##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended July 2, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission file number 1-9169
 BERNARD CHAUS, INC.
  New York
    
    13-2807386(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)530 Seventh Avenue, New York, New York
    
    10018(Address of principal executive offices)
    
    (Zip Code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.01 par value
    
    None; securities quoted on the Over the Counter Bulletin Board
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   Date
    
    Class
    
    Shares OutstandingSeptember 30, 2011
    
    Common Stock, $0.01 par value
    
    37,481,373
 Documents Incorporated by Reference




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Removed and ReservedPART IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders mattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits, Financial Statement ScheduleSIGNATURESEX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I
 
 Item 1. Business.
 General
 ® ® ® ® ® ® ® ®
    Recent Developments
   th
 1




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Products
  Chaus and Josephine Chaus
 Cynthia Steffe and Cynthia Cynthia Steffe
 Kenneth Cole
 Vince Camuto
 Private Label
   2




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Fiscal Year Ended2011
    
    
    2010Josephine Chaus and Chaus
    
    
    21
    %
    
    
    23
    %Private Labels
    
    
    11
    
    
    
    14Licensed Products
    
    
    55
    
    
    
    52Cynthia Steffe and Cynthia Cynthia Steffe
    
    
    13
    
    
    
    11Total
    
    
    100
    %
    
    
    100
    %
 Business Segments
  Customers
   Sales and Marketing
   3




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Design
  Manufacturing and Distribution
      4




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Exclusive Supply Agreement
  Imports and Import Restrictions
   Backlog
  Trademarks
  5




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Competition
    Employees
   Executive Officers
  NAME
    
    AGE
    
    POSITIONJosephine Chaus
    

    60
    
    
    
    Chairwoman of the Board and Chief Executive OfficerWilliam P. Runge
    
    57
    

    
    
    Interim Chief Financial Officer
  Josephine Chaus
 William P. Runge
 6




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Forward Looking Statements
  
 Item 1A. Risk Factors.
 We rely on a few significant customers, so the decrease in business from one or more of these
significant customers could have a material adverse impact on our business
 We must remain competitive by our ability to adequately anticipate market trends, respond to
changing fashion trends and consumer buying patterns
 CTG supplies us with the majority of our products on favorable payment terms. In the event CTG
terminates its agreement with us or requires a change in the payment terms, it could have a
material adverse effect on our business.
 We rely on our lender
CIT to borrow money in order to fund our operations
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We use foreign suppliers for the manufacturing of our products and in July 2009 we entered
into an exclusive supply agreement with one of our major manufacturers CTG.
  
    
    Political and labor instability in foreign countries
    
    Terrorism, military conflict or war
    
    Changes in quotas, duty rates or other politically imposed restrictions by China
and other foreign countries or the United States
    
    Delays in the delivery of cargo due to security considerations or other shipping
disruptions
    
    A decrease in availability or increase in the cost of raw materials
 The success of our Vince Camuto licensed products depends on the value of the licensed brands
and our achieving sufficient sales to offset the minimum royalty payments and advertising amounts
that we must pay with respect to these products.
 We operate in a highly competitive industry.
 Further consolidation in the retail industry could have a material adverse impact on our
business.
 Risks associated with the ownership of Common Stock.
 8




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We will be subject
to cyclical variations in the apparel markets.
 Our success is dependent upon our ability to attract new and retain existing key personnel.
 Our success is dependent on consumer
demand and economic conditions stabilizing.
 
 Item 2. Properties .
     
 Item 3. Legal Proceedings.
   
