##### 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 October 31, 2009
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 000-50563
 BAKERS FOOTWEAR GROUP, INC.
 (Exact name of registrant as specified in its charter)
 Missouri
    
    43-0577980(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2815 Scott Avenue,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
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q
 PagePart I Financial 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
    
    
    27Item 4. Controls and Procedures
    
    
    27Part II Other Information
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibit Index
    
    
    30CERTIFICATION OF CHIEF EXECUTIVE OFFICERCERTIFICATION OF CHIEF FINANCIAL OFFICERSECTION 1350 CERTIFICATIONS
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 November 1,
    
    
    January 31,
    
    
    October 31,2008
    
    
    2009
    
    
    2009(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    141,559
    
    
    $
    134,676
    
    
    $
    164,538Accounts receivable
    
    
    1,350,892
    
    
    
    1,330,289
    
    
    
    1,413,701Other receivables
    
    
    62,127
    
    
    
    43,090
    
    
    
    167,016Inventories
    
    
    27,183,590
    
    
    
    20,976,352
    
    
    
    23,335,432Prepaid expenses and other current assets
    
    
    1,165,208
    
    
    
    908,796
    
    
    
    857,460Prepaid income taxes
    
    
    70,406
    
    
    
    118,799
    
    
    
    120,668Total current assets
    
    
    29,973,782
    
    
    
    23,512,002
    
    
    
    26,058,815Property and equipment, net
    
    
    35,655,340
    
    
    
    34,029,666
    
    
    
    26,183,851Other assets
    
    
    1,044,079
    
    
    
    966,524
    
    
    
    934,700Total assets
    
    $
    66,673,201
    
    
    $
    58,508,192
    
    
    $
    53,177,366Liabilities and shareholders equity (deficit)Current liabilities:Accounts payable
    
    $
    7,329,296
    
    
    $
    7,556,984
    
    
    $
    12,558,384Accrued expenses
    
    
    8,216,855
    
    
    
    8,175,564
    
    
    
    8,348,935Subordinated secured term loan
    
    
    5,346,265
    
    
    
    4,817,282
    
    
    
    3,375,229Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Sales tax payable
    
    
    631,102
    
    
    
    1,032,584
    
    
    
    997,137Deferred income
    
    
    1,152,912
    
    
    
    1,218,687
    
    
    
    1,384,472Revolving credit facility
    
    
    20,249,110
    
    
    
    11,482,862
    
    
    
    16,693,755Total current liabilities
    
    
    46,925,540
    
    
    
    38,283,963
    
    
    
    47,357,912Accrued rent liabilities
    
    
    9,930,547
    
    
    
    9,774,829
    
    
    
    9,364,217Shareholders 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, 7,055,856 shares outstanding
at November 1, 2008 and January 31, 2009 and
7,382,856 shares outstanding at October 31, 2009
    
    
    705
    
    
    
    705
    
    
    
    738Additional paid-in capital
    
    
    38,357,799
    
    
    
    38,506,784
    
    
    
    39,184,879Accumulated deficit
    
    
    (28,541,390
    )
    
    
    (28,058,089
    )
    
    
    (42,730,380
    )Total shareholders equity (deficit)
    
    
    9,817,114
    
    
    
    10,449,400
    
    
    
    (3,544,763
    )Total liabilities and shareholders equity (deficit)
    
    $
    66,673,201
    
    
    $
    58,508,192
    
    
    $
    53,177,366
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 1, 2008
    
    
    October 31, 2009
    
    
    November 1, 2008
    
    
    October 31, 2009Net sales
    
    $
    41,075,064
    
    
    $
    39,042,191
    
    
    $
    128,180,666
    
    
    $
    127,739,083Cost of merchandise sold, occupancy, and
buying expenses
    
    
    32,078,177
    
    
    
    32,275,828
    
    
    
    95,054,641
    
    
    
