##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION  Form 10-Q [X]
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended April 3, 2004[  ]
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for 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 of other jurisdiction of
incorporation or organization)
    
    43-0577980(I.R.S. Employer Identification Number)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)
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes     [  ] No. Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes     [x] No Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date. Common Stock, $0.0001 par value, 5,102,481 shares issued and outstanding as of
May 14, 2004




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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 Statement of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7-11Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11-17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17Part II Other InformationItem 2. Changes in Securities and Use of Proceeds
    
    
    18-20Item 6. Exhibits and Reports on Form 8-K
    
    
    20Signatures
    
    
    21Exhibit Index
    
    
    22-24302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BAKERS FOOTWEAR GROUP, INC. 
 CONDENSED BALANCE SHEETS
 April 5,
    
    January 3,
    
    April 3,2003
    
    2004
    
    2004(Unaudited)
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    574,475
    
    
    $
    6,104,495Accounts receivable
    
    
    754,856
    
    
    
    1,051,854
    
    
    
    946,602Other receivables
    
    
    197,492
    
    
    
    186,011
    
    
    
    129,321Inventories
    
    
    17,795,084
    
    
    
    12,780,256
    
    
    
    17,939,885Prepaid expenses and other current assets
    
    
    1,066,190
    
    
    
    1,029,908
    
    
    
    1,427,468Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,235,658Total current assets
    
    
    19,813,622
    
    
    
    15,622,504
    
    
    
    27,783,429Property and equipment, net
    
    
    12,964,770
    
    
    
    12,459,178
    
    
    
    13,056,968Other assets
    
    
    858,480
    
    
    
    922,825
    
    
    
    154,709Total assets
    
    $
    33,636,872
    
    
    $
    29,004,507
    
    
    $
    40,995,106Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    2,967,126
    
    
    $
    3,529,652
    
    
    $
    6,207,287Accrued expenses
    
    
    3,749,418
    
    
    
    5,986,873
    
    
    
    3,536,126Sales tax payable
    
    
    640,796
    
    
    
    1,257,294
    
    
    
    844,096Deferred income
    
    
    516,981
    
    
    
    809,122
    
    
    
    821,091Revolving credit agreement
    
    
    15,283,202
    
    
    
    2,169,474
    
    
    
    Class A stock purchase warrants
    
    
    725,000
    
    
    
    837,500
    
    
    
    Class A stock redemption obligation
    
    
    
    
    
    
    210,799
    
    
    
    Current maturities of capital lease obligations
    
    
    831,638
    
    
    
    947,332
    
    
    
    893,619Current maturities of long-term subordinated debt
    
    
    660,203
    
    
    
    645,501
    
    
    
    Total current liabilities
    
    
    25,374,364
    
    
    
    16,393,547
    
    
    
    12,302,219Long-term subordinated debt, less current maturities
    
    
    324,608
    
    
    
    214,409
    
    
    
    Obligations under capital leases, less current maturities
    
    
    1,655,700
    
    
    
    1,347,112
    
    
    
    1,163,386Other liabilities
    
    
    982,158
    
    
    
    1,291,286
    
    
    
    1,391,816Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    64,411Class A stock redemption obligation
    
    
    1,276,863
    
    
    
    1,178,527
    
    
    
    Class B stock redemption obligation
    
    
    
    
    
    
    506,500
    
    
    
    Subordinated convertible debentures
    
    
    4,900,000
    
    
    
    4,500,000
    
    
    
    Shareholders equity:Preferred stock, $0.0001 par value, 5,000,000
shares authorized, no shares outstanding at April 3, 2004
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000 shares
authorized, 5,102,481 shares outstanding at April
3, 2004
    
    
    
    
    
    
    
    
    
    
    510Class A stock, $0.001 par value; 3,000,000 shares
authorized, 1,426,188 shares outstanding at April
5, 2003 and January 3, 2004
    
    
    1,426
    
    
    
    1,426
    
    
    
    Class B stock, $0.001 par value; 500,000 shares
authorized at April 5, 2003 and January 3, 2004
    
    
    
    
    
    
    
    
    
    
    Class C stock, $0.001 par value; 1,500,000 shares
authorized at April 5, 2003 and January 3, 2004
    
    
    
    
    
    
    
    
    
    
    Deferred stock compensation
    
    
    (66,706
    )
    
    
    
    
    
    
    Additional paid-in capital
    
    
    3,608,740
    
    
    
    3,756,814
    
    
    
    25,960,381Retained earnings (deficit)
    
    
    (4,420,281
    )
    
    
    (185,114
    )
    
    
    112,383Total shareholders equity (deficit)
    
    
    (876,821
    )
    
    
    3,573,126
    
    
    
    26,073,274Total liabilities and shareholders equity
    
    $
    33,636,872
    
    
    $
    29,004,507
    
    
    $
    40,995,106
 See accompanying notes. 3




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BAKERS FOOTWEAR GROUP, INC. 
 CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Thirteen Weeks
    
    Thirteen WeeksEnded
    
    EndedApril 5, 2003
    
    April 3, 2004Net sales
    
    $
    31,909,958
    
    
    $
    34,305,013Cost of merchandise sold, occupancy, and buying expenses
    
    
    24,191,483
    
    
    
    24,423,354Gross profit
    
    
    7,718,475
    
    
    
    9,881,659Operating expenses:Selling
    
    
    7,216,015
    
    
    
    7,440,980General and administrative
    
    
    3,198,360
    
    
    
    3,480,074Loss on disposal of property and equipment
    
    
    125,247
    
    
    
    93,491Operating loss
    
    
    (2,821,147
    )
    
    
    (1,132,886
    )Other income (expense):Interest expense
    
    
    (405,332
    )
    
    
    (441,966
    )State income tax (expense) benefit
    
    
    (1,099
    )
    
    
    Other income (expense), net
    
    
    (27,065
    )
    
    
    86,811Loss before income taxes
    
    
    (3,254,643
    )
    
    
    (1,488,041
    )Provision for (benefit from) income taxes
    
    
    
    
    
    
    (1,578,028
    )Net income (loss)
    
    $
    (3,254,643
    )
    
    $
    89,987Basic earnings (loss) per share
    
    $
    (2.09
    )
    
    $
    0.03Diluted earnings (loss) per share
    
    $
    (2.09
    )
    
    $
    0.03Pro forma income tax informationLoss before income taxes
    
    $
    (3,253,544
    )Provision for (benefit from) income taxes
    
    
    (1,230,647
    )Net loss
    
    $
    (2,022,897
    )Basic loss per share
    
    $
    (1.23
    )Diluted loss per share
    
    $
    (1.23
    )
 See accompanying notes. 4




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BAKERS FOOTWEAR GROUP, INC. 
 CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
 (Unaudited)
 Class A VotingCommon Stock
    
