##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q/A (Amendment No. 1) [X]
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended July 3, 2004
 [  ]
    
    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 of other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)2815 Scott Avenue,St. Louis, Missouri
    
    63103(Address of principal executive offices)
    
    (Zip Code)
 (314)621-0699(Registrants telephone number, including area code) Not Applicable(Former name, former address and former fiscal year, if changed since last report) 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
March 18, 2005. 1




---



EXPLANATORY NOTE This Amendment to the Bakers Footwear Group, Inc. (the Company) Quarterly Report on Form 10-Q/A
(the Report) for the quarterly period ended July 3, 2004 is being filed solely to correct
and restate the Companys previously issued financial statements as of and for the thirteen and
twenty-six week periods ended July 3, 2004 and July 5, 2003, and the notes related thereto (the
Corrections). This Report continues to speak as of the date of the original filing of the Form
10-Q on August 16, 2004 (the Original Report), and the Company has not updated the disclosures in
this Report to speak as of a later date or to reflect subsequent results, events or developments.
The only changes in this Report to the Original Report are those caused by the restatement. The Corrections are made to properly account for landlord allowances and the commencement of lease
terms in accordance with generally accepted accounting principles in the United States. See Note 2
to the Companys Condensed Financial Statements for additional discussion. The Company has reflected the results of the restatement for fiscal years ended January 3, 2004 in
an Annual Report on Form 10-K/A and has restated or will restate its interim financial statements in amended
Quarterly Reports on Form 10-Q/A for the quarterly periods ended April 3, 2004 and October 2, 2004. The restatement is reflected in Part I of this Quarterly Report on Form 10-Q/A. Item 3 of Part I
has not been amended. Item 2 of Part II has been amended to
correct as a result of the restatement the reference to planned capital
expenditures. Pursuant to the rules of the SEC, in Part II, Item 6,
we have provided currently dated certifications from our Chief Executive Officer and Chief
Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The
certifications of our Chief Executive Officer and Chief Financial Officer are attached to this Form
10-Q/A as Exhibits 31.1, 31.2, 32.1 and 32.2, respectively.  
 BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q PageExplanatory
Note
    
    2Part I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Balance Sheets
    
    3Condensed Statements of Operations
    
    4Condensed Statement of Shareholders Equity
    
    5Condensed Statements of Cash Flows
    
    6Notes to Condensed Financial Statements
    
    7-11Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    12-18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    19Item 4. Controls and Procedures
    
    19Part II Other InformationItem 2. Changes in Securities and Use of Proceeds
    
    20-21Item 4. Submission of Matters to a Vote of Security Holders
    
    21Item 6. Exhibits and Reports on Form 8-K
    
    22Signatures
    
    23Exhibit Index
    
    24-25CertificationCertificationCertificationCertification
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BAKERS FOOTWEAR GROUP,
INC. 
 CONDENSED BALANCE SHEETS
 July 5,
    
    January 3,
    
    July 3,2003
    
    2004
    
    2004as restated
    
    
    
    as restatedUnaudited
    
    
    
    UnauditedAssetsCurrent assets:Cash and cash equivalents
    
    $
    2,033,444
    
    
    $
    574,475
    
    
    $
    8,208,528Accounts receivable
    
    
    861,718
    
    
    
    1,051,854
    
    
    
    758,533Other receivables
    
    
    75,459
    
    
    
    186,011
    
    
    
    74,007Inventories
    
    
    13,942,940
    
    
    
    12,780,256
    
    
    
    15,461,854Prepaid expenses and other current assets
    
    
    1,367,650
    
    
    
    1,029,908
    
    
    
    765,812Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,192,174Total current assets
    
    
    18,281,211
    
    
    
    15,622,504
    
    
    
    26,460,908Property and equipment, net
    
    
    13,940,296
    
    
    
    13,395,838
    
    
    
    15,684,449Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    86,817Other assets
    
    
    586,114
    
    
    
    922,825
    
    
    
    207,555Total assets
    
    $
    32,807,621
    
    
    $
    29,941,167
    
    
    $
    42,439,729Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    3,345,445
    
    
    $
    3,529,652
    
    
    $
    4,778,403Accrued expenses
    
    
    4,383,056
    
    
    
    5,986,873
    
    
    
    4,774,891Sales tax payable
    
    
    788,727
    
    
    
    1,257,294
    
    
    
    713,705Deferred income
    
    
    520,858
    
    
    
    809,122
    
    
    
    780,560Revolving credit agreement
    
    
    11,517,695
    
    
    
    2,169,474
    
    
    
    Class A stock purchase warrants
    
    
    762,500
    
    
    
    837,500
    
    
    
    Class A stock redemption obligation
    
    
    42,028
    
    
    
    210,799
    
    
    
    Current maturities of capital lease obligations
    
    
    896,416
    
    
    
    947,332
    
    
    
    838,700Current maturities of long-term subordinated debt
    
    
    634,997
    
    
    
    645,501
    
    
    
    Total current liabilities
    
    
    22,891,722
    
    
    
    16,393,547
    
    
    
    11,886,259Long-term subordinated debt, less current maturities
    
    
    288,600
    
    
    
    214,409
    
    
    
    Obligations under capital leases, less current maturities
    
    
    1,536,073
    
    
    
    1,347,112
    
    
    
    969,504Accrued rent liabilities
    
    
    2,330,447
    
    
    
    2,597,770
    
    
    
    2,836,319Class A stock redemption obligation
    
    
    1,249,161
    
    
    
    1,178,527
    
    
    
    Class B stock redemption obligation
    
    
    
    
    
    
    455,316
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000 shares
authorized, 5,102,481 shares outstanding at July 3, 2004
    
    
    
    
    
    
    
    
    
    
    510Class A stock, $0.001 par value; 3,000,000 shares
authorized, 1,426,188 shares outstanding at July 5,
2003 and January 3, 2004
    
    
    1,426
    
    
    
    1,426
    
    
    
