##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended April 29, 2006
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the transition period from  to
 Commission File Number: 000-50563
 BAKERS FOOTWEAR GROUP, INC.
 (Exact name of registrant as specified in its charter)
 Missouri(State or other jurisdiction of
incorporation or organization)
    
    43-0577980(I.R.S. Employer Identification No.)2815 Scott Avenue,
St. Louis, Missouri(Address of principal executive offices)
    
    63103(Zip Code)
 (314) 621-0699
 (Registrants telephone number, including area code)
 Not applicable
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o þ
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q
  
 PagePart I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Balance Sheets
    
    
    3Condensed Statements of Operations
    
    
    4Condensed Statement of Shareholders Equity
    
    
    5Condensed Statement 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
    
    
    18Item 4. Controls and Procedures
    
    
    19Part II Other InformationItem 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21302 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 30, 2005
    
    
    January 28, 2006
    
    
    April 29, 2006(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,908,501
    
    
    $
    3,924,970
    
    
    $
    195,575Accounts receivable
    
    
    1,374,380
    
    
    
    1,099,436
    
    
    
    1,610,092Other receivables
    
    
    637,425
    
    
    
    1,271,544
    
    
    
    973,027Inventories
    
    
    20,416,274
    
    
    
    25,997,859
    
    
    
    28,198,946Prepaid expenses and other current assets
    
    
    1,421,958
    
    
    
    1,251,581
    
    
    
    923,640Deferred income taxes
    
    
    1,651,694
    
    
    
    1,821,097
    
    
    
    1,741,744Total current assets
    
    
    30,410,232
    
    
    
    35,366,487
    
    
    
    33,643,024Property and equipment, net
    
    
    24,771,443
    
    
    
    38,701,362
    
    
    
    41,827,073Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    12,872Other assets
    
    
    499,381
    
    
    
    686,835
    
    
    
    833,330Total assets
    
    $
    55,681,056
    
    
    $
    74,754,684
    
    
    $
    76,316,299Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    7,095,032
    
    
    $
    12,059,734
    
    
    $
    10,163,989Accrued expenses
    
    
    5,732,417
    
    
    
    11,922,950
    
    
    
    6,714,089Sales tax payable
    
    
    928,094
    
    
    
    634,497
    
    
    
    768,374Accrued income taxes
    
    
    189,749
    
    
    
    1,297,964
    
    
    
    113,035Deferred income
    
    
    969,197
    
    
    
    1,297,872
    
    
    
    1,258,061Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    6,829,551Current maturities of capital lease obligations
    
    
    582,883
    
    
    
    386,743
    
    
    
    346,130Total current liabilities
    
    
    15,497,372
    
    
    
    27,599,760
    
    
    
    26,193,229Obligations under capital leases, less current maturities
    
    
    517,057
    
    
    
    247,671
    
    
    
    170,927Accrued rent liabilities
    
    
    4,514,358
    
    
    
    6,327,625
    
    
    
    7,104,802Deferred income taxes
    
    
    532,869
    
    
    
    189,044
    
    
    
    Shareholders equity:Preferred stock, $0.0001 par value, 5,000,000
shares authorized, no shares outstanding at April
29, 2006
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000
shares authorized, 6,102,481 shares outstanding
at April 30, 2005, 6,300,479 shares outstanding
at January 28, 2006; and 6,492,955 shares
outstanding at April 29, 2006
    
    
    610
    
    
    
    630
    
    
    
    649Additional paid-in capital
    
    
    33,183,054
    
    
    
    34,252,066
    
    
    
    36,040,449Retained earnings
    
    
    1,435,736
    
    
    
    6,137,888
    
    
    
    6,806,243Total shareholders equity
    
    
    34,619,400
    
    
    
    40,390,584
    
    
    
    42,847,341Total liabilities and shareholders equity
    
    $
    55,681,056
    
    
    $
    74,754,684
    
    
    $
    76,316,299
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedApril 30, 2005
    
