##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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 3, 2007oro

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
    Incorporation or Organization)

(I.R.S. Employer
    Identification 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 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 þ
  Rule 12b-2 o þ
  Form 10-K
    DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



TABLE OF
    CONTENTS
  
  PART IItem 1.


Business


2Item 1A.


Risk
    Factors


20Item 1B.


Unresolved Staff
    Comments


21Item 2.


Properties


21Item 3.


Legal
    Proceedings


21Item 4.


Submission of
    Matters to a Vote of Security Holders


21PART IIItem 5.


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


21Item 6.


Selected Financial
    Data


23Item 7.


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


25Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


38Item 8.


Financial
    Statements and Supplementary Data


38Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


38Item 9A.


Controls and
    Procedures


38Item 9B.


Other
    Information


38PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


39Item 11.


Executive
    Compensation


40Item 12.


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


41Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


41Item 14.


Principal
    Accountant Fees and Services


41PART IVItem 15.


Exhibits and
    Financial Statement Schedules


41Employment Agreement with Larry SpanleyWaiver and Consent AgreementConsent of Independent Registered Public Accounting FirmPower of AttorneySection 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Financial OfficerSection 1350 of CEO and CFO




---



##### Table of Contents



PART I  Item 1.
    Business.  General
        Form 10-K,
  Company
    History
   2




---



##### Table of Contents



(314) 621-0699. Form 10-K.
  Growth
    Strategy
    Opening
    New Stores in Key Locations.
  
    We currently plan to open 10 to 12 new stores in fiscal year
    2007. In selecting specific sites, we look for high traffic
    locations primarily in regional shopping malls. We evaluate
    proposed sites based on the traffic patterns, type and quality
    of other tenants, average sales per square foot achieved by
    neighboring stores, lease terms and other factors considered
    important with respect to a specific location. We constantly
    update our search for new locations and have identified 200
    additional locations for potential new stores. We opened 34 new
    stores in fiscal year 2006, 30 new stores in fiscal year 2005,
    and 17 new stores in fiscal year 2004. As of April 16,
    2007, we have opened four new stores in fiscal year 2007.  
    We expect our new stores to average approximately $875,000 in
    store volume and to contribute approximately $160,000 of cash
    flow in their second year of operations. Construction costs for
    new stores currently average approximately $360,000. In
    connection with opening a new store, we typically receive a
    construction allowance from the landlord, which can range from
    $25,000 to over $100,000.
    We believe that the operating infrastructure we have in place is
    capable of integrating a significant number of new stores with
    relatively little additional increase in general and
    administrative expenses. Virtually all of our senior management
    executives have held similar positions at specialty retail
    chains of substantially greater size. We believe that our buying
    teams have sufficient levels of experience to support our
    expected new store growth. Finally, we believe that our
    information and logistics systems are scalable to support
    significant growth.  Expanding
    Presence of New Format Stores.
  
    We believe that we have had great success in remodeling existing
    Bakers stores into our new format. Through February 3,
    2007, 159 Bakers stores have been opened in or remodeled into
    our new store format. We expect our new format percentage to
    grow to more than 75% of our total Bakers store base by the end
    of fiscal year 2007. Sales at most remodeled stores have shown
    significant increases in volume after they are opened in the new
    format. We believe our new format stores generate higher annual
    sales because they feature a distinctive upscale contemporary
    format that is attractive to our customers. New format stores
    may not necessarily continue to achieve above average sales
    growth beyond their first year. Please also see
    Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations 
    Liquidity and Capital Resources  Investing
    Activities.
    Construction costs to remodel stores into the new format average
    approximately $360,000 and the remodeling typically requires the
    store to be closed for six to seven weeks. We plan to remodel
    existing stores into the new format in locations where we
    believe the additional investment will produce a higher return
    on investment than maintaining the current format. We remodeled
    12 Bakers stores in fiscal year 2006, 19 Bakers stores in fiscal
    year 2005 and 14 Bakers stores in fiscal year 2004 into the new
    format. We 3




---



##### Table of Contents



currently plan to remodel approximately 9 existing Bakers stores
    into the new format during fiscal year 2007. Typically, our
    stores are remodeled in connection with lease renewals.  
    We will close existing stores at the end of their current lease
    terms when we do not believe that remodeling into our new format
    will generate an acceptable economic return or when we otherwise
    cannot renew leases under terms that are mutually acceptable to
    us and our landlords. Closing underperforming stores allows us
    to better focus on our growth objectives. We closed 12 stores in
    fiscal year 2006, 13 stores in fiscal year 2005, and 12 stores
    in fiscal year 2004. We closed two stores during our four week
    transition period ended January 29, 2005. As of
    April 16, 2007, we closed four stores in fiscal year 2007.
    Please see Item 7. Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    for a table regarding the number of stores opened, acquired and
    closed in the last three years.  Increasing
    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
    todays young women into the footwear and accessory styles
    they desire.
    We employ a test and react strategy that constantly updates our
    product mix while managing inventory risk. This strategy is
    supported by our strong relationships with manufacturers, which
    allow our merchandising and buying teams to negotiate short
    lead-times, enabling us to test new styles and react quickly to
    fashion trends and keep fast-moving inventory in stock.
    We seek to continually improve the quality of our footwear
    offerings in order to meet our customers expectations and
    to allow us to strategically increase our price points. 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 also intend to drive comparable store sales increases through
    an enhanced offering of accessories and through the introduction
    and expansion of branded accessories. Accessories accounted for
    11.0% of merchandise sales in fiscal year 2006 and we believe
    that there is significant potential to expand our accessory
    sales and margins.
    Our stores sell national branded footwear 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 18.1% of our net
    shoe sales for fiscal year 2006 consisted of branded footwear.  Expanding
    into New Retail Channels.
  
