##### 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 30, 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 incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 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 InformationItem 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 InformationItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. [Reserved]
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29Signatures
    
    
    30Exhibit Index
    
    
    31Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification 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
 October 31,
    
    
    January 30,
    
    
    October 30,2009
    
    
    2010
    
    
    2010(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    164,538
    
    
    $
    154,685
    
    
    $
    137,467Accounts receivable
    
    
    1,580,717
    
    
    
    1,387,358
    
    
    
    1,903,112Inventories
    
    
    23,335,432
    
    
    
    20,233,207
    
    
    
    27,477,487Prepaid expenses and other current assets
    
    
    978,128
    
    
    
    1,234,787
    
    
    
    965,404Total current assets
    
    
    26,058,815
    
    
    
    23,010,037
    
    
    
    30,483,470Property and equipment, net
    
    
    26,183,851
    
    
    
    24,757,395
    
    
    
    19,586,088Other assets
    
    
    934,700
    
    
    
    851,035
    
    
    
    1,098,792Total assets
    
    $
    53,177,366
    
    
    $
    48,618,467
    
    
    $
    51,168,350Liabilities and shareholders equity (deficit)Current liabilities:Accounts payable
    
    $
    12,558,384
    
    
    $
    10,138,635
    
    
    $
    16,292,855Accrued expenses
    
    
    8,348,935
    
    
    
    7,320,595
    
    
    
    8,640,830Subordinated secured term loan
    
    
    3,375,229
    
    
    
    2,785,112
    
    
    
    901,407Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    Sales tax payable
    
    
    997,137
    
    
    
    1,152,277
    
    
    
    1,043,072Deferred income
    
    
    1,384,472
    
    
    
    1,366,252
    
    
    
    1,133,335Revolving credit facility
    
    
    16,693,755
    
    
    
    10,531,687
    
    
    
    17,495,501Total current liabilities
    
    
    47,357,912
    
    
    
    37,294,558
    
    
    
    45,507,000Accrued rent liabilities
    
    
    9,364,217
    
    
    
    9,183,756
    
    
    
    8,911,771Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    4,000,000Subordinated debenture
    
    
    
    
    
    
    
    
    
    
    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 October 31, 2009 and January 30, 2010 and
9,228,916 shares outstanding at October 30, 2010
    
    
    738
    
    
    
    738
    
    
    
    923Additional paid-in capital
    
    
    39,184,879
    
    
    
    39,279,600
    
    
    
    40,349,781Accumulated deficit
    
    
    (42,730,380
    )
    
    
    (37,140,185
    )
    
    
    (51,601,125
    )Total shareholders equity (deficit)
    
    
    (3,544,763
    )
    
    
    2,140,153
    
    
    
    (11,250,421
    )Total liabilities and shareholders equity (deficit)
    
    $
    53,177,366
    
    
    $
    48,618,467
    
    
    $
    51,168,350
  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
    
    
    EndedOctober 31, 2009
    
    
    October 30, 2010
    
    
    October 31, 2009
    
    
    October 30, 2010Net sales
    
    $
    39,042,191
    
    
    $
    40,575,879
    
    
    $
    127,739,083
    
    
    $
    127,393,042Cost of merchandise sold, occupancy, and
buying expenses
    
    
    32,275,828
    
    
    
    34,225,698
    
    
    
    95,354,173
    
    
    
    98,373,653Gross profit
    
    
    6,766,363
    
    
    
    6,350,181
    
    
    
    32,384,910
    
    
    
    29,019,389Operating expenses:Selling
    
    
    9,655,891
    
    
    
    9,570,751
    
    
    
    29,640,515
    
    
    
    29,000,060General and administrative
    
    
    3,872,358
    
    
    
    3,831,426
    
    
    
    12,270,014
    
    
    
    11,524,740Loss on disposal of property and equipment
    
    
    3,460
    
    
    
    7,172
    
    
    
    297,891
    
    
    
