##### Table of Contents





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
    January 30,
    2010oro

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(State or Other Jurisdiction
    of
    Incorporation or Organization)

43-0577980(I.R.S. EmployerIdentification Number)2815 Scott Avenue,
    St. Louis, Missouri(Address of Principal
    Executive Offices)

63103(Zip Code)   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 Capital Market
 Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller reporting
    company þ (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
  Form 10-K
    DOCUMENTS INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
  PART IItem 1.

Business


3Item 1A.

Risk Factors


24Item 1B.

Unresolved Staff Comments


24Item 2.

Properties


24Item 3.

Legal Proceedings


24Item 4.

[Reserved]


24PART IIItem 5.

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


24Item 6.

Selected Financial Data


26Item 7.

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


27Item 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


45Consent of Public Accounting FirmPower of AttorneyCertificationCertificationSection 1350 Certifications   2




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PART I  Item 1.
    Business.  General
      Form 10-K,
  Recent
    Developments
       3




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Form 10-K
 4




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##### Table of Contents



Company
    History
    (314) 621-0699. Form 10-K.
  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 seek to improve comparable store sales increases through
    branded and private label accessories. Accessories accounted for
    12.1% of merchandise sales in fiscal year 2009 and we believe
    that there is significant potential to expand our accessory
    sales and margins. 5




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
    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 14.2% of our net
    shoe sales for fiscal year 2009 consisted of branded footwear.
    For fiscal year 2009, our multi-channel sales were
    $10.4 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.  New Store
    Strategy
        Product
    Development and Merchandising
        Product
    Mix
   6




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Private
    Label.
        10-15%
  and/or
  H by
    Halston.
    National
    Brands.
   7




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® ® ® ® ® ® ® ®
  Accessories.
  ready-to-wear
  Merchandise
    Mix.
  2007-2009:
  Fiscal YearCategory

2007


2008


2009Private Label Footwear


71.3
%


72.8
%


75.4
%Branded Footwear


16.2
%


15.5
%


12.5
%Accessories


12.5
%


11.7
%


12.1
%Total


100.0
%


100.0
%


100.0
%   Planning
    and Allocation.
         8




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Clearance.
      Stores
  Store
    Locations and Environment.
       9




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No.StoresAlabama


1Arizona


3Arkansas


2California


38Colorado


2Connecticut


5Delaware


1Florida


18Georgia


13Idaho


1Illinois


17Indiana


2Kansas


2Kentucky


1Louisiana


5Maryland


7Massachusetts


7Michigan


9Missouri


6Nebraska


1Nevada


3New Hampshire


1New Jersey


14New Mexico


1New York


20North Carolina


4Ohio


6Oklahoma


2Pennsylvania


6Rhode Island


2South Carolina


2Tennessee


1Texas


23Utah


1Virginia


7Washington


2Wisconsin


2Total Stores


238
*Total States


37     *
    
    Excludes our Internet site, which is merchandised as a Bakers
    store. 10




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Store
    Concepts.
      Bakers

Wild PairTarget customer

Women  ages 16-35

Men & women  ages 17-29Private label sales

87%  90%

40%  45%Branded sales

10%  13%

55%  60%Fashion content

Widely  accepted

Edgy, lifestyle-basedApproximate average store size

2,300 square feet

2,100 square feet   Store
    Operations.
         11




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Sourcing
    and Distribution
          Information
    Systems and Technology
     12




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Marketing
    and Advertising
        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).   13




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History
    of Bakers Shoe Stores
    Employees
    Properties
      Intellectual
    Property and Proprietary Rights
  tm ®
  Seasonality
  back-to-school,
 14




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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 ability to successfully appeal our pending delisting from
    the Nasdaq Stock Market;
    our ability to maintain adequate 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;
    our ability to comply with the covenants under our lending
    arrangements;
    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.
   15




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If we
    cannot maintain generally positive sales trends, we could fail
    to maintain a liquidity position adequate to support our ongoing
    operations.
    The
    Nasdaq Stock Market has made a determination to delist our
    common stock and there is no assurance that our appeal of that
    determination will be successful. Delisting from Nasdaq could
    negatively impact the value of our common stock and decrease the
    ability of our shareholders or potential shareholders to
    purchase or sell shares of our common stock.
  Form 10-Q
     16




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over-the-counter
  The
    report issued by our independent registered public accounting
    firm on our fiscal year 2009 financial statements contains
    language expressing substantial doubt about our ability to
    continue as a going concern.
    Our
    revolving credit facility is scheduled to expire on
    January 31, 2011 and our continued operations are reliant
    upon our ability to either renew or replace this
    facility.
    Our
    operations could be constrained by our ability to obtain funds
    under the terms of our revolving credit facility.
   17




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Our
    credit facility restricts our activities.
        The
    terms of our subordinated secured term loan contain certain
    covenants that restrict our activities. If we are unable to
    comply with these covenants, we would have to negotiate an
    amendment to the loan agreement or the lender could accelerate
    the repayment of our indebtedness and subject us to a
    cross-default
    under our credit facility.
        A
    continued decline in general economic conditions could lead to
    reduced consumer demand for our footwear and accessories and
    could lead to reduced sales.
   18




