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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended February 2, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For 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. EmployerIncorporation or
    Organization)

Identification Number)2815 Scott Avenue,

63103St. Louis, Missouri

(Zip Code)(Address of Principal Executive
    Offices)   Registrants telephone number, including area code:
 (314) 621-0699
  Securities registered pursuant to Section 12(b) of the
    Act:
 Title of each class:
 Common Stock, par value $0.0001 per share
  Name of each exchange on which registered:
 Nasdaq Global Market
  Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer  o
    Accelerated
    filer  o
    Non-accelerated
    filer  o
    Smaller
    reporting company
    þ   Rule 12b-2 o þ
  Form 10-K
    DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


2Item 1A.


Risk Factors


22Item 1B.


Unresolved Staff Comments


22Item 2.


Properties


22Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of Security
    Holders


22PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


23Item 6.


Selected Financial Data


24Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


42Item 8.


Financial Statements and Supplementary Data


42Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


42Item 9A.


Controls and Procedures


42Item 9B.


Other Information


43PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


43Item 11.


Executive Compensation


45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


45Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


45Item 14.


Principal Accounting Fees and Services


45PART IVItem 15.


Exhibits and Financial Statement Schedules


46Separation Agreement and General ReleaseSummary of Base Salaries for Specified Executive OfficersConsent of Independent Registered Public Accounting FirmPower of AttorneyRule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 Certifications




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PART I  Item 1.
    Business.  General
      Form 10-K,
  Recent
    Developments
     2




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Form 10-K
 3




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Company
    History
    (314) 621-0699. Form 10-K.
  Strategy
    for 2008
         4




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Improving
    Comparable Store Sales
    
    We attempt to keep our product mix fresh and on target by
    constantly testing new fashions and actively monitoring
    sell-through rates in our stores. Our team of footwear
    retailers, in-house designers and merchants use their industry
    experience, relationships with agents and branded footwear
    producers, and their participation in industry trade shows to
    analyze, interpret and translate fashion trends affecting young
    women into the footwear and accessory styles they desire. To
    complement the introduction of new merchandise, we view the
    majority of our styles as core fashion styles that
    carry over for multiple seasons. Our merchants make subtle
    changes to these styles each season to keep them fresh, while
    reducing our fashion risk exposure.
    We employ a test and react strategy that constantly updates our
    product mix while managing inventory risk. This strategy is
    supported by our relationships with manufacturers, which allow
    our merchandising and buying teams to negotiate short
    lead-times, enabling us to test new styles and react relatively
    quickly to fashion trends and keep fast-moving inventory in
    stock.
    We also intend to improve comparable store sales increases
    through branded and private label accessories. Accessories
    accounted for 12.5% of merchandise sales in fiscal year 2007 and
    we believe that there is significant potential to expand our
    accessory sales and margins.
    Our stores sell national branded footwear and accessories
    because we believe that branded merchandise is important to our
    customers, adds credibility to our stores and drives customer
    traffic, increasing our overall sales volume and profitability,
    while reducing our overall exposure to fashion risk. We believe
    the presence of national branded merchandise in our product mix
    will also increase the sales of our private label merchandise.
    We continue to add sought after brands and to enhance the value
    of our private label assortment. Approximately 18.5% of our net
    shoe sales for fiscal year 2007 consisted of branded footwear.
    For fiscal year 2007, our Internet and catalog sales were
    $9.6 million. We believe our Web presence is important in
    expanding our ability to reach our target customer base and
    enhances the services we provide our customers. Furthermore, we
    believe our Internet store increases customer traffic at our
    Bakers stores and enables potential customers to locate our
    stores.
    Starting in fiscal year 2006, we have been mailing the Bakers
    catalog to existing and prospective customers. We believe that
    the catalog allows us to broaden our appeal by showcasing our
    stylish image and upscale offerings. We anticipate issuing three
    catalogs during fiscal year 2008, with an average mailing of
    approximately 500,000 copies. We believe that our catalogs
    provide an additional channel for our customers to purchase our
    merchandise and will increase traffic at our Internet store and
    our mall stores.  Long-Term
    Strengths
       5




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Product
    Development and Merchandising
        Product
    Mix
    Private
    Label.
       6




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and/or
  National
    Brands.
  , ® ® ® ® ® ®
  Accessories.
    Merchandise
    Mix.
  2005-2007:
  Fiscal YearCategory

2005


2006


2007Private Label Footwear


75.5
%


72.9
%


71.3
%Branded Footwear


13.9
%


16.1
%


16.2
%Accessories


10.6
%


11.0
%


12.5
%Total


100.0
%


100.0
%


100.0
%   Planning
    and Allocation.
   7




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Clearance.
    
  Stores
  Store
    Locations and Environment.
       8




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No.StoresAlabama


2Arizona


4Arkansas


2California


39Colorado


2Connecticut


5Delaware


1Florida


21Georgia


15Idaho


1Illinois


17Indiana


2Kansas


2Kentucky


1Louisiana


4Maryland


7Massachusetts


7Michigan


10Minnesota


1Missouri


6Nebraska


1Nevada


5New Hampshire


1New Jersey


14New Mexico


1New York


21North Carolina


3Ohio


6Oklahoma


2Pennsylvania


7Rhode Island


2South Carolina


2Tennessee


1Texas


24Utah


1Virginia


7Washington


2Wisconsin


2Total Stores


249
*Total States


38     *
    
    Excludes our Internet site, which is merchandised as a Bakers
    store.  Store
    Concepts.
   9




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Bakers

Wild PairTarget customer

Women - ages 16-35

Men & women - ages 17-29Private label sales

86% - 89%

33% - 38%Branded sales

11% - 14%

62% - 67%Fashion content

Widely-accepted

Edgy, lifestyle-basedApproximate average store size

2,350 square feet

1,900 square feet   Store
    Operations.
            Sourcing
    and Distribution
   10




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Information
    Systems and Technology
        Marketing
    and Advertising
   11




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e-mail e-mail
  Competition
          
    department stores (such as Bloomingdales, Macys,
    Dillards and Kohls);
    national branded wholesalers (such as Nine West, Steve Madden
    and Vans);
    national branded off-price retailers (such as DSW, Rack Room and
    Shoe Carnival);
    national specialty retailers (such as Finish Line,
    Journeys, Naturalizer and Aldos);
    regional chains (such as Cathy Jean and Sheik);
    discount stores (such as Wal-Mart, Target and K-Mart); and, to a
    lesser extent,
    apparel retailers (such as bebe, Charlotte Russe, Rampage and
    Wet Seal).   12




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History
    of Bakers Shoe Stores
    Employees
    Properties
      Intellectual
    Property and Proprietary Rights
  tm ®
  Seasonality
   13




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Cautionary
    Note Regarding Forward-Looking Statements and Risk
    Factors
  Form 10-K Form 10-K
    
    our ability to identify and respond to changing consumer fashion
    preferences;
    our susceptibility to operating losses;
    our inability to obtain necessary liquidity to operate our
    business as desired;
    the accuracy of our estimates regarding our capital requirements
    and needs for additional financing;
    our expectations regarding future financial results or
    performance;
    the execution of our business strategy;
    any of our other plans, objectives, expectations and intentions
    contained in this Annual Report on
    Form 10-K
    that are not historical facts; and
    changes in general economic and business conditions.  Risk
    Factors
  Our
    failure to identify and respond to changing consumer fashion
    preferences in a timely manner would negatively impact our
    sales, profitability, liquidity and our image as a fashion
    resource for our customers.
   14




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If our
    sales trends do not improve, we could fail to maintain a
    liquidity position adequate to support our ongoing
    operations.
    The
    terms of our three-year subordinated secured term loan contain
    certain financial covenants with respect to our performance and
    other covenants that restrict our activities. If we are unable
    to comply with these covenants, the lender could accelerate the
    repayment of our indebtedness and subject us to a cross-default
    under our credit facility.
     15