    67,449Impairment of long-lived assets
    
    
    2,762,273
    
    
    
    1,415,979
    
    
    
    2,762,273
    
    
    
    1,415,979Operating loss
    
    
    (9,527,619
    )
    
    
    (8,475,147
    )
    
    
    (12,585,783
    )
    
    
    (12,988,839
    )Other income (expense):Interest expense
    
    
    (680,580
    )
    
    
    (542,348
    )
    
    
    (2,179,478
    )
    
    
    (1,537,184
    )Other, net
    
    
    41,219
    
    
    
    82,514
    
    
    
    92,970
    
    
    
    116,787Loss before income taxes
    
    
    (10,166,980
    )
    
    
    (8,934,981
    )
    
    
    (14,672,291
    )
    
    
    (14,409,236
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,704Net loss
    
    $
    (10,166,980
    )
    
    $
    (8,934,981
    )
    
    $
    (14,672,291
    )
    
    $
    (14,460,940
    )Basic loss per share
    
    $
    (1.38
    )
    
    $
    (1.03
    )
    
    $
    (2.01
    )
    
    $
    (1.85
    )Diluted loss per share
    
    $
    (1.38
    )
    
    $
    (1.03
    )
    
    $
    (2.01
    )
    
    $
    (1.85
    )
  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
    
    
    
    
    
    
    
    
    
    
    269,981
    
    
    
    
    
    
    
    269,981Issuance of common stock
    
    
    1,844,860
    
    
    
    184
    
    
    
    799,816
    
    
    
    
    
    
    
    800,000Shares issued in connection
with exercise of stock options
    
    
    1,200
    
    
    
    1
    
    
    
    384
    
    
    
    
    
    
    
    385Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,460,940
    )
    
    
    (14,460,940
    )Balance at October 30, 2010
    
    
    9,228,916
    
    
    $
    923
    
    
    $
    40,349,781
    
    
    $
    (51,601,125
    )
    
    $
    (11,250,421
    )
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks EndedOctober 31, 2009
    
    
    October 30, 2010Operating activitiesNet loss
    
    $
    (14,672,291
    )
    
    $
    (14,460,940
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    5,021,487
    
    
    
    4,389,813Accretion of debt discount
    
    
    391,280
    
    
    
    178,795Stock-based compensation expense
    
    
    490,620
    
    
    
    269,981Interest expense recognized for issuing common stock related to amending
the subordinated secured term loan
    
    
    187,500
    
    
    
    Loss on disposal of property and equipment
    
    
    297,891
    
    
    
    67,450Impairment of long-lived assets
    
    
    2,762,273
    
    
    
    1,415,979Changes in operating assets and liabilities:Accounts receivable
    
    
    (207,330
    )
    
    
    (352,385
    )Inventories
    
    
    (2,359,080
    )
    
    
    (7,244,280
    )Prepaid expenses and other current assets
    
    
    49,467
    
    
    
    269,383Other assets
    
    
    127,707
    
    
    
    (13,713
    )Accounts payable
    
    
    5,001,400
    
    
    
    6,154,220Accrued expenses and deferred income
    
    
    303,709
    
    
    
    978,113Accrued rent liabilities
    
    
    (410,612
    )
    
    
    (271,985
    )Net cash used in operating activities
    
    
    (3,015,979
    )
    
    
    (8,619,569
    )Investing activitiesPurchase of property and equipment
    
    
    (331,746
    )
    
    
    (852,334
    )Proceeds from sale of property and equipment
    
    
    27
    
    
    
    3,282Net cash used in investing activities
    
    
    (331,719
    )
    
    
    (849,052
    )Financing activitiesNet advances under revolving credit facility
    
    
    5,210,893
    
    
    
    6,963,814Net proceeds from the issuance of subordinated secured term loan and common stock
    
    
    
    
    
    
    4,549,704Costs of issuing subordinated term loan and common stock
    
    
    
    
    