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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;
    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.
   19




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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.
    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; 20




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
    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 and pirates;
    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
  A
    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.
   21




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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.
    We
    would be adversely affected if our distribution operations were
    disrupted.
    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. 22




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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.
   23




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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.
    [Reserved] PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information and Holders
   24




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High

Low2008First quarter (ended May 3, 2008)

$
3.90


$
1.30Second quarter (ended August 2, 2008)


2.19



0.86Third quarter (ended November 1, 2008)


3.67



0.75Fourth quarter (ended January 31, 2009)


1.48



0.272009First quarter (ended May 2, 2009)

$
1.47


$
0.17Second quarter (ended August 1, 2009)


1.20



0.63Third quarter (ended October 31, 2009)


0.98



0.68Fourth quarter (ended January 30, 2010)


1.75



0.55   Dividends
    Recent
    Sales of Unregistered Securities
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
   25




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Item 6.
    Selected
    Financial Data.  Form 10-K.
  Fiscal Year Ended(1)February 2,


January 31,


January 30,January 28,


February 3,


2008


2009


20102006(2)


2007(3)(4)


(5)(6)(7)(8)


(6)(7)(8)(9)(10)


(7)(8)(10)Net sales

$
194,780,125


$
204,753,062


$
186,279,987


$
183,661,789


$
185,368,696Gross profit


65,340,924



62,202,028



47,461,122



50,551,662



53,368,600Income (loss) before income taxes


10,502,572



(2,452,971
)


(16,965,898
)


(14,910,754
)


(9,082,096
)Provision for (benefit from) income taxes


3,949,282



(909,860
)


691,367



84,847



Net income (loss)

$
6,553,290


$
(1,543,111
)

$
(17,657,265
)

$
(14,995,601
)

$
(9,082,096
)Net income (loss) per common shareBasic

$
1.10


$
(0.24
)

$
(2.70
)

$
(2.13
)

$
(1.24
)Diluted

$
1.04


$
(0.24
)

$
(2.70
)

$
(2.13
)

$
(1.24
)Total assets

$
74,754,684


$
83,158,859


$
67,558,951


$
58,508,192


$
48,618,467Long-term debt and capital lease obligations, less current
    portion

$
247,671


$
57,863


$
4,000,000


$



$
     (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)
    
    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 had an exercise price of
    $10.18 per share and expired 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.(3)
    
    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.(4)
    
    On January 29, 2006, we began recognizing 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 not restated. Total stock based
    compensation expense for fiscal years 2006, 2007, 2008 and 2009
    was $744,422, $529,571, $609,901 and $585,341, respectively.(5)
    
    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.(6)
    
    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. 26




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(7)
    
    During fiscal years 2007, 2008 and 2009, we recognized
    $3,131,169, $2,609,589 and $2,762,273, respectively, in noncash
    charges related to the impairment of long-lived assets of
    underperforming stores.(8)
    
    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. As of January 31, 2009
    and January 30, 2010, the valuation allowance had increased
    to $12,896,006 and $16,363,420, respectively.(9)
    
    During fiscal year 2008, the Company obtained net proceeds of
    $6.7 million from the entry into a $7.5 million
    subordinated secured term loan and the issuance of
    350,000 shares of common stock.(10)
    
    As discussed in Note 2 to the financial statements, the
    entire balance of the subordinated secured term loan and the
    subordinated convertible debentures has been classified as
    current liabilities. Scheduled principal repayments due after
    one year from January 30, 2010 for the subordinated
    convertible debentures are $4,000,000.  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
         27




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Form 10-K
 28




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Critical
    Accounting Policies
      Merchandise
    inventories
  first-in,
  Store
    closing and impairment charges
  store-by-store start-up
 29




---



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Stock-based
    compensation expense
        Deferred
    income taxes
       30




---



##### Table of Contents



Fiscal
    Year
    Results
    of Operations
    Fiscal Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Net sales


100.0
%


100.0
%


100.0
%Cost of merchandise sold, occupancy and buying expense


74.5



72.5



71.2Gross profit


25.5



27.5



28.8Selling expense


25.0



23.0



22.0General and administrative expense


9.6



9.4



8.6(Gain) loss on disposal of property and equipment


(2.5
)


0.2



0.2Impairment of long-lived assets


1.7



1.4



1.5Operating loss


(8.3
)


(6.5
)


(3.5
)Other income, net


0.1



0.1



0.1Interest expense


(0.9
)


(1.8
)


(1.5
)Provision for income taxes


0.4







Net loss


(9.5
)%


(8.2
)%


(4.9
)%     Fiscal Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Number of stores at beginning of period


257



249



239Stores opened or acquired during period


6



2



4Stores closed during period


(14
)


(12
)