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The
    report issued by our independent registered public accounting
    firm on our fiscal year 2007 financial statements contains
    language expressing substantial doubt about our ability to
    continue as a going concern.
    Our
    operations could be constrained by our ability to obtain funds
    under the terms of our revolving credit facility.
    A
    decline in general economic conditions could lead to reduced
    consumer demand for our footwear and accessories and could lead
    to reduced sales.
    Our
    overall profitability is highly dependent upon our fourth
    quarter results.
    Our
    operations are subject to quarterly fluctuations that can impact
    our profitability and liquidity.
    
    fashion trends;
    the effectiveness of our inventory management;
    changes in our merchandise mix; 16




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
    weather conditions;
    changes in general economic conditions; and
    actions of competitors, mall anchor stores or co-tenants.    We are
    subject to risks associated with leasing our stores, including
    those stores where we acquired the lease through bankruptcy
    auctions.
  debtor-in-possession,
  Our
    market share may be adversely impacted at any time by a
    significant number of competitors.
    The
    departure of members of our senior management team could
    adversely affect our business.
    Our
    failure to maintain good relationships with our manufacturers
    could harm our ability to procure quality inventory in a timely
    manner.
   17




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We
    rely on a small number of buying agents and private label
    vendors for a substantial portion our merchandise purchases, and
    our failure to maintain good relationships with any of them
    could harm our ability to source our products.
    Our
    merchandise is manufactured by foreign manufacturers; therefore,
    the availability and costs of our products may be negatively
    affected by risks associated with international
    trade.
    
    adverse fluctuations in currency exchange rates;
    changes in import tariffs, duties or quotas;
    the imposition of taxes or other charges on imports;
    the imposition of restrictive trade policies or sanctions by the
    United States on one or more of the countries from which we
    obtain footwear and accessories;
    expropriation or nationalization;
    compliance with and changes in import restrictions and
    regulations;
    exposure to different legal standards and the burden of
    complying with a variety of foreign laws and changing foreign
    government policies;
    international hostilities, war or terrorism;
    changes in foreign governments, regulations, political unrest,
    work stoppages, shipment disruption or delays; and
    changes in economic conditions in countries in which our
    manufacturers and suppliers are located.    and/or
 18




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Continued
    decline in the value of the United States dollar relative to
    other currencies, especially the Chinese yuan could negatively
    impact our gross margins.
    Our
    reliance on manufacturers in China exposes us to supply
    risks.
    Our
    ability to expand into some territorial and foreign
    jurisdictions under the trademarks Bakers and
    Wild Pair is restricted.
    Our
    potential inability or failure to renew, register or otherwise
    protect our trademarks could have a negative impact on the value
    of our brand names.
   19




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We
    would be adversely affected if our distribution operations were
    disrupted.
    We may
    be subject to liability under our registration
    statements.
    Form 10-K
  Our
    credit facility restricts our activities.
       20




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The
    market price of our common stock may be materially adversely
    affected by market volatility.
    
    actual or anticipated variations in comparable store sales or
    operating results;
    changes in financial estimates by research analysts;
    actual or anticipated changes in the United States economy or
    the retailing environment;
    changes in the market valuations of other footwear or retail
    companies; and
    announcements by us or our competitors of significant
    acquisitions, strategic partnerships, divestitures, joint
    ventures, financing transactions, securities offerings or other
    strategic initiatives.  We are
    controlled by a small group of shareholders whose interests may
    differ from other shareholders.
      The
    public sale of our common stock by selling shareholders could
    adversely affect the price of our common stock.
    There
    is relatively limited trading in our common stock.
    Our
    charter documents and Missouri law may inhibit a takeover, which
    may cause a decline in the value of our stock.
   21




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Executive
    Officers of the Registrant
    Item 1A.
    Risk
    Factors.    Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.    Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   22




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information and Holders
      High


Low2006First quarter (ended April 29, 2006)

$
23.03


$
18.89Second quarter (ended July 29, 2006)


19.74



10.76Third quarter (ended October 28, 2006)


15.75



9.02Fourth quarter (ended February 3, 2007)


15.72



8.632007First quarter (ended May 5, 2007)

$
12.80


$
8.55Second quarter (ended August 4, 2007)


9.34



6.18Third quarter (ended November 3, 2007)


6.28



2.85Fourth quarter (ended February 2, 2008)


4.00



2.02   Dividends
    Recent
    Sales of Unregistered Securities
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
   23




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Item 6.
    Selected
    Financial Data.  Form 10-K.
  Fiscal Year Ended(1)January 3,


January 1,


January 28,


February 3,


February 2, 20082004(2)


2005(2)(3)


2006(4)(5)


2007(6)(7)


(7)(8)(9)(10)(11)Net sales

$
148,223,553


$
150,514,663


$
194,780,125


$
204,753,062


$
186,279,987Gross profit


44,530,778



46,033,614



65,340,924



62,202,028



47,461,122Income (loss) before income taxes


1,629,906



465,533



10,502,572



(2,452,971
)


(16,965,898
)Provision for (benefit from) income taxes






(962,468
)


3,949,282



(909,860
)


691,367Net income (loss)

$
1,629,906


$
1,428,001


$
6,553,290


$
(1,543,111
)

$
(17,657,265
)Net income (loss) per common shareBasic

$
0.90


$
0.31


$
1.10


$
(0.24
)

$
(2.70
)Diluted

$
0.77


$
0.28


$
1.04


$
(0.24
)

$
(2.70
)Total assets

$
29,941,167


$
49,370,708


$
74,754,684


$
83,158,859


$
67,558,951Long-term debt, capital lease obligations and redeemable
    securities, less current portion

$
7,695,365


$
679,414


$
247,671


$
57,863


$
4,000,000Unaudited pro forma information:


(Unaudited
)Income before income taxes

$
1,697,725Provision for income taxes


657,758Net income

$
1,039,967Net income per common shareBasic

$
0.49Diluted

$
0.47     (1)
    
    Because of the changes in the number of stores for each period,
    our operating results for each period and future periods may not
    be comparable in some significant respects. See
    Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations for a
    reconciliation and discussion of certain store openings and
    closings by period. The Company currently has no plans to pay
    dividends. See the information under the caption
    Item 5. Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities  Dividends, which is incorporated
    herein by reference.(2)
    
    Through January 3, 2004, we elected S corporation status
    for Federal and state income tax purposes. Accordingly, for the
    year ended January 3, 2004, no provision was made for
    Federal or certain state income taxes. Pro forma net income has
    been computed as if we had been fully subject to Federal, state
    and local income taxes. Effective January 4, 2004, we
    terminated our S election and became taxable as a C corporation. 24




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In accordance with SFAS No. 109, we have reflected the
    net impact of the temporary differences between the book and tax
    bases of our assets and liabilities as of the date of conversion
    as a component of our provision for income taxes for fiscal year
    2004. This resulted in the recognition of a nonrecurring income
    tax benefit of approximately $1.2 million. As an S
    corporation, we paid distributions to our shareholders in
    amounts sufficient to allow them to pay income taxes related to
    an allocable share of our taxable income and did not pay
    traditional cash dividends per share. Such distributions are not
    comparable to dividends that would be paid by a C corporation.(3)
    
