##### 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 July 31, 2010
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from

to
 Commission File Number: 000-50563
 BAKERS FOOTWEAR GROUP, INC.
 (Exact name of registrant as specified in its charter)
 Missouri
    
    43-0577980(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2815 Scott Avenue,St. Louis, Missouri
    
    63103(Address of principal executive offices)
    
    (Zip Code)
 (314) 621-0699  (Registrants telephone number, including area code)
 Not Applicable  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q
 PagePart I Financial Information
    
    
    3Item 1. Financial Statements (Unaudited)
    
    
    3Condensed Balance Sheets
    
    
    3Condensed Statements of Operations
    
    
    4Condensed Statement of Shareholders Equity (Deficit)
    
    
    5Condensed Statements of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II Other Information
    
    
    27Item 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. [Reserved]
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibit Index
    
    
    30EX-4.8 AMENDMENT NUMBER 5 TO LOAN DOCUMENTSEX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICEREX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICEREX-32.1 CERTIFICATION OF CEO AND CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 August 1,
    
    
    January 30,
    
    
    July 31,2009
    
    
    2010
    
    
    2010(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    152,733
    
    
    $
    154,685
    
    
    $
    149,905Accounts receivable
    
    
    1,240,445
    
    
    
    1,387,358
    
    
    
    1,407,330Inventories
    
    
    18,859,814
    
    
    
    20,233,207
    
    
    
    21,626,346Prepaid expenses and other current assets
    
    
    1,071,539
    
    
    
    1,234,787
    
    
    
    934,568Total current assets
    
    
    21,324,531
    
    
    
    23,010,037
    
    
    
    24,118,149Property and equipment, net
    
    
    30,426,035
    
    
    
    24,757,395
    
    
    
    22,029,961Other assets
    
    
    1,043,152
    
    
    
    851,035
    
    
    
    924,497Total assets
    
    $
    52,793,718
    
    
    $
    48,618,467
    
    
    $
    47,072,607Liabilities and shareholders equity (deficit)Current liabilities:Accounts payable
    
    $
    11,663,031
    
    
    $
    10,138,635
    
    
    $
    16,904,303Accrued expenses
    
    
    7,027,366
    
    
    
    7,320,595
    
    
    
    7,244,742Subordinated secured term loan
    
    
    3,718,774
    
    
    
    2,785,112
    
    
    
    1,550,049Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    Sales tax payable
    
    
    588,347
    
    
    
    1,152,277
    
    
    
    914,007Deferred income
    
    
    1,328,404
    
    
    
    1,366,252
    
    
    
    1,143,402Revolving credit facility
    
    
    8,412,972
    
    
    
    10,531,687
    
    
    
    9,553,095Total current liabilities
    
    
    36,738,894
    
    
    
    37,294,558
    
    
    
    37,309,598Accrued noncurrent rent liabilities
    
    
    9,518,101
    
    
    
    9,183,756
    
    
    
    8,972,557Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    4,000,000Shareholders equity (deficit):Preferred stock, $0.0001 par value, 5,000,000
shares authorized, no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000
shares authorized, 7,382,856 shares outstanding
at August 1, 2009 and January 30, 2010 and
7,384,056 shares outstanding at July 31, 2010
    
    
    738
    
    
    
    738
    
    
    
    739Additional paid-in capital
    
    
    39,099,385
    
    
    
    39,279,600
    
    
    
    39,455,857Accumulated deficit
    
    
    (32,563,400
    )
    
    
    (37,140,185
    )
    
    
    (42,666,144
    )Total shareholders equity (deficit)
    
    
    6,536,723
    
    
    
    2,140,153
    
    
    
    (3,209,548
    )Total liabilities and shareholders equity (deficit)
    
    $
    52,793,718
    
    
    $
    48,618,467
    
    
    $
    47,072,607
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 1, 2009
    
    
    July 31, 2010
    
    
    August 1, 2009
    
    
    July 31, 2010Net sales
    
    $
    43,720,271
    
    
    $
    43,293,127
    
    
    $
    88,696,892
    
    
    $
    86,817,163Cost of merchandise sold, occupancy, and buying expenses
    
    
    30,798,164
    
    
    