    95,354,173Gross profit
    
    
    8,996,887
    
    
    
    6,766,363
    
    
    
    33,126,025
    
    
    
    32,384,910Operating expenses:Selling
    
    
    9,931,164
    
    
    
    9,655,891
    
    
    
    30,838,296
    
    
    
    29,640,515General and administrative
    
    
    4,015,896
    
    
    
    3,872,358
    
    
    
    12,410,864
    
    
    
    12,270,014Loss on disposal of property and equipment
    
    
    67,261
    
    
    
    3,460
    
    
    
    320,861
    
    
    
    297,891Impairment of long-lived assets
    
    
    2,609,588
    
    
    
    2,762,273
    
    
    
    2,609,588
    
    
    
    2,762,273Operating loss
    
    
    (7,627,022
    )
    
    
    (9,527,619
    )
    
    
    (13,053,584
    )
    
    
    (12,585,783
    )Other income (expense):Interest expense
    
    
    (767,664
    )
    
    
    (680,580
    )
    
    
    (2,297,446
    )
    
    
    (2,179,478
    )Other, net
    
    
    51,562
    
    
    
    41,219
    
    
    
    94,626
    
    
    
    92,970Loss before income taxes
    
    
    (8,343,124
    )
    
    
    (10,166,980
    )
    
    
    (15,256,404
    )
    
    
    (14,672,291
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    222,498
    
    
    
    Net loss
    
    $
    (8,343,124
    )
    
    $
    (10,166,980
    )
    
    $
    (15,478,902
    )
    
    $
    (14,672,291
    )Basic loss per share
    
    $
    (1.18
    )
    
    $
    (1.38
    )
    
    $
    (2.20
    )
    
    $
    (2.01
    )Diluted loss per share
    
    $
    (1.18
    )
    
    $
    (1.38
    )
    
    $
    (2.20
    )
    
    $
    (2.01
    )
  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 31, 2009
    
    
    7,055,856
    
    
    $
    705
    
    
    $
    38,506,784
    
    
    $
    (28,058,089
    )
    
    $
    10,449,400Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    490,620
    
    
    
    
    
    
    
    490,620Issuance of common stock
    
    
    250,000
    
    
    
    25
    
    
    
    187,475
    
    
    
    
    
    
    
    187,500Issuance of restricted stock
    
    
    77,000
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,672,291
    )
    
    
    (14,672,291
    )Balance at October 31, 2009
    
    
    7,382,856
    
    
    $
    738
    
    
    $
    39,184,879
    
    
    $
    (42,730,380
    )
    
    $
    (3,544,763
    )
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS  (Unaudited)
 Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks EndedNovember 1, 2008
    
    
    October 31, 2009Operating activitiesNet loss
    
    $
    (15,478,902
    )
    
    $
    (14,672,291
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    5,973,696
    
    
    
    5,021,487Accretion of debt discount
    
    
    508,765
    
    
    
    391,280Stock-based compensation expense
    
    
    455,916
    
    
    
    490,620Interest expense recognized for issuing common stock related to
amending the subordinated secured term loan
    
    
    
    
    
    
    187,500Loss on disposal of property and equipment
    
    
    320,861
    
    
    
    297,891Impairment of long-lived assets
    
    
    2,609,588
    
    
    
    2,762,273Changes in operating assets and liabilities:Accounts receivable
    
    
    (37,346
    )
    
    
    (207,330
    )Inventories
    
    
    (9,121,649
    )
    
    
    (2,359,080
    )Prepaid expenses and other current assets
    
    
    (468,034
    )
    
    
    51,336Prepaid income taxes
    
    
    1,917,215
    
    
    
    (1,869
    )Other assets
    
    
    637,231
    
    
    
    127,707Accounts payable
    
    
    247,082
    
    
    
    5,001,400Accrued expenses and deferred income
    
    
    (1,022,765
    )
    
    
    303,709Accrued rent liabilities
    
    
    (240,214
    )
    