    
    385Principal payments on subordinated secured term loan
    
    
    (1,833,333
    )
    
    
    (2,062,500
    )Net cash provided by financing activities
    
    
    3,377,560
    
    
    
    9,451,403Net increase (decrease) in cash and cash equivalents
    
    
    29,862
    
    
    
    (17,218
    )Cash and cash equivalents at beginning of period
    
    
    134,676
    
    
    
    154,685Cash and cash equivalents at end of period
    
    $
    164,538
    
    
    $
    137,467Supplemental disclosures of cash flow informationCash paid for interest
    
    $
    1,475,034
    
    
    $
    1,048,992
  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. Impairment of Long-Lived Assets
 8




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##### Table of Contents



4. Nasdaq Capital Market Delisting
  5. Revolving Credit Facility
   6. Subordinated Debenture
  9




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##### Table of Contents



7. Subordinated Secured Term Loan
     10




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##### Table of Contents



8. Subordinated Convertible Debentures
    9. Income Taxes
   11




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##### Table of Contents



Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 31, 2009
    
    
    October 30, 2010
    
    
    October 31, 2009
    
    
    October 30, 2010Current:Federal
    
    $
    (1,896,202
    )
    
    $
    (1,739,470
    )
    
    $
    (2,959,723
    )
    
    $
    (3,085,410
    )State and local
    
    
    (439,318
    )
    
    
    (399,418
    )
    
    
    (674,481
    )
    
    
    (643,147
    )Total current
    
    
    (2,335,520
    )
    
    
    (2,138,888
    )
    
    
    (3,634,204
    )
    
    
    (3,728,557
    )Deferred:Federal
    
    
    (1,320,839
    )
    
    
    (1,089,568
    )
    
    
    (1,679,324
    )
    
    
    (1,469,185
    )State and local
    
    
    (240,153
    )
    
    
    (198,103
    )
    
    
    (305,332
    )
    
    
    (267,124
    )Total deferred
    
    
    (1,560,992
    )
    
    
    (1,287,671
    )
    
    
    (1,984,656
    )
    
    
    (1,736,309
    )Valuation allowance
    
    
    3,896,512
    
    
    
    3,426,559
    
    
    
    5,618,860
    
    
    
    5,516,570Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51,704
  Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 31, 2009
    
    
    October 30, 2010
    
    
    October 31, 2009
    
    
    October 30, 2010Federal income tax at statutory rate
    
    $
    (3,558,443
    )
    
    $
    (3,127,243
    )
    
    $
    (5,135,302
    )
    
    $
    (5,043,233
    )Impact of State NOL carryback refund restrictions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,704Impact of graduated Federal rates
    
    
    101,670
    
    
    
    89,350
    
    
    
    146,723
    
    
    
    144,092State and local taxes, net of federal income taxes
    
    
    (449,604
    )
    
    
    (395,118
    )
    
    
    (648,846
    )
    
    
    (637,216
    )Change in valuation allowance
    
    
    3,896,512
    
    
    
    3,426,558
    
    
    
    5,618,860
    
    
    
    5,516,570Permanent differences
    
    
    9,865
    
    
    
    6,453
    
    
    
    18,565
    
    
    
    19,787Total income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51,704
   October 31, 2009
    
    
    January 30, 2010
    
    
    October 30, 2010Deferred tax assets:Net operating loss carryforward
    
    $
    10,966,852
    
    
    $
    8,894,200
    
    
    $
    12,822,453Vacation accrual
    
    
    398,736
    
    
    
    396,524
    
    
    
    410,565Inventory
    
    
    1,386,641
    
    
    
    989,396
    
    
    
    1,419,073Stock-based compensation
    
    
    1,079,577
    
    
    
    1,116,518
    
    
    
    1,221,810Accrued rent
    
    
    3,652,044
    
    
    
    3,581,665
    
    
    
    3,475,591Property and equipment
    
    
    1,185,803
    
    
    
    1,496,584
    
    
    