    31,360,215
    
    
    
    63,078,345
    
    
    
    64,147,955Gross profit
    
    
    12,922,107
    
    
    
    11,932,912
    
    
    
    25,618,547
    
    
    
    22,669,208Operating expenses:Selling
    
    
    10,008,801
    
    
    
    9,625,021
    
    
    
    19,984,624
    
    
    
    19,429,309General and administrative
    
    
    4,058,016
    
    
    
    3,902,762
    
    
    
    8,397,656
    
    
    
    7,693,314Loss on disposal of property and equipment
    
    
    9,850
    
    
    
    8,608
    
    
    
    294,431
    
    
    
    60,277Operating loss
    
    
    (1,154,560
    )
    
    
    (1,603,479
    )
    
    
    (3,058,164
    )
    
    
    (4,513,692
    )Other income (expense):Interest expense
    
    
    (612,318
    )
    
    
    (440,263
    )
    
    
    (1,498,898
    )
    
    
    (994,836
    )Other, net
    
    
    30,235
    
    
    
    20,304
    
    
    
    51,751
    
    
    
    34,273Loss before income taxes
    
    
    (1,736,643
    )
    
    
    (2,023,438
    )
    
    
    (4,505,311
    )
    
    
    (5,474,255
    )Income tax expense
    
    
    
    
    
    
    51,704
    
    
    
    
    
    
    
    51,704Net loss
    
    $
    (1,736,643
    )
    
    $
    (2,075,142
    )
    
    $
    (4,505,311
    )
    
    $
    (5,525,959
    )Net loss per common share
    
    $
    (0.24
    )
    
    $
    (0.28
    )
    
    $
    (0.62
    )
    
    $
    (0.75
    )
  4




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENT OF SHAREHOLDERS EQUITY (DEFICIT)
 (Unaudited)
 Common StockShares
    
    
    
    
    
    
    AdditionalIssued and
    
    
    
    
    
    
    Paid-In
    
    
    AccumulatedOutstanding
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at January 30, 2010
    
    
    7,382,856
    
    
    $
    738
    
    
    $
    39,279,600
    
    
    $
    (37,140,185
    )
    
    $
    2,140,153Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    175,874
    
    
    
    
    
    
    
    175,874Shares issued in connection
with exercise of stock options
    
    
    1,200
    
    
    
    1
    
    
    
    383
    
    
    
    
    
    
    
    384Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,525,959
    )
    
    
    (5,525,959
    )Balance at July 31, 2010
    
    
    7,384,056
    
    
    $
    739
    
    
    $
    39,455,857
    
    
    $
    (42,666,144
    )
    
    $
    (3,209,548
    )
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks EndedAugust 1, 2009
    
    
    July 31, 2010Operating activitiesNet loss
    
    $
    (4,505,311
    )
    
    $
    (5,525,959
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    3,399,982
    
    
    
    2,961,383Accretion of debt discount
    
    
    276,492
    
    
    
    139,937Stock-based compensation expense
    
    
    405,126
    
    
    
    175,874Interest expense recognized for issuing common
stock related to amending the subordinated
secured term loan
    
    
    187,500
    
    
    
    Loss on disposal of property and equipment
    
    
    294,431
    
    
    
    60,278Changes in operating assets and liabilities:Accounts receivable
    
    
    132,942
    
    
    
    143,396Inventories
    
    
    2,116,538
    
    
    
    (1,393,139
    )Prepaid expenses and other current assets
    
    
    (43,944
    )
    
    
    300,219Other assets
    
    
    39,965
    
    
    
    (73,462
    )Accounts payable
    
    
    4,106,047
    
    
    
    6,765,668Accrued expenses and deferred income
    
    
    (1,482,718
    )
    
    
    (536,973
    )Accrued
noncurrent rent liabilities
    
    
    (256,728
    )
    