    
    (410,612
    )Net cash used in operating activities
    
    
    (13,698,556
    )
    
    
    (3,015,979
    )Investing activitiesPurchase of property and equipment
    
    
    (714,364
    )
    
    
    (331,746
    )Proceeds from sale of property and equipment
    
    
    982
    
    
    
    27Net cash used in investing activities
    
    
    (713,382
    )
    
    
    (331,719
    )Financing activitiesNet advances under revolving credit facility
    
    
    9,064,731
    
    
    
    5,210,893Proceeds from issuance of subordinated secured term loan and common stock
    
    
    7,025,000
    
    
    
    Costs of issuing subordinated term loan and common stock
    
    
    (325,542
    )
    
    
    Principal payments on subordinated secured term loan
    
    
    (1,312,500
    )
    
    
    (1,833,333
    )Principal payments under capital lease obligations
    
    
    (57,863
    )
    
    
    Net cash provided by financing activities
    
    
    14,393,826
    
    
    
    3,377,560Net increase (decrease) in cash and cash equivalents
    
    
    (18,112
    )
    
    
    29,862Cash and cash equivalents at beginning of period
    
    
    159,671
    
    
    
    134,676Cash and cash equivalents at end of period
    
    $
    141,559
    
    
    $
    164,538Supplemental disclosures of cash flow informationCash paid for interest
    
    $
    1,535,753
    
    
    $
    1,475,034
  6




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##### Table of Contents



BAKERS
FOOTWEAR GROUP, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
 1. Basis of Presentation
  Recent Accounting Pronouncements
 Generally Accepted Accounting Principles
 Subsequent Events
 2. Liquidity
    7




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##### Table of Contents



3. Impairment of Long-Lived Assets
  8




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##### Table of Contents



4. Subordinated Secured Term Loan
       9




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##### Table of Contents



5. Revolving Credit Facility
   6. Subordinated Convertible Debentures
  10




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##### Table of Contents



Derivatives and
Hedging
 7. Income Taxes
 Income Taxes
    Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedNovember 1, 2008
    
    
    October 31, 2009
    
    
    November 1, 2008
    
    
    October 31, 2009Current:Federal
    
    $
    (1,288,047
    )
    
    $
    (1,896,202
    )
    
    $
    (2,671,151
    )
    
    $
    (2,959,723
    )State and local
    
    
    (311,853
    )
    
    
    (439,318
    )
    
    
    (653,854
    )
    
    
    (674,481
    )Total current
    
    
    (1,599,900
    )
    
    
    (2,335,520
    )
    
    
    (3,325,005
    )
    
    
    (3,634,204
    )Deferred:Federal
    
    
    (1,354,271
    )
    
    
    (1,320,839
    )
    
    
    (1,932,449
    )
    
    
    (1,679,324
    )State and local
    
    
    (246,231
    )
    
    
    (240,153
    )
    
    
    (365,465
    )
    
    
    (305,332
    )Total deferred
    
    
    (1,600,502
    )
    
    
    (1,560,992
    )
    
    
    (2,297,914
    )
    
    
    (1,984,656
    )Valuation allowance
    
    
    3,200,402
    
    
    
    3,896,512
    
    
    
    5,845,417
    
    
    
    5,618,860Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    222,498
    
    
    $
    
 11




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##### Table of Contents



Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedNovember 1, 2008
    
    
    October 31, 2009
    
    
    November 1, 2008
    
    
    October 31, 2009Federal income tax at statutory rate
    
    $
    (2,920,093
    )
    
    $
    (3,558,443
    )
    
    $
    (5,339,741
    )
    
    $
    (5,135,302
    )Impact of federal alternative minimum tax
    
    
    
    
    
    
    
    
    
    
    222,498
    
    
    
    Impact of graduated Federal rates
    
    
    83,431
    
    
    
    101,670
    
    
    
    152,564
    
    
    