    2,664,962Total deferred tax assets
    
    
    18,669,653
    
    
    
    16,474,887
    
    
    
    22,014,454Deferred tax liabilities:Prepaid expenses
    
    
    154,787
    
    
    
    111,467
    
    
    
    133,851Total deferred tax liabilities
    
    
    154,787
    
    
    
    111,467
    
    
    
    133,851Valuation allowance
    
    
    (18,514,866
    )
    
    
    (16,363,420
    )
    
    
    (21,880,603
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
 12




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##### Table of Contents



10. Stock-Based Compensation
   Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks EndedOctober 31, 2009
    
    October 30, 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
  11. Earnings (Loss) Per Share
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 31, 2009
    
    
    October 30, 2010
    
    
    October 31, 2009
    
    
    October 30, 2010Numerator:Net loss
    
    $
    (10,166,980
    )
    
    $
    (8,934,981
    )
    
    $
    (14,672,291
    )
    
    $
    (14,460,940
    )Numerator for loss per share
    
    
    (10,166,980
    )
    
    
    (8,934,981
    )
    
    
    (14,672,291
    )
    
    
    (14,460,940
    )Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    $
    (10,166,980
    )
    
    $
    (8,934,981
    )
    
    $
    (14,672,291
    )
    
    $
    (14,460,940
    )Denominator:Denominator for basic earnings (loss) per
share  weighted average shares
    
    
    7,382,856
    
    
    
    8,701,813
    
    
    
    7,309,830
    
    
    
    7,822,982Effect of dilutive securitiesStock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
 adjusted weighted average shares and assumed
conversions
    
    
    7,382,856
    
    
    
    8,701,813
    
    
    
    7,309,830
    
    
    
    7,822,982
 13




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##### Table of Contents



12. Commitments and Contingencies
  13. Fair Value of Financial Instruments
 Financial Instruments
 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
 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
 October 30, 2010CarryingAmount
    
    
    Fair ValueCash and cash equivalents
    
    $
    137,467
    
    
    $
    137,467Revolving credit facility
    
    
    17,495,501
    
    
    
    17,495,501Subordinated debenture
    
    
    4,000,000
    
    
    
    4,000,000Subordinated secured term loan
    
    
    901,407
    
    
    
    901,407Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    3,017,069
  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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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
    
    
    Thirty-
    
    
    Thirty-Weeks
    
    
    Weeks
    
    
    nine Weeks
    
    
    nine WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 31,
    
    
    October 30,
    
    
    October 31,
    
    
    October 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    82.7
    
    
    
    84.4
    
    
    
    74.6
    
    
    
    77.2Gross profit
    
    
    17.3
    
    
    
    15.6
    
    
    
    25.4
    
    
    
    22.8Selling expense
    
    
    24.7
    
    
    
    23.6
    
    
    
    23.2
    
    
    
    22.8General and administrative expense
    
    
    9.9
    
    
    
    9.4
    
    
    
    9.6
    
    
    
    9.0Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.1Impairment of long-lived assets
    
    
    7.1
    
    
    
    3.5
    
    
    
    2.1
    
    
    
    1.1Operating loss
    
    
    (24.4
    )
    
    
    (20.9
    )
    
    
    (9.9
    )
    
    
    (10.2
    )Other income, net
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    (1.7
    )
    
    
    (1.3
    )
    
    
    (1.7
    )
    
    
    (1.2
    )Loss before income taxes
    
    
    (26.0
    )
    
    
    (22.0
    )
    
    
    (11.5
    )
    
    
    (11.3
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (26.0
    )%
    
    
    (22.0
    )%
    
    
    (11.5
    )%
    
    
    (11.3
    )%
  Thirteen
    
    
    Thirteen
    
    
    Thirty-
    
    
    Thirty-Weeks
    
    
    Weeks
    
    
    nine Weeks
    
    
    nine WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 31,
    
    
    October 30,
    
    
    October 31,
    
    
    October 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Number of stores at beginning of period
    