    
    (211,199
    )Net cash provided by operating activities
    
    
    4,670,322
    
    
    
    2,806,023Investing activitiesPurchase of property and equipment
    
    
    (207,384
    )
    
    
    (460,767
    )Proceeds from sale of property and equipment
    
    
    9
    
    
    
    3,172Net cash used in investing activities
    
    
    (207,375
    )
    
    
    (457,595
    )Financing activitiesNet advances under revolving credit facility
    
    
    (3,069,890
    )
    
    
    (978,592
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    384Principal payments on subordinated secured term loan
    
    
    (1,375,000
    )
    
    
    (1,375,000
    )Net cash provided by (used in) financing activities
    
    
    (4,444,890
    )
    
    
    (2,353,208
    )Net decrease in cash and cash equivalents
    
    
    18,057
    
    
    
    (4,780
    )Cash and cash equivalents at beginning of period
    
    
    134,676
    
    
    
    154,685Cash and cash equivalents at end of period
    
    $
    152,733
    
    
    $
    149,905Supplemental disclosures of cash flow informationCash paid for interest
    
    $
    1,162,009
    
    
    $
    757,734
  6




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##### Table of Contents



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




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##### Table of Contents



3. Nasdaq Capital Market Delisting
  8




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##### Table of Contents



4. Revolving Credit Facility
   5. Subordinated Secured Term Loan
      9




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##### Table of Contents



6. Subordinated Convertible Debentures
     10




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##### Table of Contents



7. Income Taxes
     Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedAugust 1, 2009
    
    
    July 31, 2010
    
    
    August 1, 2009
    
    
    July 31, 2010Current:Federal
    
    $
    (485,007
    )
    
    $
    (425,208
    )
    
    $
    (1,063,521
    )
    
    $
    (1,345,940
    )State and local
    
    
    (104,287
    )
    
    
    (44,314
    )
    
    
    (235,163
    )
    
    
    (243,729
    )Total current
    
    
    (589,294
    )
    
    
    (469,522
    )
    
    
    (1,298,684
    )
    
    
    (1,589,669
    )Deferred:Federal
    
    
    (62,890
    )
    
    
    (211,275
    )
    
    
    (358,485
    )
    
    
    (379,617
    )State and local
    
    
    (11,434
    )
    
    
    (38,414
    )
    
    
    (65,179
    )
    
    
    (69,021
    )Total deferred
    
    
    (74,324
    )
    
    
    (249,689
    )
    
    
    (423,664
    )
    
    
    (448,638
    )Valuation allowance
    
    
    663,618
    
    
    
    770,915
    
    
    
    1,722,348
    
    
    
    2,090,011Total income tax expense
    
    $
    
    
    
    $
    51,704
    
    
    $
    
    
    
    $
    51,704
  Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedAugust 1, 2009
    
    
    July 31, 2010
    
    
    August 1, 2009
    
    
    July 31, 2010Federal income tax at statutory rate
    
    $
    (607,825
    )
    
    $
    (708,203
    )
    
    $
    (1,576,859
    )
    
    $
    (1,915,990
    )Impact of State NOL carryback refund restrictions
    
    
    
    
    
    
    51,704
    
    
    
    
    
    
    
    51,704Impact of graduated Federal rates
    
    
    17,366
    
    
    
    20,234
    
    
    
    45,053
    
    
    
    54,743State and local taxes, net of federal
income taxes
    
    
    (76,801
    )
    
    
    (89,490
    )
    
    
    (199,242
    )
    
    
    (242,099
    )Change in valuation allowance
    
    
    663,618
    
    
    
    770,915
    
    
    
    1,722,348
    
    
    
    2,090,012Permanent differences
    
    
    3,642
    
    
    
    6,544
    
    
    
    8,700
    
    
    
    13,334Total income tax expense
    
    $
    
    
    
    $
    51,704
    
    
    $
    
    
    
    $
    51,704
  11




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##### Table of Contents



August 1, 2009
    
    
    January 30, 2010
    
    
    July 31, 2010Deferred tax assets:Net operating loss carryforward
    
    $
    8,631,332
    
    
    $
    8,894,200
    
    
    $
    10,683,566Vacation accrual
    
    
    394,056
    
    
    