    Since we began operating our Internet store in fiscal year 2000,
    our Internet sales have grown rapidly. For fiscal year 2006, our
    Internet and catalog sales were $8.3 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.
    In 2006, we introduced our 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 five catalogs during fiscal
    year 2007 and expect to expand the average mailing from 400,000
    copies to as many as 800,000 copies. We believe that our
    catalogs provide a new channel for our customers to purchase our
    merchandise and will increase traffic at our Internet store and
    our mall stores. 4




---



##### Table of Contents



Product
    Development and Merchandising
        Product
    Mix
    Private
    Label.
         5




---



##### Table of Contents



and/or
  National
    Brands.
  ® ® ® ® ® ®
  Accessories.
  ready-to-wear
  Merchandise
    Mix.
  2004-2006:
  Fiscal Year(1)Category

2004


2005


2006Private Label Footwear


74.0
%


75.5
%


72.9
%Branded Footwear


15.6
%


13.9
%


16.1
%Accessories


10.4
%


10.6
%


11.0
%Total


100.0
%


100.0
%


100.0
%     (1)
    
    Merchandise mix during our transition period in January 2005 was
    not materially different from that in the table.  Planning
    and Allocation.
     6




---



##### Table of Contents



Clearance.
      Stores
  Store
    Locations and Environment.
       7




---



##### Table of Contents



No.StoresAlabama


2Arizona


5Arkansas


2California


41Colorado


2Connecticut


5Delaware


1Florida


21Georgia


15Idaho


1Illinois


16Indiana


3Kansas


2Kentucky


1Louisiana


4Maryland


8Massachusetts


7Michigan


10Minnesota


2Missouri


6Nebraska


2Nevada


4New Hampshire


1New Jersey


14New Mexico


1New York


21North Carolina


3Ohio


6Oklahoma


2Pennsylvania


7Rhode Island


2South Carolina


2Tennessee


1Texas


24Utah


1Virginia


7Washington


2Wisconsin


3Total Stores


257
*Total States


38     *
    
    Excludes our Internet site, which is merchandised as a Bakers
    store. 8




---



##### Table of Contents



Store
    Concepts.
          Bakers

Wild PairTarget customer

Women - ages 16-35

Men & women -
    ages 17-29Private label sales

87% - 90%

33% - 38%Branded sales

10% - 13%

62% - 67%Fashion content

Widely-accepted

Edgy, lifestyle-basedApproximate average store size

2,350 square feet

1,900 square feet   Store
    Operations.
         9




---



##### Table of Contents



Sourcing
    and Distribution
          Information
    Systems and Technology
     10




---



##### Table of Contents



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). 11




---



##### Table of Contents



History
    of Bakers Shoe Stores
    Employees
    Properties
      Intellectual
    Property and Proprietary Rights
  tm ®
 12




---



##### Table of Contents



Seasonality
  back-to-school,
  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 expand as planned including our failure to
    integrate a significant number of new stores;
    the risk factors described below;
    our expectations regarding future financial results or
    performance contained in Item 7. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations;
    the execution of our business strategy;
    the market opportunity for our services and products;
    the accuracy of our estimates regarding our capital requirements
    and needs for additional financing;
    any of our other plans, objectives, expectations and intentions
    contained in this
    Form 10-K
    that are not historical facts; and
    changes in general economic and business conditions. 13




---



##### Table of Contents



Risk
    Factors
  Our
    failure to identify and respond to changing consumer fashion
    preferences in a timely manner would negatively impact our
    sales, profitability and our image as a fashion resource for our
    customers.
    Our
    operations and expansion plans could be constrained by our
    ability to obtain funds under the terms of our revolving credit
    facility.
    Our
    growth strategy relies on the continued addition of new stores,
    which could strain our resources and cause the performance of
    our existing stores to suffer.
      
    availability of sufficient capital resources;
    identifying suitable markets and sites for new store locations; 14




---



##### Table of Contents




    negotiating acceptable lease terms;
    acceptance of store formats and product offerings in different
    locations; and
    managing inventory effectively to meet the needs of new and
    existing stores on a timely basis.  Our
    overall profitability is highly dependent upon our fourth
    quarter results
    A
    decline in general economic conditions could lead to reduced
    consumer demand for our footwear and accessories and could lead
    to reduced sales and a delay in our expansion
    plans.
    We are
    susceptible to operating losses which would adversely affect our
    business and an investment in our common stock.
    Fluctuations
    in our quarterly results of operations could cause the price of
    our common stock to decline substantially.
    
    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.   15




---



##### Table of Contents



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.
    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; 16




---



##### Table of Contents




    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
  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.
   17




---



##### Table of Contents



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.
    We may
    be subject to liability under our registration
    statements.
    We are
    subject to risks associated with leasing our stores, including
    those stores where we acquired the lease through bankruptcy
    auctions.
  debtor-in-possession,
 18




---



##### Table of Contents



Our
    credit facility restricts our activities.
        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.
   19




---



##### Table of Contents



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.
      Executive
    Officers of the Registrant
    Item 1A.
    Risk
    Factors.   20




---



##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.    Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information and Holders
      High


Low2005First quarter (ended
    April 30, 2005)

$
11.34


$
9.17Second quarter (ended
    July 30, 2005)


12.38



9.22Third quarter (ended
    October 29, 2005)


16.50



11.76Fourth quarter (ended
    January 28, 2006)


20.05



13.542006First 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



8.63  21




---



##### Table of Contents



Stock
    Price Performance Graph
  line-of-business
  
  2/05/04


01/01/05


01/29/05


01/28/06


02/03/07Bakers Footwear Group, Inc.