(5
)Number of stores at end of period


249



239



238  31




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##### Table of Contents



Fiscal
    Year Ended January 30, 2010 Compared to Fiscal Year Ended
    January 31, 2009
  Net sales.
  Gross profit.
  Selling expense.
  General and administrative expense.
  Gain/loss on disposal of property and
    equipment.
  Impairment of long-lived assets.
  Interest expense.
  Income tax expense.
  Net loss.
  Fiscal
    Year Ended January 31, 2009 Compared to Fiscal Year Ended
    February 2, 2008
  Net sales.
 32




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##### Table of Contents



Gross profit.
  Selling expense.
  General and administrative expense.
  Gain/loss on disposal of property and
    equipment.
  Impairment of long-lived assets.
  Interest expense.
  Income tax expense.
  Net loss.
 33




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Seasonality
    and Quarterly Fluctuations
    Fiscal Year Ended February 2, 2008(1)(2)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   Fiscal Year Ended January 31, 2009(1)Thirteen


Thirteen


Thirteen


ThirteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedMay 5,


August 2,


November 1,


January 31,2008


2008


2008


2009Net sales

$
43,537,503


$
43,568,099


$
41,075,064


$
55,481,123Gross profit


11,249,973



12,879,165



8,996,887



17,425,637Operating expenses


15,319,099



14,236,601



16,623,909



16,148,228Operating income (loss)


(4,069,126
)


(1,357,436
)


(7,627,022
)


1,277,409   Fiscal Year Ended January 30, 2010(1)Thirteen


Thirteen


Thirteen Weeks


Thirteen WeeksWeeks Ended


Weeks Ended


Ended


EndedMay 2,


August 1,


October 31,


January 30,2009


2009


2009


2010Net sales

$
44,976,621


$
43,720,271


$
39,042,191


$
57,629,613Gross profit


12,696,440



12,922,107



6,766,363



20,983,690Operating expenses


14,600,044



14,076,667



16,293,982



14,853,036Operating income (loss)


(1,903,604
)


(1,154,560
)


(9,527,619
)


6,130,654     (1)
    
    During the second and third quarters of fiscal year 2007 and the
    third quarters of fiscal year 2008 and 2009 we recognized
    $755,672, $2,375,497, $2,609,588, and $2,762,273, respectively,
    in noncash charges related to the impairment of long-lived
    assets of underperforming stores.(2)
    
    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.  back-to-school,
  Liquidity
    and Capital Resources
   34




---



##### Table of Contents



35




---



##### Table of Contents



Form 10-K
    January 31,


January 30,2009


2010Cash

$
134,676


$
154,685Inventories


20,976,352



20,233,207Total current assets


23,512,002



23,010,037Revolving credit facility


11,482,862



10,531,687Subordinated secured term loan


4,817,282



2,785,112Subordinated convertible debentures


4,000,000



4,000,000Total current liabilities


38,283,963



37,294,558Net working capital


(14,771,961
)


(14,284,521
)Property and equipment, net


34,029,666



24,757,395Total assets


58,508,192



48,618,467Total shareholders equity


10,449,400



2,140,153Unused borrowing capacity*


736,030



1,928,913     *
    
     as calculated under the terms of our revolving
    credit facility 36




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##### Table of Contents



Operating
    activities
              Investing
    activities
         37




---



##### Table of Contents



Financing
    activities
    Revolving
    Credit Facility
           38




---



##### Table of Contents



Subordinated
    Secured Term Loan
           39




---



##### Table of Contents



Subordinated
    Convertible Debentures
         40




---



##### Table of Contents



2005
    Private Placement of Common Stock and Warrants
    IPO
    Warrants
    Contractual
    Obligations
    Payments Due in PeriodLess Than








More ThanContractual Obligations

Total


1 Year


1-3 Years


3-5 Years


5 YearsLong-term debt obligations(1)

$
7,938,110


$
3,128,785


$
4,809,325


$



$
Operating lease obligations(2)


134,311,719



24,790,027



45,058,159



36,032,621



28,430,912Purchase obligations(3)


30,532,364



24,532,364



3,000,000



3,000,000



Total

$
172,782,193


$
52,451,176


$
52,867,484


$
39,032,621


$
28,430,912     (1)
    
    Includes principal and interest payments on our subordinated
    secured term loan and our subordinated convertible debentures.
    As discussed in Note 2 to the financial statements, these
    obligations are classified as current liabilities on our balance
    sheet at January 30, 2010.(2)
    
    Includes minimum payment obligations relating to our store
    leases.(3)
    
    Includes merchandise on order, minimum royalty payments related
    to the H by Halston license, and payment obligations relating to
    store construction and miscellaneous service contracts.  Off-Balance
    Sheet Arrangements
   41




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##### Table of Contents



Recent
    Accounting Pronouncements
        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




---



##### 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.
  Executive
    Officers of the Registrant
    Name

Age

PositionPeter A. Edison


54


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


49


Executive Vice President and Chief Merchandising OfficerStanley K. Tusman


63


Executive Vice President and Chief Planning OfficerJoseph R. VanderPluym


58


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


51


Executive Vice President and Chief Financial Officer,
    Controller, Treasurer and Secretary  43