    396,524
    
    
    
    405,885Inventory
    
    
    1,032,562
    
    
    
    989,396
    
    
    
    997,214Stock-based compensation
    
    
    1,046,234
    
    
    
    1,116,518
    
    
    
    1,185,109Accrued rent
    
    
    3,712,059
    
    
    
    3,581,665
    
    
    
    3,499,297Property and equipment
    
    
    20,540
    
    
    
    1,496,584
    
    
    
    1,833,074Total deferred tax assets
    
    
    14,836,783
    
    
    
    16,474,887
    
    
    
    18,604,145Deferred tax liabilities:Prepaid expenses
    
    
    218,429
    
    
    
    111,467
    
    
    
    150,101Total deferred tax liabilities
    
    
    218,429
    
    
    
    111,467
    
    
    
    150,101Valuation allowance
    
    
    (14,618,354
    )
    
    
    (16,363,420
    )
    
    
    (18,454,044
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
  8. Stock-Based Compensation
   Twenty-six
    
    Twenty-sixWeeks Ended
    
    Weeks EndedAugust 1, 2009
    
    July 31, 2010Options granted
    
    
    72,000
    
    
    
    227,000Weighted-average fair value of options granted
    
    $
    0.33
    
    
    $
    1.96AssumptionsDividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    2.2
    %
    
    
    2.8
    %Expected volatility
    
    
    54
    %
    
    
    97
    %Expected option life
    
    6 years
    
    
    6 years
  12




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##### Table of Contents



9. Earnings Per Share
   Thirteen
    
    
    Thirteen
    
    
    Twenty-six
    
    
    Twenty-sixWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 1, 2009
    
    
    July 31, 2010
    
    
    August 1, 2009
    
    
    July 31, 2010Numerator:Net loss
    
    $
    (1,736,643
    )
    
    $
    (2,075,142
    )
    
    $
    (4,505,311
    )
    
    $
    (5,525,959
    )Numerator for loss per share
    
    
    (1,736,643
    )
    
    
    (2,075,142
    )
    
    
    (4,505,311
    )
    
    
    (5,525,959
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (1,736,643
    )
    
    $
    (2,075,142
    )
    
    $
    (4,505,311
    )
    
    $
    (5,525,959
    )Denominator:Denominator for basic earnings per share 
weighted average shares
    
    
    7,382,856
    
    
    
    7,384,056
    
    
    
    7,273,318
    
    
    
    7,383,566Effect of dilutive securitiesStock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
 adjusted weighted average shares and assumed
conversions
    
    
    7,382,856
    
    
    
    7,384,056
    
    
    
    7,273,318
    
    
    
    7,383,566
  10. Commitments and Contingencies
  13




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##### Table of Contents



11. Fair Value of Financial Instruments
  August 1, 2009CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    152,733
    
    
    $
    152,733Revolving credit facility
    
    
    8,412,972
    
    
    
    8,412,972Subordinated secured term loan
    
    
    3,718,774
    
    
    
    3,697,626Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,391,276
 January 30, 2010CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    154,685
    
    
    $
    154,685Revolving credit facility
    
    
    10,531,687
    
    
    
    10,531,687Subordinated secured term loan
    
    
    2,785,112
    
    
    
    2,811,386Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,578,638
 July 31, 2010CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    149,905
    
    
    $
    149,905Revolving credit facility
    
    
    9,553,095
    
    
    
    9,553,095Subordinated secured term loan
    
    
    1,550,049
    
    
    
    1,565,855Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,799,363
  14




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Companys unaudited condensed
financial statements and notes thereto provided herein and the Companys audited financial
statements and notes thereto in our annual report on Form 10-K for the fiscal year ended January
30, 2010. The following Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in the forward-looking statements. The
factors that might cause such a difference also include, but are not limited to, those discussed in
our Annual Report on Form 10-K under Item 1. Business  Cautionary Note Regarding Forward-Looking
Statements and Risk Factors and under Item 1. Business  Risk Factors and those discussed
elsewhere in our Annual Report on Form 10-K and related notes thereto and elsewhere in this
quarterly report.
 Overview
     Debt Agreements
  15