100.00




122.44




119.66




239.32




138.72Hemscott Apparel Store Group Index



100.00




124.67




128.73




151.96




170.53Russell 2000 Index



100.00




112.67




107.90




126.78




130.48   Dividends
    Recent
    Sales of Unregistered Securities
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   22




---



##### Table of Contents



Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Item 6.
    Selected
    Financial Data.  Form 10-K.
  Fiscal Year Ended(6)(7)January 4,


January 3,


January 1,


January 28,


February 3,2003(4)


2004


2005(5)


2006(8)


2007(1)(9)Net sales

$
151,147,810


$
148,223,553


$
150,514,663


$
194,780,125


$
204,753,062Gross profit


44,563,077



44,530,778



46,033,614



65,340,924



62,202,028Income (loss) before cumulative
    effect of change in accounting and income taxes


(714,797
)


1,629,906



465,533



10,502,572



(2,452,971
)Provision for (benefit from) income
    taxes










(962,468
)


3,949,282



(909,860
)Income (loss) before cumulative
    effect of change in accounting


(714,797
)


1,629,906



1,428,001



6,553,290



(1,543,111
)Cumulative effect of change in
    accounting(2)


2,774,899















Net income (loss)(3)

$
2,060,102


$
1,629,906


$
1,428,001


$
6,553,290


$
(1,543,111
)Net income (loss) per common shareBasic

$
1.36


$
0.90


$
0.31


$
1.10


$
(0.24
)Diluted

$
0.96


$
0.77


$
0.28


$
1.04


$
(0.24
)Total assets

$
30,022,982


$
29,941,167


$
49,370,708


$
74,754,684


$
83,158,859Long-term debt, capital lease
    obligations and redeemable securities, less current portion

$
9,343,154


$
7,695,365


$
679,414


$
247,671


$
57,863Unaudited pro forma information(3):


(Unaudited
)


(Unaudited
)Income (loss) before cumulative
    effect of change in accounting and income taxes

$
(878,442
)

$
1,697,725Provision for (benefit from) income
    taxes


(302,363
)


657,758Income (loss) before cumulative
    effect of change in accounting


(576,079
)


1,039,967Cumulative effect of change in
    accounting, net of tax(2)


1,763,934



Net income

$
1,187,855


$
1,039,967Net income per common shareBasic

$
0.75


$
0.49Diluted

$
0.54


$
0.47     (1)
    
    We base our fiscal year on a 52/53 week period. The fiscal
    year ended February 3, 2007 is 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. 23




---



##### Table of Contents



(2)
    
    Represents the cumulative effect of adopting
    SFAS No. 142, Goodwill and Other Intangible
    Assets, and recognizing as income the unamortized deferred
    credit related to the excess of fair value over cost arising
    from the acquisition of our Bakers and Wild Pair store locations
    in 1999.(3)
    
    Through January 3, 2004, we elected S corporation
    status for Federal and state income tax purposes. Accordingly,
    for periods through 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.
    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.
    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.(4)
    
    Reflects approximately $1.7 million in initial public
    offering costs charged in fiscal year 2002 as a result of a
    delay in the initial public offering process.(5)
    
    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. See
    Note 3 in the Notes to the Financial Statements.(6)
    
    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. The
    audited results of operations and changes in shareholders
    equity and cash flows for the four week transition period are
    included in our Financial Statements and Notes thereto. 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 24




---



##### Table of Contents



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).(7)
    
    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.(8)
    
    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.(9)
    
    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 not restated. Total stock based
    compensation expense for fiscal year 2006 was $744,422, the
    related income tax benefit was $286,022, increasing our net loss
    by $458,400, or $0.07 per share.  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
         25




---



##### Table of Contents



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
 26




---



##### Table of Contents



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
   27




---



##### Table of Contents



Fiscal
    Year
  52-week
  Results
    of Operations
    Fiscal Year EndedJanuary 1,


January 28,


February 3,2005


2006


2007Net sales


100.0
%


100.0
%


100.0
%Cost of merchandise sold,
    occupancy and buying expense


69.4



66.5



69.6Gross profit


30.6



33.5



30.4Selling expense


20.9



19.7



22.1General and administrative expense


8.6



8.1



8.9Loss on disposal of property and
    equipment


0.3



0.2



0.1Impairment and disposal of
    long-lived assets


0.1







Operating income (loss)


0.7



5.5



(0.8
)Other income, net


0.2



0.1



0.1Interest expense


(0.6
)


(0.2
)


(0.5
)Provision for (benefit from)
    income taxes


(0.7
)


2.0



(0.4
)Net income (loss)


1.0
%


3.4
%


(0.8
)%     Fiscal Year EndedJanuary 1,


January 28,


February 3,2005


2006(1)


2007Number of stores at beginning of
    period


215



218



235Stores opened or acquired during
    period


17



30



34Stores closed during period


(12
)


(13
)


(12
)Number of stores at end of period


220



235



257     (1)
    
    The number of stores at the beginning of fiscal year 2005 is net
    of two stores that were closed during the four week transition
    period ended January 29, 2005. 28




---



##### Table of Contents



Fiscal
    Year Ended February 3, 2007 Compared to Fiscal Year Ended
    January 28, 2006
  Net sales.
  Gross profit.
  Selling expense.
  General and administrative expense.
  Loss on disposal of property and
    equipment.
  Interest expense.
  Income tax expense (benefit).
  Net income (loss).
  Fiscal
    Year Ended January 28, 2006 Compared to Fiscal Year Ended
    January 1, 2005
  Net sales.
 29




---



##### Table of Contents



Gross profit.
  Selling expense.
  General and administrative expense.
  Loss on disposal of property and
    equipment.
  Interest expense.
  Income tax expense (benefit).
  Net income.
  Four
    Week Transition Period Ended January 29, 2005 Compared to
    Four Weeks Ended January 31, 2004
   30