    On February 10, 2004, we consummated our initial public
    offering with the sale of 2,160,000 shares of common stock.
    On March 12, 2004, we sold an additional
    324,000 shares of common stock in connection with the
    exercise by the underwriters of the full over-allotment option.
    All of the shares of common stock sold to the public were sold
    at $7.75 per share. The aggregate gross proceeds from the
    initial public offering were approximately $19.3 million.
    The net proceeds to us from the offering were approximately
    $15.5 million. We used the net proceeds received from the
    initial public offering to repay $5.7 million on our
    revolving credit agreement, $0.9 million to redeem
    outstanding warrants, $0.9 million to repay subordinated
    debt and $8.0 million for capital expenditures. Immediately
    prior to our initial public offering, we had three classes of
    common stock authorized, Class A common stock, Class B
    common stock and Class C common stock, of which only shares
    of Class A and Class B common stock were outstanding.
    Upon the consummation of our initial public offering
    1,693,244.92 shares of Class A common stock and
    271,910 shares of Class B common stock automatically
    converted into an aggregate of 1,965,150 shares of common
    stock on a 1.0 for 1.0 basis, excluding fractional shares.
    Mandatory redemption rights in favor of certain holders of prior
    Class A and Class B common stock were also terminated.
    In addition, upon the consummation of our initial public
    offering, $4.9 million in aggregate principal amount of our
    subordinated convertible debentures due 2007 were automatically
    converted into 653,331 shares of our common stock. Further,
    in connection with the closing of our initial public offering,
    we sold to the representatives of the underwriters and their
    designees warrants to purchase up to an aggregate of
    216,000 shares of common stock at an exercise price equal
    to $12.7875 per share, subject to antidilution adjustments, for
    a purchase price of $0.0001 per warrant.(4)
    
    On March 10, 2005, we changed our fiscal year to the
    Saturday closest to January 31. Previously our fiscal year
    ended four weeks earlier. As a result of this change, we had a
    four week transition period ended January 29, 2005. We
    believe that the change in our fiscal year end does not impact
    the comparability of the five fiscal years presented in this
    table. For the four week transition period ended
    January 29, 2005, net sales were $9,158,759, gross profit
    was $608,547, loss before income taxes was $2,935,201, benefit
    from income taxes was $1,069,402, net loss was $1,865,799 and
    net loss per common share on both a basic and diluted basis was
    $0.37. At January 29, 2005, total assets were $46,722,870
    and long-term debt, capital lease obligations and redeemable
    securities, less current portion was $634,413. The following
    unaudited information for the four weeks ended January 31,
    2004, the comparable period to the four week transition period,
    is presented for comparative purposes: net sales were
    $8,762,538, gross profit was $1,871,644, loss before income
    taxes was $1,451,810, benefit from income taxes was $1,709,249,
    net income was $257,439, basic earnings per share was $0.20, and
    diluted earnings per share was $0.10. At January 31, 2004,
    total assets were $31,183,356 (unaudited) and long-term debt,
    capital lease obligations and redeemable securities, less
    current portion was $7,561,579 (unaudited).(5)
    
    On April 8, 2005, we sold 1,000,000 shares of common
    stock and warrants to purchase 250,000 shares of common
    stock to certain investors in a private placement for gross
    proceeds of $8,750,000. The warrants have an exercise price of
    $10.18 per share and, subject to certain conditions, expire on
    April 8, 2010. We also issued warrants to purchase
    125,000 shares of common stock at an exercise price of
    $10.18 to the placement agent. The net proceeds after placement
    fees and expenses were $7,538,419. We used the proceeds to
    finance new store expansion and remodel existing stores into our
    new format.(6)
    
    We base our fiscal year on a 52/53 week period. The fiscal
    year ended February 3, 2007 was a 53-week period. For more
    information regarding our fiscal year, please see
    Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations  Fiscal
    Year.(7)
    
    On January 29, 2006, we adopted SFAS No. 123R,
    Share-Based Payment, under which we recognize
    compensation expense for stock-based compensation ratably over
    the service period related to each grant based on the grant date
    fair value. We used the modified prospective method whereby
    prior years results were 25




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not restated. Total stock based compensation expense for fiscal
    year 2006 and fiscal year 2007 was $744,422 and $529,571,
    respectively.(8)
    
    During fiscal year 2007, the Company completed a private
    placement of $4,000,000 in aggregate principal amount of
    subordinated convertible debentures. The Company received net
    proceeds of $3,578,752.(9)
    
    During fiscal year 2007, the Company entered into an agreement
    to terminate a long-term below market operating lease, in
    exchange for an immediate $5,050,000 cash payment, and the right
    to continue occupying the space through January 8, 2009.
    The Company recognized a net gain of $4.7 million from this
    transaction in fiscal year 2007. The Company does not believe
    that it has any other operating leases which could be terminated
    on substantially similar terms.(10)
    
    During fiscal year 2007 we recognized $3,131,169 in noncash
    charges related to the impairment of long-lived assets of
    underperforming stores, including three prototype stores we
    determined were no longer consistent with our strategic focus.(11)
    
    During fiscal year 2007, the Companys pretax losses
    exceeded the Companys operating loss carryback potential.
    Therefore, the Company concluded that the realizability of net
    deferred tax assets was no longer more likely than not, and
    established a valuation allowance against its net deferred tax
    assets. As of February 2, 2008 the valuation allowance was
    $7,186,389, resulting in a net provision for income tax expense
    of $691,367 for fiscal year 2007.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  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. Factors that might
    cause such a difference include, but are not limited to, those
    discussed in Item 1. Business  Cautionary
    Note Regarding Forward-Looking Statements and Risk Factors
    and Item 1. Business  Risk Factors
    and elsewhere in this annual report. The following section is
    qualified in its entirety by this more detailed information and
    our Financial Statements and the related Notes thereto, included
    elsewhere in this Annual Report on
    Form 10-K.
  Overview
       26




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Form 10-K
 27




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Critical
    Accounting Policies
      Merchandise
    inventories
  first-in,
  Store
    closing and impairment charges
  Accounting for the Disposal of
    Long-Lived Assets store-by-store start-up
 28




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Stock-based
    compensation expense
  Share-Based Payment
  Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation,
      Deferred
    income taxes
  Accounting for Income Taxes
   29




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Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Fiscal
    Year
   30




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Results
    of Operations
    Fiscal Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Net sales


100.0
%


100.0
%


100.0
%Cost of merchandise sold, occupancy and buying expense


66.5



69.6



74.5Gross profit


33.5



30.4



25.5Selling expense


19.7



22.1



25.0General and administrative expense


8.1



8.9



9.6Loss (gain) on disposal of property and equipment


0.2



0.2



(2.5
)Impairment of long-lived assets










1.7Operating income (loss)


5.5



(0.8
)


(8.3
)Other income, net


0.1



0.1



0.1Interest expense


(0.2
)


(0.5
)


(0.9
)Provision for (benefit from) income taxes


2.0



(0.4
)


0.4Net income (loss)


3.4
%


(0.8
)%


(9.5
)%     Fiscal Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Number of stores at beginning of period


218



235



257Stores opened or acquired during period


30



34



6Stores closed during period


(13
)


(12
)


(14
)Number of stores at end of period


235



257



249   Fiscal
    Year Ended February 2, 2008 Compared to Fiscal Year Ended
    February 3, 2007
  Net sales.
  Gross profit.
 31




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##### Table of Contents



Selling expense.
  General and administrative expense.
  Gain/loss on disposal of property and
    equipment.
  Impairment of long-lived assets.
  Interest expense.
  Income tax expense (benefit).
  Net income (loss).
  Fiscal
    Year Ended February 3, 2007 Compared to Fiscal Year Ended
    January 28, 2006
  Net sales.
  Gross profit.
  Selling expense.
 32




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##### Table of Contents



General and administrative expense.
  Loss on disposal of property and
    equipment.
  Interest expense.
  Income tax expense (benefit).
  Net income.
  Seasonality
    and Quarterly Fluctuations
    Fiscal Year Ended January 28, 2006Thirteen


Thirteen


Thirteen Weeks


Thirteen WeeksWeeks Ended


Weeks Ended


Ended


EndedApril 30,


July 30,


October 29,


January 28,2005


2005


2005


2006Net sales

$
44,943,180


$
45,255,560


$
43,242,897


$
61,338,488Gross profit


15,406,619



14,983,321



11,840,353



23,110,631Operating expenses


12,324,081



12,977,218



13,552,715



15,770,151Operating income (loss)


3,082,538



2,006,103



(1,712,362
)