    Class B stock, $0.001 par value; 500,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Class C stock, $0.001 par value; 1,500,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Deferred stock compensation
    
    
    (5,791
    )
    
    
    
    
    
    
    Additional paid-in capital
    
    
    3,704,503
    
    
    
    3,756,814
    
    
    
    25,636,343Retained earnings (deficit)
    
    
    (4,088,520
    )
    
    
    (503,754
    )
    
    
    1,110,794Total shareholders equity (deficit)
    
    
    (388,382
    )
    
    
    3,254,486
    
    
    
    26,747,647Total liabilities and shareholders equity (deficit)
    
    $
    32,807,621
    
    
    $
    29,941,167
    
    
    $
    42,439,729
 See accompanying notes. 3




---



##### Table of Contents



BAKERS FOOTWEAR GROUP, INC. 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Thirteen
    
    Thirteen
    
    Twenty-six
    
    Twenty-sixWeeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5, 2003
    
    July 3, 2004
    
    July 5, 2003
    
    July 3, 2004as restated
    
    as restated
    
    as restated
    
    as restatedNet sales
    
    $
    38,310,685
    
    
    $
    38,904,743
    
    
    $
    70,220,643
    
    
    $
    73,209,756Cost of merchandise sold, occupancy, and
buying expenses
    
    
    26,867,933
    
    
    
    26,304,694
    
    
    
    51,169,616
    
    
    
    50,867,754Gross profit
    
    
    11,442,752
    
    
    
    12,600,049
    
    
    
    19,051,027
    
    
    
    22,342,002Operating expenses:Selling
    
     
    7,315,965
    
    
    
    7,480,693
    
    
    
    14,557,723
    
    
    
    14,986,612General and administrative
    
    
    2,921,426
    
    
    
    3,462,547
    
    
    
    6,026,786
    
    
    
    6,842,091Loss on disposal of property and equipment
    
    
    24,312
    
    
    
    45,058
    
    
    
    149,559
    
    
    
    138,549Operating income (loss)
    
    
    1,181,049
    
    
    
    1,611,751
    
    
    
    (1,683,041
    )
    
    
    374,750Other income (expense):Interest expense
    
    
    (403,158
    )
    
    
    (133,438
    )
    
    
    (808,489
    )
    
    
    (575,404
    )State income tax (expense) benefit
    
    
    (40,654
    )
    
    
    
    
    
    
    (41,753
    )
    
    
    Other income (expense), net
    
    
    (22,961
    )
    
    
    36,240
    
    
    
    (50,026
    )
    
    
    123,051Income (loss) before income taxes
    
    
    714,276
    
    
    
    1,514,553
    
    
    
    (2,583,309
    )
    
    
    (77,603
    )Provision for (benefit from) income taxes
    
    
    
    
    
    
    592,124
    
    
    
    
    
    
    
    (1,166,001
    )Net income (loss)
    
    $
    714,276
    
    
    $
    922,429
    
    
    $
    (2,583,309
    )
    
    $
    1,088,398Basic earnings (loss) per share
    
    $
    0.49
    
    
    $
    0.18
    
    
    $
    (1.66
    )
    
    $
    0.26Diluted earnings (loss) per share
    
    $
    0.33
    
    
    $
    0.17
    
    
    $
    (1.66
    )
    
    $
    0.23Pro forma income tax informationIncome (loss) before income taxes
    
    $
    754,930
    
    
    
    
    
    
    $
    (2,541,557
    )Provision for (benefit from) income taxes
    
    
    292,574
    
    
    
    
    
    
    
    (954,391
    )Net income (loss)
    
    $
    462,356
    
    
    
    
    
    
    $
    (1,587,166
    )Net income (loss) per common share:Basic
    
    $
    0.31
    
    
    
    
    
    
    $
    (0.97
    )Diluted
    
    $
    0.21
    
    
    
    
    
    
    $
    (0.97
    )
 See accompanying notes. 4




---



##### Table of Contents



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
    
    
    $
    (503,754
    )
    
    $
    3,254,486Adjust accumulated
deficit and
shareholder
distributions to
reflect conversion
from S Corporation to
C Corporation, as restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (442,140
    )
    
    
    503,754
    
    
    
    61,614Accretion of class A
redeemable stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,854
    )
    
    
    (116,854
    )Accretion of class B
redeemable stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,250
    
    
    
    139,250Exchange
of class A
and B common stock for
new common stock, as restated
    
    
    1,965,150
    
    
    
    197
    
    
    
    (1,426,188
    )
    
    
    (1,426
    )
    
    
    1,823,475
    
    
    
    
    
    
    
    1,822,246Shares issued in
connection with
initial public
offering
    
    
    2,484,000
    
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    15,543,458
    
    
    
    
    
    
    
    15,543,706Conversion of
convertible debentures
into common stock
    
    
    653,331
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    4,954,736
    
    
    
    
    
    
    
    4,954,801Net
income, as restated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,088,398
    
    
    
    1,088,398Balance
at July 5, 2004, as restated
    
    
    5,102,481
    
    
    $
    510
    
    
    
    
    
    
    $
    
    
    
    $
    25,636,343
    
    
    $
    1,110,794
    
    
    $
    26,747,647
 See accompanying notes. 5




---



##### Table of Contents



BAKERS FOOTWEAR GROUP,
INC. 
 CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Twenty-six
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 5, 2003
    
    July 3, 2004as restated
    
    as restatedOperating activitiesNet income (loss)
    
    $
    (2,583,309
    )
    
    $
    1,088,398Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,411,026
    
    
    
    1,570,350Deferred income taxes
    
    
    
    
    
    
    (1,278,991
    )Beneficial conversion of subordinated debentures
    
    
    
    
    
    
    163,333Stock-based compensation expense
    
    
    217,593
    
    
    
    Amortization of debt discount
    
    
    
    
    
    
    9,820Accretion of stock warrants
    
    
    75,640
    
    
    
    12,500Loss on disposal of property and equipment
    
    
    149,559
    
    
    
