September 7, 2006 (File
No. 000-50563)).
 30




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##### Table of Contents



Exhibit No.
    
    Description10.3
    
    Waiver and Consent Agreement dated as of April 18, 2007 by and
between Bank of America, N.A. and the Company (incorporated by
reference to Exhibit 10.14.2 to the Companys Annual Report on
Form 10-K for the fiscal year ended February 3, 2007 filed on
April 24, 2007 (File No. 000-50563)).10.4
    
    First Amendment to Second Amended and Restated Loan and
Security Agreement dated as of May 17, 2007 by and between the
Company and Bank of America, N.A. (incorporated by reference
to Exhibit 10.4 to the Companys Current Report on Form 8-K
filed on May 18, 2007 (File No. 000-50563)).10.5
    
    Extension Agreement dated June 26, 2007 between the Company
and Bank of America, N.A. (incorporated by reference to
Exhibit 4.4 to the Companys Current Report on Form 8-K filed
on July 2, 2007 (File No. 000-50563)).10.6
    
    Second Amendment to Second Amended and Restated Loan and
Security Agreement dated February 1, 2008 by and among the
Company and Bank of America, N.A. (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on February 4, 2008 (File No. 000-50563)).10.7
    
    Third Amendment to Second Amended and Restated Loan and
Security Agreement dated February 1, 2008 by and among the
Company and Bank of America, N.A. (incorporated by reference
to Exhibit 10.7 to the Companys Current Report on Form 8-K
filed on April 15, 2009 (File No. 000-50563)).10.8
    
    Fourth Amendment to Second Amended and Restated Loan and
Security Agreement dated February 1, 2008 by and among the
Company and Bank of America, N.A.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 Chief
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 Chief Financial Officer).
 
 *
    
    Confidential treatment requested as to certain portions, which portions are omitted and
filed separately with the SEC. 31