    
    April 29, 2006Net sales
    
    $
    44,943,180
    
    
    $
    49,804,913Cost of merchandise sold, occupancy, and buying expenses
    
    
    29,536,561
    
    
    
    33,507,762Gross profit
    
    
    15,406,619
    
    
    
    16,297,151Operating expenses:Selling
    
    
    8,626,977
    
    
    
    10,398,368General and administrative
    
    
    3,557,231
    
    
    
    4,699,040Loss on disposal of property and equipment
    
    
    139,873
    
    
    
    14,612Operating income
    
    
    3,082,538
    
    
    
    1,185,131Other income (expense):Interest expense
    
    
    (126,390
    )
    
    
    (112,938
    )Other, net
    
    
    36,467
    
    
    
    22,837Income before income taxes
    
    
    2,992,615
    
    
    
    1,095,030Provision for income taxes
    
    
    1,141,477
    
    
    
    426,675Net income
    
    $
    1,851,138
    
    
    $
    668,355Basic earnings per share
    
    $
    0.35
    
    
    $
    0.11Diluted earnings per share
    
    $
    0.33
    
    
    $
    0.10
  4




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
 Common StockShares
    
    
    
    
    
    
    AdditionalIssued and
    
    
    
    
    
    
    Paid-In
    
    
    RetainedOutstanding
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance at January 28, 2006
    
    
    6,300,479
    
    
    $
    630
    
    
    $
    34,252,066
    
    
    $
    6,137,888
    
    
    $
    40,390,584Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    214,218
    
    
    
    
    
    
    
    214,218Shares issued in connection
with exercise of stock warrants
    
    
    71,366
    
    
    
    7
    
    
    
    508,983
    
    
    
    
    
    
    
    508,990Shares issued in connection
with exercise of stock options
    
    
    121,110
    
    
    
    12
    
    
    
    450,790
    
    
    
    
    
    
    
    450,802Income tax benefit from
exercise of stock options
    
    
    
    
    
    
    
    
    
    
    614,392
    
    
    
    
    
    
    
    614,392Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    668,355
    
    
    
    668,355Balance at April 29, 2006
    
    
    6,492,955
    
    
    $
    649
    
    
    $
    36,040,449
    
    
    $
    6,806,243
    
    
    $
    42,847,341
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedApril 30, 2005
    
    
    April 29, 2006Operating activitiesNet income
    
    $
    1,851,138
    
    
    $
    668,355Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,094,215
    
    
    
    1,696,124Deferred income taxes
    
    
    951,728
    
    
    
    (122,563
    )Stock-based compensation expense
    
    
    
    
    
    
    214,218Loss on disposal of property and equipment
    
    
    139,873
    
    
    
    14,612Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (669,196
    )
    
    
    (212,139
    )Inventories
    
    
    (2,613,919
    )
    
    
    (2,201,087
    )Prepaid expenses and other current assets
    
    
    (241,202
    )
    
    
    327,941Other assets
    
    
    (121,914
    )
    
    
    (146,495
    )Accounts payable
    
    
    (1,408,628
    )
    
    
    (1,895,745
    )Accrued expenses and deferred income
    
    
    397,195
    
    
    
    (5,114,795
    )Accrued income taxes
    
    
    189,749
    
    
    
    (1,184,929
    )Accrued rent liabilities
    
    
    812,910
    
    
    
    777,177Net cash provided by (used in) operating activities
    
    
    381,949
    
    
    
    (7,179,326
    )Investing activitiesPurchase of property and equipment
    
    
    (4,278,136
    )
    
    
    (4,839,277
    )Proceeds from sale of property and equipment
    
    
    514
    
    
    
    2,830Net cash used in investing activities
    
    
    (4,277,622
    )
    
    
    (4,836,447
    )Financing activitiesNet advances under revolving credit facility
    
    
    
    
    
    
    6,829,551Proceeds from sale of common stock and warrants
    
    
    7,559,524
    
    
    
    Proceeds from exercise of stock warrants
    
    
    
    
    
    
    508,990Proceeds from exercise of stock options
    
    
    
    
    
    
    450,802Income tax benefit from exercise of stock options
    
    
    