    138,549Changes in operating assets and liabilities:Accounts receivable
    
    
    57,079
    
    
    
    405,325Inventories
    
    
    336,662
    
    
    
    (2,681,598
    )Prepaid expenses and other current assets
    
    
    (736,866
    )
    
    
    264,096Other assets
    
    
    351,368
    
    
    
    656,808Accounts payable
    
    
    378,505
    
    
    
    1,248,751Accrued expenses and deferred income
    
    
    (134,462
    )
    
    
    (1,369,023
    )Accrued rent
liabilities
    
    
    185,590
    
    
    
    238,549Net cash provided by (used in) operating activities
    
    
    (291,615
    )
    
    
    466,867Investing activitiesPurchase of property and equipment
    
    
    (1,535,761
    )
    
    
    (4,041,054
    )Proceeds from sale of property and equipment
    
    
    1,953
    
    
    
    43,544Net cash used in investing activities
    
    
    (1,533,808
    )
    
    
    (3,997,510
    )Financing activitiesNet advances (repayments) under revolving notes payable
    
    
    4,474,478
    
    
    
    (2,169,474
    )Proceeds from initial public offering
    
    
    
    
    
    
    15,543,706Principal payments under capital lease obligations
    
    
    (470,893
    )
    
    
    (486,240
    )Principal payments of subordinated debt
    
    
    (143,767
    )
    
    
    (859,910
    )Payment to retire stock warrants
    
    
    
    
    
    
    (850,000
    )Cash distributions to shareholders
    
    
    (951
    )
    
    
    (13,386
    )Net cash provided by financing activities
    
    
    3,858,867
    
    
    
    11,164,696Net increase in cash and cash equivalents
    
    
    2,033,444
    
    
    
    7,634,053Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    574,475Cash and cash equivalents at end of period
    
    $
    2,033,444
    
    
    $
    8,208,528Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    41,753
    
    
    $
    127,705Cash paid for interest
    
    $
    729,443
    
    
    $
    417,860Noncash investing and financing transactionsCapital lease obligations
    
    $
    786,216
    
    
    $
    
 See accompanying notes. 6




---



##### 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/A for fiscal year ended January 3,
2004. Certain reclassifications of prior year amounts have been made to conform
to the current year presentation. 2. Restatement of Financial Statements This note should be read in conjunction with Note 2 Restatement of Financial Statements under
Notes to Financial Statements included in Item 8, Financial Statements and Supplementary Data of
our Annual Report on Form 10-K/A for the fiscal year ended January 3, 2004. On February 25, 2005, we announced that after consultation with our independent registered public accountants, we would
correct our lease accounting to include the build out period as part of the straight line rental
calculation in compliance with FASTB No. 85-3. We also announced that we would correct previously
issued balance sheets to reflect the receipt of landlord allowances as an increase in accrued rent
liabilities rather than as a reduction of leasehold improvements. These corrections resulted in
the restatement of operating results and financial position for the fiscal years 1999 through 2003
and for the first three quarters of fiscal year 2004. Previously, we accounted for the receipt of landlord allowances as a reduction of leasehold
improvements and recognized rent expense over the lease term specified in the lease agreement. We
will now account for landlord allowances as an increase in accrued rent liabilities and recognize
rent expense beginning when we take possession of the leased premises, generally six to eight weeks
prior to the beginning of the lease term. We will also amortize landlord allowances as a reduction
of rent expense effective with this earlier date. This change does not affect the timing or amount
of actual rent payments. Following is a summary of the effects of these changes on the Companys balance sheets as of July
3, 2004 and July 5, 2003, as well as the effects of these changes on the Companys statements of
operations and cash flows for the thirteen and twenty-six week periods then ended: Statements of OperationsAs reported
    
    
    Change
    
    
    RestatedThirteen weeks ended July, 5, 2003Cost of merchandise sold, occupancy and
buying expenses
    
    $
    26,885,544
    
    
    $
    (17,611
    )
    
    $
    26,867,933Gross profit
    
    
    11,425,141
    
    
    
    17,611
    
    
    
    11,442,752Selling expense
    
    
    7,290,222
    
    
    
    25,743
    
    
    
    7,315,965Operating income
    
    
    1,189,181
    
    
    
    (8,132
    )
    
    
    1,181,049Income before income taxes
    
    
    722,408
    
    
    
    (8,132
    )
    
    
    714,276Net income
    
    
    722,408
    
    
    
    (8,132
    )
    
    
    714,276Net income per common share  basic
    
    
    0.50
    
    
    
    (0.01
    )
    
    
    0.49Net income per common share  diluted
    
    
    0.33
    
    
    
    
    
    
    
    0.33Unaudited pro forma information:Income before income taxes
    
    
    763,062
    
    
    
    (8,132
    )
    
    
    754,930Provision for income taxes
    
    
    295,664
    
    
    
    (3,090
    )
    
    
    292,574Net income
    
    
    467,398
    
    
    
    (5,042
    )
    
    
    462,356Net income per common share  basic
    
    
    0.32
    
    
    
    (0.01
    )
    
    
    0.31Net income per common share  diluted
    
    
    0.21
    
    
    
    
    
    
    
    0.21Twenty-six weeks ended July, 5, 2003Cost of merchandise sold, occupancy and
buying expenses
    
    
    51,170,027
    
    
    
    (411
    )
    
    
    51,169,616Gross profit
    
    
    19,050,616
    
    
    
    411
    
    
    
    19,051,027Selling expense
    
    
    14,506,237
    
    
    
    51,486
    
    
    
    14,557,723Operating loss
    
    
    (1,631,966
    )
    
    
    (51,075
    )
    
    
    (1,683,041
    )Loss before income taxes
    
    
    (2,532,234
    )
    
    
    (51,075
    )
    
    
    (2,583,309
    )Net loss
    
    
    (2,532,234
    )
    
    
    (51,075
    )
    