---



##### Table of Contents



Net sales.
  Gross profit.
  Selling expense.
  General and administrative expense.
  Income tax benefit.
  Net income (loss).
  Seasonality
    and Quarterly Fluctuations
    Fiscal Year Ended January 1, 2005Thirteen


Thirteen


Thirteen


ThirteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedApril 3, 2004


July 3, 2004


October 2, 2004


January 1, 2005Net sales

$
34,305,013


$
38,904,743


$
31,589,495


$
45,715,412Gross profit


9,667,056



12,467,827



6,847,351



17,051,380Operating expenses


10,904,057



10,856,076



11,173,404



12,026,681Operating income (loss)


(1,237,001
)


1,611,751



(4,326,053
)


5,024,699   Fiscal Year Ended January 28, 2006(1)Thirteen


Thirteen


Thirteen


ThirteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedApril 30, 2005


July 30, 2005


October 29, 2005


January 28, 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   31




---



##### Table of Contents



Fiscal Year Ended February 3, 2007(2)Thirteen


Thirteen


Thirteen


FourteenWeeks Ended


Weeks Ended


Weeks Ended


Weeks EndedApril 29, 2006


July 29, 2006


October 28, 2006


February 3, 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     (1)
    
    In connection with the change in our fiscal year we had a four
    week transition period from January 2, 2005 through
    January 29, 2005. The summary operating results for our
    transition period were as follows: net sales of $9,158,759,
    gross profit of $608,547, operating expenses of $3,530,744, and
    operating loss of $2,922,197.(2)
    
    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
    operating income(loss), 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.  back-to-school,
      Liquidity
    and Capital Resources
   32




---



##### Table of Contents



January 28,


February 3,2006


2007Cash

$
3,924,970


$
407,346Inventories


25,997,859



24,102,006Total current assets


35,366,487



30,809,573Revolving credit facility






13,099,304Total current liabilities


27,599,760



32,518,530Net working capital


7,766,727



(1,708,957
)Property and equipment, net


38,701,362



51,021,077Total assets


74,754,684



83,158,859Total shareholders equity


40,390,584



41,166,849Unused borrowing capacity*


19,220,644



6,100,178     *
    
    - as calculated under the terms of our revolving credit facility    Operating
    activities
         33




---



##### Table of Contents



Investing
    activities
        Financing
    activities
    (successor-by-merger
 34




---



##### Table of Contents



Form S-3
 35




---



##### Table of Contents



Accounting for Contingencies
      Initial
    Public Offering
       36




---



##### Table of Contents



Contractual
    Obligations
    Payments Due in PeriodLess Than


1-3


3-5


More ThanContractual Obligations

Total


1 Year


Years


Years


5 YearsLong-term debt obligations

$



$



$



$



$
Capital lease obligations(1)


302,135



236,983



65,152







Operating lease obligations(2)


201,307,705



25,916,500



50,763,414



46,831,929



77,795,862Purchase obligations(3)


28,811,680



28,378,699



410,186



22,795



Other long-term liabilities


















Total

$
230,421,520


$
54,532,182


$
51,238,752


$
46,854,724


$
77,795,862     (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.  Off-Balance
    Sheet Arrangements
    Recent
    Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Impact of
    Inflation
   37




---



##### Table of Contents



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.  The
    Companys management, with the participation of the
    Companys Chief Executive Officer and Chief Financial
    Officer, has evaluated the effectiveness of the Companys
    disclosure controls and procedures (as such term is defined in
    Rules 13a-15(e)
    and
    15d-15(e)
    under the Securities Exchange Act of 1934, as amended (the
    Exchange Act)), as of the end of the period covered
    by this report. Any controls and procedures, no matter how well
    designed and operated, can provide only reasonable assurance of
    achieving the desired control objectives. Based on such
    evaluation, the Companys Chief Executive Officer and Chief
    Financial Officer have concluded that, as of the end of such
    period, the Companys disclosure controls and procedures
    provided reasonable assurance that the disclosure controls and
    procedures were effective in recording, processing, summarizing
    and reporting, on a timely basis, information required to be
    disclosed by the Company in the reports that it files or submits
    under the Exchange Act and in accumulating and communicating
    such information to management, including the Companys
    Chief Executive Officer and Chief Financial Officer, as
    appropriate to allow timely decisions regarding required
    disclosure.



Internal Control Over Financial Reporting.  The
    Companys management, with the participation of the
    Companys Chief Executive Officer and Chief Financial
    Officer, conducted an evaluation of the Companys internal
    control over financial reporting to determine whether any
    changes occurred during the Companys fourth fiscal quarter
    ended February 3, 2007 that have materially affected, or
    are reasonably likely to materially affect, the Companys
    internal control over financial reporting. Based on that
    evaluation, there has been no such change during the
    Companys fourth quarter of fiscal year 2006.  Item 9B.
    Other
    Information.  Entry
    into a Material Definitive Agreement; Creation of a Direct
    Financial Obligation or an Obligation under an Off-Balance Sheet
    Arrangement of a Registrant.
  Amendment
    of Minimum Availability Covenant of Credit Facility.
   38




---



##### Table of Contents



Form 10-K.
   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Regulation S-K.
  Executive
    Officers of the Registrant
    Name

Age


PositionPeter A. Edison


51


Chairman of the Board and Chief
    Executive OfficerMichele A. Bergerac


51


President and DirectorMark D. Ianni


46


Executive Vice
    President  General Merchandise ManagerLawrence L. Spanley, Jr.