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##### Table of Contents



Peter A. Edison
  Mark D. Ianni
  Stanley K. Tusman
  Joseph R. VanderPluym 30-year
  Charles R. Daniel, III
    Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
  Form 10-K.
 44




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##### Table of Contents



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.     PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    Financial Statements: page F-1. page F-1
  Financial Statement Schedules:
  Exhibits: Form 10-K:
 45




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##### Table of Contents



SIGNATURES
  Form 10-K
    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)

April 30, 2010*(Charles
    R. Daniel, III)

Executive Vice President and Chief Financial Officer,
    Controller, Treasurer and Secretary (Principal Financial Officer
    and Principal Accounting Officer)

April 30, 2010(Andrew
    N. Baur)

Director

April 30, 2010*(Timothy
    F. Finley)

Director

April 30, 2010*(Harry
    E. Rich)

Director

April 30, 2010*(Scott
    C. Schnuck)

Director

April 30, 2010     *
    
    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
 46




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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 4.2 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended January 31, 2009 filed on
    April 24, 2009 (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
    filed on April 13, 2005 (File
    No. 000-50563)).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
    filed on April 13, 2005 (File
    No. 000-50563)).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
    filed on April 13, 2005 (File
    No. 000-50563)).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
    filed on April 13, 2005 (File
    No. 000-50563)).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
    filed on July 2, 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
    filed on July 2, 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
    filed on July 2, 2007 (File
    No. 000-50563)).4
.11

First Amendment to Subordinated Convertible Debentures and
    Subordinated Convertible Debenture Purchase Agreement dated
    April 20, 2010 (incorporated by reference to
    Exhibit 4.3 to the Companys Current Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).4
.12

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
    filed on July 2, 2007 (File
    No. 000-50563)).4
.13*

Second Lien Credit Agreement dated February 1, 2008
    (Loan Agreement) by and among the Company, and
    Private Equity Management Group, Inc. and the Lender named
    therein (incorporated by reference to Exhibit 4.1 to the
    Companys Current Report on
    Form 8-K
    filed on October 14, 2009 (File
    No. 000-50563)).4
.14

Subordinated Term Note evidencing amounts borrowed by the
    Company under the Second Lien Credit Agreement (incorporated by
    reference to Exhibit 4.2 to the Companys Current
    Report on
    Form 8-K
    filed on February 4, 2008 (File
    No. 000-50563)). 47




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##### Table of Contents



Exhibit No.

Description4
.15

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 Quarterly Report on
    Form 10-Q
    for the period ended August 1, 2009 filed on
    September 10, 2009 (File
    No. 000-50563)).4
.16

Subordination Agreement dated February 1, 2008 by and among
    the Company, Bank of America, N.A. and Private Equity Management
    Group, Inc., in its capacity as administrative agent for the
    Lender named therein (incorporated by reference to
    Exhibit 4.4 to the Companys Current Report on
    Form 8-K
    filed on February 4, 2008 (File
    No. 000-50563)).4
.17

Subordination Agreement dated February 1, 2008 by and among
    the Company, Private Equity Management Group, Inc., in its
    capacity as administrative agent for the Lender named therein,
    and the subordinated creditors named therein (incorporated by
    reference to Exhibit 4.5 to the Companys Current
    Report on
    Form 8-K
    filed on February 4, 2008 (File
    No. 000-50563)).4
.18

Registration Rights Agreement dated February 1, 2008 by and
    among the Company and Private Equity Management Group, Inc.
    (incorporated by reference to Exhibit 4.6 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended August 1, 2009 filed on
    September 10, 2009 (File
    No. 000-50563)).4
.19

Fee Letter dated February 1, 2008 between Private Equity
    Management Group, Inc. and the Company (incorporated by
    reference to Exhibit 4.7 to the Companys Current
    Report on
    Form 8-K
    filed on February 4, 2008 (File
    No. 000-50563)).4
.20*

Amendment Number 1 to Loan Documents dated May 9, 2008 by
    and among the Company, Private Equity Management Group, Inc. and
    the Lender named therein (incorporated by reference to
    Exhibit 4.8 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended August 1, 2009 filed on
    September 10, 2009 (File
    No. 000-50563)).4
.21

Letter of Consent delivered to the Company and Private Equity
    Management Group, Inc. by Bank of America, N.A. (incorporated by
    reference to Exhibit 4.3 to the Companys Current
    Report on
    Form 8-K
    filed on May 9, 2008 (File
    No. 000-50563)).4
.22

Amendment Number 2 to Loan Documents dated April 9, 2009 by
    and among the Company, Private Equity Management Group, Inc. and
    the Lender named therein (incorporated by reference to
    Exhibit 4.10 to the Companys Current Report on
    Form 8-K
    filed on April 15, 2009 (File
    No. 000-50563)).4
.23

Amendment Number 3 to Loan Documents dated September 3,
    2009 by and among the Company, Private Equity Management Group,
    Inc. and the Lender named therein (incorporated by reference to
    Exhibit 4.11 to the Companys Quarterly Report on
    Form 10-Q
    filed on September 10, 2009 (File
    No. 000-50563)).4
.24