    
    (2,583,309
    )Net loss per common share  basic
    
    
    (1.60
    )
    
    
    (0.06
    )
    
    
    (1.66
    )Net income per common share  diluted
    
    
    (1.60
    )
    
    
    (0.06
    )
    
    
    (1.66
    )Unaudited pro forma information:Loss before income taxes
    
    
    (2,490,482
    )
    
    
    (51,075
    )
    
    
    (2,541,557
    )Provision for income taxes
    
    
    (934,983
    )
    
    
    (19,409
    )
    
    
    (954,391
    )Net loss
    
    
    (1,555,499
    )
    
    
    (31,666
    )
    
    
    (1,587,166
    )Net loss per common share  basic
    
    
    (0.91
    )
    
    
    (0.06
    )
    
    
    (0.97
    )Net loss per common share  diluted
    
    
    (0.91
    )
    
    
    (0.06
    )
    
    
    (0.97
    )Thirteen weeks ended July 3, 2004Cost of merchandise sold, occupancy and
buying expenses
    
    
    26,306,381
    
    
    
    (1,687
    )
    
    
    26,304,694Gross profit
    
    
    12,598,362
    
    
    
    1,687
    
    
    
    12,600,049Selling expense
    
    
    7,452,004
    
    
    
    28,689
    
    
    
    7,480,693Operating income
    
    
    1,638,753
    
    
    
    (27,002
    )
    
    
    1,611,751Income before income taxes
    
    
    1,541,555
    
    
    
    (27,002
    )
    
    
    1,514,553Provision for income taxes
    
    
    602,385
    
    
    
    (10,261
    )
    
    
    592,124Net income
    
    
    939,170
    
    
    
    (16,741
    )
    
    
    922,429Net income per common share  basic
    
    
    0.18
    
    
    
    
    
    
    
    0.18Net income per common share  diluted
    
    
    0.17
    
    
    
    
    
    
    
    0.17Twenty-six weeks ended July 3, 2004Cost of merchandise sold, occupancy and
buying expenses
    
    
    50,830,265
    
    
    
    37,489
    
    
    
    50,867,754Gross profit
    
    
    22,379,491
    
    
    
    (37,489
    )
    
    
    22,342,002Selling expense
    
    
    14,892,984
    
    
    
    93,628
    
    
    
    14,986,612Operating income
    
    
    505,867
    
    
    
    (131,117
    )
    
    
    374,750Income (loss) before income taxes
    
    
    53,514
    
    
    
    (131,117
    )
    
    
    (77,603
    )Provision for (benefit from) income taxes
    
    
    (975,643
    )
    
    
    (190,358
    )
    
    
    (1,166,001
    )Net income
    
    
    1,029,157
    
    
    
    59,241
    
    
    
    1,088,398Net income per common share  basic
    
    
    0.25
    
    
    
    0.01
    
    
    
    0.26Net income per common share  diluted
    
    
    0.22
    
    
    
    0.01
    
    
    
    0.23
 Balance SheetsAs reported
    
    
    Change
    
    
    RestatedAs of July 5, 2003Property and equipment, net
    
    $
    13,060,917
    
    
    $
    879,379
    
    
    $
    13,940,296Total assets
    
    
    31,928,242
    
    
    
    879,379
    
    
    
    32,807,621Accrued rent liabilities
    
    
    1,075,156
    
    
    
    1,255,291
    
    
    
    2,330,447Total shareholders deficit
    
    
    (12,470
    )
    
    
    (375,912
    )
    
    
    (388,382
    )As of July 3, 2004Property and equipment, net
    
    
    14,841,416
    
    
    
    843,033
    
    
    
    15,684,449Net noncurrent deferred income tax assets
    
    
    
    
    
    
    86,817
    
    
    
    86,817Total assets
    
    
    41,509,879
    
    
    
    929,850
    
    
    
    42,439,729Accrued rent liabilities
    
    
    1,492,346
    
    
    
    1,343,973
    
    
    
    2,836,319Net noncurrent deferred income tax liabilities
    
    
    103,540
    
    
    
    (103,540
    )
    
    
    Total shareholders equity
    
    
    27,058,230
    
    
    
    (310,583
    )
    
    
    26,747,647
 3. 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 $15,540,000 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 $5,680,743 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. 4. 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 7




---



##### Table of Contents



provisions of the Internal Revenue Code, the individual shareholders
included their pro rata portion of the Companys taxable income in their
personal income tax returns. Accordingly, through January 3, 2004, 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 week and twenty-six week periods ended July 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 $1,158,043 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 income tax expense (benefit) for the thirteen
weeks and twenty-six weeks ended July 3, 2004 are as follows: Thirteen
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 3, 2004
    
    July 3, 2004Current:Federal
    
    $
    429,282
    
    
    $
    86,729State and local
    
    
    90,490
    
    
    
    26,261Total current
    
    
    519,772
    
    
    
    112,990Deferred:Federal
    
    
    60,928
    
    
    
    (1,077,045
    )State and local
    
    
    11,424
    
    
    
    (201,946
    )Total deferred
    
    
    72,352
    
    
    
    (1,278,991
    )Total income tax expense (benefit)
    
    $
    592,124
    
    
    $
    (1,166,001
    )
 The differences between income tax expense (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 and twenty-six weeks ended July 3, 2004 are
as follows: Thirteen
    
    Twenty-sixWeeks Ended
    
    Weeks EndedJuly 3, 2004
    
    July 3, 2004Federal income tax at 34% statutory rate
    
    $
    514,948
    
    
    $
    (26,385
    )State and local taxes, net of federal income taxes
    
    
    70,582
    
    
    
    6,895Permanent differences
    
    
    6,594
    
    
    
    11,532Conversion from S corporation status to C corporation status
    
    
    
    
    
    
    (1,158,043
    )Total income tax expense (benefit)
    
    $
    592,124
    
    
    $
    (1,166,001
    )
 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




---



##### Table of Contents



Components of the Companys deferred tax assets and liabilities are as
follows: July 3, 2004Deferred tax assets:Vacation accrual
    