    
    
    
    614,392Principal payments under capital lease obligations
    
    
    (187,109
    )
    
    
    (117,357
    )Net cash provided by financing activities
    
    
    7,372,415
    
    
    
    8,286,378Net increase (decrease) in cash and cash equivalents
    
    
    3,476,742
    
    
    
    (3,729,395
    )Cash and cash equivalents at beginning of period
    
    
    1,431,759
    
    
    
    3,924,970Cash and cash equivalents at end of period
    
    $
    4,908,501
    
    
    $
    195,575Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    69,825
    
    
    $
    1,291,506Cash paid for interest
    
    $
    114,156
    
    
    $
    76,974
  6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
 1. Basis of Presentation
  2. Private Placement of Common Stock and Warrants
    7




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##### Table of Contents



3. Income Taxes
  Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedApril 30, 2005
    
    
    April 29, 2006Current:Federal
    
    $
    159,789
    
    
    $
    463,189State and local
    
    
    29,960
    
    
    
    86,049Total current
    
    
    189,749
    
    
    
    549,238Deferred:Federal
    
    
    801,454
    
    
    
    (103,707
    )State and local
    
    
    150,274
    
    
    
    (18,856
    )Total deferred
    
    
    951,728
    
    
    
    (122,563
    )Total income tax expense
    
    $
    1,141,477
    
    
    $
    426,675
  Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedApril 30, 2005
    
    
    April 29, 2006Federal income tax at statutory rate
    
    $
    1,047,415
    
    
    $
    383,261Impact of graduated Federal rates
    
    
    (29,926
    )
    
    
    (9,795
    )State and local taxes, net of federal income taxes
    
    
    119,705
    
    
    
    43,801Permanent differences
    
    
    4,283
    
    
    
    9,408Total income tax expense
    
    $
    1,141,477
    
    
    $
    426,675
   April 30, 2005
    
    
    January 28, 2006
    
    
    April 29, 2006Deferred tax assets:Net operating loss carryforward
    
    $
    386,430
    
    
    $
    
    
    
    $
    Vacation accrual
    
    
    384,730
    
    
    
    387,344
    
    
    
    399,044Inventory
    
    
    1,026,998
    
    
    
    1,593,904
    
    
    
    1,564,244Stock-based compensation
    
    
    426,634
    
    
    
    267,835
    
    
    
    237,076Accrued rent
    
    
    1,677,456
    
    
    
    2,380,024
    
    
    
    2,770,873Total deferred tax assets
    
    
    3,902,248
    
    
    
    4,629,107
    
    
    
    4,971,237Deferred tax liabilities:Property and equipment
    
    
    2,783,423
    
    
    
    2,836,902
    
    
    
    2,995,077Prepaid expenses
    
    
    
    
    
    
    160,152
    
    
    
    221,544Total deferred tax liabilities
    
    
    2,783,423
    
    
    
    2,997,054
    
    
    
    3,216,621Net deferred tax assets
    
    $
    1,118,825
    
    
    $
    1,632,053
    
    
    $
    1,754,616
 4. Stock-Based Compensation
 Adoption of SFAS 123R
 Share-Based Payment
 8




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##### Table of Contents



Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees,
  ThirteenWeeks EndedApril 30, 2005Net income as reported
    
    $
    1,851,138Add: Stock based compensation expense
included in net income as reported
    
    
    Deduct: Stock based compensation
expense determined under fair value
method, net of related income tax
effect
    
    
    (103,543
    )Pro forma net income
    
    $
    1,747,595Basic earnings per share:As reported
    
    $
    0.35Pro forma
    
    $
    0.33Diluted earnings per share:As reported
    
    $
    0.33Pro forma
    
    $
    0.31
 Stock Options
   Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 30, 2005
    
    April 29, 2006Options granted
    
    
    194,700
    
    
    
    73,228Weighted-average fair value of options granted
    
    $
    6.92
    
    
    $
    10.97AssumptionsDividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    3.5
    %
    