Amendment Number 4 to Loan Documents dated March 23, 2010
    by and among the Company, Private Equity Management Group, Inc.
    and the Lender named therein (incorporated by reference to
    Exhibit 4.12 to the Companys Current Report on
    Form 8-K
    filed on March 25, 2010 (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
    filed on March 21, 2007 (File
    No. 000-50563)).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
    filed on March 21, 2007 (File
    No. 000-50563)).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
    filed on January 8, 2004 (File
    No. 333-86332)).10
.3

Letter to Peter Edison outlining 2009 bonus levels (incorporated
    by reference to Exhibit 10.4 to the Companys Current
    Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563)).10
.4

Letter to Stan Tusman outlining 2009 bonus levels (incorporated
    by reference to Exhibit 10.5 to the Companys Current
    Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563)).10
.5

Letter to Joe VanderPluym outlining 2009 bonus levels
    (incorporated by reference to Exhibit 10.6 to the
    Companys Current Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563)). 48




---



##### Table of Contents



Exhibit No.

Description10
.6

Letter to Mark Ianni outlining 2009 bonus levels (incorporated
    by reference to Exhibit 10.7 to the Companys Current
    Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563))10
.7

Letter to Charlie Daniel outlining 2009 bonus levels
    (incorporated by reference to Exhibit 10.8 to the
    Companys Current Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563)).10
.8

Letter to Peter Edison outlining 2010 bonus levels (incorporated
    by reference to Exhibit 10.4 to the Companys Current
    Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.9

Letter to Joe VanderPluym outlining 2010 bonus levels
    (incorporated by reference to Exhibit 10.5 to the
    Companys Current Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.10

Letter to Mark Ianni outlining 2010 bonus levels (incorporated
    by reference to Exhibit 10.6 to the Companys Current
    Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.11

Letter to Stan Tusman outlining 2010 bonus levels (incorporated
    by reference to Exhibit 10.7 to the Companys Current
    Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.12

Letter to Charlie Daniel outlining 2010 bonus levels
    (incorporated by reference to Exhibit 10.8 to the
    Companys Current Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.13

Bakers Footwear Group, Inc. 2005 Incentive Compensation Plan
    (incorporated by reference to Appendix A to the
    Companys 2005 Proxy Statement filed on April 27, 2005
    (File
    No. 000-50563)).10
.13.1

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
.13.2

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
    filed on October 9, 2007 (File
    No. 000-50563)).10
.14

Summary of base salaries for specified executive officers
    (incorporated by reference to Exhibit 10.25 to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended February 2, 2008 filed on
    May 2, 2008 (File
    No. 000-50563)).10
.15

Summary of March 11, 2008 stock option grants for the
    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
.16

Summary of March 12, 2009 restricted stock awards for the
    executive officers (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on March 18, 2009 (File
    No. 000-50563)).10
.17

Summary of April 20, 2010 stock option grants to executive
    officers of the Company (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on April 23, 2010 (File
    No. 000-50563)).10
.18

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
    filed on January 20, 2004 (File
    No. 333-86332)).10
.19

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
    filed on January 20, 2004 (File
    No. 333-86332)).10
.20

Employment Agreement dated September 5, 2006 by and between
    the Company and Joe VanderPluym (incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K
    filed on September 7, 2006 (File
    No. 000-50563)).10
.21

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
    filed on September 7, 2006 (File
    No. 000-50563)).10
.22

Amended Employment Agreement dated February 3, 2008 by and
    among the Company and Lawrence L. Spanley, Jr. (incorporated by
    reference to Exhibit 10.3 (and included in
    Exhibit 10.2) to the Companys Current Report on
    Form 8-K
    filed on February 4, 2008 (File
    No. 000-50563)).10
.23

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 filed on June 19,
    2007 (File
    No. 000-50563)). 49




---



##### Table of Contents



Exhibit No.

Description10
.24

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
.24.1

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
    filed on September 7, 2006 (File
    No. 000-50563)).10
.24.2

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 filed on
    April 24, 2007 (File
    No. 000-50563)).10
.24.3

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
    filed on May 18, 2007 (File
    No. 000-50563)).10
.24.4

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
.24.5

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
.24.6

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
.24.7

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
    for the period ended August 1, 2009 filed on
    September 10, 2009 (File
    No. 000-50563)).10
.25

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
    filed on April 16, 2002 (File
    No. 333-86332)).10
.26

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
    filed on April 16, 2002 (File
    No. 333-86332)).10
.27

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
    filed on June 4, 2002 (File
    No. 333-86332)).10
.28

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
    filed on June 4, 2002 (File
    No. 333-86332)).11
.1

Statement regarding computation of per share earnings
    (incorporated by reference from Note 15 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).     *
    
    Portions are omitted pursuant to a confidential treatment
    request and are filed separately with the SEC. 50




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##### Table of Contents



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  51




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##### Table of Contents



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




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##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.BALANCE SHEETS
  January 31,