    $
    287,768Inventory
    
    
    904,406Stock-based compensation
    
    
    426,634Accrued rent
    
    
    1,077,801Total deferred tax assets
    
    
    2,696,609Deferred tax liabilities:Property and equipment
    
    
    1,417,618Total deferred tax liabilities
    
    
    1,417,618Net deferred tax assets
    
    $
    1,278,991
 5. 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. Options to purchase 24,718 shares of common stock were granted during the
thirteen weeks ended July 5, 2003. The Company recorded compensation expense
of $156,678 and $217,593 for the thirteen weeks and twenty-six weeks ended July
5, 2003, respectively, 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 income (loss) and net income
(loss) per share would not have differed 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. 9




---



##### Table of Contents



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
    
    Thirteen
    
    Twenty-six
    
    Twenty-sixWeeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5, 2003
    
    July 3, 2004
    
    July 5, 2003
    
    July 3, 2004Net income (loss) as reported
    
    $
    714,276
    
    
    $
    922,429
    
    
    $
    (2,583,309
    )
    
    $
    1,088,398Add: Stock based compensation
expense included in net income as
reported
    
    
    156,678
    
    
    
    
    
    
    
    217,593
    
    
    
    Deduct: Stock based compensation
expense determined under fair
value method, net of related
income tax effect
    
    
    (156,678
    )
    
    
    (99,826
    )
    
    
    (217,593
    )
    
    
    (166,377
    )Pro forma net income (loss)
    
    $
    714,276
    
    
    $
    822,603
    
    
    $
    (2,583,309
    )
    
    $
    922,021
 Thirteen
    
    Thirteen
    
    Twenty-six
    
    Twenty-sixWeeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5, 2003
    
    July 3, 2004
    
    July 5, 2003
    
    July 3, 2004Basic earnings (loss) per share:As reported
    
    $
    0.49
    
    
    $
    0.18
    
    
    $
    (1.66
    )
    
    $
    0.26Pro forma
    
    $
    0.49
    
    
    $
    0.16
    
    
    $
    (1.66
    )
    
    $
    0.22Diluted earnings (loss) per share:As reported
    
    $
    0.33
    
    
    $
    0.17
    
    
    $
    (1.66
    )
    
    $
    0.23Pro forma
    
    $
    0.33
    
    
    $
    0.15
    
    
    $
    (1.66
    )
    
    $
    0.20
 The weighted-average fair value of options granted during the twenty-six
weeks ended July 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. 6. Earnings (Loss) Per Share Basic earnings 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. 10




---



##### Table of Contents



The following table presents a reconciliation of our basic and diluted
weighted average common shares outstanding for the period. Thirteen
    
    Thirteen
    
    Twenty-six
    
    Twenty-sixWeeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5, 2003
    
    July 3, 2004
    
    July 5, 2003
    
    July 3, 2004Numerator:Net income (loss)
    
    $
    714,276
    
    
    $
    922,429
    
    
    $
    (2,583,309
    )
    
    $
    1,088,398Accretion on redeemable stock
    
    
    (14,326
    )
    
    
    
    
    
    
    210,049
    
    
    
    22,396Numerator for basic earnings per share
    
    
    699,950
    
    
    
    922,429
    
    
    
    (2,373,260
    )
    
    
    1,110,794Reverse accretion on redeemable stock
    
    
    14,326
    
    
    
    
    
    
    
    (210,049
    )
    
    
    (22,396
    )Interest expense related to
convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,387Interest expense related to warrants
    
    
    37,500
    
    
    
    
    
    
    
    75,640
    
    
    
    7,750Numerator for diluted earnings per share
    
    $
    751,776
    
    
    $
    922,429
    
    
    $
    (2,507,669
    )
    
    $
    1,122,535Denominator for basic earnings per share 
weighted average shares
    
    
    1,426,188
    
    
    
    5,102,481
    
    
    
    1,426,188
    
    
    
    4,278,573Effect of dilutive securitiesStock options
    
    
    251,815
    
    
    
    352,692
    
    
    
    
    
    
    
    333,014Stock purchase warrants
    
    
    76,897
    
    
    
    
    
    
    
    
    
    
    
    24,509Redeemable securities
    
    
    538,967
    
    
    
    
    
    
    
    
    
    
    
    248,941Denominator for diluted earnings per share
 adjusted weighted average shares and
assumed conversions
    
    
    2,293,867
    
    
    
    5,455,173
    
    
    
    1,426,188
    
    
    
    4,885,037
 For the twenty-six weeks ended July 5, 2003, 247,882 stock options, 76,897
stock purchase warrants, and 538,967 shares of redeemable securities were
excluded from the computation of diluted earnings per share because they were
anti-dilutive. For the thirteen weeks ended July 3, 2004, 216,000 stock
purchase warrants were excluded from the computation of diluted earnings per
share because they were anti-dilutive. 11