60


Executive Vice
    President  Chief Financial Officer, Treasurer and
    SecretaryStanley K. Tusman


60


Executive Vice
    President  Inventory and Information ManagementJoseph R. Vander Pluym


55


Executive Vice
    President  Stores   Peter A. Edison
  Michele A. Bergerac 17-year
  Mark D. Ianni
 39




---



##### Table of Contents



Lawrence L. Spanley, Jr.
  Stanley K. Tusman
  Joseph R. Vander Pluym 30-year
    Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
  Form 10-K.
  Item 11.
    Executive
    Compensation.   40




---



##### Table of Contents



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:
 41




---



##### Table of Contents



SIGNATURES
  Form 10-K
     By
    /s/  PETER
    A. EDISON   Chairman of the Board and Chief Executive Officer
 (Principal Executive Officer)
    Signature

Title

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

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

April 23, 2007*(Lawrence
    L. Spanley, Jr.)

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

April 23, 2007*(Andrew
    N. Baur)

Director

April 23, 2007*(Michele
    Bergerac)

Director

April 23, 2007*(Timothy
    F. Finley)

Director

April 23, 2007*(Harry
    E. Rich)

Director

April 23, 2007*(Scott
    C. Schnuck)

Director

April 23, 2007     *
    
    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




---



##### 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).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

Consultant Agreement dated
    May 18, 2001 by and between the Company and Mark H.
    Brown & Associates, LLC (incorporated by reference to
    Exhibit 10.11 to the Companys Registration Statement
    on
    Form S-1
    (File
    No. 333-86332),
    filed April 16, 2002).10
.6

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
.7

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).




---



##### Table of Contents



Exhibit No.

Description10
.8

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
.9

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
.10

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
.11

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
.12

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).10
.13

Employment Agreement dated
    August 26, 2006 by and between the Company and Larry
    Spanley.10
.14

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
.14.1

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
.14.2

Waiver and Consent Agreement dated
    as of April 18, 2007 by and between Bank of America, N.A.
    and the Company.10
.15

Tax Indemnification Agreement
    among the Company and its shareholders dated January 3,
    2004. (incorporated by reference to Exhibit 10.18 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
.16

Software License Agreement dated
    June 3, 1999 by and between JDA Software, Inc. and the
    Company (incorporated by reference to Exhibit 10.19 of
    Amendment No. 4 to the Companys Registration
    Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 20, 2004).10
.17

Amendment to Software License
    Agreement and Software Support Agreement dated June 4, 1999
    by and between JDA Software, Inc. and the Company (incorporated
    by reference to Exhibit 10.30 of Amendment No. 4 to
    the Companys Registration Statement on
    Form S-1
    (File
    No. 333-86332),
    filed January 20, 2004).10
.18

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
.19

Letter to Peter Edison outlining
    2006 bonus levels (incorporated by reference to
    Exhibit 10.6 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.20

Letter to Michele Bergerac
    outlining 2006 bonus levels (incorporated by reference to
    Exhibit 10.7 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.21

Letter to Stan Tusman outlining
    2006 bonus levels (incorporated by reference to
    Exhibit 10.8 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.22

Letter to Mark Ianni outlining
    2006 bonus levels (incorporated by reference to
    Exhibit 10.9 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.23

Letter to Joe Vander Pluym
    outlining 2006 bonus levels (incorporated by reference to
    Exhibit 10.10 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.24

Letter to Larry Spanley outlining
    2006 bonus levels (incorporated by reference to
    Exhibit 10.11 to the Companys Current Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.25

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)).




---



##### Table of Contents



Exhibit No.

Description10
.26

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
.27

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
.28

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
.29

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
.30

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
.31

Summary of March 16, 2006
    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 22, 2006 (File
    No. 000-50563)).10
.32

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
.33

Summary of base salaries for
    executive officers (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on April 5, 2006 (File
    No. 000-50563)).10
.34

Summary of Compensation of
    Non-management Directors as of March 16, 2006 (incorporated
    by reference to Exhibit 10.13 to the Companys Current
    Report on
    Form 8-K
    filed on March 22, 2006 (File
    No. 000-50563)).10
.35

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
.36

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)).11
.1

Statement regarding computation of
    per share earnings (incorporated by reference from Note 13
    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).




---



##### 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




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  
          
    F-1




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
 BALANCE
    SHEETS  January 28,


February 3,2006


2007ASSETSCurrent assets:Cash and cash equivalents

$
3,924,970


$
407,346Accounts receivable


1,099,436



1,352,936Other receivables


1,271,544



1,140,168Inventories


25,997,859



24,102,006Prepaid expenses and other current
    assets


1,251,581



713,810Prepaid income taxes






1,129,637Deferred income taxes


1,821,097



1,963,670Total current assets


35,366,487



30,809,573Property and equipment, net


38,701,362



51,021,077Deferred income taxes






424,139Other assets


686,835



904,070Total assets

$
74,754,684


$
83,158,859LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
12,059,734


$
8,134,642Accrued expenses


11,922,950



9,004,436Sales tax payable


634,497



757,868Accrued income taxes


1,297,964



Deferred income


1,297,872



1,332,473Revolving credit facility






13,099,304Current maturities of capital
    lease obligations


386,743



189,807Total current liabilities


27,599,760



32,518,530Obligations under capital leases,
    less current maturities


247,671



57,863Accrued rent liabilities


6,327,625



9,415,617Deferred income taxes


189,044



Shareholders 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, 6,300,479 and
    6,493,035 shares outstanding at January 28, 2006 and
    February 3, 2007, respectively


630



649Additional paid-in capital


34,252,066



36,571,423Retained earnings


6,137,888



4,594,777Total shareholders equity


40,390,584



41,166,849Total liabilities and
    shareholders equity

$
74,754,684


$
83,158,859    F-2




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
 STATEMENTS OF OPERATIONS  Four WeeksYear Ended