    146,723State and local taxes, net of federal income taxes
    
    
    (368,944
    )
    
    
    (449,604
    )
    
    
    (674,671
    )
    
    
    (648,846
    )Permanent differences
    
    
    5,204
    
    
    
    9,865
    
    
    
    16,431
    
    
    
    18,565Valuation allowance
    
    
    3,200,402
    
    
    
    3,896,512
    
    
    
    5,845,417
    
    
    
    5,618,860Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    222,498
    
    
    $
    
   November 1, 2008
    
    
    January 31, 2009
    
    
    October 31, 2009Deferred tax assets:Net operating loss carryforward
    
    $
    6,947,140
    
    
    $
    7,332,648
    
    
    $
    10,966,852Vacation accrual
    
    
    382,854
    
    
    
    384,696
    
    
    
    398,736Inventory
    
    
    1,821,079
    
    
    
    1,187,969
    
    
    
    1,386,641Stock-based compensation
    
    
    828,181
    
    
    
    888,235
    
    
    
    1,079,577Accrued rent
    
    
    3,897,741
    
    
    
    3,812,183
    
    
    
    3,652,044Property and equipment
    
    
    
    
    
    
    
    
    
    
    1,185,803Total deferred tax assets
    
    
    13,876,995
    
    
    
    13,605,731
    
    
    
    18,669,653Deferred tax liabilities:Prepaid expenses
    
    
    147,665
    
    
    
    159,717
    
    
    
    154,787Property and equipment
    
    
    697,524
    
    
    
    550,008
    
    
    
    Total deferred tax liabilities
    
    
    845,189
    
    
    
    709,725
    
    
    
    154,787Valuation allowance
    
    
    (13,031,806
    )
    
    
    (12,896,006
    )
    
    
    (18,514,866
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
  8. Stock-Based Compensation
  12




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Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks EndedNovember 1, 2008
    
    October 31, 2009Options granted
    
    
    310,500
    
    
    
    72,000Weighted-average fair value of options granted
    
    
    $0.86
    
    
    
    $0.33AssumptionsDividends
    
    
    0%
    
    
    
    0%Risk-free interest rate
    
    
    2.8% - 3.7%
    
    
    
    2.2%Expected volatility
    
    
    46%
    
    
    
    54%Expected option life
    
    6 years
    
    6 years
  9. Earnings (Loss) Per Share
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 1, 2008
    
    
    October 31, 2009
    
    
    November 1, 2008
    
    
    October 31, 2009Numerator:Net loss
    
    $
    (8,343,124
    )
    
    $
    (10,166,980
    )
    
    $
    (15,478,902
    )
    
    $
    (14,672,291
    )Numerator for loss per share
    
    
    (8,343,124
    )
    
    
    (10,166,980
    )
    
    
    (15,478,902
    )
    
    
    (14,672,291
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (8,343,124
    )
    
    $
    (10,166,980
    )
    
    $
    (15,478,902
    )
    
    $
    (14,672,291
    )Denominator:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for basic earnings (loss) per
share  weighted average shares
    
    
    7,055,856
    
    
    
    7,382,856
    
    
    
    7,035,526
    
    
    
    7,309,830Effect of dilutive securitiesStock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
 adjusted weighted average shares and assumed
conversions
    
    
    7,055,856
    
    
    
    7,382,856
    
    
    
    7,035,526
    
    
    
    7,309,830
  Earnings
per Share
 13




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##### Table of Contents



10. Commitments and Contingencies
  11. Fair Value of Financial Instruments
 Financial Instruments
 November 1, 2008CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    141,559
    
    
    $
    141,559Revolving credit facility
    
    
    20,249,110
    
    
    
    20,249,110Subordinated secured term loan
    
    
    5,346,265
    
    
    
    5,313,272Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,251,583
 January 31, 2009CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    134,676
    
    
    $
    134,676Revolving credit facility
    
    
    11,482,862
    
    
    