    Common StockShares
    
    
    
    
    
    Shares
    
    
    
    
    
    Additional
    
    RetainedIssued and
    
    
    
    
    
    Issued and
    
    
    
    
    
    Paid-In
    
    EarningsOutstanding
    
    Amount
    
    Outstanding
    
    Amount
    
    Capital
    
    (Deficit)
    
    TotalBalance at January 3, 2004
    
    
    
    
    
    $
    
    
    
    
    1,426,188
    
    
    $
    1,426
    
    
    $
    3,756,814
    
    
    $
    (185,114
    )
    
    $
    3,573,126Adjust accumulated
deficit to reflect
conversion from S
Corporation to C
Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185,114
    )
    
    
    185,114
    
    
    
    Accretion of class A
redeemable stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,854
    )
    
    
    (116,854
    )Accretion of class B
redeemable stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,250
    
    
    
    139,250Exchange of Class A
redeemable stock,
Class A common stock
and Class B
redeemable stock for
new common stock
    
    
    1,965,150
    
    
    
    197
    
    
    
    (1,426,188
    )
    
    
    (1,426
    )
    
    
    1,874,659
    
    
    
    
    
    
    
    1,873,430Shares issued in
connection with
initial public
offering
    
    
    2,484,000
    
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    15,559,286
    
    
    
    
    
    
    
    15,559,534Conversion of
convertible
debentures into
common stock
    
    
    653,331
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    4,954,736
    
    
    
    
    
    
    
    4,954,801Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,987
    
    
    
    89,987Balance at April 3, 2004
    
    
    5,102,481
    
    
    $
    510
    
    
    
    
    
    
    $
    
    
    
    $
    25,960,381
    
    
    $
    112,383
    
    
    $
    26,073,274
 See accompanying notes. 5




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BAKERS FOOTWEAR GROUP, INC. 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Thirteen Weeks
    
    Thirteen WeeksEnded
    
    EndedApril 5, 2003
    
    April 3, 2004Operating activitiesNet income (loss)
    
    $
    (3,254,643
    )
    
    $
    89,987Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    653,558
    
    
    
    727,871Deferred income taxes
    
    
    
    
    
    
    (1,171,247
    )Beneficial conversion of subordinated debentures
    
    
    
    
    
    
    163,333Amortization of deferred debt issuance costs
    
    
    30,762
    
    
    
    1,538Stock-based compensation expense
    
    
    60,915
    
    
    
    Amortization of debt discount
    
    
    12,447
    
    
    
    9,820Accretion of stock warrants
    
    
    38,140
    
    
    
    12,500Loss on disposal of property and equipment
    
    
    125,247
    
    
    
    93,491Changes in operating assets and liabilities:Accounts
receivable and other receivables
    
    
    41,908
    
    
    
    161,942Inventories
    
    
    (3,515,482
    )
    
    
    (5,159,629
    )Prepaid expenses and other current assets
    
    
    (435,406
    )
    
    
    (397,560
    )Other assets
    
    
    48,240
    
    
    
    708,116Accounts payable
    
    
    186
    
    
    
    2,677,635Accrued expenses and deferred income
    
    
    (919,906
    )
    
    
    (2,511,866
    )Other liabilities
    
    
    93,002
    
    
    
    100,530Net cash used in operating activities
    
    
    (7,021,032
    )
    
    
    (4,493,539
    )Investing activitiesPurchase of property and equipment
    
    
    (822,599
    )
    
    
    (1,419,587
    )Proceeds from sale of property and equipment
    
    
    1,313
    
    
    
    435Net cash used in investing activities
    
    
    (821,286
    )
    
    
    (1,419,152
    )Financing activitiesNet advances (repayments) under revolving notes payable
    
    
    8,239,984
    
    
    
    (2,169,474
    )Proceeds from initial public offering
    
    
    
    
    
    
    15,559,534Principal payments under capital lease obligations
    
    
    (302,124
    )
    
    
    (237,439
    )Principal payments of subordinated debt
    
    
    (95,000
    )
    
    
    (859,910
    )Payment to retire stock warrants
    
    
    
    
    
    
    (850,000
    )Cash distributions to shareholders
    
    
    (542
    )
    
    
    Net cash provided by financing activities
    
    
    7,842,318
    
    
    
    11,442,711Net increase in cash and cash equivalents
    
    
    
    
    
    
    5,530,020Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    574,475Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    6,104,495Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    1,099
    
    
    $
    33,857Cash paid for interest
    
    $
    318,449
    
    
    $
    275,216Noncash investing and financing transactionsCapital lease obligations
    
    $
    672,296
    
    
    $
    
 See accompanying notes. 6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC. 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 Unaudited
 1. Basis of Presentation The accompanying unaudited condensed financial statements contain all
adjustments that management believes are necessary to present fairly
Bakers Footwear Group, Inc.s (the
Companys) financial position, results of operations and cash flows for the
periods presented. Such adjustments consist of normal recurring accruals.
Certain information and disclosures normally included in notes to financial
statements have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. The Companys
operations are subject to seasonal fluctuations and, consequently, operating
results for interim periods are not necessarily indicative of the results that
may be expected for other interim periods or for the full year. The condensed
financial statements should be read in conjunction with the audited financial
statements and the notes thereto contained in our Annual Report on Form 10-K
for fiscal year ended January 3, 2004. 2. Initial Public Offering On February 10, 2004, the Company completed
its Initial Public Offering (IPO) and sold 2,160,000 shares of common stock at
$7.75 per share. On March 12, 2004, the Company sold an additional 324,000
shares of common stock at $7.75 per share when the underwriters exercised their
over-allotment option. The net proceeds to the Company were approximately
$15,560,000 after deducting the underwriting discount and other expenses
incurred in connection with the IPO. The Company used the proceeds from the IPO to repay the $4.9 million
balance on its revolving credit agreement, repay $859,910 of subordinated debt,
and repurchase stock warrants for $850,000. The Company used the remaining
proceeds for working capital purposes, primarily for the purchase of inventory
in the ordinary course of business and capital expenditures. Pending
use of the remaining proceeds, the Company has invested in
short-term, investment-grade, interest bearing instruments. Effective with the IPO, all shares of the Companys existing Class A,
Class B, and Class C common stock were exchanged for shares of new common stock
on a one to one basis, excluding fractional shares, and the Companys related
repurchase obligations were terminated. The Company issued stock purchase warrants covering 216,000 shares of
common stock with an exercise price of $12.7875 per share, subject to
antidilution adjustments, to representatives of the underwriters. The warrants
become exercisable on February 10, 2005 and expire on February 10, 2009. The subordinated convertible debentures were converted into 653,331 shares
of common stock at a conversion rate of $7.50 per share. The Company
recognized a beneficial conversion expense of $163,333 for the difference
between the $7.75 IPO price and the $7.50 conversion price. 3. Income Taxes Effective January 4, 2004, the Company elected, by the consent of its
shareholders, to revoke its status as an S corporation and become subject to
taxation as a C corporation. Under the S Corporation provisions of the
Internal Revenue Code, the individual shareholders include their pro rata
portion of the Companys taxable income in their personal income tax returns.
Accordingly, through January 3, 2004, 7