7,340,480   Fiscal Year Ended February 3, 2007(1)Thirteen


Thirteen


Thirteen


FourteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedApril 29,


July 29,


October 28,


February 3,2006


2006


2006


2007Net sales

$
49,804,913


$
47,184,870


$
46,552,522


$
61,210,757Gross profit


16,297,151



13,511,316



12,122,764



20,270,797Operating expenses


15,112,020



14,986,654



16,082,440



17,580,978Operating income (loss)


1,185,131



(1,475,338
)


(3,959,676
)


2,689,820   33




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##### Table of Contents



Fiscal Year Ended February 2, 2008 (1)(2)(3)Thirteen


Thirteen


Thirteen


ThirteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedMay 5,


August 4,


November 3,


February 2,2007


2007


2007


2008Net sales

$
49,255,817


$
41,984,658


$
40,293,957


$
54,745,555Gross profit


15,288,041



9,276,094



3,508,981



19,388,006Operating expenses


16,492,999



16,363,091



18,375,013



11,616,861Operating income (loss)


(1,204,958
)


(7,086,997
)


(14,866,032
)


7,771,145     (1)
    
    On January 29, 2006, we adopted Statement of Financial
    Accounting Standards (SFAS) No. 123R, Share-Based
    Payment, (SFAS 123R) under which we
    recognize compensation expense for stock-based compensation
    ratably over the service period related to each grant based on
    the grant date fair value. We used the modified prospective
    transition method under which financial statements covering
    periods prior to adoption have not been restated. The impact of
    stock based compensation expense on operating income(loss) in
    fiscal year 2006, is $214,218 for the thirteen weeks ended
    April 29, 2006, $228,598 for the thirteen weeks ended
    July 29, 2006, $250,431 for the thirteen weeks ended
    October 28, 2006, and $51,175, for the fourteen weeks ended
    February 3, 2007. The impact on the fourteen weeks ended
    February 3, 2007 reflects the reversal of $134,923 related
    to the change in the estimated vesting of performance shares
    issued in fiscal year 2006. The impact of stock based
    compensation expense on operating income(loss) in fiscal year
    2007, is $192,316 for the thirteen weeks ended May 5, 2007,
    $139,387 for the thirteen weeks ended August 4, 2007,
    $19,821 for the thirteen weeks ended November 3, 2007, and
    $178,047, for the thirteen weeks ended February 2, 2008.(2)
    
    During the second and third quarters of fiscal year 2007 we
    recognized $755,672 and $2,375,497, respectively in noncash
    charges related to the impairment of long-lived assets of
    underperforming stores, including, in the third quarter, three
    prototype stores we determined were no longer consistent with
    our strategic focus.(3)
    
    During the fourth quarter of fiscal year 2007, we entered into
    an agreement to terminate a long-term below market operating
    lease, in exchange for a $5.0 million cash payment, and the
    right to continue occupying the space through January 8,
    2009. We recognized a net gain of $4.7 million from this
    transaction in the fourth quarter of fiscal year 2007, which is
    reflected as a component of operating expenses.      Liquidity
    and Capital Resources
     34




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##### Table of Contents



Form 10-K.
  Form 10-K Form 10-K.
 35




---



##### Table of Contents



February 3,


February 2,2007


2008Cash

$
407,346


$
159,671Inventories


24,102,006



18,061,941Total current assets


30,809,573



22,282,080Revolving credit facility


13,099,304



11,184,379Total current liabilities


32,518,530



29,348,090Net working capital


(1,708,957
)


(7,066,010
)Property and equipment, net


51,021,077



43,810,776Total assets


83,158,859



67,558,951Subordinated convertible debentures






4,000,000Total shareholders equity


41,166,849



24,040,100Unused borrowing capacity*


6,100,178



1,455,865     *
    
     as calculated under the terms of our revolving
    credit facility  Operating
    activities
             36




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##### Table of Contents



Investing
    activities
          Financing
    activities
    Revolving
    Credit Facility
  (successor-by-merger
 37




---



##### Table of Contents



Subordinated
    Convertible Debentures
     38




---



##### Table of Contents



2005
    Private Placement of Common Stock and Warrants
    Accounting for Contingencies
   39




---



##### Table of Contents



IPO
    Warrants
      Subsequent
    Event  Issuance of Debt and Common Stock
           40




---



##### Table of Contents



Form 10-K
  Capital
    Leases
    Contractual
    Obligations
    Payments Due in PeriodLess Than








More ThanContractual Obligations

Total


1 Year


1-3 Years


3-5 Years


5 YearsLong-term debt obligations

$
5,734,278


$
386,333


$
770,556


$
4,577,389


$
Capital lease obligations(1)


65,152



65,152











Operating lease obligations(2)


179,997,533



26,293,869



48,402,446



43,280,257



62,020,961Purchase obligations(3)


26,466,327



25,942,527



523,800







Other long-term liabilities


















Total

$
212,263,290


$
52,687,881


$
49,696,802


$
47,857,646


$
62,020,961     (1)
    
    Includes payment obligations relating to our point of sale
    hardware and software leases.(2)
    
    Includes minimum payment obligations relating to our store
    leases.(3)
    
    Includes merchandise on order and payment obligations relating
    to store construction and miscellaneous service contracts. 41




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##### Table of Contents



Off-Balance
    Sheet Arrangements
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an Amendment of FASB Statement
    No. 115 instrument-by-instrument
  Impact of
    Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.    Item 8.
    Financial
    Statements and Supplementary Data.  page F-1
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Disclosure Controls and Procedures. Rules 13a-15(e) 15d-15(e)
 42




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##### Table of Contents



Managements Annual Report on Internal Control Over
    Financial Reporting. Rules 13a-15(f) 15d-15(f)
      Changes in Internal Control Over Financial
    Reporting.
  Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Regulation S-K.
 43




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##### Table of Contents



Executive
    Officers of the Registrant
    Name

Age

PositionPeter A. Edison


52


Chairman of the Board, Chief Executive Officer and PresidentMark D. Ianni


47


Executive Vice President and Chief Merchandising OfficerStanley K. Tusman


61


Executive Vice President and Chief Planning OfficerJoseph R. Vander Pluym


56


Executive Vice President and Chief Operations OfficerCharles R. Daniel, III


49


Vice President  Finance, Controller, Treasurer and
    Secretary   Peter A. Edison
  Mark D. Ianni
  Stanley K. Tusman
  Joseph R. Vander Pluym 30-year
  Charles R. Daniel, III
   44




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##### Table of Contents



Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
  Form 10-K.
  Item 11.
    Executive
    Compensation.  
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.     45




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    Financial Statements: page F-1. page F-1
  Financial Statement Schedules:
  Exhibits: Form 10-K:
 46




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##### Table of Contents



SIGNATURES
  Form 10-K
     May 2,
    2008
    By /s/  PETER A.
    EDISON    Chairman of the Board, Chief Executive Officer
 And President (Principal Executive Officer)
     Signature

Title

Date/s/  PETER
    A. EDISON(Peter
    A. Edison)

Chairman of the Board, Chief Executive Officer, President and
    Director (Principal Executive Officer)

May 2, 2008*(Charles
    R. Daniel, III)

Vice President  Finance, Controller, Treasurer and
    Secretary (Principal Financial Officer and Principal Accounting
    Officer)

May 2, 2008*(Andrew
    N. Baur)

Director

May 2, 2008*(Timothy
    F. Finley)

Director

May 2, 2008*(Harry
    E. Rich)

Director

May 2, 2008*(Scott
    C. Schnuck)

Director

May 2, 2008     *
    
    Peter A. Edison, by signing his name hereto, does sign this
    document on behalf of the above noted individuals, pursuant to
    powers of attorney duly executed by such individuals which have
    been filed as an Exhibit to this Report.  PETER
    A. EDISON
   Attorney-in-Fact
 47




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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

Representatives Warrant Agreement, dated February 10,
    2004 by and among the Company, Ryan Beck & Co., Inc.
    and BB&T Capital Markets, a Division of Scott &
    Stringfellow, Inc. (incorporated by reference to
    Exhibit 4.3 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended January 3, 2004 filed on
    April 2, 2004 (File
    No. 000-50563)).4
.2