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##### Table of Contents



Nasdaq Listing
   Critical Accounting Policies
   Merchandise inventories
  16




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##### Table of Contents



Store closing and impairment charges
  Stock-based compensation expense
  Deferred income taxes
     17




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##### Table of Contents



Results of Operations
  Thirteen
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedAugust 1,
    
    July 31,
    
    August 1,
    
    July 31,2009
    
    2010
    
    2009
    
    2010Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and
buying expense
    
    
    70.4
    
    
    
    72.5
    
    
    
    71.1
    
    
    
    73.9Gross profit
    
    
    29.6
    
    
    
    27.5
    
    
    
    28.9
    
    
    
    26.1Selling expense
    
    
    22.9
    
    
    
    22.2
    
    
    
    22.5
    
    
    
    22.4General and administrative expense
    
    
    9.3
    
    
    
    9.0
    
    
    
    9.5
    
    
    
    8.8Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    0.1Operating loss
    
    
    (2.6
    )
    
    
    (3.7
    )
    
    
    (3.5
    )
    
    
    (5.2
    )Other income, net
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    Interest expense
    
    
    (1.5
    )
    
    
    (1.0
    )
    
    
    (1.7
    )
    
    
    (1.1
    )Loss before income taxes
    
    
    (4.0
    )
    
    
    (4.7
    )
    
    
    (5.1
    )
    
    
    (6.3
    )Provision for income taxes
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Net loss
    
    
    (4.0
    )%
    
    
    (4.8
    )%
    
    
    (5.1
    )%
    
    
    (6.4
    )%
  Thirteen
    
    Thirteen
    
    Twenty-
    
    Twenty-Weeks
    
    Weeks
    
    six Weeks
    
    six WeeksEnded
    
    Ended
    
    Ended
    
    EndedAugust 1,
    
    July 31,
    
    August 1,
    
    July 31,2009
    
    2010
    
    2009
    
    2010Number of stores at
beginning of period
    
    
    239
    
    
    
    239
    
    
    
    239
    
    
    
    238Stores opened during period
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    2Stores closed during period
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (3
    )Number of stores at end of period
    
    
    240
    
    
    
    237
    
    
    
    240
    
    
    
    237
 Thirteen Weeks Ended July 31, 2010 Compared to Thirteen Weeks Ended August 1, 2009
 Net sales.
 Gross profit.
 18




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##### Table of Contents



Selling expense.
 General and administrative expense.
 Interest expense.
 Net loss
 Twenty-six Weeks Ended July 31, 2010 Compared to Twenty-six Weeks Ended August 1, 2009
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Interest expense.
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
  19




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20




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August 1, 2009
    
    January 30, 2010
    
    July 31, 2010Cash
    
    $
    152,733
    
    
    $
    154,685
    
    
    $
    149,905Inventories
    
    
    18,859,814
    
    
    
    20,233,207
    
    
    
    21,626,346Total current assets
    
    
    21,324,531
    
    
    
    23,010,037
    
    
    
    24,118,149Property and equipment, net
    
    
    30,426,035
    
    
    
    24,757,395
    
    
    
    22,029,961Total assets
    
    
    52,793,718
    
    
    
    48,618,467
    
    
    
    47,072,607Revolving credit facility
    
    
    8,412,972
    
    
    
    10,531,687
    
    
    
    9,553,095Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    3,718,774
    
    
    
    2,785,112
    
    
    
    1,550,049Total current liabilities
    
    
    36,738,894
    
    
    
    37,294,558
    
    
    
    37,309,598Total shareholders equity (deficit)
    
    
    6,536,723
    
    
    
    2,140,153
    
    
    
    (3,209,548
    )Net working capital
    
    
    (15,414,363
    )
    
    
    (14,284,521
    )
    