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##### Table of Contents



the Company was not subject to federal and certain state corporate income
taxes. However, the Company was subject to income taxes in certain states in
which it conducts business. The pro forma information on the accompanying statement of operations for
the thirteen weeks ended April 5, 2003 has been adjusted to reflect a reduction
in other income (expense) for these state income tax expenses, and is presented
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, as if the Company had been a C corporation during
that period and thus subject to federal and state income taxes. As a result of this change in tax status, the Company recorded deferred
tax assets and liabilities for the temporary differences between the book and
tax basis of assets and liabilities at the time of conversion. The Company
recognized a net benefit of $1,017,511 for the impact of these amounts as a
component of the provision for income taxes for the thirteen weeks ended April
3, 2004. Significant components of the benefit from income taxes for the thirteen
weeks ended April 3, 2004 are as follows: ThirteenWeeks EndedApril 3, 2004Current:Federal
    
    $
    342,553State and local
    
    
    64,228Total current
    
    
    406,781Deferred:Federal
    
    
    986,313State and local
    
    
    184,934Total deferred
    
    
    1,171,247Total income tax benefit
    
    $
    1,578,028
 The differences between the income tax benefit at the statutory U.S.
federal income tax rate of 34% and the amount reported in the statement of
operations for the thirteen weeks ended April 3, 2004 are as follows: Thirteen WeeksEnded April 3,2004Statutory federal income tax rate
    
    
    34.00
    %State and local taxes, net of federal income taxes
    
    
    4.00
    %Permanent differences
    
    
    (0.33
    )%Conversion from S corporation status to C corporation status
    
    
    68.38
    %Effective tax rate
    
    
    106.05
    %
 Deferred income taxes arise from temporary differences in the recognition
of income and expense for income tax purposes. Deferred income taxes were
computed using the liability method and reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial statement purposes and the amounts used for income tax purposes. 8




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Components of the Companys deferred tax assets and liabilities are as
follows: April 3, 2004Deferred tax assets:Vacation accrual
    
    $
    278,268Inventory
    
    
    954,654Stock-based compensation
    
    
    426,634Accrued rent
    
    
    550,550Total deferred tax assets
    
    
    2,210,106Deferred tax liabilities:Property and equipment
    
    
    1,038,859Total deferred tax liabilities
    
    
    1,038,859Net deferred tax assets
    
    $
    1,171,247
 4. Stock-Based Compensation SFAS No. 123, Accounting for Stock-Based Compensation, establishes the use
of the fair value-based method of accounting for all stock-based compensation
arrangements. SFAS No. 123 permits companies to use the intrinsic value
accounting method specified in Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations to
account for stock-based employee compensation arrangements. The Company uses
the intrinsic value-based method to account for stock-based employee
compensation arrangements and complies with the disclosure provisions of SFAS
No. 123. The Company recorded compensation
expense of $60,915 for the thirteen
weeks ended April 5, 2003, which represents the difference between the
estimated fair value of the stock on the date of the grant compared to the
$0.01 exercise price per option. For pro forma purposes, had the compensation
expense been determined in accordance with SFAS No. 123, net loss and net loss
per share would not have been materially different from the amounts reported. Effective with the IPO, the Company issued options to purchase 304,500
shares of common stock with an exercise price of $7.75 per share to certain
employees and directors. These options vest over five years and expire after
ten years. Had compensation cost for all options been determined based on
the grant date fair values of the options in accordance with SFAS No. 123, net
income and earnings per share would have been reduced to the pro forma amounts
indicated below: Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 5, 2003
    
    April 3, 2004Net income (loss) as reported
    
    $
    (3,254,643
    )
    
    $
    89,987Add: Stock based
compensation expense
included in net income as
reported
    
    
    60,915
    
    
    
    Deduct: Stock based
compensation expense
determined under fair value
method, net of related
income tax effect
    
    
    (60,915
    )
    
    
    (66,551
    )Pro forma net income (loss)
    
    $
    (3,254,643
    )
    
    $
    23,436
 9




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##### Table of Contents



Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 5, 2003
    
    April 3, 2004Basic earnings (loss) per share:As reported
    
    $
    (2.09
    )
    
    $
    0.03Pro forma
    
    $
    (2.09
    )
    
    $
    0.01Diluted earnings (loss) per share:As reported
    
    $
    (2.09
    )
    
    $
    0.03Pro forma
    
    $
    (2.09
    )
    
    $
    0.01
 No options were granted during the thirteen weeks ended April 5, 2003.
The weighted-average fair value of options granted during the thirteen weeks
ended April 3, 2004 was $4.68. The fair value of these options was estimated
at grant date using the Black-Scholes option pricing model assuming no
dividends, a risk-free interest rate of 3%, expected volatility of 64%, and
expected option life of 6 years. 5. Earnings (Loss) Per Share Basic earning per common share are computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share are computed using the weighted average number of common shares
and potential dilutive securities that were outstanding during the period.
Potential dilutive securities consist of outstanding stock options, warrants,
and, through the effective date of the IPO, convertible debentures, and
redeemable Class A and Class B stock. The following table presents a
reconciliation of our basic and diluted
weighted average common shares outstanding for the period. Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 5, 2003
    
    April 3, 2004Numerator:Net Income (loss)
    
    $
    (3,254,643
    )
    
    $
    89,987Accretion on redeemable stock
    
    
    269,333
    
    
    
    22,396Numerator for basic earnings per share
    
    
    (2,985,310
    )
    
    
    112,383Reverse accretion on redeemable stock
    
    
    (269,333
    )
    
    
    (22,396
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    26,387Interest expense related to warrants
    
    
    38,140
    
    
    
    7,750Numerator for diluted earnings per share
    
    $
    (3,216,503
    )
    
    $
    124,124Denominator for basic earnings per share  weighted average shares
    
    
    1,426,188
    
    
    