---



##### 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/A. 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/A under Item 1. Business 
Cautionary Statements Regarding Forward-Looking Statements and Certain Risks. Restatement of Financial Statements On February 25, 2005, the Company announced that after consultation with its independent registered public accountants, it
would correct its lease accounting to include the build out period as part of the straight line
rental calculation in compliance with FASTB No. 85-3. The Company also announced that it would
correct previously issued balance sheets to reflect the receipt of landlord allowances as an
increase in accrued rent liabilities rather than as a reduction of leasehold improvements. These
corrections resulted in the restatement of operating results and financial position for the fiscal
years 1999 through 2003 as reflected in Amendment No. 1 to our Annual Report on Form 10-K/A for the
fiscal year ended January 3, 2004 and for the first three quarters of fiscal year 2004 as reflected
in amended Quarterly Reports on Form 10-Q/A. Previously, the Company accounted for the receipt of landlord allowances as a reduction of
leasehold improvements and recognized rent expense over the lease term specified in the lease
agreement. The Company will now account for landlord allowances as an increase in accrued rent
liabilities and recognize rent expense beginning when it takes possession of the leased premises,
generally six to eight weeks prior to the beginning of the lease term. The Company will also
amortize landlord allowances as a reduction of rent expense effective with this earlier date. This
change does not affect the timing or amount of actual rent payments. See Note 2 to the condensed financial statements of this Report for a summary of the effects of
these changes on the Companys balance sheets as of July 5, 2003 and July 3, 2004, as well as on
the Companys statements of operations and cash flows for the thirteen and twenty-six week periods
then ended. The accompanying Managements Discussion and Analysis gives effect to these
corrections. 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 July 3, 2004, we operated 177 Bakers stores and
29 Wild Pair stores located in 36 states. During the first quarter of 2004, we completed our initial public offering
(IPO) generating net proceeds of $15.5 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 remodel existing stores and open new stores. We have developed new formats for our Bakers and Wild Pair stores which
have met with consumer acceptance and have resulted in comparable store sales increases at new format stores that exceed out corporate average.
New format stores may not necessarily continue to achieve such above average growth beyond their first comparable year. We have undertaken a program to remodel existing stores and
open new stores which should result in more than 50% of our Bakers stores
operating in the new format by the end of 2005. We expect remodeled stores to be closed for approximately six or seven weeks during the period of remodeling. During the first half 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 half of 2004 our sales increased 4.3% compared
to the first half of 2003, and our gross profit increased 17.3%. As a result
of improved sales and margins, we reduced our pre-tax loss to $78,000 in the
first half of 2004 compared to a pre tax loss of $2.6 million in the first half
of 2003. 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. 12




---



##### Table of Contents



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 Statement of Financial Accounting Standards
(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 which do not recognize S corporation status. Our S corporation
status was terminated effective January 4, 2004 and, as a result, we became
subject to Federal and state income taxes as a C Corporation. 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
net tax effects of temporary differences between the carrying amounts of assets and liabilities 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. 13




---



##### Table of Contents



Thirteen
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5,
    
    July 3,
    
    July 5,
    
    July 3,2003
    
    2004
    
    2003
    
    2004Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    70.1
    
    
    
    67.6
    
    
    
    72.9
    
    
    
    69.5Gross profit
    
    
    29.9
    
    
    
    32.4
    
    
    
    27.1
    
    
    
    30.5Selling expense
    
    
    19.1
    
    
    
    19.2
    
    
    
    20.7
    
    
    
    20.5General and administrative expense
    
    
    7.6
    
    
    
    8.9
    
    
    
    8.6
    
    
    
    9.3Loss on disposal of property and equipment
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2Operating income (loss)
    
    
    3.1
    
    
    
    4.2
    
    
    
    (2.4
    )
    
    
    0.5Other income (expense)
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    0.2Interest expense
    
    
    (1.0
    )
    
    
    (0.3
    )
    
    
    (1.2
    )
    
    
    (0.8
    )Income (loss) before income taxes
    
    
    1.9
    
    
    
    3.9
    
    
    
    (3.7
    )
    
    
    (0.1
    )Income tax expense (benefit)
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    (1.6
    )Net income (loss)
    
    
    1.9
    %
    
    
    2.4
    %
    
    
    (3.7
    )%
    
    
    1.5
    %
 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
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedJuly 5,
    
    July 3,
    
    July 5,
    
    July 3,2003
    
    2004
    
    2003
    
    2004Number of stores at beginning of period
    
    
    220
    
    
    
    207
    
    
    
    233
    
    
    
    215Stores opened or acquired during period
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Stores closed during period
    
    
    (5
    )
    
    
    (1
    )
    
    
    (18
    )
    
    
    (9
    )Number of stores at end of period
    
    
    216
    
    
    
    206
    
    
    
    216
    
    
    
    206
 Thirteen Weeks Ended July 3, 2004 Compared to Thirteen Weeks Ended July 5, 2003 Net sales.Net sales increased to $38.9 million for the thirteen weeks
ended July 3, 2004 (second quarter 2004) from $38.3 million for the thirteen
weeks ended July 5, 2003 (second quarter 2003), an increase of $0.6 million.
This increase resulted from higher average unit prices reflecting less
discounting compared to the second quarter of 2003. Net sales for the second
quarter of 2004 reflect the continuation of strong consumer demand for dress
footwear that began in the fourth quarter of 2003, partially offset by slower than expected sales of casual footwear, particularly summer sandals in June. Net sales increased despite
operating ten fewer stores compared to the second quarter of 2003 and having eleven stores closed temporarily for remodeling during part of the second quarter of 2004. Our
comparable store sales for the second quarter of 2004 increased by 4.7%
compared to the second quarter of 2003. Comparable store sales in June 2004 only increased by 2.0% reflecting overall weakness in the retailing sector and customer demand for lower-priced flip flops which
we expect to continue through the summer selling season. Gross profit.Gross profit increased to $12.6 million in the second
quarter of 2004 from $11.4 million in the second quarter of 2003, an increase
of $1.2 million. As a percentage of sales, gross profit increased to 32.4% in
the second quarter of 2004 from 29.9% in the second quarter of 2003. This
reflects improved markdown experience resulting from continued strong customer
demand. Selling expense.Selling expense increased to $7.5 million in the second
quarter of 2004 from $7.3 million in the second quarter of 2003, an increase of
$0.2 million. 14