Ended


Year Ended


Year EndedJanuary 1,


January 29,


January 28,


February 3,2005


2005


2006


2007Net sales

$
150,514,663


$
9,158,759


$
194,780,125


$
204,753,062Cost of merchandise sold,
    occupancy, and buying expenses


104,481,049



8,550,212



129,439,201



142,551,034Gross profit


46,033,614



608,547



65,340,924



62,202,028Operating expenses:Selling


31,366,210



2,357,862



38,384,575



45,221,479General and administrative


12,915,802



1,143,899



15,778,796



18,207,593Loss on disposal of property and
    equipment


475,405



8,489



440,542



277,754Impairment of long-lived assets


202,801



20,494



20,252



55,266Operating income (loss)


1,073,396



(2,922,197
)


10,716,759



(1,560,064
)Other income (expense):Interest expense


(936,607
)


(30,360
)


(426,617
)


(1,005,217
)Other income (expense), net


328,744



17,356



212,430



112,310Income (loss) before income taxes


465,533



(2,935,201
)


10,502,572



(2,452,971
)Provision for (benefit from)
    income taxes


(962,468
)


(1,069,402
)


3,949,282



(909,860
)Net income (loss)

$
1,428,001


$
(1,865,799
)

$
6,553,290


$
(1,543,111
)Net income (loss) per common share:Basic

$
0.31


$
(0.37
)

$
1.10


$
(0.24
)Diluted

$
0.28


$
(0.37
)

$
1.04


$
(0.24
)    F-3




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
 STATEMENTS
    OF SHAREHOLDERS EQUITY  Class A, Class B, andCommon Stock


Class C Common Stock





RetainedShares





Shares





Additional


EarningsIssued and





Issued and





Paid-In


(AccumulatedOutstanding


Amount


Outstanding


Amount


Capital


Deficit)


TotalBalance at January 3, 2004





$




1,426,188


$
1,426


$
3,756,814


$
(503,754
)

$
3,254,486Adjust accumulated deficit and
    shareholder distributions to reflect conversion from S
    Corporation to C Corporation


















(442,140
)


503,754



61,614Accretion of Class A
    redeemable stock






















(116,854
)


(116,854
)Accretion of Class B
    redeemable stock






















139,250



139,250Exchange of Class A and B
    common stock for new common stock


1,965,150



197



(1,426,188
)


(1,426
)


1,823,475







1,822,246Shares issued in connection with
    Initial Public Offering


2,484,000



248











15,530,745







15,530,993Conversion of convertible
    debentures into common stock


653,331



65











4,954,736







4,954,801Net income






















1,428,001



1,428,001Balance at January 1, 2005


5,102,481



510











25,623,630



1,450,397



27,074,537Net loss






















(1,865,799
)


(1,865,799
)Balance 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
    exercise of stock warrants


76,896



8











636,242







636,250Shares issued in connection
    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



40,390,584Share based compensation
    expense


















744,422







744,422Shares issued in connection
    exercise of stock warrants


71,366



7











508,983







508,990Shares issued in connection
    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


$
41,166,849    F-4




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
 STATEMENTS
    OF CASH FLOWS  Four WeeksYear Ended


Ended


Year Ended


Year EndedJanuary 1,


January 29,


January 28,


February 3,2005


2005


2006


2007Operating activitiesNet income (loss)

$
1,428,001


$
(1,865,799
)

$
6,553,290


$
(1,543,111
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization


3,368,834



340,580



5,259,431



7,579,929Deferred income taxes


(1,098,640
)


(971,913
)


476,593



(755,756
)Stock-based compensation expense














744,422Income tax benefit from exercise of
    stock options










324,922



Beneficial conversion of
    subordinated debentures


163,333











Amortization of debt discount


9,820











Accretion of stock warrants


12,500











Impairment of long-lived assets


202,801



20,494



20,252



55,266Loss on disposal of property and
    equipment


475,405



8,489



440,542



277,754Changes in operating assets and
    liabilities:Accounts receivable and other
    receivables


(645,441
)


540,696



(1,028,371
)


(122,124
)Inventories


(4,010,497
)


(1,011,602
)


(8,195,504
)


1,895,853Prepaid expenses and other current
    assets


(18,439
)


(132,409
)


(70,825
)


537,771Prepaid income taxes














(1,129,637
)Other assets


510,369



(23,473
)


(309,368
)


(217,235
)Accounts payable


3,132,392



1,841,616



3,556,074



(3,925,092
)Accrued expenses and deferred income


2,156,394



(2,562,060
)


6,622,806



(2,760,542
)Accrued income taxes










1,259,871



(1,297,964
)Accrued rent liabilities


1,088,349



15,329



2,626,177



3,087,992Net cash provided by (used in)
    operating activities


6,775,181



(3,800,052
)


17,535,890



2,427,526Investing activitiesPurchase of property and equipment


(11,409,438
)


(1,385,436
)


(22,816,172
)


(20,390,113
)Proceeds from disposition of
    property and equipment


44,025



2,175



122,494



157,449Net cash used in investing
    activities


(11,365,413
)


(1,383,261
)


(22,693,678
)


(20,232,664
)Financing activitiesNet borrowings (payments) on line
    of credit


(2,169,474
)










13,099,304Excess income tax benefit from
    exercise of stock options














614,542Net proceeds from sale of common
    stock and warrants


15,530,993







7,538,419



Net proceeds from exercise of stock
    options










128,965



451,422Net proceeds from exercise of stock
    warrants










636,250



508,990Payments to retire stock warrants


(850,000
)










Principal payments under capital
    lease obligations


(947,332
)