    3,454,666Effect of dilutive securitiesStock options
    
    
    
    
    
    
    314,303Stock purchase warrants
    
    
    
    
    
    
    49,018Redeemable securities
    
    
    
    
    
    
    500,167Denominator for diluted earnings per share  adjusted weighted
average shares and assumed conversions
    
    
    1,426,188
    
    
    
    4,318,154
 For the thirteen weeks ended April 5, 2003, 243,948 stock options, 76,897
stock purchase warrants, and 538,967 shares of redeemable securities were
excluded from the computation of diluted 10




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earnings per share because they were anti-dilutive. For the thirteen
weeks ended April 3, 2004, 216,000 stock purchase warrants were excluded from
the computation of diluted earnings per share because they were anti-dilutive. 
 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 Statements Regarding Forward-Looking Statements and Certain Risks. Overview We are a national, mall-based, specialty retailer of distinctive footwear
and accessories targeting young women who demand quality fashion products. We
feature private label and national brand dress, casual and sport shoes, boots,
sandals and accessories. As of April 3, 2004, we operated 178 Bakers stores
and 29 Wild Pair stores located in 36 states. During the first quarter of 2004, we completed our initial public offering
generating net proceeds of $15.6 million, converted $6.8 million of convertible
debt and redeemable securities into common stock, and repaid $4.1 million of
debt obligations. This has significantly enhanced our financial position and
will enable us to pursue our plans to increase the number of stores we operate
and remodel existing stores into our new format. We anticipate that our new
format stores will result in higher sales in future periods. During the first quarter of 2004, our operating results reflected the
trend of increased demand for more fashion-oriented womens footwear that
started in the fall of 2003. For the first quarter of 2004 our sales increased
7.5% compared to the first quarter of 2003, and, more significantly, our gross
profit increased 28%. For comparison purposes, we classify our stores as comparable or
non-comparable. A new stores sales are not included in comparable store sales
until the thirteenth month of operation. Sales from remodeled stores are
excluded from comparable store sales during the period of remodeling. Critical Accounting Policies Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require us to make
estimates and assumptions about future events and their impact on amounts
reported in our financial statements and related Notes. Since future events
and their impact cannot be determined with certainty, the actual results will
inevitably differ from our estimates. These differences could be material to
the financial statements. We believe that our application of accounting policies, and the estimates
that are inherently required by these policies, are reasonable. We believe
that the following significant accounting policies may involve a higher degree
of judgment and complexity. 11




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Merchandise inventories Merchandise inventories are valued at the lower of cost or market using
the first-in first-out retail inventory method. Permanent markdowns are
recorded to reflect expected adjustments to retail prices in accordance with
the retail inventory method. The process of determining our expected
adjustments to retail prices requires significant judgment by management.
Among other factors, management utilizes performance metrics to evaluate the
quality and freshness of inventory, including the number of weeks of supply on
hand, sell-through percentages and aging categories of inventory by selling
season, to make its best estimate of the appropriate inventory markdowns. If
market conditions are less favorable than those projected by management,
additional inventory markdowns may be required. Store closing and impairment charges Based on the criteria in SFAS No. 144, Accounting for the Disposal of
Long-Lived Assets, long-lived assets to be held and used are reviewed for
impairment when events or circumstances exist that indicate the carrying amount
of those assets may not be recoverable. We regularly analyze the operating
results of our stores and assess the viability of under-performing stores to
determine whether they should be closed or whether their associated assets,
including furniture, fixtures, equipment, and leasehold improvements, have been
impaired. Asset impairment tests are performed at least annually, on a
store-by-store basis. After allowing for an appropriate start-up period,
unusual nonrecurring events, and favorable trends, fixed assets of stores
indicated to be impaired are written down to fair value. Deferred income taxes Through January 3, 2004, we were an S corporation under Subchapter S of
the Internal Revenue Code and comparable state tax laws, and consequently were
not subject to income taxes on our earnings in those jurisdictions, other than
state franchise and net worth taxes. However, we were subject to income taxes
in some states in which we conduct business which do not recognize S
corporation status. Our S corporation status was terminated effective January
4, 2004. Beginning with the thirteen week period ended April 3, 2004 we are
a C Corporation for Federal and state income tax purposes and, as a result, are
subject to Federal and state income taxes. We calculate income taxes in accordance with SFAS No. 109 Accounting for
Income Taxes, which requires the use of the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized based on the
difference between their carrying amounts for financial reporting purposes and
income tax reporting purposes. Deferred tax assets and liabilities are
measured using the tax rates in effect in the years when those temporary
differences are expected to reverse. Inherent in the measurement of deferred
taxes are certain judgments and interpretations of existing tax law and other
published guidance as applied to our operations. No valuation allowance has
been provided for the deferred tax assets because we generated taxable income
in prior periods and we anticipate that future taxable income will be
sufficient to allow us to fully recover the amount of net deferred tax assets. Results of Operations The following table sets forth our operating results, expressed as a
percentage of sales, for the periods indicated. 12




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Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 5, 2003
    
    April 3, 2004Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    75.8
    
    
    
    71.2Gross profit
    
    
    24.2
    
    
    
    28.8Selling expense
    
    
    22.6
    
    
    
    21.7General and administrative expense
    
    
    10.0
    
    
    
    10.1Loss on disposal of property and equipment
    
    
    0.4
    
    
    
    0.3Operating loss
    
    
    (8.8
    )
    
    
    (3.3
    )Other income (expense)
    
    
    (0.1
    )
    
    
    0.3Interest expense
    
    
    (1.3
    )
    
    
    (1.3
    )Loss before income taxes
    
    
    (10.2
    )
    
    
    (4.3
    )Income tax benefit
    
    
    
    
    
    
    4.6Net income (loss)
    
    
    (10.2
    )%
    
    
    0.3
    %
 The following table sets forth our number of stores at the beginning and
end of each period indicated and the number of stores opened, acquired and
closed during each period indicated. Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 5, 2003
    
    April 3, 2004Number of stores at beginning of period
    
    
    233
    
    
    
    215Stores opened or acquired during period
    
    
    
    
    
    
    Stores closed during period
    
    
    (13
    )
    
    
    (8
    )Number of stores at end of period
    
    
    220
    
    
    