    
    4.75
    %Expected volatility
    
    
    64
    %
    
    
    50% - 55
    %Expected option life
    
    6 years
    
    5  6 years
 9




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##### Table of Contents



Vested
    
    Non Vested
    
    TotalNumber of
    
    Weighted Average
    
    Number of
    
    Weighted Average
    
    Number of
    
    Weighted AverageOptions
    
    Exercise Price
    
    Options
    
    Exercise Price
    
    Options
    
    Exercise PriceBalance at January 28, 2006
    
    
    207,710
    
    
    $
    1.62
    
    
    
    438,680
    
    
    $
    9.41
    
    
    
    646,390
    
    
    $
    6.91Granted
    
    
    
    
    
    
    
    
    
    
    73,228
    
    
    
    20.06
    
    
    
    73,228
    
    
    
    20.06Vested
    
    
    96,000
    
    
    
    9.20
    
    
    
    (96,000
    )
    
    
    9.20
    
    
    
    
    
    
    
    Exercised
    
    
    (121,110
    )
    
    
    3.78
    
    
    
    
    
    
    
    
    
    
    
    (121,110
    )
    
    
    3.78Forfeited
    
    
    
    
    
    
    
    
    
    
    (11,200
    )
    
    
    14.55
    
    
    
    (11,200
    )
    
    
    14.55Balance at April 29, 2006
    
    
    182,600
    
    
    $
    4.17
    
    
    
    404,708
    
    
    $
    11.25
    
    
    
    587,308
    
    
    $
    9.05
   Weighted-Average
    
    
    Weighted-AverageNumber of
    
    
    Contractual Life
    
    
    Exercise
    
    
    AggregateRange of Exercise Prices
    
    Options
    
    
    (Years)
    
    
    Price
    
    
    Intrinsic Value$0.01
    
    
    98,540
    
    
    
    7.8
    
    
    $
    0.01
    
    
    $
    1,895,890$7.75
    
    
    53,960
    
    
    
    7.8
    
    
    
    7.75
    
    
    
    620,540$9.70 - $13.25
    
    
    30,100
    
    
    
    8.9
    
    
    
    11.38
    
    
    
    237,178$20.06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total ($0.01 - $20.06)
    
    
    182,600
    
    
    
    8.0
    
    
    $
    4.17
    
    
    $
    2,753,608
  Weighted-Average
    
    
    Weighted-AverageNumber of
    
    
    Contractual Life
    
    
    Exercise
    
    
    AggregateRange of Exercise Prices
    
    Options
    
    
    (Years)
    
    
    Price
    
    
    Intrinsic Value$0.01
    
    
    98,540
    
    
    
    7.8
    
    
    $
    0.01
    
    
    $
    1,895,890$7.75
    
    
    221,280
    
    
    
    7.8
    
    
    
    7.75
    
    
    
    2,544,720$9.70 - $13.25
    
    
    184,219
    
    
    
    8.9
    
    
    
    11.32
    
    
    
    1,460,104$20.06
    
    
    62,995
    
    
    
    9.9
    
    
    
    20.06
    
    
    
    Total ($0.01 - $20.06)
    
    
    567,034
    
    
    
    8.4
    
    
    $
    8.93
    
    
    $
    5,900,714
  Restricted and Performance Shares
  10




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##### Table of Contents



5. Earnings Per Share
   Thirteen
    
    
    ThirteenWeeks Ended
    
    
    Weeks EndedApril 30, 2005
    
    
    April 29, 2006Numerator:Net Income
    
    $
    1,851,138
    
    
    $
    668,355Numerator for earnings per share
    
    $
    1,851,138
    
    
    $
    668,355Denominator for basic earnings per
share  weighted average shares
    
    
    5,344,239
    
    
    
    6,332,110Effect of dilutive securitiesStock options
    
    
    253,833
    
    
    
    261,767Stock purchase warrants
    
    
    843
    
    
    
    216,862Denominator for diluted earnings
per share  adjusted weighted
average shares and assumed
conversions
    
    
    5,598,915
    
    
    