January 30,2009


2010ASSETSCurrent assets:Cash and cash equivalents

$
134,676


$
154,685Accounts receivable


1,373,379



1,387,358Inventories


20,976,352



20,233,207Prepaid expenses and other current assets


1,027,595



1,234,787Total current assets


23,512,002



23,010,037Property and equipment, net


34,029,666



24,757,395Other assets


966,524



851,035Total assets

$
58,508,192


$
48,618,467LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
7,556,984


$
10,138,635Accrued expenses


8,175,564



7,320,595Subordinated secured term loan


4,817,282



2,785,112Subordinated convertible debentures


4,000,000



4,000,000Sales tax payable


1,032,584



1,152,277Deferred income


1,218,687



1,366,252Revolving credit facility


11,482,862



10,531,687Total current liabilities


38,283,963



37,294,558Accrued noncurrent rent liabilities


9,774,829



9,183,756Shareholders 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, 7,055,856 and 7,382,856 shares outstanding at
    January 31, 2009 and January 30, 2010, respectively


705



738Additional paid-in capital


38,506,784



39,279,600Accumulated deficit


(28,058,089
)


(37,140,185
)Total shareholders equity


10,449,400



2,140,153Total liabilities and shareholders equity

$
58,508,192


$
48,618,467    F-2




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.STATEMENTS OF OPERATIONS
  Year Ended


Year Ended


Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Net sales

$
186,279,987


$
183,661,789


$
185,368,696Cost of merchandise sold, occupancy, and buying expenses


138,818,865



133,110,127



132,000,096Gross profit


47,461,122



50,551,662



53,368,600Operating expenses:Selling


46,513,361



42,157,931



40,826,820General and administrative


17,901,666



17,213,142



15,928,472(Gain) loss on disposal of property and equipment


(4,698,232
)


347,176



306,164Impairment of long-lived assets


3,131,169



2,609,588



2,762,273Operating loss


(15,386,842
)


(11,776,175
)


(6,455,129
)Other income (expense):Interest expense


(1,693,878
)


(3,255,087
)


(2,723,566
)Other income (expense), net


114,822



120,508



96,599Loss before income taxes


(16,965,898
)


(14,910,754
)


(9,082,096
)Provision for income taxes


691,367



84,847



Net loss

$
(17,657,265
)

$
(14,995,601
)

$
(9,082,096
)Net loss per common share:

$
(2.70
)

$
(2.13
)

$
(1.24
)    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 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
)


24,040,100Stock-based compensation expense










609,901







609,901Issuance of common stock


400,000



40



794,960







795,000Net loss














(14,995,601
)


(14,995,601
)Balance at January 31, 2009


7,055,856



705



38,506,784



(28,058,089
)


10,449,400Stock-based compensation expense










585,341







585,341Issuance of common stock


250,000



25



187,475







187,500Issuance of restricted stock


77,000



8











8Net loss














(9,082,096
)


(9,082,096
)Balance at January 30, 2010


7,382,856


$
738


$
39,279,600


$
(37,140,185
)

$
2,140,153    F-4




---



##### Table of Contents



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


Year Ended


Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Operating activitiesNet loss

$
(17,657,265
)

$
(14,995,601
)

$
(9,082,096
)Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:Depreciation and amortization


8,583,524



7,781,462



6,535,588Deferred income taxes


2,387,809







Accretion of debt discount






667,282



488,663Stock-based compensation expense


529,571



609,901



585,341Interest expense recognized for issuing common stock related to
    amending the subordinated secured term loan










187,500Impairment of long-lived assets


3,131,169



2,609,588



2,762,273(Gain) loss on disposal of property and equipment


(4,698,232
)


347,176



306,164Changes in operating assets and liabilities:Accounts receivable


1,117,431



2,294



(13,971
)Inventories


6,040,065



(2,914,411
)


743,145Prepaid expenses and other current assets


16,636



(211,622
)


(238,969
)Prepaid income taxes


(857,984
)


1,868,822



31,777Other assets


(201,690
)


714,785



211,373Accounts payable


(1,052,428
)


474,770



2,581,651Accrued expenses and deferred income


(71,143
)


(596,799
)


(587,711
)Accrued noncurrent rent liabilities


755,144



(395,932
)


(591,073
)Net cash provided by (used in) operating activities


(1,977,393
)


(4,038,285
)


3,919,655Investing activitiesPurchase of property and equipment


(4,763,687
)


(923,256
)


(428,054
)Proceeds from disposition of property and equipment


5,017,639



1,468



416Net cash provided by (used in) investing activities


253,952



(921,788
)


(427,638
)Financing activitiesNet borrowings (payments) on line of credit


(1,914,925
)


298,483



(951,175
)Proceeds from issuance of convertible debentures


4,000,000







Debt issuance costs


(420,447
)


(325,542
)


Net proceeds from exercise of stock options


938







Proceeds from issuance of restricted stock


7







Proceeds from issuance of subordinated secured term loan and
    common stock






7,020,000



Principal payments of subordinated secured term loan






(2,000,000
)


(2,520,833
)Principal payments under capital lease obligations


(189,807
)