    207
 Thirteen Weeks Ended April 3, 2004 Compared to Thirteen Weeks Ended April 5, 2003 Net sales.Net sales increased to $34.3 million for the thirteen weeks
ended April 3, 2004 (first quarter 2004) from $31.9 million for the thirteen
weeks ended April 5 2003 (first quarter 2003), an increase of
$2.4 million.
This increase resulted principally from higher average unit prices
reflecting less discounting compared to the first quarter of 2003. Net sales for the first quarter of 2004 reflect the continuation of strong
consumer demand for dress footwear that began in the fourth quarter of 2003 and
compare favorably to the weak retail environment during the first quarter of
2003. Net sales increased despite operating thirteen fewer stores compared to
the first quarter of 2003. Our comparable store sales for the first quarter of
2004 increased by 11.2% compared to the first quarter of 2003. Gross profit.Gross profit increased to $9.9 million in the first quarter
of 2004 from $7.7 million in the first quarter of 2003. As a percentage of
sales, gross profit increased to 28.8% in the first quarter of 2004 from 24.2%
in the first quarter of 2003. This reflects significantly improved markdown
experience resulting from the strong retail environment that started in the
fourth quarter of 2003 and continued through the first quarter of 2004. Selling expense.Selling expense increased to $7.4 million in the first
quarter of 2004 from $7.2 million in the first quarter of 2003, an increase of
$200,000, but decreased as a percentage of sales to 21.7% from 22.6%. This
increase was due primarily to higher salaries and commissions but reflects 13




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continued effective expense management demonstrated by the reduction of
sales expense as a percentage of sales. General and administrative expense.General and administrative expense
increased to $3.5 million in the first quarter of 2004 from $3.2 million in the
first quarter of 2003, an increase of $300,000. The increase was due primarily
to increased compensation expense compared to the first quarter of 2003. Income tax benefit.Effective January 4, 2004, we converted to a C
corporation and became subject to federal and state income taxes. In
accordance with SFAS 109, Accounting for Income Taxes, we have reflected the
net impact of the temporary differences between the book and tax basis of our
assets and liabilities as of the date of conversion as a component of our
provision for income taxes for the period. This resulted in the recognition of
a nonrecurring income tax benefit of $1.0 million for the first quarter of
2004. In addition, we recognized a tax benefit of $500,000 for the first
quarter of 2004 related to the taxable loss incurred during the quarter.
Because we were an S corporation during the first quarter of 2003 there was no
comparable income tax benefit for that period. On a pro forma basis, had we
been a C corporation for the first quarter of 2003, we would have had a tax
benefit of $1.2 million for the period. Net income (loss). We had net income of $90,000 in the first quarter of
2004 compared to a net loss of $3.2 million in the first quarter
of 2003. If we
had been taxed as a C corporation for the first quarter of 2003, our net loss
would have been $2.0 million for that period. Seasonality and Quarterly Fluctuations Our operating results are subject to significant seasonal variations. Our
quarterly results of operations have fluctuated, and are expected to continue
to fluctuate in the future, as a result of these seasonal variances, in
particular our principal selling seasons. We have five principal selling
seasons: transition (post-holiday), Easter, back-to-school, fall and holiday.
Sales and net income in our second and fourth quarters are typically much
stronger than in our first and third quarters. In addition to our normal seasonal fluctuation, some events, in particular
the Easter holiday, shift between fiscal quarters in some years due to the
nature of our fiscal year. This shift will influence our quarterly comparable
results. Easter falls in the second quarter of fiscal years 2003 and 2004. Quarterly comparisons may also be affected by the timing of sales and
costs associated with opening of new stores, including acquisitions. Liquidity and Capital Resources During the first quarter of 2004, we completed our initial public offering
which generated net proceeds of $15.6 million. Our cash requirements are
primarily for working capital, capital expenditures and principal payments on
our capital lease obligations. Historically, these needs for cash have been
met by cash flows from operations, borrowings under our revolving credit
facility and sales of subordinated debt. At April 3, 2004, we had total assets of $41.0 million and shareholders
equity of $26.1 million compared to total assets of $29.0 million and
shareholders equity of $3.6 million at January 3, 2004, and compared to total
assets of $33.6 million and a deficit in shareholders equity of $900,000 at
April 5, 2003. At April 3, 2004, we had net working capital of $15.5 million,
and $12.1 million of unused borrowing capacity under our revolving credit
facility, based upon our borrowing base calculation, compared to negative net
working capital of $800,000 and $5.6 million of unused borrowing capacity at 14




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January 3, 2004 and compared to negative net working capital of $5.6
million and $400,000 of unused borrowing capacity at April 5, 2003. The improvement in our financial position primarily relates to the proceeds from our initial public
offering, the conversion of our subordinated debentures and redeemable Class A and Class
B common stock into common stock, and our improved operating results. We anticipate that our cash flows from operations, borrowings under our
revolving credit facility, and proceeds from our initial public offering will
be sufficient for our operating cash requirements for at least the next 12
months and will allow us to further execute our business plan, including our
planned expansion. Operating activities For the first quarter of 2004, our net cash used by operating activities
was $4.5 million compared to net cash used by operating activities of $7.0
million in the first quarter of 2003, an improvement of $2.5 million. The
primary cause of this improvement was increased operating income in 2004. The
primary use of cash for operating activities during the first quarter of 2004
and 2003 is the seasonal change in inventory which increased $5.2 million in
the first quarter of 2004 and $3.5 million in the first quarter of 2003. Investing activities Cash used in investing activities was $1.4 million in the first quarter of
2004 compared to $800,000 for the first quarter of 2003. During each quarter,
cash used in investing activities consisted of capital expenditures for
furniture, fixtures and leasehold improvements for both new and remodeled
stores. We anticipate that our capital expenditures in fiscal year 2004, primarily
related to new stores, store remodelings, distribution and general corporate
activities, will be approximately $8.0 million to $9.0 million. We plan to open approximately 15 new stores in fiscal year 2004 and 30 to
35 new stores in fiscal year 2005. Net capital expenditures for a new store
are expected to average approximately $200,000, including point of sale
equipment. The average inventory investment, net of payables, for a new store
is expected to range from approximately $45,000 to $75,000, depending on the
size and sales expectation of the store and the timing of the new store
opening. Pre-opening expenses, such as marketing, salaries, supplies and
utilities are expensed as incurred. We plan to remodel approximately 17 to
21 stores in our new
format in fiscal year 2004. Remodeling the average existing store into the
new format is estimated to cost approximately $225,000. We also plan
to perform minor remodeling at approximately ten stores in fiscal
year 2004 at an average cost of $40,000 per store. Financing activities On February 10, 2004, we consummated our initial public offering with the
sale of 2,160,000 shares of common stock. On March 12, 2004, we sold an
additional 324,000 shares of common stock in connection with the exercise, by
the underwriters, of the full over-allotment option. All of the shares of
common stock sold to the public were sold at a price of $7.75 per share. The
aggregate gross proceeds from the shares of common stock and the warrants sold
was approximately $19.3 million. The net 15