    6,810,739
  6. Subsequent Event
  11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Companys unaudited condensed
financial statements and notes thereto provided herein and the Companys audited financial
statements and notes thereto in our annual report on Form 10-K. The following Managements
Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements. The factors that might cause such a difference
also include, but are not limited to, those discussed in our annual report on Form 10-K under Item
1. Business  Cautionary Note Regarding Forward-Looking Statements and Risk Factors and under
Item 1  Business-Risk Factors and those discussed elsewhere our annual report on Form 10-K and
elsewhere in this report.
 Overview
     Share-Based Payment
   Critical Accounting Policies
   12




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##### Table of Contents



Merchandise inventories
  Store closing and impairment charges
 Accounting for the Disposal of Long-Lived Assets
 Stock-based compensation expense
 Share-Based Payment
 Deferred income taxes
 Accounting for Income Taxes
 13




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##### Table of Contents



Results of Operations
  Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 30, 2005
    
    April 29, 2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    65.7
    
    
    
    67.3Gross profit
    
    
    34.3
    
    
    
    32.7Selling expense
    
    
    19.2
    
    
    
    20.9General and administrative expense
    
    
    7.9
    
    
    
    9.4Loss on disposal of property and equipment
    
    
    0.3
    
    
    
    Operating income
    
    
    6.9
    
    
    
    2.4Other income, net
    
    
    0.1
    
    
    
    Interest expense
    
    
    (0.3
    )
    
    
    (0.2
    )Income before income taxes
    
    
    6.7
    
    
    
    2.2Provision for income taxes
    
    
    2.5
    
    
    
    0.9Net income
    
    
    4.2
    %
    
    
    1.3
    %
  Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedApril 30, 2005
    
    April 29, 2006Number of stores at beginning of period
    
    
    218
    
    
    
    235Stores opened during period
    
    
    7
    
    
    
    12Stores closed during period
    
    
    (4
    )
    
    
    (2
    )Number of stores at end of period
    
    
    221
    
    
    
    245
 Thirteen Weeks Ended April 29, 2006 Compared to Thirteen Weeks Ended April 30, 2005
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 14




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##### Table of Contents



Income tax expense.
 Net income
 Seasonality and Quarterly Fluctuations
   Liquidity and Capital Resources
   April 30, 2005
    
    January 28, 2006
    
    April 29, 2006Cash
    
    $
    4,908,501
    
    
    $
    3,924,970
    
    
    $
    195,575Inventories
    
    
    20,416,274
    
    
    
    25,997,859
    
    
    
    28,198,946Total current assets
    
    
    30,410,232
    
    
    
    35,366,487
    
    
    
    33,643,024Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    6,829,551Total current liabilities
    
    
    15,497,372
    
    
    
    27,599,760
    
    
    
    26,193,229Net working capital
    
    
    14,912,860
    
    
    
    7,766,727
    
    
    
    7,449,795Property and equipment, net
    
    
    24,771,443
    
    
    
    38,701,362
    
    
    
    41,827,073Total assets
    
    
    55,681,056
    
    
    
    74,754,684
    
    
    
    76,316,299Total shareholders equity
    
    
    34,619,400
    
    
    
    40,390,584
    
    
    
    42,847,341Unused borrowing capacity*
    
    
    15,137,998
    
    
    
    19,220,644
    
    
    
    14,227,440
 
 *
    
    as calculated under the terms of our revolving credit facility  Operating activities
  15




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##### Table of Contents



Investing activities
   Financing activities
    16




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##### Table of Contents



Accounting for Derivative Instruments and
Hedging Activities Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock The Effect of a
Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock,
  17




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    5 YearsLong-term debt obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations (1)
    
    
    684,555
    
    
    
    441,666
    
    
    
    242,889
    
    
    
    
    
    
    
    Operating lease obligations (2)
    
    
    183,822,693
    
    
    
    23,370,842
    
    
    
    45,252,482
    
    
    
    41,879,263
    
    
    
    73,320,106Purchase obligations (3)
    
    
    28,675,267
    
    
    
    28,666,903
    
    
    