Form of common stock certificate (incorporated by reference to
    Exhibit 4.6 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended January 3, 2004 filed on
    April 2, 2004 (File
    No. 000-50563)).4
.3

Warrants issued by the Company to representatives of the
    underwriters, or their designees (incorporated by reference to
    Exhibit 4.7 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended January 3, 2004 filed on
    April 2, 2004 (File
    No. 000-50563)).4
.4

Purchase Agreement dated March 31, 2005 by and among the
    Company and the Investors named therein (incorporated by
    reference to Exhibit 4.1 to the Companys Current
    Report on
    Form 8-K
    (File
    No. 000-50563),
    filed on April 13, 2005).4
.5

Registration Rights Agreement dated April 8, 2005 by and
    among the Company, the Investors named therein and Ryan
    Beck & Co., Inc. (incorporated by reference to
    Exhibit 4.2 to the Companys Current Report on
    Form 8-K
    (File
    No. 000-50563),
    filed on April 13, 2005).4
.6

Form of Warrants issued by the Company to the Investors on
    April 8, 2005 (incorporated by reference to
    Exhibit 4.3 to the Companys Current Report on
    Form 8-K
    (File
    No. 000-50563),
    filed on April 13, 2005).4
.7

Form of Warrants issued by the Company to Ryan Beck &
    Co., Inc. or its designees on April 8, 2005 (incorporated
    by reference to Exhibit 4.4 to the Companys Current
    Report on
    Form 8-K
    (File
    No. 000-50563),
    filed on April 13, 2005).4
.8

Subordinated Convertible Debenture Purchase Agreement dated
    June 13, 2007 by and among the Company and the Investors
    named therein (incorporated by reference to Exhibit 4.1 to
    the Companys Current Report on
    Form 8-K
    dated June 26, 2007 (File
    No. 000-50563)).4
.9

9.5% Subordinated Convertible Debentures issued by the
    Company to Investors on June 26, 2007 (incorporated by
    reference to Exhibit 4.2 to the Companys Current
    Report on
    Form 8-K
    dated June 26, 2007 (File
    No. 000-50563)).4
.10

Subordination Agreement dated June 26, 2007 by and among
    the Company, the Investors named therein and Bank of America,
    N.A. (incorporated by reference to Exhibit 4.3 to the
    Companys Current Report on
    Form 8-K
    dated June 26, 2007 (File
    No. 000-50563)).4
.11

Registration Rights Agreement dated June 26, 2007 by and
    among the Company and the Investors named therein (incorporated
    by reference to Exhibit 4.5 to the Companys Current
    Report on
    Form 8-K
    dated June 26, 2007 (File
    No. 000-50563)).4
.12

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
    dated February 1, 2008 (File
    No. 000-50563)).4
.13

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
    dated February 1, 2008 (File
    No. 000-50563)).4
.14

Security Agreement dated February 1, 2008 by and among the
    Company, Private Equity Management Group, Inc. and the Lender
    named therein (incorporated by reference to Exhibit 4.3 to
    the Companys Current Report on
    Form 8-K
    dated February 1, 2008 (File
    No. 000-50563)). 48




---



##### Table of Contents



Exhibit No.

Description4
.15

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
    dated February 1, 2008 (File
    No. 000-50563)).4
.16

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
    dated February 1, 2008 (File
    No. 000-50563)).4
.17

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 Current Report on
    Form 8-K
    dated February 1, 2008 (File
    No. 000-50563)).4
.18

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
    dated February 1, 2008 (File
    No. 000-50563)).10
.1

Bakers Footwear Group, Inc. 2003 Stock Option Plan, as amended
    (incorporated by reference to Exhibit 10.3 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 000-50563),
    filed on March 21, 2007).10
.1.1

Form of Nonqualified Option Award Agreement under Bakers
    Footwear Group, Inc. 2003 Stock Option Plan (incorporated by
    reference to Exhibit 10.2 to the Companys Current
    Report on
    Form 8-K
    (File
    No. 000-50563)
    filed on March 21, 2007).10
.2

Bakers Footwear Group, Inc. Cash Bonus Plan (incorporated by
    reference to Exhibit 10.2 of Amendment No. 3 to the
    Companys Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 8, 2004).10
.3

Concurrent Use Agreement dated June 23, 1999 between the
    Company and Novus, Inc. (incorporated by reference to
    Exhibit 10.9 to the Companys Registration Statement
    on
    Form S-1
    (File
    No. 333-86332),
    filed April 16, 2002).10
.4

Assignment of Rights dated June 23, 1999 between the
    Company and Edison Brothers Stores, Inc. (incorporated by
    reference to Exhibit 10.10 to the Companys
    Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed April 16, 2002).10
.5

Letter of Understanding Between the Company, Transmodal
    Associates, Inc. and Cargotrans Transitarios Internacionais
    Ltda. (incorporated by reference to Exhibit 10.13 of
    Amendment No. 1 to the Companys Registration
    Statement on
    Form S-1
    (File
    No. 333-86332),
    filed June 4, 2002).10
.6

Motor Transportation Contract dated October 25, 1999
    between Combined Express, Inc. and the Company (incorporated by
    reference to Exhibit 10.14 of Amendment No. 1 to
    Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed June 4, 2002).10
.7

Employment Agreement dated January 12, 2004 by and between
    the Company and Peter Edison (incorporated by reference to
    Exhibit 10.15 of Amendment No. 4 to the Companys
    Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 20, 2004).10
.8

Separation Agreement and General Release dated December 2007 by
    and between the Company and Michele Bergerac.10
.8.1

Employment Agreement dated April 1, 2002 by and between the
    Company and Michele Bergerac (incorporated by reference to
    Exhibit 10.16 of Amendment No. 4 to the Companys
    Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 20, 2004).10
.9

Employment Agreement dated September 16, 2002 by and
    between the Company and Stanley K. Tusman (incorporated by
    reference to Exhibit 10.20 of Amendment No. 4 to the
    Companys Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 20, 2004).10
.10

Employment Agreement dated September 5, 2006 by and between
    the Company and Joe Vander Pluym (incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K
    dated September 7, 2006).10
.11

Employment Agreement dated August 31, 2006 by and between
    the Company and Mark Ianni (incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K
    dated September 7, 2006). 49




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##### Table of Contents



Exhibit No.

Description10
.12

Release Agreement dated February 1, 2008 by and among the
    Company and Lawrence L. Spanley, Jr. (incorporated by reference
    to Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    dated February 1, 2008 (File
    No. 000-50563)).10
.12.1

Amended Employment Agreement dated February 3, 2008 by and
    among the Company and Lawrence L. Spanley, Jr. (incorporated by
    reference to Exhibit 10.3 to the Companys Current
    Report on
    Form 8-K
    dated February 1, 2008 (File
    No. 000-50563)).10
.13

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
    dated September 7, 2006).10
.13.1

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
    dated September 7, 2006).10
.13.2

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).10
.13.3

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
    dated May 18, 2007 (File
    No. 000-50563)).10
.13.4

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
    dated February 1, 2008 (File
    No. 000-50563)).10
.13.5

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
    dated June 26, 2007 (File
    No. 000-50563)).10
.14

Underwriting Agreement, dated February 4, 2004, by and
    among the Company, Ryan Beck & Co., Inc. and BB&T
    Capital Markets, a Division of Scott & Stringfellow,
    Inc., as representatives of the underwriters named therein
    (incorporated by reference to Exhibit 10.32 to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended January 3, 2004 filed on
    April 2, 2004 (File
    No. 000-50563)).10
.15

Letter to Peter Edison outlining 2008 bonus levels (incorporated
    by reference to Exhibit 10.4 to the Companys Current
    Report on
    Form 8-K
    filed on March 17, 2008 (File
    No. 000-50563)).10
.16