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proceeds to us from the offering were approximately $15.6 million. We
used the net proceeds received from the initial public offering to repay $4.9
million on our revolving credit agreement, $0.9 million to redeem outstanding
warrants, $0.9 million to repay subordinated debt, and $1.4 million for capital
expenditures. We expect to use the remaining net proceeds for capital
expenditures, working capital requirements and other general corporate
purposes, including the purchase of inventory in the ordinary course of
business. Pending use of the proceeds, we are investing in short-term,
investment-grade interest bearing instruments. In connection with our IPO, $4.5 million of subordinated convertible
debentures automatically converted into 653,331 shares of common stock at a
fixed exercise price of $7.50 per share. Our Class A and Class B common stock
was converted into shares of our new common stock on a one to one basis,
excluding fractional shares, and $1.9 million of related redemption obligations
were terminated. At April 3, 2004, we had 5,102,481 shares of common stock
outstanding. We have a $25.0 million secured revolving credit facility with Fleet
Retail Finance, Inc. Amounts borrowed under the facility bear interest at a
rate equal to the base rate (as defined in the agreement) plus 0.75% per annum,
which was equal to 4.75% per annum at January 3. 2004. The aggregate amount
that we may borrow under the agreement at any time is established by a formula,
which is based on our inventory level but cannot be greater than $25.0 million.
The agreement is secured by substantially all of our assets. The credit
facilitys maturity date is January 5, 2005. We repaid the outstanding balance
on the credit facility during the first quarter of 2004 from the proceeds of
our IPO. In connection with the closing of our IPO, we sold to the representatives
of the underwriters and their designees warrants to purchase up to an aggregate
of 216,000 shares of common stock at an exercise price equal to $12.7875 per
share, subject to antidilution adjustments, for a purchase price of $0.0001 per
warrant for the warrants. The warrant holders may exercise the warrants as to
all or any lesser number of the underlying shares of common stock at any time
during the four-year period commencing on February 10, 2005. Our ability to meet our current and anticipated operating requirements
will depend on our future performance, which, in turn, will be subject to
general economic conditions and financial, business and other factors,
including factors beyond our control. Off-Balance Sheet Arrangements At April 3, 2004 and April 5, 2003, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities or variable
interest entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. We are, therefore, not materially exposed to any financing,
liquidity, market or credit risk that could otherwise have arisen if we had
engaged in such relationships. Recent Accounting Pronouncements In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements,
relating to consolidation of variable interest entities (VIEs). The provisions
of FIN 46 became effective immediately for VIEs created after January 31, 2003.
The provisions of FIN 46 for VIEs created on or before January 31, 2003 were
delayed until December 31, 2003 by FASB Staff Position No. FIN 46-6, Effective
Date of FASB Interpretation No. 46, Consolidation of Variable Interest
Entities,issued in October 2003. We were not required to consolidate any
VIEs. 16




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##### Table of Contents



Effect of Inflation Overall, we do not believe that inflation has had a material adverse
impact on our business or operating results during the periods presented. We
cannot give assurance, however, that our business will not be affected by
inflation in the future. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our earnings and cash flows may be subject to fluctuations due to changes
in interest rates. Our financing arrangements include both fixed and variable
rate debt in which changes in interest rates will impact the fixed and variable
rate debt differently. A change in the interest rate of fixed rate debt will
impact the fair value of the debt, whereas a change in the interest rate on the
variable rate debt will impact interest expense and cash flows. Management
does not believe that the risk associated with changing interest rates would
have a material effect on our results of operations or financial condition. 
 ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures:The Companys management, with the
participation of the Companys Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of
the end of the period covered by this report. Any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. Based on such evaluation, the
Companys Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Companys disclosure controls and
procedures provided reasonable assurance that the disclosure controls and
procedures are effective in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the Company in the
report that it files or submits under the Exchange Act. Internal control Over Financial Reporting:The companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, also conducted an evaluation of the Companys internal control over
financial reporting to determine whether any changes occurred during the
Companys first fiscal quarter ended April 3, 2004 that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting. Based on that evaluation, there has been no
such change during the Companys first fiscal quarter. 17




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BAKERS FOOTWEAR GROUP, INC. 
 PART II  OTHER INFORMATION
 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities In connection with the consummation of the initial public offering on
February 10, 2004, the Company issued to Ryan Beck & Co., Inc. and BB&T Capital
Markets, a Division of Scott & Stringfellow, Inc., the underwriters
representatives for the initial public offering, or their designees, five year
warrants to purchase up to 216,000 shares of the Companys common stock,
subject to antidilution adjustments, at an exercise price of $12.7875 per share
of common stock. The representatives paid a purchase price of $0.0001 per
warrant, an aggregate of $21.60. The warrant holders may exercise the warrants
at any time during the four-year period commencing February 10, 2005 and ending
February 10, 2009. In the foregoing transaction, the Company relied on the
exemption from registration for private transactions not involving any public
offering pursuant to Section 4(2) under the Securities Act of 1933 and/or the
rules and regulations thereunder for transactions by an issuer not involving
any public offering. The Companys $4.9 million in aggregate principal amount of subordinated
convertible debentures automatically converted in accordance with their terms
into an aggregate of 653,331 shares of the Companys common stock at a
conversion price of $7.50 upon the consummation of the initial public offering.
For the conversion of the debentures into shares of common stock the Company
relied on the exemption(s) from registration relating to offerings that did not
involve any public offering pursuant to Section 4(2) under the Securities Act
of 1933 and/or an exchange by the issuer with its existing security holders
exclusively where no commission or other remuneration is paid or given directly
or indirectly for soliciting such exchange pursuant to Section 3(a)(9) under
the Securities Act of 1933. Immediately prior to consummation of the initial public offering, the
Company had three classes of common stock authorized, Class A common stock,
Class B common stock and Class C common stock, of which only shares of Class A
and Class B common stock were outstanding. Upon the completion of the initial
public offering, in accordance with the then existing articles of
incorporation, 1,693,244.92 shares of Class A common stock and 271,910 shares
of Class B common stock automatically converted into an aggregate of 1,965,150
shares of common stock. The conversion was on 1.0-for-1.0 basis, excluding
fractional shares. As a result, the Company now has one class of voting common
stock issued and outstanding. In addition, holders of Class C options amended
their option award agreements to purchase Class C common stock to cover shares
of the new class of common stock. The Company relied on the exemption from
registration under the Securities Act of 1933 pursuant to Section 3(a)(9)
and/or the rules and regulations thereunder for securities exchanged by an
issuer with its existing security holders exclusively where no commission or
other remuneration is paid or given directly or indirectly for soliciting such
exchange. In all the foregoing transactions to the extent that the Company has
relied on the exemption from registration for private transactions not
involving any public offering pursuant to Section 4(2) under the Securities Act
of 1933 and/or the rules and regulations thereunder for transactions by an
issuer not involving any public offering, sales of the securities were without
the use of an underwriter, and, to the extent applicable, the certificates
evidencing the securities relating to the foregoing transactions bore
restrictive legends permitting the transfer thereof only upon registration of
such securities or an exemption under the Securities Act. The recipients of
securities represented their intention to acquire the securities for investment
purposes only and not with a view to or for distribution in connection with
these 18