 Item 4. Removed and Reserved
 
 PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
   9




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High
    
    
    LowFiscal 2010
    
    First Quarter
    
    $
    0.20
    
    
    $
    0.12Second Quarter
    
    
    0.29
    
    
    
    0.19Third Quarter
    
    
    0.29
    
    
    
    0.10Fourth Quarter
    
    
    0.15
    
    
    
    0.01Fiscal 2011
    
    First Quarter
    
    $
    0.17
    
    
    $
    0.06Second Quarter
    
    
    0.23
    
    
    
    0.05Third Quarter
    
    
    0.17
    
    
    
    0.10Fourth Quarter
    
    
    0.16
    
    
    
    0.10
       10




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Item 6. Selected Financial Data.
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 ® ® ® ® ® ® ® ®
   Exclusive Supply Agreement
  Results of Operations
  Fiscal Year Ended2011
    
    
    2010Net revenue
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    19.0
    %
    
    
    24.4
    %Selling, general and administrative expenses
    
    
    32.5
    %
    
    
    29.6
    %Gain on early termination of license agreement
    
    
    5.1
    %
    
    
    Interest expense
    
    
    0.9
    %
    
    
    0.8
    %Net loss
    
    
    (9.3
    )%
    
    
    (6.0
    )%
   11




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Financial Condition, Liquidity and Capital Resources
 General
  12




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Financing Agreements
  th
   Factoring Agreements
  13




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Future Financing Requirements
    Off Balance Sheet Arrangements
  Inflation
  Seasonality of Business and Fashion Risk
  14




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Foreign Operations
  Critical Accounting Policies and Estimates
     15




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
   
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  16




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Changes in Internal Control over Financial Reporting
  Managements Report on Internal Control over Financial Reporting
     
 Item 9B. Other Information
 None
 
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant.
  17




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Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders
matters.
   
 Item 13. Certain Relationships and Related Transactions.
  
 Item 14. Principal Accounting Fees and Services.
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedule
 (a)
    
    Financial Statements and Financial Statement Schedule: See List of Financial
Statements and Financial Statement Schedule on page F-1.(b)
    
    Exhibits
 3.1
    
    Restated Certificate of Incorporation (the Restated Certificate) of the Company
(incorporated by reference to Exhibit 3.1 of the Companys Registration Statement on Form S-1,
Registration No. 33-5954 (the 1986 Registration Statement)).3.2
    
    Amendment dated November 18, 1987 to the Restated Certificate (incorporated by reference to
Exhibit 3.11 of the Companys Registration Statement on Form S-2, Registration No. 33-63317
(the 1995 Registration Statement)).3.3
    
    Amendment dated November 15, 1995 to the Restated Certificate (incorporated by reference to
Exhibit 3.12 of Amendment No. 1 to the 1995 Registration Statement).3.4
    
    Amendment dated December 9, 1998 to the Restated Certificate (incorporated by reference to
Exhibit 3.13 of the Companys Form 10-K for the year ended June 30, 1998 (the 1998 Form
10-K)).3.5
    
    By-Laws of the Company, as amended (incorporated by reference to exhibit 3.1 of the Companys
Form 10-Q for the quarter ended December 31, 1987).
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3.6
    
    Amendment dated September 13, 1994 to the By-Laws (incorporated by reference to Exhibit 10.105
of the Companys Form 10-Q for the quarter ended September 30, 1994).10.77
    
    1998 Stock Option Plan, as amended by Amendment No.1 thereto including form of related stock
option agreement (incorporated by reference to Exhibit A and Exhibit B of the Companys Proxy
Statement filed with the Commission on October 17, 2000).10.81
    
    Collective Bargaining Agreement between the Company and Amalgamated Workers Union, Local 88
effective as
of September 24, 1999 (incorporated by reference to Exhibit 10.81 of the Companys Form 10-K
for the year ended June 30, 1999 (the 1999 Form 10-K)).10.82
    
    Lease between the Company and Adler Realty Company, dated June 1, 1999 with respect to the
Companys
executive offices and showroom at 530 Seventh Avenue, New York City (incorporated by reference
to Exhibit 10.82 of the 1999 Form 10-K).10.83
    
    Lease between the Company and Kaufman Eighth Avenue Associates, dated September 11, 1999
with respect to the Companys technical support facilities at 519 Eighth
Avenue, New York City (incorporated by reference to Exhibit of the
Companys Form 10-K for the year ended June 30, 2000 (the 2000 Form 10-K)).10.90
    
    Lease modification agreement between the Company and Hartz Mountain Industries, Inc., dated
August 30, 1999 with respect to the Companys distribution and office facilities in Secaucus, NJ.
(incorporated by reference to Exhibit 10.90 of the Companys Form 10-K for the year ended June 30,
2001 (the 2001 Form 10-K)).10.100
    