    11,482,862Subordinated secured term loan
    
    
    4,817,282
    
    
    
    4,786,652Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,227,463
 October 31, 2009CarryingAmount
    
    Fair ValueCash and cash equivalents
    
    $
    164,538
    
    
    $
    164,538Revolving credit facility
    
    
    16,693,755
    
    
    
    16,693,755Subordinated secured term loan
    
    
    3,375,229
    
    
    
    3,369,606Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    2,466,896
  12. Nasdaq Listing
  14




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Companys unaudited condensed
financial statements and notes thereto provided herein and the Companys audited financial
statements and notes thereto in our annual report on Form 10-K for the fiscal year ended January
31, 2009. The following Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in the forward-looking statements. The
factors that might cause such a difference also include, but are not limited to, those discussed in
our Annual Report on Form 10-K under Item 1. Business  Cautionary Note Regarding Forward-Looking

Statements and Risk Factors and under Item 1. Business  Risk Factors and those discussed
elsewhere in our Annual Report on Form 10-K and related notes thereto and elsewhere in this
quarterly report.
 Overview
      15




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Critical Accounting Policies
  Generally Accepted
Accounting Principles
  Merchandise inventories
  16




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Store closing and impairment charges
 Property, Plant, and Equipment
  Stock-based compensation expense
 Compensation  Stock Compensation
 Deferred income taxes
 Income Taxes,
  17




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Results of Operations
  Thirteen
    
    
    Thirteen
    
    
    Thirty-
    
    
    Thirty-Weeks
    
    
    Weeks
    
    
    nine Weeks
    
    
    nine WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 1,
    
    
    October 31,
    
    
    November 1,
    
    
    October 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    78.1
    
    
    
    82.7
    
    
    
    74.2
    
    
    
    74.6Gross profit
    
    
    21.9
    
    
    
    17.3
    
    
    
    25.8
    
    
    
    25.4Selling expense
    
    
    24.2
    
    
    
    24.7
    
    
    
    24.1
    
    
    
    23.2General and administrative expense
    
    
    9.8
    
    
    
    9.9
    
    
    
    9.7
    
    
    
    9.6Loss on disposal of property and equipment
    
    
    0.2
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2Impairment of long-lived assets
    
    
    6.3
    
    
    
    7.1
    
    
    
    2.0
    
    
    
    2.1Operating loss
    
    
    (18.6
    )
    
    
    (24.4
    )
    
    
    (10.2
    )
    
    
    (9.9
    )Other income, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    (1.8
    )
    
    
    (1.7
    )
    
    
    (1.8
    )
    
    
    (1.7
    )Loss before income taxes
    
    
    (20.3
    )
    
    
    (26.0
    )
    
    
    (11.9
    )
    
    
    (11.5
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    Net loss
    
    
    (20.3
    )%
    
    
    (26.0
    )%
    
    
    (12.1
    )%
    
    
    (11.5
    )%
  Thirteen
    
    
    Thirteen
    
    
    Thirty-
    
    
    Thirty-Weeks
    
    
    Weeks
    
    
    nine Weeks
    
    
    nine WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedNovember 1,
    
    
    October 31,
    
    
    November 1,
    
    
    October 31,2008
    
    
    2009
    
    
    2008
    
    
    2009Number of stores at beginning of period
    
    
    243
    
    
    
    240
    
    
    
    249
    
    
    
    239Stores opened during period
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    4Stores closed during period
    
    
    (3
    )
    
    
    
    
    
    
    (10
    )
    
    
    (2
    )Number of stores at end of period
    
    
    241
    
    
    
    241
    
    
    
    241
    
    
    
    241
 Thirteen Weeks Ended October 31, 2009 Compared to Thirteen Weeks Ended November 1, 2008
 Net sales.
 18




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Gross profit.
 Selling expense.
 General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 Net loss
 Thirty-nine Weeks Ended October 31, 2009 Compared to Thirty-nine Weeks Ended November 1, 2008
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Impairment of long-lived assets
 19