    
    240
    
    
    
    237
    
    
    
    239
    
    
    
    238Stores opened during period
    
    
    1
    
    
    
    2
    
    
    
    4
    
    
    
    4Stores closed during period
    
    
    
    
    
    
    (3
    )
    
    
    (2
    )
    
    
    (6
    )Number of stores at end of period
    
    
    241
    
    
    
    236
    
    
    
    241
    
    
    
    236
 18




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##### Table of Contents



Thirteen Weeks Ended October 30, 2010 Compared to Thirteen Weeks Ended October 1, 2009
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 Net loss
 Thirty-nine Weeks Ended October 30, 2010 Compared to Thirty-nine Weeks Ended October 31, 2009
 Net sales.
 Gross profit.
 Selling expense.
 19




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##### Table of Contents



General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
      20




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21




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##### Table of Contents



October 31, 2009
    
    
    January 30, 2010
    
    
    October 30, 2010Cash
    
    $
    164,538
    
    
    $
    154,685
    
    
    $
    137,467Inventories
    
    
    23,335,432
    
    
    
    20,233,207
    
    
    
    27,477,487Total current assets
    
    
    26,058,815
    
    
    
    23,010,037
    
    
    
    30,483,470Property and equipment, net
    
    
    26,183,851
    
    
    
    24,757,395
    
    
    
    19,586,088Total assets
    
    
    53,177,366
    
    
    
    48,618,467
    
    
    
    51,168,350Revolving credit facility
    
    
    16,693,755
    
    
    
    10,531,687
    
    
    
    17,495,501Subordinated convertible debentures
    
    
    4,000,000
    
    
    
    4,000,000
    
    
    
    4,000,000Subordinated debenture
    
    
    
    
    
    
    
    
    
    
    4,000,000Subordinated secured term loan
    
    
    3,375,229
    
    
    
    2,785,112
    
    
    
    901,407Total current liabilities
    
    
    47,357,912
    
    
    
    37,294,558
    
    
    
    45,507,000Total shareholders equity (deficit)
    
    
    (3,544,763
    )
    
    
    2,140,153
    
    
    
    (11,250,421
    )Net working capital (deficit)
    
    
    (21,299,097
    )
    
    
    (14,284,521
    )
    
    
    (15,023,530
    )Unused borrowing capacity*
    
    
    3,508,600
    
    
    
    1,928,913
    
    
    
    2,813,626
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
    Investing activities
  22




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##### Table of Contents



Financing activities
  Revolving Credit Facility
       23




---



##### Table of Contents



Subordinated Secured Term Loan
       24




---



##### Table of Contents



Subordinated Convertible Debentures
     Subordinated Debenture
 25




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##### Table of Contents



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)
    
    $
    15,395,744
    
    
    $
    1,930,244
    
    
    $
    5,486,333
    
    
    $
    1,100,000
    
    
    $
    6,879,167Operating lease obligations (2)
    
    
    118,297,309
    
    
    
    24,027,652
    
    
    
    42,399,809
    
    
    
    31,963,379
    
    
    
    19,906,469Purchase obligations (3)
    
    
    13,972,194
    
    
    
    9,097,194
    
    
    
    3,000,000
    
    
    
    1,875,000
    
    
    
    Total
    
    $
    147,665,247
    
    
    $
    35,055,090
    
    
    $
    50,886,142
    
    
    $
    34,938,379
    
    
    $
    26,785,636
 
 (1)
    
    Includes principal and interest payments on our subordinated convertible debentures,
subordinated debenture, 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. 26




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##### Table of Contents



Recent Accounting Pronouncements
  Impact of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  28




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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
  29




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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) 30




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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. (incorporated by reference to Exhibit 4.8 to the Companys Quarterly
Report on Form 10-Q filed on September 14, 2010 (File No. 000-50563)).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)).
 31




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##### Table of Contents



Exhibit No.
    
    Description10.5
    
    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 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 11 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).
 32