(60,063
)


(652,635
)


(386,744
)Principal payments of subordinated
    debt


(859,910
)










Cash distributions to shareholders


(13,385
)










Net cash provided by (used in)
    financing activities


10,690,892



(60,063
)


7,650,999



14,287,514Net increase (decrease) in cash and
    cash equivalents


6,100,660



(5,243,376
)


2,493,211



(3,517,624
)Cash and cash equivalents at
    beginning of period


574,475



6,675,135



1,431,759



3,924,970Cash and cash equivalents at end of
    period

$
6,675,135


$
1,431,759


$
3,924,970


$
407,346Supplemental disclosures of cash
    flow informationCash paid for income taxes

$
142,735


$



$
1,852,368


$
1,643,607Cash paid for interest

$
776,580


$
39,619


$
423,006


$
986,622    F-5




---



##### Table of Contents



BAKERS
    FOOTWEAR GROUP, INC.
 NOTES TO
    FINANCIAL STATEMENTS
    February 3, 2007  1.
    Summary
    of Significant Accounting Policies  Operations
    Fiscal
    Year
  52-53 week
  Use of
    Estimates
    Cash
    and Cash Equivalents
    Inventories
  first-in,
 F-6




---



##### Table of Contents



Property
    and Equipment
  98-1, Accounting for the Costs of Computer Software Developed for
    or Obtained for Internal Use.
  Impairment
    of Long-Lived Assets
  store-by-store Accounting for the Impairment or Disposal of Long-Lived
    Assets.
    Revenue
    Recognition
    Cost
    of Merchandise Sold
    Operating
    Leases
      Stock-Based
    Compensation
  Share-Based Payment
 F-7




---



##### Table of Contents



Accounting for Stock-Based Compensation Accounting for
    Stock Issued to Employees
  Advertising
    and Marketing Expense
  point-of-sale
  Earnings
    per Share
    Income
    Taxes
  Accounting for Income Taxes
  Distributions
    to Shareholders
   F-8




---



##### Table of Contents



Deferred
    Income
  12-month 12-month
    Business
    Segment
    Shipping
    and Handling Costs
    Recent
    Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  2.
    Issuance
    of Common Stock and Warrants     F-9




---



##### Table of Contents



Form S-3 Accounting for Contingencies
    3.
    Initial
    Public Offering           F-10




---



##### Table of Contents



4.
    Property
    and Equipment    Estimated Useful


January 28,


February 3,Lives


2006


2007Furniture, fixtures, and equipment


3 to 8 years


$
20,249,066


$
28,009,665Leasehold improvements


up to 10 years



25,073,799



38,285,637Computer equipment and software


3 years



3,913,903



4,529,367Construction in progress






5,223,362



2,896,03254,460,130



73,720,701Less accumulated depreciation and
    amortization






15,758,768



22,699,624$
38,701,362


$
51,021,077     5.
    Accrued
    Expenses    January 28,


February 3,2006


2007Employee compensation and benefits

$
4,674,087


$
2,304,338Accrued rent


193,940



503,034Other


7,054,923



6,197,064$
11,922,950


$
9,004,436  F-11




---



##### Table of Contents



6.
    Capital
    Lease Obligations        Fiscal year:2007

$
236,9832008


65,152Total minimum lease payments


302,135Less amount representing interest


54,465Present value of minimum lease
    payments (including current portion of $189,807)

$
247,670   7.
    Operating
    Leases      Fiscal year:2007

$
25,916,5002008


25,803,6082009


24,959,8062010


24,054,5512011


22,777,378Thereafter


77,795,862$
201,307,705   8.
    Revolving
    Credit Agreement   F-12




---



##### Table of Contents



9.
    Employee
    Benefit Plan    10.
    Commitments
    and Contingencies    11.
    Income
    Taxes     F-13




---



##### Table of Contents



Four WeeksYear Ended


Ended


Year Ended


Year EndedJanuary 1,


January 29,


January 28,


February 3,2005


2005


2006


2007Current:Federal

$



$
(82,096
)

$
2,962,463


$
(111,713
)State and local


136,172



(15,393
)


548,319



(42,391
)Total current


136,172



(97,489
)


3,510,782



(154,104
)Deferred:Federal


(868,365
)


(818,453
)


363,248



(639,486
)State and local


(230,275
)


(153,460
)


75,252



(116,270
)Total deferred


(1,098,640
)


(971,913
)


438,500



(755,756
)Total provision for (benefit from)
    income taxes

$
(962,468
)

$
(1,069,402
)

$
3,949,282


$
(909,860
)     Four WeeksYear Ended


Ended


Year Ended


Year EndedJanuary 1,


January 29,


January 28,


February 3,2005


2005


2006


2007Federal income tax at statutory
    rate

$
162,937



(1,027,320
)

$
3,675,900


$
(858,540
)Impact of graduated Federal rates


(4,656
)


29,352



(100,000
)


24,530State and local income taxes, net
    of Federal income taxes


14,787



(72,564
)


415,086



(108,632
)Permanent differences


22,507



1,130



(41,704
)


32,782Conversion from S Corporation
    to C Corporation status


(1,158,043
)










Total provision for (benefit from)
    income taxes

$
(962,468
)

$
(1,069,402
)

$
3,949,282


$
(909,860
)      F-14




---



##### Table of Contents



January 28,


February 3,2006


2007Deferred tax assets:Vacation accrual

$
387,344


$
426,763Inventory


1,593,904



1,712,111Stock-based compensation


267,835



443,840Accrued rent


2,380,024



3,646,741Total deferred tax assets


4,629,107



6,229,455Deferred tax liabilities:Property and equipment


2,836,902



3,666,442Prepaid expenses


160,152



175,204Total deferred tax liabilities


2,997,054



3,841,646Net deferred tax assets

$
1,632,053


$
2,387,809   12.
    Stock-Based
    Compensation  Adoption
    of SFAS 123R
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees
 F-15