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transactions. Each security bore a restrictive legend and/or the recipient
was a party to an agreement restricting transfer and had adequate access to
information about us through such recipients relationship with us or through
information provided to them. Use of Proceeds On February 5, 2004, the Company commenced its initial public offering. On
February 10, 2004, the Company consummated its initial public offering with the
sale of 2,160,000 shares of common stock, excluding exercise of the
underwriters over-allotment option. In connection with the Companys initial
public offering, the Company also sold 216,000 warrants to purchase shares of
common stock to Ryan Beck & Co., Inc. and BB&T Capital Markets, a Division of
Scott and Stringfellow, Inc. as the representatives of the underwriters, or
their designees. On March 12, 2004, the Company sold an additional 324,000
shares of common stock in connection with the exercise, by the underwriters, of
the full over-allotment option. The public offering price of the common stock
was $7.75 per share. We sold the warrants for $0.0001 per warrant. The shares of common stock sold in the offering and the warrants to
purchase common stock were registered under the Securities Act of 1933, as
amended, on two Registration Statements (Nos. 333-86332 and 333-112477) on Form
S-1. The Securities and Exchange Commission declared Registration Statement No.
333-86332 effective on February 3, 2004. Registration Statement No. 333-112477
was effective upon filing on February 4, 2004 pursuant to Rule 462(b) under the
Securities Act of 1933. All 2,160,000 shares of common stock sold to the public
in the initial closing, plus all 324,000 shares of common stock covered by an
over-allotment option granted to the underwriters were sold at a price of $7.75
per share. The warrants were sold to the representatives of the underwriters at
a price of $0.0001 per warrant. Each warrant may be converted into one share of
common stock at an exercise price $12.7875. The Registration Statements
collectively registered 2,484,000 shares of common stock at a maximum aggregate
offering price of $26,772,000, 216,000 warrants at a maximum aggregate offering
price of $22, all of which common stock and warrants were sold in the offering,
and 216,000 shares of common stock underlying the warrants at a maximum
aggregate offering price of $2,851,000. The aggregate gross proceeds from the shares of common stock and the
warrants sold were approximately $19.3 million. The net proceeds to the Company
from the offering were approximately $15.6 million after deducting the
underwriting discount of $1.9 million and $1.8 million of other expenses
incurred in connection with the offering. A reasonable estimate for the amount
of expenses incurred has been provided instead of the actual amount of
expenses. None of such payments were to directors, officers, ten percent
shareholders or affiliates of the issuer. As of April 3, 2004, the Company has used the net proceeds received from
the initial public offering for the following purposes: $4.9 million to repay
the balance on its revolving credit agreement to Fleet Retail Finance, Inc.,
$1.4 million to redeem outstanding warrants and a note payable in favor of
Mississippi Valley Capital, LLC, $0.4 million to repay subordinated debt in
favor of the Companys prior Class B shareholders, and $1.4 million for the
purchase of property and equipment, primarily store fixtures and leasehold
improvements. Reasonable estimates for the amounts have been provided instead
of the actual amounts. The credit agreement and the subordinated debt were
secured, in part, by a personal guaranty of Peter Edison, the Companys
Chairman of the Board and Chief Executive Officer. Mississippi Valley Capital,
LLC is a member managed limited liability company, of which Mr. Baur, one of
the Companys directors, is one of the two managers. In addition, Mr. Baurs
children are three of the four members. Mr. Baur is also a director of Marshall
& Ilsley Corporation, which is a ten percent participant in the Companys
credit facility with Fleet Retail Finance, Inc.. Pending use of the remaining
proceeds, the Company has invested in short-term, investment-grade interest
bearing instruments. 19




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##### Table of Contents



The Company intends to use the remaining net proceeds from the offering to
fund its planned capital expenditures in fiscal year 2004, primarily related to
new stores, store remodelings, distribution and general corporate activities,
of approximately $8.0 million to $9.0 million. The Company plans to open 15
new stores, all in the Companys new format and remodel approximately 27
stores, including 17 to 21 in the new format, in fiscal year 2004. The Company
expects to use any remaining net proceeds for working capital requirements and
other general corporate purposes. Except as set forth above, none of proceeds
were paid to directors, officers, ten percent shareholders or affiliates of the
issuer. Our revolving credit facility prohibits the payment of dividends,
except for common stock dividends. Purchase of Equity Securities by the Issuer and Affiliated Purchasers The Company does not have any programs to repurchase shares of its common stock
and no such repurchases were made during the thirteen weeks ended April 3,
2004. Issuer Purchases of Equity Securities (c) Total Number of(b)
    
    Shares Purchased as
    
    (d) Maximum Number of(a) Total Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased (000s)
    
    per Share
    
    Programs (000s)
    
    Plans or Programs (000s)January 4, 2004 
January 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 1, 2004
February 28, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1, 2004 
April 3, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index herein (b) Reports on Form 8-K: Pursuant to Items 7 and 12, on March 10, 2004,
the Company filed a Report on Form 8-K dated March 10, 2004 to furnish the
press release announcing its earnings per share and net sales for the fourth
quarter and year end of fiscal 2003 and to furnish excerpts from the Companys
conference call webcast on March 4, 2004 relating to the fourth quarter and
year end fiscal 2003 results, business developments and future outlook.
Pursuant to items 7 and 9, on March 16, 2004, the Company filed a Report on
Form 8-K dated March 16, 2004 to furnish the Companys March 12, 2004 press
release announcing the exercise of the full over-allotment option of 324,000
shares of common stock by the underwriters. 20