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Interest expense.
 Income tax expense.
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
      20




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21




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November 1, 2008
    
    January 31, 2009
    
    October 31, 2009Cash
    
    $
    141,559
    
    
    $
    134,676
    
    
    $
    164,538Inventories
    
    
    27,183,590
    
    
    
    20,976,352
    
    
    
    23,335,432Total current assets
    
    
    29,973,782
    
    
    
    23,512,002
    
    
    
    26,058,815Property and equipment, net
    
    
    35,655,340
    
    
    
    34,029,666
    
    
    
    26,183,851Total assets
    
    
    66,673,201
    
    
    
    58,508,192
    
    
    
    53,177,366Revolving credit facility
    
    
    20,249,110
    
    
    
    11,482,862
    
    
    
    16,693,755Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    5,346,265
    
    
    
    4,817,282
    
    
    
    3,375,229Total current liabilities
    
    
    46,925,540
    
    
    
    38,283,963
    
    
    
    47,357,912Total shareholders equity (deficit)
    
    
    9,817,114
    
    
    
    10,449,400
    
    
    
    (3,544,763
    )Net working capital (deficit)
    
    
    (16,951,758
    )
    
    
    (14,771,961
    )
    
    
    (21,299,097
    )Unused borrowing capacity*
    
    
    1,392,559
    
    
    
    736,030
    
    
    
    3,508,600
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
   Investing activities
   Financing activities
  22




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Revolving Credit Facility
        Subordinated Secured Term Loan
  23




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24




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Subordinated Convertible Debentures
     25




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2005 Private Placement of Common Stock and Warrants
    IPO Warrants
  Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments due by PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    More than 5 YearsLong-term debt obligations (1)
    
    $
    9,219,632
    
    
    $
    3,310,793
    
    
    $
    1,716,728
    
    
    $
    4,192,111
    
    
    $
    Operating lease obligations (2)
    
    
    138,622,069
    
    
    
    24,535,123
    
    
    
    44,464,042
    
    
    
    36,943,968
    
    
    
    32,678,936Purchase obligations (3)
    
    
    27,844,048
    
    
    
    27,790,048
    
    
    
    54,000
    
    
    
    
    
    
    
    Total
    
    $
    175,685,749
    
    
    $
    55,635,964
    
    
    $
    46,234,770
    
    
    $
    41,136,079
    
    
    $
    32,678,936
 
 (1)
    
    Includes principal and interest payment obligations relating to our subordinated convertible
debentures and to our subordinated secured term loan. These instruments are classified as
current liabilities on our balance sheet.(2)
    
    Includes minimum payment obligations related to our store leases.(3)
    
    Includes merchandise on order and payment obligations relating to store construction and
miscellaneous service contracts. 26




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Recent Accounting Pronouncements
 Generally Accepted Accounting Principles
 Subsequent Events
 Financial Instruments
 Impact of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures.
 Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  27




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We received a staff deficiency letter from the Nasdaq Stock Market indicating that we have not
met a listing standard for continued listing on the Nasdaq Capital Market. If we are unable to
comply with continuing listing requirements we may be subject to delisting, which could cause our
stock to be subject to additional volatility and illiquidity.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 ITEM 6. EXHIBITS
  28




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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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EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Companys
Annual Report on Form 10-K for the fiscal year ended January
3, 2004 filed on April 2, 2004 (File No. 000-50563)).3.2
    
    
    Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Companys Annual Report on Form 10-K for
the fiscal year ended January 3, 2004 filed on April 2, 2004
(File No. 000-50563)).4.1
    
    
    *Second Lien Credit Agreement dated February 1, 2008 (Loan
Agreement) by and among the Company, and Private Equity
Management Group, Inc. and the Lender named therein
(incorporated by reference to Exhibit 4.1 to the Companys
Current Report on Form 8-K filed on October 14, 2009 (File No.
000-50563)).4.2
    