---



##### Table of Contents



Four WeeksYear Ended


Ended


Year EndedJanuary 1,


January 29,


January 28,2005


2005


2006Net income (loss) as reported

$
1,428,001


$
(1,865,799
)

$
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


(366,030
)


(33,275
)


(544,135
)Pro forma net income (loss)

$
1,061,971


$
(1,899,074
)

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

$
0.31


$
(0.37
)

$
1.10Pro forma

$
0.23


$
(0.37
)

$
1.00Diluted earnings (loss) per share:As reported

$
0.28


$
(0.37
)

$
1.04Pro forma

$
0.21


$
(0.37
)

$
0.96   Stock
    Options
      Year Ended

Year EndedJanuary 28, 2006

February 3, 2007Options granted

205,200

91,728Weighted-average fair value of
    options granted

$6.92

$10.48Assumptions:Dividends

0%

0%Risk-free interest rate

3.0% - 3.5%

4.75% - 5.0%Expected volatility

64%

50% - 55%Expected option life

6 years

5 - 6 years  F-16




---



##### Table of Contents



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 3, 2004


268,992


$
0.01






$




268,992


$
0.01Granted










304,500



7.75



304,500



7.75Vested


1,000



7.75



(1,000
)


7.75







Exercised






















Forfeited










(4,900
)


7.75



(4,900
)


7.75Balance 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(1)


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



9.30     (1)
    
    There were no options granted, vested, exercised, or forfeited
    during the four week transition period ended January 29,
    2005.      Weighted-Average


Weighted-AverageNumber of


Contractual Life


Exercise


AggregateRange of Exercise Prices

Options


(Years)


Price


Intrinsic Value$0.01


98,540



7.0


$
0.01


$
1,132,225$7.75


53,440



7.0



7.75



200,400$9.30  $13.80


31,820



8.1



11.31



6,323$20.06














Total ($0.01  $20.06)


183,800



7.2



4.22


$
1,338,948  F-17




---



##### Table of Contents



Weighted-Average


Weighted-AverageNumber of


Contractual Life


Exercise


AggregateRange of Exercise Prices

Options


(Years)


Price


Intrinsic Value$0.01


98,540



7.0


$
0.01


$
1,132,225$7.75


221,200



7.0



7.75



829,500$9.30  $13.80


190,816



8.2



11.38



35,731$20.06


75,050



9.1



20.06



Total ($0.01  $20.06)


585,606



7.7



9.21


$
1,997,456     Restricted
    and Performance Shares
   F-18




---



##### Table of Contents



13.
    Earnings
    per Share    Four WeeksYear Ended


Ended


Year Ended


Year EndedJanuary 1,


January 29,


January 28,


February 3,2005


2005


2006


2007Numerator:Net income (loss)

$
1,428,001


$
(1,865,799
)

$
6,553,290


$
(1,543,111
)Accretion on redeemable stock


22,396











Numerator for basic earnings
    (loss) per share


1,450,397



(1,865,799
)


6,553,290



(1,543,111
)Add accretion on redeemable stock


(22,396
)










Interest expense related to
    convertible debentures


26,387











Interest expense related to
    warrants


7,750











Numerator for diluted earnings
    (loss) per share

$
1,462,138


$
(1,865,799
)

$
6,553,290


$
(1,543,111
)Denominator:Denominator for basic earnings
    (loss) per share  weighted average shares


4,690,527



5,102,481



5,981,401



6,453,527Effect of dilutive securities:Stock options


319,778







239,078



Stock purchase warrants


12,254







58,466



Convertible debentures


68,205











Redeemable securities


56,837











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


5,147,601



5,102,481



6,278,945



6,453,527Basic earnings per
    shareNet income (loss)

$
0.30



(0.37
)

$
1.10


$
(0.24
)Accretion on Class A and
    Class B redeemable stock


0.01











Net income (loss) allocable to
    common shareholders

$
0.31


$
(0.37
)

$
1.10


$
(0.24
)Diluted earnings per
    shareNet income (loss) allocable to
    common shareholders

$
0.28


$
(0.37
)

$
1.04


$
(0.24
)    F-19




---



##### Table of Contents



14.
    Fair
    Value of Financial Instruments    January 28, 2006


February 3, 2007Carrying





CarryingAmount


Fair Value


Amount


Fair ValueCash and cash equivalents

$
3,924,970


$
3,924,970


$
407,346


$
407,346Revolving credit facility










13,099,304



13,099,304Capital lease obligations,
    including current maturities


634,414



760,150



247,670



287,277     15.
    Related
    Party Transactions    16.
    Quarterly
    Financial Data  Unaudited    Thirteen Weeks


Thirteen Weeks


Thirteen Weeks


Thirteen WeeksEnded


Ended


Ended


EndedApril 30, 2005


July 30, 2005


October 29, 2005


January 28, 2006Fiscal year 2005:Net sales

$
44,943,180


$
45,255,560


$
43,242,897


$
61,338,488Gross profit


15,406,619



14,983,321



11,840,353



23,110,631Net income (loss)


1,851,138



1,223,619



(1,049,982
)


4,528,515Basic earnings (loss) per share


0.35



0.20



(0.17
)


0.73Diluted earnings (loss) per share


0.33



0.19



(0.17
)


0.68   Thirteen Weeks


Thirteen Weeks


Thirteen Weeks


Fourteen WeeksEnded


Ended


Ended


EndedApril 29, 2006


July 29, 2006


October 28, 2006


February 3, 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     (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. F-20