Letter to Stan Tusman outlining 2008 bonus levels (incorporated
    by reference to Exhibit 10.5 to the Companys Current
    Report on
    Form 8-K
    filed on March 17, 2008 (File
    No. 000-50563)).10
.17

Letter to Mark Ianni outlining 2008 bonus levels (incorporated
    by reference to Exhibit 10.6 to the Companys Current
    Report on
    Form 8-K
    filed on March 17, 2008 (File
    No. 000-50563)).10
.18

Letter to Joe Vander Pluym outlining 2008 bonus levels
    (incorporated by reference to Exhibit 10.7 to the
    Companys Current Report on
    Form 8-K
    filed on March 17, 2008 (File
    No. 000-50563)).10
.19

Letter to Peter Edison outlining 2007 bonus levels (incorporated
    by reference to Exhibit 10.6 to the Companys Current
    Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.20

Letter to Michele Bergerac outlining 2007 bonus levels
    (incorporated by reference to Exhibit 10.7 to the
    Companys Current Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.21

Letter to Stan Tusman outlining 2007 bonus levels (incorporated
    by reference to Exhibit 10.8 to the Companys Current
    Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.22

Letter to Mark Ianni outlining 2007 bonus levels (incorporated
    by reference to Exhibit 10.9 to the Companys Current
    Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.23

Letter to Joe Vander Pluym outlining 2007 bonus levels
    (incorporated by reference to Exhibit 10.10 to the
    Companys Current Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.24

Letter to Larry Spanley outlining 2007 bonus levels
    (incorporated by reference to Exhibit 10.11 to the
    Companys Current Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.25

Summary of base salaries for specified executive officers. 50




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##### Table of Contents



Exhibit No.

Description10
.26

Summary of March 15, 2007 stock option grants and
    performance awards for executive officers (incorporated by
    reference to Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    filed on March 21, 2007 (File
    No. 000-50563)).10
.27

Summary of October 3, 2007 stock option grants and
    restricted stock awards for Peter A. Edison, Mark D. Ianni,
    Joseph R. Vander Pluym and Stanley K. Tusman (incorporated by
    reference to Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    dated October 3, 2007 (File
    No. 000-50563)).10
.28

Summary of March 11, 2008 stock option grants for executive
    officers (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed on March 17, 2008 (File
    No. 000-50563)).10
.29

Summary of Compensation of Non-management Directors as of
    March 15, 2007 (incorporated by reference to
    Exhibit 10.12 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended May 5, 2007 (File
    No. 000-50563)).10
.30

Bakers Footwear Group, Inc. 2005 Incentive Compensation Plan
    (incorporated by reference to the Companys 2005 Proxy
    Statement dated April 27, 2005, Appendix A).10
.30.1

Form of Notice of Award of Performance Shares under Bakers
    Footwear Group, Inc. 2005 Incentive Compensation Plan
    (incorporated by reference to Exhibit 10.4 to the
    Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.30.2

Form of Restricted Stock Award Agreement under Bakers Footwear
    Group, Inc. 2005 Incentive Compensation Plan (incorporated by
    reference to Exhibit 10.4 to the Companys Current
    Report on
    Form 8-K
    dated October 3, 2007 (File
    No. 000-50563)).11
.1

Statement regarding computation of per share earnings
    (incorporated by reference from Note 16 of the Financial
    Statements).14
.1

Code of Business Conduct (incorporated by reference to
    Exhibit 14.1 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)).23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney.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).  51




---



##### 



INDEX TO
    FINANCIAL STATEMENTS
  Contents
   
 Report of Independent Registered Public
    Accounting Firm


F-1Balance Sheets


F-2Statements of Operations


F-3Statements of Shareholders Equity


F-4Statements of Cash Flows


F-5Notes to Financial Statements


F-6   52




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm   
            /s/  ERNST &
    YOUNG LLP
    F-1




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  BALANCE SHEETS
  February 3,


February 2,2007


2008ASSETSCurrent assets:Cash and cash equivalents

$
407,346


$
159,671Accounts receivable


1,352,936



1,192,674Other receivables


1,140,168



182,999Inventories


24,102,006



18,061,941Prepaid expenses and other current assets


713,810



697,174Prepaid income taxes


1,129,637



1,987,621Deferred income taxes


1,963,670



Total current assets


30,809,573



22,282,080Property and equipment, net


51,021,077



43,810,776Deferred income taxes


424,139



Other assets


904,070



1,466,095Total assets

$
83,158,859


$
67,558,951LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
8,134,642


$
7,082,214Accrued expenses


9,004,436



9,162,561Sales tax payable


757,868



498,510Deferred income


1,332,473



1,362,563Revolving credit facility


13,099,304



11,184,379Current maturities of capital lease obligations


189,807



57,863Total current liabilities


32,518,530



29,348,090Subordinated convertible debentures






4,000,000Obligations under capital leases, less current maturities


57,863



Accrued rent liabilities


9,415,617



10,170,761Shareholders equity:Preferred stock, $0.0001 par value; 5,000,000 shares
    authorized, no shares outstanding






Common stock, $0.0001 par value; 40,000,000 shares
    authorized, 6,493,035 and 6,655,856 shares outstanding at
    February 3, 2007 and February 2, 2008, respectively


649



665Additional paid-in capital


36,571,423



37,101,923Retained earnings (accumulated deficit)


4,594,777



(13,062,488
)Total shareholders equity


41,166,849



24,040,100Total liabilities and shareholders equity

$
83,158,859


$
67,558,951    F-2




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  STATEMENTS
    OF OPERATIONS
  Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Net sales

$
194,780,125


$
204,753,062


$
186,279,987Cost of merchandise sold, occupancy, and buying expenses


129,439,201



142,551,034



138,818,865Gross profit


65,340,924



62,202,028



47,461,122Operating expenses:Selling


38,384,575



45,221,479



46,513,361General and administrative


15,778,796



18,207,593



17,901,666(Gain) loss on disposal of property and equipment


440,542



277,754



(4,698,232
)Impairment of long-lived assets


20,252



55,266



3,131,169Operating income (loss)


10,716,759



(1,560,064
)


(15,386,842
)Other income (expense):Interest expense


(426,617
)


(1,005,217
)


(1,693,878
)Other income (expense), net


212,430



112,310



114,822Income (loss) before income taxes


10,502,572



(2,452,971
)


(16,965,898
)Provision for (benefit from) income taxes


3,949,282



(909,860
)


691,367Net income (loss)

$
6,553,290


$
(1,543,111
)

$
(17,657,265
)Net income (loss) per common share:Basic

$
1.10


$
(0.24
)

$
(2.70
)Diluted

$
1.04


$
(0.24
)

$
(2.70
)    F-3




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  STATEMENTS
    OF SHAREHOLDERS EQUITY
  Common Stock





RetainedShares





Additional


EarningsIssued and





Paid-In


(AccumulatedOutstanding


Amount


Capital


Deficit)


TotalBalance at January 29, 2005


5,102,481


$
510


$
25,623,630


$
(415,402
)

$
25,208,738Shares issued in connection with private placement of common
    stock and warrants


1,000,000



100



7,538,319







7,538,419Shares issued in connection with exercise of stock warrants


76,896



8



636,242







636,250Shares issued in connection with exercise of stock options


121,102



12



128,953







128,965Income tax benefit from exercise of stock options










324,922







324,922Net income














6,553,290



6,553,290Balance at January 28, 2006


6,300,479



630



34,252,066



6,137,888



40,390,584Stock-based compensation expense










744,422







744,422Shares issued in connection with exercise of stock warrants


71,366



7



508,983







508,990Shares issued in connection with exercise of stock options


121,190



12



451,410







451,422Income tax benefit from exercise of stock options










614,542







614,542Net loss














(1,543,111
)


(1,543,111
)Balance at February 3, 2007


6,493,035



649



36,571,423



4,594,777



41,166,849Stock-based compensation expense










529,571







529,571Shares issued in connection with exercise of stock options


93,821



9



929







938Issuance of restricted stock


69,000



7











7Net loss














(17,657,265
)