    
    Note evidencing amounts borrowed by the Company under the Loan
Agreement (incorporated by reference to Exhibit 4.2 to the
Companys Current Report on Form 8-K filed on February 4, 2008
(File No. 000-50563)).4.3
    
    
    Security Agreement dated February 1, 2008 by the Company and
the Private Equity Management Group, Inc., in its capacity as
administrative agent for the Lender Group, as defined therein
(incorporated by reference to Exhibit 4.3. to the Companys
Quarterly Report on Form 10-Q filed on September 10, 2009
(File No. 000-50593)).4.4
    
    
    Subordination Agreement dated February 1, 2008 by and among
the Company, Bank of America, N.A. and Private Equity
Management Group, Inc., in its capacity as administrative
agent for the Lender named therein (incorporated by reference
to Exhibit 4.4 to the Companys Current Report on Form 8-K
filed on February 4, 2008 (File No. 000-50563)).4.5
    
    
    Subordination Agreement dated February 1, 2008 by and among
the Company, Private Equity Management Group, Inc., in its
capacity as administrative agent for the Lender named therein,
and the subordinated creditors named therein (incorporated by
reference to Exhibit 4.5 to the Companys Current Report on
Form 8-K filed on February 4, 2008 (File No. 000-50563)).4.6
    
    
    Registration Rights Agreement dated February 1, 2008 by and
among the Company and Private Equity Management Group, Inc.
(incorporated by reference to Exhibit 4.6. to the Companys
Quarterly Report on Form 10-Q filed on September 10, 2009
(File No. 000-50593)).4.7
    
    
    Fee Letter dated February 1, 2008 between Private Equity
Management Group, Inc. and the Company (incorporated by
reference to Exhibit 4.7 to the Companys Current Report on
Form 8-K filed on February 4, 2008 (File No. 000-50563)).4.8
    
    
    *Amendment Number 1 to Loan Documents dated as of May 9, 2008
by and among the Company, Private Equity Management Group,
Inc. and the Lender named therein (incorporated by reference
to Exhibit 4.8. to the Companys Quarterly Report on Form 10-Q
filed on September 10, 2009 (File No. 000-50593)).4.9
    
    
    Letter of Consent delivered to the Company and Private Equity
Management Group, Inc. by Bank of America, N.A. (incorporated
by reference to Exhibit 4.3 to the Companys Current Report on
Form 8-K filed on May 9, 2008 (File No. 000-50563)).4.10
    
    
    Amendment Number 2 to Loan Documents dated April 9, 2009 by
and among the Company, Private Equity Management Group, Inc.
and the Lender named therein (incorporated by reference to
Exhibit 4.10 to the Companys Current Report on Form 8-K filed
on April 15, 2009 (File No. 000-50563)).4.11
    
    
    Amendment Number 3 to Loan Documents dated as of September 3,
2009 by and among the Company, Private Equity Management
Group, Inc. and the Lender named therein (incorporated by
reference to Exhibit 4.11. to the Companys Quarterly Report
on Form 10-Q filed on September 10, 2009 (File No.
000-50593)).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)).
 30




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Exhibit No.
    
    Description10.2
    
    
    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)).10.7
    
    
    Third Amendment to Second Amended and Restated Loan and
Security Agreement dated February 1, 2008 by and among the
Company and Bank of America, N.A. (incorporated by reference
to Exhibit 10.7 to the Companys Current Report on Form 8-K
filed on April 15, 2009 (File No. 000-50563)).10.8
    
    
    Fourth Amendment dated September 8, 2009 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 10.8. to the Companys Quarterly
Report on Form 10-Q filed on September 10, 2009 (File No.
000-50593)).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).
 
 *
    
    Portions are omitted pursuant to a confidential treatment request and
are filed separately with the SEC. 31