---



##### Table of Contents



General and administrative expense.General and administrative expense
increased to $3.5 million in the second quarter of 2004 from $2.9 million in
the second quarter of 2003, an increase of $600,000. The increase was due
primarily to public company expenses incurred in 2004. Interest expense.Interest expense decreased to $133,000 in the second
quarter of 2004 from $403,000 in the second quarter of 2003, a decrease of
$270,000. In the first quarter of 2004, we converted our subordinated
convertible debentures into common stock and paid the outstanding balances of
our other debt instruments except for capital lease obligations with the
proceeds from our IPO. The decrease in interest expense reflects the reduction
in our borrowings compared to the prior year. Income tax expense.Effective January 4, 2004, we converted to a C
corporation and became subject to federal and state income taxes. We
recognized tax expense of $592,000 for the second quarter of 2004 related to
the taxable income for the quarter. Because we were an S corporation during
the second quarter of 2003 there was no comparable income tax expense for that
period. On a pro forma basis, had we been a C corporation for the second
quarter of 2003, we would have had income tax expense of $293,000 for the
period. Net income. We had net
income of $922,000 in the second quarter of 2004
compared to net income of $714,000 in the second quarter of 2003. If we had
been taxed as a C corporation for the second quarter of 2003, our net income
would have been $462,000 for that period. Twenty-six Weeks Ended July 3, 2004 Compared to Twenty-six Weeks Ended July 5,
2003 Net sales.Net sales increased to $73.2 million for the twenty-six weeks
ended July 3, 2004 (first half 2004) from $70.2 million for the twenty-six
weeks ended July 5, 2003 (first half 2003), an increase of $3.0 million. This
increase resulted from higher average unit prices reflecting less discounting
compared to the first half of 2003. Net sales for the first half of 2004
reflect the continuation of strong consumer demand for dress footwear that
began in the fourth quarter of 2003, partially offset by slower than expected sales of casual footwear, particularly summer sandals in June. Net sales increased despite operating ten
fewer stores compared to the first half of 2003. Our comparable store sales
for the first half of 2004 increased by 7.7% compared to the first half of
2003. The comparable store sales trend weakened during the course of the first half of 2004. Gross profit.Gross profit
increased to $22.3 million in the first half
of 2004 from $19.1 million in the first half of 2003. As a percentage of
sales, gross profit increased to 30.5% in the first half of 2004 from 27.1% in
the first half of 2003. This reflects improved markdown experience resulting
from continued strong customer demand. Selling expense.Selling
expense increased to $15.0 million in the first
half of 2004 from $14.6 million in the first half of 2003, an increase of $0.4
million, but decreased as a percentage of sales to 20.5% from 20.7% reflecting
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 $6.8 million in the first half of 2004 from $6.0 million in the
first half of 2003, an increase of $0.8 million. The increase was due
primarily to public company expenses incurred in the first half of 2004. 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 No. 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 $1.2 million for the first half of 2004.
In addition, we recognized nominal tax expense for the first half of 2004
related to the 15




---



##### Table of Contents



taxable income during the period. Because we were an S corporation during
the first half 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 half
of 2003, we would have had a tax benefit of $1.0 million for the period. Net
income (loss). We had net income of $1.1 million in the first half of
2004 compared to a net loss of $2.6 million in the first half of 2003. If we
had been taxed as a C corporation for the first half of 2003, our net loss
would have been $1.6 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 fluctuations, some events, in
particular the Easter holiday, shift between fiscal quarters in some years due
to the nature of our fiscal year. This shift can influence our quarterly
comparable results. Easter was 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 remodeling stores, opening new stores, or acquiring
stores. Liquidity and Capital Resources During the first quarter of 2004, we completed our initial public offering
which generated net proceeds of $15.5 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 July 3, 2004, we
had total assets of $42.4 million and shareholders
equity of $26.7 million compared to total assets of $29.9 million and
shareholders equity of $3.3 million at January 3, 2004, and compared to total
assets of $32.8 million and a deficit in shareholders
equity of $388,000 at
July 5, 2003. At July 3, 2004, we had net working capital of $14.6 million,
and $10.5 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
January 3, 2004 and compared to negative net working capital of $4.6 million
and $1.2 million of unused borrowing capacity at July 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. 16




---



##### Table of Contents



Operating activities For the first half of 2004, our net cash provided by operating activities
was $467,000 compared to net cash used by operating activities of $292,000 in
the first half of 2003, an improvement of $759,000. The primary cause of this
improvement was the $3.7 million increase in net income compared to the first
half of 2003 partially offset by a $2.7 million increase in inventories from
January 3, 2004 to July 3, 2004. Our inventories at July 3, 2004 were $15.5 million up from $13.9 million
at July 5, 2003, primarily as a result of a change in purchasing procedures
implemented during 2004 in which we are shipping a substantial amount of
product sourced from China directly to our stores rather than shipping it first
to our distribution centers. We believe that this process will reduce our
overall shipping expense and reduce the shipping time to our stores. As a
result of these new procedures, these products are received into inventory at
the time they are shipped from China rather than when they are received in the United
States, resulting in higher reported inventories and accounts payable. Over two-thirds of our products are currently manufactured in China. Recently the continued significant growth in the Chinese
economy has resulted in periodic energy and labor shortages, as well as transportation and shipping bottlenecks. We actively monitor these matters and their potential impact on the
sourcing of our products. Investing activities Cash used in investing activities was $4.0 million in the first half of
2004 compared to $1.5 million for the first half of 2003. During each period,
cash used in investing activities consisted of capital expenditures for
furniture, fixtures and leasehold improvements. A substantial portion of the
2004 capital expenditures relates to new and remodeled stores scheduled to open
during the third and fourth quarter. 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 $9.0 million to $10.0 million. We plan to open approximately 15
to 17 new stores in fiscal year 2004 and
30 to 35 new stores in fiscal year 2005. Capital expenditures for a new
store including point of sale
equipment are expected to average approximately $225,000 to $275,000. We generally receive landlord allowances in connection with new
stores averaging approximately $25,000 to $75,000. 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,
rent and
utilities are expensed as incurred. We plan to complete the remodeling of approximately 17 stores in our new format
by mid-fourth quarter 2004. Remodeling the average existing store into the new format is
estimated to cost approximately $200,000 to $250,000. 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 proceeds to us from the offering were
approximately $15.5 million. As of July 3, 2004, we have used the net proceeds
received from the initial public offering to repay $5.7 million on our
revolving credit agreement, $0.9 million to redeem outstanding warrants, $0.9
million to repay subordinated debt, and $4.0 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. 17