(17,657,265
)Balance at February 2, 2008


6,655,856


$
665


$
37,101,923


$
(13,062,488
)

$
24,040,100    F-4




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  STATEMENTS
    OF CASH FLOWS
  Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Operating activitiesNet income (loss)

$
6,553,290


$
(1,543,111
)

$
(17,657,265
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


5,259,431



7,579,929



8,583,524Deferred income taxes


476,593



(755,756
)


2,387,809Stock-based compensation expense






744,422



529,571Excess income tax benefit from exercise of stock options






(614,542
)


Income tax benefit from exercise of stock options


324,922







Impairment of long-lived assets


20,252



55,266



3,131,169(Gain) loss on disposal of property and equipment


440,542



277,754



(4,698,232
)Changes in operating assets and liabilities:Accounts receivable and other receivables


(1,028,371
)


(122,124
)


1,117,431Inventories


(8,195,504
)


1,895,853



6,040,065Prepaid expenses and other current assets


(70,825
)


537,771



16,636Prepaid income taxes






(1,129,637
)


(857,984
)Other assets


(309,368
)


(217,235
)


(201,690
)Accounts payable


3,556,074



(3,925,092
)


(1,052,428
)Accrued expenses and deferred income


6,622,806



(2,760,542
)


(71,143
)Accrued income taxes


1,259,871



(683,422
)


Accrued rent liabilities


2,626,177



3,087,992



755,144Net cash provided by (used in) operating activities


17,535,890



2,427,526



(1,977,393
)Investing activitiesPurchase of property and equipment


(22,816,172
)


(20,390,113
)


(4,763,687
)Proceeds from disposition of property and equipment


122,494



157,449



5,017,639Net cash provided by (used in) investing activities


(22,693,678
)


(20,232,664
)


253,952Financing activitiesNet borrowings (payments) on line of credit






13,099,304



(1,914,925
)Proceeds from issuance of convertible debentures










4,000,000Debt issuance costs










(420,447
)Excess income tax benefit from exercise of stock options






614,542



Net proceeds from sale of common stock and warrants


7,538,419







Net proceeds from exercise of stock options


128,965



451,422



938Net proceeds from exercise of stock warrants


636,250



508,990



Proceeds from issuance of restricted stock










7Principal payments under capital lease obligations


(652,635
)


(386,744
)


(189,807
)Net cash provided by financing activities


7,650,999



14,287,514



1,475,766Net increase (decrease) in cash and cash equivalents


2,493,211



(3,517,624
)


(247,675
)Cash and cash equivalents at beginning of period


1,431,759



3,924,970



407,346Cash and cash equivalents at end of period

$
3,924,970


$
407,346


$
159,671Supplemental disclosures of cash flow informationCash paid for income taxes

$
1,852,368


$
1,643,607


$
82,631Cash paid for interest

$
423,006


$
986,622


$
1,667,213    F-5




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS
 February 2, 2008
  1.
    Summary
    of Significant Accounting Policies  Operations
    Fiscal
    Year
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Accounts
    Receivable
    Inventories
  first-in,
 F-6




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Property
    and Equipment
  98-1, Accounting for the Costs of Computer Software Developed for
    or Obtained for Internal Use.
  Impairment
    of Long-Lived Assets
  Accounting for the Disposal of
    Long-Lived Assets store-by-store start-up
  Revenue
    Recognition
    Cost
    of Merchandise Sold
    Operating
    Leases
     F-7




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Stock-Based
    Compensation
  Share-Based Payment
  Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation
  Advertising
    and Marketing Expense
    Earnings
    per Share
    Income
    Taxes
  Accounting for Income Taxes
 F-8




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Deferred
    Income
  12-month 12-month
    Business
    Segment
    Shipping
    and Handling Costs
    Recent
    Accounting Pronouncements
  Fair Value Measurements
 F-9




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an Amendment of FASB Statement
    No. 115 instrument-by-instrument
  2.
    Liquidity           F-10




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Form 10-K
  3.
    Subsequent
    Event  Issuance of Debt and Common Stock          Form 10-K
 F-11




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    4.
    Issuance
    of Common Stock and Warrants    Form S-3 Accounting for Contingencies
     F-12




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    5.
    Property
    and Equipment    EstimatedUseful

February 3,


February 2,Lives

2007


2008Furniture, fixtures, and equipment

3 to 8 years

$
28,009,665


$
29,436,089Leasehold improvements

up to 10 years


38,285,637



41,559,804Computer equipment and software

3 years


4,529,367



5,129,929Construction in progress




2,896,032



1,152,03973,720,701



77,277,861Less accumulated depreciation and amortization




22,699,624



33,467,085$
51,021,077


$
43,810,776     6.
    Accrued
    Expenses    February 3,


February 2,2007


2008Employee compensation and benefits

$
2,304,338


$
1,870,318Accrued rent


503,034



873,247Other


6,197,064



6,418,996$
9,004,436


$
9,162,561   7.
    Capital
    Lease Obligations        Fiscal year: 2008

$
65,152Less amount representing interest


(7,289
)Present value of minimum lease payments

$
57,863  F-13




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  8.
    Operating
    Leases      Fiscal year:2008

$
26,293,8692009


24,661,7852010


23,740,6622011


22,472,1362012


20,808,121Thereafter


62,020,961$
179,997,534   9.
    Sale of
    Leasehold Interest    10.
    Subordinated
    Convertible Debentures      11.
    Revolving
    Credit Agreement   F-14




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        12.
    Employee
    Benefit Plan    13.
    Commitments
    and Contingencies    14.
    Income
    Taxes  Accounting
    for Income Taxes
 F-15




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Current:Federal

$
2,962,463


$
(111,713
)

$
(3,380,295
)State and local


548,319



(42,391
)


(220,329
)Total current


3,510,782



(154,104
)


(3,600,624
)Deferred:Federal


363,248



(639,486
)


(1,982,129
)State and local


75,252



(116,270
)


(912,269
)Total deferred


438,500



(755,756
)


(2,894,398
)Valuation allowance










7,186,389Total provision for (benefit from) income taxes

$
3,949,282


$
(909,860
)

$
691,367     Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Federal income tax at statutory rate

$
3,675,900


$
(858,540
)

$
(5,938,064
)Impact of graduated Federal rates


(100,000
)


24,530



169,659State and local income taxes, net of Federal income taxes


415,086



(108,632
)


(753,399
)Change in valuation allowance










7,186,389Permanent differences


(41,704
)


32,782



26,782Total provision for (benefit from) income taxes

$
3,949,282


$
(909,860
)

$
691,367  F-16




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        February 3,


February 2,2007


2008Deferred tax assets:Net operating loss carryforward

$



$
3,048,240Vacation accrual


426,763



392,994Inventory


1,712,111



1,379,621Stock-based compensation


443,840



650,373Accrued rent


3,646,741



4,049,924Total deferred tax assets


6,229,455



9,521,152Deferred tax liabilities:Property and equipment


3,666,442



2,150,157Prepaid expenses


175,204



184,606Total deferred tax liabilities


3,841,646



2,334,763Valuation allowance






(7,186,389
)Net deferred tax assets

$
2,387,809


$
   15.
    Stock-Based
    Compensation  Adoption
    of SFAS 123R
  Share-Based Payment
  Accounting for Stock Issued to Employees
 F-17




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Accounting for Stock-Based
    Compensation
    Year EndedJanuary 28,2006Net income as reported

$
6,553,290Add: Stock based compensation expense included in net income as
    reported


Deduct: Stock based compensation expense determined under fair
    value method, net of related income tax effect