(57,863
)


Net cash provided by (used in) financing activities


1,475,766



4,935,078



(3,472,008
)Net increase (decrease) in cash and cash equivalents


(247,675
)


(24,995
)


20,009Cash and cash equivalents at beginning of period


407,346



159,671



134,676Cash and cash equivalents at end of period

$
159,671


$
134,676


$
154,685Supplemental disclosures of cash flow informationCash paid for income taxes

$
82,631


$



$
Cash paid for interest

$
1,667,213


$
2,098,519


$
2,032,627    F-5




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS
 January 30,
    2010
  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
    Impairment
    of Long-Lived Assets
  store-by-store start-up
  Revenue
    Recognition
    Cost
    of Merchandise Sold
    Operating
    Leases
      Stock-Based
    Compensation
   F-7




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Advertising
    and Marketing Expense
  point-of-sale
  Earnings
    per Share
    Earnings per Share
  Income
    Taxes
     F-8




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    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)
    Reclassifications
    2.
    Liquidity           F-10




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        Form 10-K
  3.
    Subsequent
    Events  Amendment
    to Subordinated Secured Term Loan
    Nasdaq
    Listing
  Form 10-Q Form 8-K
  Form 25-NSE
 F-11




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Amendment
    to Subordinated Convertible Debentures
    4.
    Subordinated
    Secured Term Loan         F-12




---



##### Table of Contents



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


January 31,


January 30,Lives


2009


2010Furniture, fixtures, and equipment


3 to 8 years


$
29,354,367


$
29,285,427Leasehold improvements


up to 10 years



41,770,376



41,710,865Computer equipment and software


3 years



5,290,391



4,354,093Construction in progress






556,819



398,33376,971,953



75,748,718Less accumulated depreciation and amortization






42,942,287



50,991,323$
34,029,666


$
24,757,395    F-13




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  6.
    Accrued
    Expenses    January 31,


January 30,2009


2010Employee compensation and benefits

$
1,861,819


$
1,974,366Accrued rent


265,975



303,723Other


6,047,770



5,042,506$
8,175,564


$
7,320,595   7.
    Operating
    Leases      Fiscal year:2010

$
24,790,0272011


23,360,4502012


21,697,7092013


19,040,5242014


16,992,097Thereafter


28,430,912$
134,311,719   8.
    Sale of
    Leasehold Interest    9.
    Subordinated
    Convertible Debentures   F-14




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Derivatives and Hedging
  10.
    Revolving
    Credit Agreement        11.
    Employee
    Benefit Plan   F-15




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  12.
    Commitments
    and Contingencies      13.
    Income
    Taxes  Income Taxes,
     F-16




---



##### Table of Contents



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


Year Ended


Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Current:Federal

$
(3,380,295
)

$
(3,007,729
)

$
(1,250,116
)State and local


(220,329
)


(840,435
)


(311,435
)Total current


(3,600,624
)


(3,848,164
)


(1,561,551
)Deferred:Federal


(1,982,129
)


(1,491,342
)


(1,612,653
)State and local


(912,269
)


(285,264
)


(293,210
)Total deferred


(2,894,398
)


(1,776,606
)


(1,905,863
)Valuation allowance


7,186,389



5,709,617



3,467,414Total provision for income taxes

$
691,367


$
84,847


$
     Year Ended


Year Ended


Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Federal income tax at statutory rate

$
(5,938,064
)

$
(5,218,763
)

$
(3,178,734
)Impact of federal alternative minimum tax






214,907



Impact of state NOL carryback refunds






(137,651
)


Impact of graduated Federal rates


169,659



149,107



90,821State and local income taxes, net of Federal income taxes


(753,399
)


(651,802
)


(401,655
)Change in valuation allowance


7,186,389



5,709,617



3,467,414Permanent differences


26,782



19,432



22,154Total provision for income taxes

$
691,367


$
84,847


$
    F-17




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    January 31,


January 30,2009


2010Deferred tax assets:Net operating loss carryforward

$
7,332,648


$
8,894,200Vacation accrual


384,696



396,524Inventory


1,187,969



989,396Stock-based compensation


888,235



1,116,518Accrued rent


3,812,183



3,581,665Property and equipment






1,496,584Total deferred tax assets


13,605,731



16,474,887Deferred tax liabilities:Property and equipment


550,008



Prepaid expenses


159,717



111,467Total deferred tax liabilities


709,725



111,467Valuation allowance


(12,896,006
)


(16,363,420
)Net deferred tax assets

$



$
   14.
    Stock-Based
    Compensation    2003
    Stock Option Plan
       F-18




---



##### Table of Contents



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

Year Ended

Year EndedFebruary 2,

January 31,

January 30,2008

2009

2010Options granted

272,613

310,500

72,000Weighted-average fair value of options granted

$3.59

$0.86

$0.18Assumptions:Dividends

0%

0%

0%Risk-free interest rate

4.25% - 4.5%

2.83% - 3.69%

2.2%Expected volatility

43% - 46%

46%

54%Expected option life

5-6 years

6 years

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 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