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BAKERS FOOTWEAR GROUP, INC. 
 SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed, on its behalf by the
undersigned thereunto duly authorized. Date: May 17, 2004 BAKERS FOOTWEAR GROUP, INC.
(Registrant)By:
    /s/ Lawrence L. Spanley, Jr.Lawrence L. Spanley, Jr.Chief Financial Officer, Vice President-
Finance, Treasurer, and Secretary
(On behalf of the Registrant and as principal financial officer) 21




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EXHIBIT INDEX ExhibitNumber
    
    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
    
    Debenture Purchase Agreement dated April 4, 2002 by and
among the Company and the persons on the attached signature
pages (incorporated by reference to Exhibit 4.1 of the
Companys Registration Statement on Form S-1 (File No.
333-86332), filed April 16, 2002).4.1.1
    
    Convertible Debenture Exchange Agreement dated January 2,
2004 by and among the Company, Special Situations Private
Equity Fund, L.P., Special Situations Cayman Fund, L.P.,
Special Situations Fund III, L.P., Julian Edison, The Crown
Advisors, LLC, Crown Investment Partners, L.P. and SWB
Holdings, Inc. (incorporated by reference to Exhibit 4.1.1
of Amendment No. 3 to the Companys Registration Statement
on Form S-1 (File No. 333-86332), filed January 8, 2004).4.1.2
    
    Form of Subordinated Convertible Debenture dated January
2004 (included as Exhibit A to Exhibit 4.1.1).4.2.1
    
    Second Registration Rights Agreement dated January 2, 2004
by and among the Company, Special Situations Fund III,
L.P., Special Situations Cayman Fund, L.P., Special
Situations Private Equity Fund, L.P., The Crown Advisors
LLC, Crown Investment Partners, LP, SWB Holdings, Inc. and
Julian Edison (incorporated by reference to Exhibit 4.2.1
of Amendment No. 3 to the Companys Registration Statement
on Form S-1 (File No. 333-86332), filed January 8, 2004).4.2.2
    
    Letter to Ryan Beck & Co., Inc. and BB&T Capital Markets,
as representatives of the underwriters, relating to
restrictions on transferability of common stock underlying
convertible debentures, executed by all holders of
subordinated convertible debentures (incorporated by
reference to Exhibit 4.2.2 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)).4.3
    
    Representatives Warrant Agreement, dated February 10, 2004
by and among the Company, Ryan Beck & Co., Inc. and BB&T
Capital Markets, a Division of Scott & Stringfellow,
Inc.(incorporated by reference to Exhibit 4.3 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)).4.4
    
    Amended and Restated Intercreditor and Subordination
Agreement dated January 2, 2004 by and among Fleet Retail
Finance Inc., Special Situations Private Equity Fund, L.P.,
Special Situations Cayman Fund, L.P., Special Situations
Fund III, L.P., Julian Edison, The Crown Advisors, LLC,
Crown Investment Partners, L.P., SWB Holdings, Inc. and the
Company (incorporated by reference to Exhibit
 22




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##### Table of Contents



ExhibitNumber
    
    Description4.4 of
Amendment No. 3 to the Companys Registration Statement on
Form S-1 (File No. 333-86332), filed January 8, 2004).4.5
    
    Letter to Ryan Beck & Co., Inc. and BB&T Capital Markets,
as representatives of the underwriters, relating to
restrictions on transferability of common stock, executed
by all directors, officers and shareholders prior to the
initial public offering (incorporated by reference to
Exhibit 4.5 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)).4.6
    
    Form of common stock certificate (incorporated by reference
to Exhibit 4.6 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)).4.7
    
    Warrants issued by the Company to representatives of the
underwriters, or their designees (incorporated by reference
to Exhibit 4.7 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)).10.1
    
    Bakers Footwear Group, Inc. 2003 Stock Option Plan
(incorporated by reference to Exhibit 10.1 of Amendment No.
3 to the Companys Registration Statement on Form S-1 (File
No. 333-86332), filed January 8, 2004).10.2
    
    Bakers Footwear Group, Inc. Cash Bonus Plan (incorporated
by reference to Exhibit 10.2 of Amendment No. 3 to the
Companys Registration Statement on Form S-1 (File No.
333-86332), filed January 8, 2004).10.3
    
    Employment Agreement dated January 12, 2004 by and between
the Company and Peter Edison (incorporated by reference to
Exhibit 10.15 of Amendment No. 4 to the Companys
Registration Statement on Form S-1 (File No. 333-86332),
filed January 20, 2004).10.4
    
    Fourth Amendment and Waiver and Consent Agreement dated
January 28, 2004 by and between Fleet Retail Finance, Inc.
and the Company (incorporated by reference to Exhibit
10.17.7 of Amendment No. 5 to the Companys Registration
Statement on Form S-1 (File No. 333-86332), filed January
30, 2004).10.5
    
    Tax Indemnification Agreement among the Company and its
shareholders dated January 3, 2004 (incorporated by
reference to Exhibit 10.18 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)).10.6
    
    Financial Advisor Agreement, dated February 4, 2004, by and
between Ryan Beck & Co., Inc. and the Company (incorporated
by reference to Exhibit 10.31 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)).10.7
    
    Underwriting Agreement, dated February 4, 2004, by and
among the Company, Ryan Beck & Co. Inc. and BB&T Capital
Markets, a Division of Scott & Stringfellow Inc., as
representatives of the underwriters named therein
(incorporated by reference to Exhibit 10.32 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)).
 23




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##### Table of Contents



ExhibitNumber
    
    Description10.8
    
    Letter to Peter Edison from Peter Edison dated March 1,
2004 outlining the 2004 bonus levels (incorporated by
reference to Exhibit 10.33 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)).10.9
    
    Letter to Michele Bergerac from Peter Edison dated March 1,
2004 outlining the 2004 bonus levels (incorporated by
reference to Exhibit 10.34 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)).10.10
    
    Letter to Mark Ianni from Peter Edison dated March 1, 2004
outlining the 2004 bonus levels (incorporated by reference
to Exhibit 10.35 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)).10.11
    
    Letter to Stan Tusman from Peter Edison dated March 1, 2004
outlining the 2004 bonus levels (incorporated by reference
to Exhibit 10.36 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)).10.12
    
    Letter to Joe Vander Pluym from Peter Edison dated March 1,
2004 outlining the 2004 bonus levels (incorporated by
reference to Exhibit 10.37 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)).10.13
    
    Letter to Larry Spanley from Peter Edison dated March 1,
2004 outlining the 2004 bonus levels (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)).11.1
    
    Statement regarding computation of per share earnings
(incorporated by reference from Note 5 of the Companys
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 Certification (pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Chief Executive
Officer).32.2
    
    Section 1350 Certification (pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Chief Financial
Officer)
 24