    
    (13,191,449
    )Unused borrowing capacity*
    
    
    896,903
    
    
    
    1,928,913
    
    
    
    1,054,189
 
 *
    
    as calculated under the terms of our revolving credit facility 21




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Operating activities
   Investing activities
   Financing activities
  Revolving Credit Facility
    22




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Subordinated Secured Term Loan
     23




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Subordinated Convertible Debentures
    24




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##### Table of Contents



Subordinated Debenture
     Off-Balance Sheet Arrangements
  25




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##### Table of Contents



Contractual Obligations
  Payments due by PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    More than 5 YearsLong-term debt obligations (1)
    
    $
    6,458,182
    
    
    $
    2,071,849
    
    
    $
    4,386,333
    
    
    $
    
    
    
    $
    Operating lease obligations (2)
    
    
    124,508,751
    
    
    
    24,334,788
    
    
    
    43,509,938
    
    
    
    33,418,913
    
    
    
    23,245,112Purchase obligations (3)
    
    
    36,725,665
    
    
    
    31,475,665
    
    
    
    3,000,000
    
    
    
    2,250,000
    
    
    
    Total
    
    $
    167,692,598
    
    
    $
    57,882,302
    
    
    $
    50,896,271
    
    
    $
    35,668,913
    
    
    $
    23,245,112
 
 (1)
    
    Includes principal and interest payments on our subordinated convertible debentures and our
subordinated secured term loan.(2)
    
    Includes minimum payment obligations related to our store leases.(3)
    
    Includes merchandise on order, minimum royalty payments and payment obligations relating to
store construction and miscellaneous service contracts. Recent Accounting Pronouncements
  Impact of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  We were recently delisted from the Nasdaq Stock Market. Our common stock is not quoted on a
national exchange, and there is relatively limited trading in our common stock, which limits the
ability of our shareholders or potential shareholders to purchase or sell shares of our common
stock and limits our ability to obtain financing.
  The departure of members of our senior management team could adversely affect our business.
  27




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. [Removed and Reserved]
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  28




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##### Table of Contents



SIGNATURES
   BAKERS FOOTWEAR GROUP, INC.
(Registrant)By:
    /s/ Peter A. EdisonPeter A. EdisonChairman of the Board, Chief Executive Officer
and President (Principal Executive Officer) Bakers
Footwear Group, Inc.
(On behalf of the Registrant) By:
    /s/ Charles R. Daniel, IIICharles R. Daniel, IIIExecutive Vice President and Chief Financial Officer,
Controller, Treasurer, and Secretary
(Principal Financial Officer and
Principal Accounting Officer) 29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Companys
Annual Report on Form 10-K for the fiscal year ended
January 3, 2004 filed on April 2, 2004 (File No.
000-50563)).3.2
    
    
    Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 to the Companys Annual Report on Form 10-K
for the fiscal year ended January 3, 2004 filed on April
2, 2004 (File No. 000-50563)).4.1
    
    
    Debenture and Stock Purchase Agreement dated August 26,
2010 by and among the Company and Steven Madden, Ltd.
(incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed on August 27, 2010 (File
No. 000-50563)).4.2
    
    
    Debenture issued by the Company to Steven Madden, Ltd. on
August 26, 2010 (incorporated by reference to Exhibit 4.2
to the Companys Current Report on Form 8-K filed on
August 27, 2010 (File No. 000-50563)).4.3
    
    
    Voting Agreement dated August 26, 2010 by and among the
Company, Peter A. Edison, and Steven Madden, Ltd.
(incorporated by reference to Exhibit 4.3 to the Companys
Current Report on Form 8-K filed on August 27, 2010 (File
No. 000-50563)).4.4
    
    
    Registration Rights Agreement dated August 26, 2010 by and
among the Company and Steven Madden, Ltd. (incorporated by
reference to Exhibit 4.4 to the Companys Current Report
on Form 8-K filed on August 27, 2010 (File No.
000-50563)).4.5
    