11.00



(116,876
)


11.00







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



9.90



512,448



9.45



688,226



9.56Granted










310,500



1.79



310,500



1.79Vested


156,498



9.67



(156,498
)


9.67







Exercised






















Forfeited


(12,154
)


10.62



(24,999
)


6.98



(37,153
)


8.17Balance at January 31, 2009


320,122



9.76



641,451



5.78



961,573



7.11Granted










72,000



0.33



72,000



0.33Vested


211,063



7.41



(211,063
)


7.41







Exercised






















Forfeited or surrendered


(258,156
)


10.49



(70,662
)


10.52



(328,818
)


10.50Balance at January 30, 2010


273,029


$
7.26



431,726


$
3.31



704,755


$
4.84    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



4.0


$
0.01


$
5,144$1.43  $4.52


110,900



8.0



3.07



$7.75


73,820



4.0



7.75



$9.30  $13.80


66,967



5.9



10.98



$20.06


16,623



6.1



20.06



Total ($0.01  $20.06)


273,029



6.2



7.26


$
5,144     Weighted-Average


Weighted-AverageNumber of


Contractual Life


Exercise


AggregateRange of Exercise Prices

Options


(Years)


Price


Intrinsic Value$0.01  $0.77


69,719



8.8


$
0.31


$
54,944$1.43  $4.52


399,600



8.0



2.64



$7.75


73,820



4.0



7.75



$9.30  $13.80


108,983



6.2



10.81



$20.06


28,233



6.1



20.06



Total ($0.01  $20.06)


680,355



7.3



4.99


$
54,944     2005
    Incentive Compensation Plan
    Performance
    Shares
   F-20




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Restricted
    Shares
    15.
    Earnings
    per Share    Year Ended


Year Ended


Year EndedFebruary 2,


January 31,


January 30,2008


2009


2010Numerator:Net income (loss)

$
(17,657,265
)

$
(14,995,601
)

$
(9,082,096
)Numerator for basic earnings (loss) per share


(17,657,265
)


(14,995,601
)


(9,082,096
)Interest expense related to convertible debentures










Numerator for diluted earnings (loss) per share

$
(17,657,265
)

$
(14,995,601
)

$
(9,082,096
)Denominator:Denominator for basic earnings (loss) per share 
    weighted average shares


6,540,905



7,040,609



7,328,087Effect of dilutive securities:Stock options










Stock purchase warrants










Convertible debentures










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


6,540,905



7,040,609



7,328,087    F-21




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Earnings per Share
  16.
    Fair
    Value of Financial Instruments    January 31, 2009


January 30, 2010Carrying





CarryingAmount


Fair Value


Amount


Fair ValueCash and cash equivalents

$
134,676


$
134,676


$
154,685


$
154,685Revolving credit facility


11,482,862



11,482,862



10,531,687



10,531,687Subordinated secured term loan


4,817,282



4,786,652



2,785,112



2,811,386Subordinated convertible debentures


4,000,000



2,227,463



4,000,000



2,578,638     17.
    Related
    Party Transactions    18.
    Quarterly
    Financial Data  Unaudited    Thirteen Weeks


Thirteen Weeks


Thirteen Weeks


Thirteen WeeksEnded


Ended


Ended


EndedMay 3,


August 2,


November 1,


January 31,2008


2008


2008


2009Fiscal year 2008:Net sales

$
43,537,503


$
43,568,099


$
41,075,064


$
55,481,123Gross profit


11,249,973



12,879,165



8,996,887



17,425,637Net income (loss)(1)(2)


(4,874,068
)


(2,261,710
)


(8,343,124
)


483,301Basic earnings (loss) per share


(0.70
)


(0.32
)


(1.18
)


0.07Diluted earnings (loss) per share


(0.70
)


(0.32
)


(1.18
)


0.07   F-22




---



##### Table of Contents



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


Thirteen Weeks


Thirteen WeeksThirteen Weeks


Ended


Ended


EndedEnded May 2,


August 1,


October 31,


January 30,2009


2009


2009


2010Fiscal year 2009:Net sales

$
44,976,621


$
43,720,271


$
39,042,191


$
57,629,613Gross profit


12,696,440



12,922,107



6,766,363



20,983,690Net income (loss)(2)


(2,768,668
)


(1,736,643
)


(10,166,980
)


5,590,195Basic earnings (loss) per share


(0.39
)


(0.24
)


(1.38
)


0.76Diluted earnings (loss) per share


(0.39
)


(0.24
)


(1.38
)


0.72     (1)
    
    During fiscal year 2008 the Company recognized income tax
    expense of $222,498 in the second quarter related to federal
    alternative minimum tax and recognized income tax benefit of
    $137,651 in the fourth quarter related to realized state net
    operating loss carrybacks. All other net income tax benefits
    were offset by changes to the valuation allowance.(2)
    
    During the third quarter of fiscal year 2008 and 2009, the
    Company recognized $2,609,588, and $2,762,273 respectively in
    noncash charges related to the impairment of long-lived assets
    of underperforming stores. F-23