---



##### Table of Contents



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 July 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 Group, 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. We repaid the
outstanding balance on the credit facility during the first quarter of 2004
from the proceeds of our IPO. The credit facilitys maturity date is January
5, 2005. We are currently negotiating an extension of the facility with the
lender. 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 July 3, 2004 and July 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). We were not
required to consolidate any VIEs. 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. 18




---



##### Table of Contents



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 The companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the Companys internal control over
financial reporting to determine whether any changes occurred during the period
covered by this report 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 period
covered by this report. 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. As described in Note 2 to the Condensed Financial Statements, in February 2005, the Company, in consultation
with its Audit Committee and its independent registered public accountants, concluded that it must
correct its previously issued financial statements to properly account for landlord allowances and
the commencement of lease terms. This correction resulted in the restatement of operating results
and financial position for the fiscal years 1999 through 2003, which is reflected in the Companys
Annual Report on Form 10-K/A, and for the first thirty-nine weeks of 2004, which is reflected in
amended Quarterly Reports on Form 10-Q/A filed or to be filed for the quarterly periods of fiscal
year 2004. The Public Company Accounting Oversight Boards Auditing Standard No. 2, An Audit of Internal
Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements,
states that a restatement of financial statements in prior filings with the SEC is a strong
indicator of the existence of a material weakness in the design or operation of internal control
over financial reporting. Based on that definition, the Companys Chief Executive Officer and Chief
Financial Officer concluded that a material weakness existed in the Companys internal control over
financial reporting, and disclosed this to the Audit Committee and to the independent registered
public accountants. The Companys Chief Executive Officer and Chief Financial Officer also concluded that this matter
constituted ineffectiveness of its disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q/A (July 3, 2004), in ensuring that material
information relating to the Company, required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SECs rules and forms. The Company has remediated the material weakness in internal control over financial reporting and the
ineffectiveness of its disclosure controls and procedures by conducting a review of its accounting
related to leases, and correcting its method of accounting for landlord allowances and the
commencement of lease terms. The Company has established procedures designed to ensure that
landlord allowances will be properly classified and that rent expense will be recognized in the
appropriate periods in the Companys financial statements. 19




---



##### Table of Contents



BAKERS FOOTWEAR GROUP, INC. 
 PART II  OTHER
INFORMATION
 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 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 $15.5 million after deducting the
underwriting discount of $1.9 million and $1.9 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 July 3, 2004, the Company has used the net proceeds received from
the initial public offering for the following purposes: $5.7 million to repay
the balance on its revolving credit agreement to Fleet Retail Group, 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 $4.0 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 20




---



##### Table of Contents



participant in the Companys credit facility with Fleet Retail Group,
Inc.. Pending use of the remaining proceeds, the Company has invested in
short-term, investment-grade interest bearing instruments. 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 $9.0 million to $10.0 million. The Company plans to open 15 to
17 new stores, all in the Companys new format and remodel approximately 27
stores, including 17 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 twenty-six weeks ended July
3, 2004. Issuer Purchases of Equity Securities (c) Total Number of(a) Total
    
    (b)
    
    Shares Purchased as
    
    (d) Maximum Number ofNumber of
    
    Average
    
    Part of Publicly
    
    Shares that May Yet BeShares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    per Share
    
    Programs
    
    Plans or ProgramsApril 4, 2004  May 1, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 2, 2004  May 29, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 30, 2004  July 3, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a)    The annual meeting of shareholders of the Registrant was held on May 14,
2004. (b)    At the annual meeting of shareholders of the Registrant held on May 14,
2004, action was taken with respect to the election of all six directors of the
Registrant: 4,495,865 shares were voted for Peter A. Edison while authority
was withheld with respect to 230 shares, 4,495,595 shares were voted for
Michele A. Bergerac while authority was withheld with respect to 500 shares,
4,495,865 shares were voted for Andrew N. Baur while authority was withheld
with respect to 230 shares, 4,496,095 shares were voted for Timothy F. Finley
while authority was withheld with respect to no shares, 4,496,095 shares were
voted for Harry E. Rich while authority was withheld with respect to no shares,
4,495,995 shares were voted for Scott C. Schnuck while authority was withheld
with respect to 100 shares. (c)    Shareholders ratified the appointment of Ernst & Young LLP as the Companys
independent public accountants: 4,428,172 shares were voted in favor, 720
shares were voted against, no shares abstained and there were no broker
non-votes. 21




---



##### Table of Contents



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 of Form 8-K, on May 13,
2004, the Company filed a Report on Form 8-K dated May 10, 2004 to furnish the
press release announcing its financial results for the first quarter of 2004
and excerpts from its conference call webcast on May 10, 2004 relating to first
quarter 2004 financial results, business developments and future outlook.
Pursuant to Items 7, 9 and 12 of Form 8-K, on May 14, 2004, the Company filed a
Report on Form 8-K dated May 14, 2004 to furnish supplemental information. 22




---



##### Table of Contents



BAKERS FOOTWEAR GROUP,
INC. 
 SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to this Quarterly
Report on Form 10-Q/A to be signed, on its behalf by the
undersigned thereunto duly authorized. Date: March 21, 2005 BAKERS FOOTWEAR GROUP, INC.
(Registrant)By:
    
    /s/ Peter A. EdisonPeter A. EdisonChief Executive Officer(On behalf of the Registrant)By:
    
    /s/ Lawrence L. Spanley, Jr.Lawrence L. Spanley, Jr.Chief Financial Officer, Vice President-Finance, Treasurer, and Secretary(As principal financial officer)
 23




---



##### Table of Contents



EXHIBIT INDEX Number
    
    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)).
 24




---



##### Table of Contents



Number
    
    Description4.3
    
    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 Group 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 4.4 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)).11.1
    
    Statement regarding computation of
per share earnings (incorporated by
reference from Note 6 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)
 25