(544,135
)Pro forma net income

$
6,009,155Basic earnings per share:As reported

$
1.10Pro forma

$
1.00Diluted earnings per share:As reported

$
1.04Pro forma

$
0.96   Stock
    Options
     F-18




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Options granted


205,200



91,728



272,613Weighted-average fair value of options granted

$
6.92


$
10.48


$
3.59Assumptions:Dividends


0
%


0
%


0
%Risk-free interest rate


3.0% - 3.5
%


4.75% - 5.0
%


4.25% - 4.5
%Expected volatility


64
%


50% - 55
%


43% - 46
%Expected option life


6 years



5-6 years



5-6 years     Vested


Non Vested


TotalNumber of


Weighted Average


Number of


Weighted Average


Number of


Weighted AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceBalance at January 1, 2005


269,992


$
0.04



298,600


$
7.75



568,592


$
4.09Granted










205,200



11.32



205,200



11.32Vested


59,720



7.75



(59,720
)


7.75







Exercised


(121,102
)


1.09











(121,102
)


1.09Forfeited


(900
)


7.75



(5,400
)


8.41



(6,300
)


8.32Balance at January 28, 2006


207,710



1.62



438,680



9.41



646,390



6.91Granted










91,728



19.61



91,728



19.61Vested


98,660



9.21



(98,660
)


9.21







Exercised


(121,190
)


3.79











(121,190
)


3.79Forfeited


(1,380
)


8.32



(16,220
)


13.55



(17,600
)


13.14Balance at February 3, 2007


183,800



4.22



415,528



11.55



599,328



9.30Granted










272,613



7.38



272,613



7.38Vested


116,876



14.89



(116,876
)


14.89







Exercised


(93,821
)


0.01











(93,821
)


0.01Forfeited


(31,077
)


10.27



(58,817
)


11.62



(89,894
)


11.15Balance at February 2, 2008


175,778


$
12.49



512,448


$
8.56



688,226


$
9.56    F-19




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Weighted-Average


Weighted-AverageNumber of


Contractual Life


Exercise


AggregateRange of Exercise Prices

Options


(Years)


Price


Intrinsic Value$0.01


4,719



6.0


$
0.01


$
13,968$7.75


94,340



6.0



7.75



$4.52














$9.30 - $13.80


60,640



7.1



11.33



$20.06


16,079



8.1



20.06



Total ($0.01 - $20.06)


175,778



6.6



9.90


$
13,968     Weighted-Average


Weighted-AverageNumber of


Contractual Life


Exercise


AggregateRange of Exercise Prices

Options


(Years)


Price


Intrinsic Value$0.01


4,719



6.0


$
0.01


$
13,968$7.75


194,920



6.0



7.75



$4.52


130,000



9.0



4.52



$9.30 - $13.80


268,949



8.0



10.95



$20.06


65,237



8.1



20.06



Total ($0.01 - $20.06)


663,825



7.7



9.57


$
13,968     Restricted
    and Performance Shares
   F-20




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      16.
    Earnings
    per Share    Year Ended


Year Ended


Year EndedJanuary 28,


February 3,


February 2,2006


2007


2008Numerator:Net income (loss)

$
6,553,290


$
(1,543,111
)

$
(17,657,265
)Numerator for basic earnings (loss) per share


6,553,290



(1,543,111
)


(17,657,265
)Interest expense related to convertible debentures










Numerator for diluted earnings (loss) per share

$
6,553,290


$
(1,543,111
)

$
(17,657,265
)Denominator:Denominator for basic earnings (loss) per share
     weighted average shares


5,981,401



6,453,527



6,540,905Effect of dilutive securities:Stock options


239,078







Stock purchase warrants


58,466







Convertible debentures










Denominator for diluted earnings (loss) per share
     adjusted weighted average shares and assumed
    conversions


6,278,945



6,453,527



6,540,905    F-21




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  17.
    Fair
    Value of Financial Instruments    February 3, 2007


February 2, 2008Carrying





CarryingAmount


Fair Value


Amount


Fair ValueCash and cash equivalents

$
407,346


$
407,346


$
159,671


$
159,671Revolving credit facility


13,099,304



13,099,304



11,184,379



11,184,379Subordinated convertible debentures










4,000,000



3,023,392Capital lease obligations, including current maturities


247,670



287,277



57,863



57,863     18.
    Related
    Party Transactions      19.
    Quarterly
    Financial Data  Unaudited    Thirteen Weeks


Thirteen Weeks


Thirteen Weeks


Fourteen WeeksEnded


Ended


Ended


EndedApril 29,


July 29,


October 28,


February 3,2006


2006


2006


2007Fiscal year 2006:Net sales

$
49,804,913


$
47,184,870


$
46,552,522


$
61,210,757Gross profit


16,297,151



13,511,316



12,122,764



20,270,797Net income (loss)(1)


668,355



(1,026,498
)


(2,601,754
)


1,416,786Basic earnings (loss) per share


0.11



(0.16
)


(0.40
)


0.22Diluted earnings (loss) per share


0.10



(0.16
)


(0.40
)


0.21   F-22




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Thirteen Weeks


Thirteen Weeks


Thirteen Weeks


Thirteen WeeksEnded


Ended


Ended


EndedMay 5,


August 4,


November 3,


February 2,2007


2007


2007


2008Fiscal year 2007:Net sales

$
49,255,817


$
41,984,658


$
40,293,957


$
54,745,555Gross profit


15,288,041



9,276,094



3,508,981



19,388,006Net income (loss)(2)(3)(4)


(965,174
)


(8,744,782
)


(15,294,582
)


7,347,273Basic earnings (loss) per share


(0.15
)


(1.35
)


(2.35
)


1.10Diluted earnings (loss) per share


(0.15
)


(1.35
)


(2.35
)


1.03     (1)
    
    On January 29, 2006, the Company adopted Statement of
    Financial Accounting Standards (SFAS) No. 123R,
    Share-Based Payment, (SFAS 123R) under
    which the Company recognizes compensation expense for
    stock-based compensation ratably over the service period related
    to each grant based on the grant date fair value. The Company
    used the modified prospective transition method under which
    financial statements covering periods prior to adoption have not
    been restated. The impact of stock based compensation expense on
    net income (loss), after recognition of income tax benefits, is
    $132,601, or $0.02 per share, for the thirteen weeks ended
    April 29, 2006, $141,502 or $0.02 per share for the
    thirteen weeks ended July 29, 2006, $154,212 or $0.02 per
    share for the thirteen weeks ended October 28, 2006, and
    $30,085, or $0.01 per share for the fourteen weeks ended
    February 3, 2007. The impact on the fourteen weeks ended
    February 3, 2007 reflects the reversal of $83,083, net of
    income tax effect, related to the change in the estimated
    vesting of performance shares issued in fiscal year 2006.(2)
    
    At February 3, 2007, the Company had adequate available net
    operating loss carryback potential to support the recorded
    balance of net deferred tax assets. The Companys loss
    before income taxes for the twenty-six weeks ended
    August 4, 2007 exceeded the Companys carryback
    potential and was anticipated to result in a cumulative loss
    before income taxes for the three year period ending
    February 2, 2008. Therefore, as of August 4, 2007, the
    Company concluded that the realizability of net deferred tax
    assets was no longer more likely than not, and established a
    $4,142,287 valuation allowance against its net deferred tax
    assets which resulted in a net provision for income tax expense
    of $1,280,839 for the second quarter of fiscal year 2007. As a
    consequence of the existence of the valuation allowance, there
    was no net provision for or benefit from income taxes during the
    third and fourth quarters of fiscal year 2007.(3)
    
    On December 11, 2007, the Company entered into an agreement
    to terminate a below market operating lease, in exchange for a
    $5,050,000 cash payment, and the right to continue occupying the
    space through January 8, 2009. The Company recognized a net
    gain of $4.7 million from this transaction in the fourth
    quarter of fiscal year 2007.(4)
    
    During the second and third quarters of fiscal year 2007 the
    Company recognized $755,672 and $2,375,497, respectively in
    noncash charges related to the impairment of long-lived assets
    of underperforming stores, including, in the third quarter,
    three prototype stores we determined were no longer consistent
    with our strategic focus. F-23