    
    Subordination Agreement dated August 26, 2010 by and among
the Company, Bank of America, N.A., and Steven Madden,
Ltd. (incorporated by reference to Exhibit 4.5 to the
Companys Current Report on Form 8-K filed on August 27,
2010 (File No. 000-50563)).4.6
    
    
    Subordination Agreement dated August 26, 2010 by and among
the Company, Private Equity Management Group, Inc., in its
capacity as administrative agent for GVECR II 2007 E Trust
dated December 17, 2007, and Steven Madden, Ltd.
(incorporated by reference to Exhibit 4.6 to the Companys
Current Report on Form 8-K filed on August 27, 2010 (File
No. 000-50563)).4.7
    
    
    Subordination Agreement dated August 26, 2010 by and among
the Company, the holders of $4 million aggregate principal
amount of the Companys 9.5% Subordinated Convertible
Debentures due June 30, 2012, and Steven Madden, Ltd.
(incorporated by reference to Exhibit 4.7 to the Companys
Current Report on Form 8-K filed on August 27, 2010 (File
No. 000-50563)).4.8
    
    
    Amendment Number 5 to Loan Documents dated
August 26,
2010 by and among the Company, Private Equity Management
Group, Inc. and the Lender named therein.10.1
    
    
    Second Amended and Restated Loan and Security Agreement
dated as of August 31, 2006 by and between Bank of
America, N.A. and the Company (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on September 7, 2006 (File No. 000-50563)).10.2
    
    
    Amended and Restated Revolving Credit Note dated as of
August 31, 2006 by and between Bank of America, N.A. and
the Company (incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K filed on
September 7, 2006 (File No. 000-50563)).10.3
    
    

Waiver
and consent agreement
dated as of
April 18, 2007 by and between Bank of America, N.A. and
the Company (incorporated by reference to Exhibit 10.14.2 to
the Companys Annual Report on Form 10-K for the fiscal year
ended February 3, 2007 filed on
April 24, 2007 (File No. 000-50563)).10.4
    
    
    First Amendment to Second Amended and Restated Loan and
Security Agreement dated as of May 17, 2007 by and between
the Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.4 to the Companys Current Report
on Form 8-K filed on May 18, 2007 (File No. 000-50563)).10.5
    
    
    Extension Agreement dated June 26, 2007 between the
Company and Bank of America, N.A. (incorporated by
reference to Exhibit 4.4 to the Companys Current Report
on Form 8-K filed on July 2, 2007 (File No. 000-50563)).10.6
    
    
    Second Amendment to Second Amended and Restated Loan and
Security Agreement dated February 1, 2008 by and among the
Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed on February 4, 2008 (File No.
000-50563)).
 30




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##### Table of Contents



Exhibit No.
    
    Description10.7
    
    
    Third Amendment to Second Amended and Restated Loan and
Security Agreement dated April 9, 2009 by and among the
Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.7 to the Companys Current Report
on Form 8-K filed on April 15, 2009 (File No. 000-50563)).10.8
    
    
    Fourth Amendment to Second Amended and Restated Loan and
Security Agreement dated September 8, 2009 by and among
the Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.8 to the Companys Quarterly
Report on Form 10-Q filed on September 10, 2009 (File No.
000-50563)).10.9
    
    
    Fifth Amendment to Second Amended and Restated Loan and
Security Agreement dated May 28, 2010 by and among the
Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.9 to the Companys Current Report
on Form 8-K filed on May 28, 2010 (File No. 000-50563)).10.10
    
    
    Waiver of Bank of America, N.A., dated August 26, 2010
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on August 27,
2010 (File No. 000-50563)).10.11
    
    
    Consent of Bank of America, N.A., dated August 26, 2010
(incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed on August 27,
2010 (File No. 000-50563)).11.1
    
    
    Statement regarding computation of per share earnings
(incorporated by reference from Note 9 to the unaudited
interim financial statements included herein).31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, executed by
Chief Executive Officer).31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, executed by
Chief Financial Officer).32.1
    
    
    Section 1350 Certifications (pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, executed by Chief
Executive Officer and the Chief Financial Officer).
 31