    8,364
    
    
    
    
    
    
    
    Total
    
    $
    213,182,515
    
    
    $
    52,479,411
    
    
    $
    45,503,735
    
    
    $
    41,879,263
    
    
    $
    73,320,106
 
 (1)
    
    Includes payment obligations relating to our point of sale hardware and software leases.(2)
    
    Includes minimum payment obligations related to our store leases.(3)
    
    Includes merchandise on order and payment obligations relating to store construction and
miscellaneous service contracts. Recent Accounting Pronouncements
  Effect of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  18




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##### Table of Contents






ITEM 4. CONTROLS AND PROCEDURES


Disclosure Controls and Procedures.


Internal Control Over Financial Reporting.





BAKERS FOOTWEAR GROUP, INC.
PART II  OTHER INFORMATION





ITEM 1A. RISK FACTORS







ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


Purchase of Equity Securities by the Issuer and Affiliated Purchasers  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
 ITEM 6. EXHIBITS
  19




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##### Table of Contents



SIGNATURES
   BAKERS FOOTWEAR GROUP, INC.
          
         (Registrant)By:
    /s/ Peter A. EdisonPeter A. EdisonChairman of the Board and
Chief Executive Officer
Bakers Footwear Group, Inc.
(On behalf of the Registrant)By:
    /s/ Lawrence L. Spanley, Jr.Lawrence L. Spanley, Jr.Executive Vice President, Chief Financial Officer,
Treasurer, and Secretary
(As principal financial officer) 20




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##### Table of Contents



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)).10.1
    
    Bakers Footwear Group, Inc. 2003 Stock Option Plan, as
amended (incorporated by reference to the Companys 2006 Proxy
Statement dated April 24, 2006, Appendix C).10.2
    
    Summary of March 16, 2006 stock option grants and performance
share awards for executive officers of the Company (incorporated
by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K filed on March 22, 2006 (File No. 000-50563)).10.3
    
    Form of Nonqualified Option Award Agreement under Bakers Footwear
Group, Inc. 2003 Stock Option Plan (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K filed on
March 22, 2006 (File No. 000-50563)).10.4
    
    Form of Notice of Award of Performance Shares under Bakers
Footwear Group, Inc. 2005 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.4 to the Companys
Current Report on Form 8-K filed on March 22, 2006 (File No.
000-50563)).10.5
    
    Letter to Peter Edison outlining 2006 bonus levels (incorporated
by reference to Exhibit 10.6 to the Companys Current Report on
Form 8-K filed on March 22, 2006 (File No. 000-50563)).10.6
    
    Letter to Michele Bergerac outlining 2006 bonus levels
(incorporated by reference to Exhibit 10.7 to the Companys
Current Report on Form 8-K filed on March 22, 2006 (File No.
000-50563)).10.7
    
    Letter to Stan Tusman outlining 2006 bonus levels (incorporated by
reference to Exhibit 10.8 to the Companys Current Report on Form
8-K filed on March 22, 2006 (File No. 000-50563)).10.8
    
    Letter to Mark Ianni outlining 2006 bonus levels (incorporated by
reference to Exhibit 10.9 to the Companys Current Report on Form
8-K filed on March 22, 2006 (File No. 000-50563)).10.9
    
    Letter to Joe Vander Pluym outlining 2006 bonus levels
(incorporated by reference to Exhibit 10.10 to the Companys
Current Report on Form 8-K filed on March 22, 2006 (File No.
000-50563)).10.10
    
    Letter to Larry Spanley outlining 2006 bonus levels (incorporated
by reference to Exhibit 10.11 to the Companys Current Report on
Form 8-K filed on March 22, 2006 (File No. 000-50563)).10.11
    
    Summary of Compensation of Non-management Directors as of March
16, 2006 (incorporated by reference to Exhibit 10.13 to the
Companys Current Report on Form 8-K filed on March 22, 2006 (File
No. 000-50563)).10.12
    
    Summary of 2006 base salaries for executive officers of the
Company (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on April 5, 2006 (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)
 21