    Financing Agreement between the Company and CIT/Commercial Services, Inc., as Agent, dated
September 27, 2002. (incorporated by reference to Exhibit 10.100 of the 2002
Form 10-K).10.101
    
    Factoring Agreement between the Company and CIT/Commercial Services, Inc., dated September
27, 2002. (incorporated by reference to Exhibit 10.101 of the 2002 Form
10-K).10.102
    
    Joinder and Amendment No. 1 to Financing Agreement by and among the Company, S.L. Danielle
and The CIT
Group/Commercial Services, Inc., as agent, dated November 27, 2002. (incorporated by
reference to Exhibit 10.102 of the Companys Form 10-Q for the quarter
ended December 31, 2002).10.103
    
    Amendment No. 1 to Factoring Agreement between the Company and The CIT Group/Commercial
Services, Inc., dated November 27, 2002. (incorporated by reference to Exhibit 10.103 of the
Companys Form 10-Q for the quarter ended December 31, 2002).10.104
    
    Factoring Agreement between S.L. Danielle and The CIT Group/Commercial Services, Inc., dated
November 27, 2002. (incorporated by reference to Exhibit 10.104 of the Companys Form 10-Q for the
quarter ended December 31, 2002).10.105
    
    Asset Purchase Agreement between S.L. Danielle and S.L. Danielle, Inc., dated November 27,
2002. (incorporated by reference to Exhibit 10.105 of the Companys Form 10-Q for the quarter
ended December 31, 2002).10.106
    
    Joinder and Amendment No. 2 to Financing Agreement by and among the Company, S.L.
Danielle, Cynthia Steffe Acquisition, LLC and The CIT
Group/Commercial Services, Inc., as agent, dated January 30, 2004.
(incorporated by reference to Exhibit 10.106 of the Companys Form 10-Q for the quarter ended
December 31, 2003).
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10.107
    
    Amendment No. 2 to Factoring Agreement between the Company and The CIT Group/Commercial
Services, Inc., dated January 30, 2004. (incorporated
by reference to Exhibit 10.107 of the Companys Form 10-Q for the quarter ended
December 31, 2003).10.108
    
    Amendment No. 1 to Factoring Agreement between S.L. Danielle and The CIT Group/Commercial
Services, Inc., dated January 30, 2004. (incorporated
by reference to Exhibit 10.108 of the Companys Form 10-Q for the quarter ended
December 31, 2003).10.109
    
    Factoring Agreement between Cynthia Steffe Acquisition, LLC and The CIT Group/Commercial
Services, Inc., dated January 15, 2004.
(incorporated by reference to Exhibit 10.109 of the Companys Form 10-Q for the
quarter ended December 31, 2003).10.112
    
    Notice of Defactoring among Bernard Chaus, Inc., S.L. Danielle Acquisition, LLC and the
CIT Group/Commercial Services, Inc., dated
March 31, 2004. (incorporated by reference to Exhibit 10.112 of the
Companys Form 10-Q for the quarter ended March 31, 2004).10.113
    
    Amendment No. 1 to Factoring Agreement between Cynthia Steffe Acquisition LLC and the CIT
Group/Commercial Services, Inc., dated April1,
2004. (incorporated by reference to Exhibit 10.113 of the
Companys Form 10-Q for the quarter ended March 31, 2004).10.114
    
    Amendment No. 3 to Financing Agreement among the Company, S.L. Danielle, Cynthia
Steffe Acquisition, LLC and the CIT Group/Commercial Services, Inc. as agent,
dated September 15, 2004 (incorporated by reference to Exhibit 10.114 of
the 2004 Form 10-K).10.117
    
    Amendment No. 4 to Financing Agreement among the Company, S.L. Danielle, Cynthia
Steffe Acquisition, LLC and the CIT Group/Commercial Services, Inc. as agent, dated November
11, 2004. (incorporated by reference to Exhibit 10.117 of the Companys form 10-Q the
quarter ended December 31, 2004).10.118
    
    Amendment No. 2 to Factoring Agreement between Cynthia Steffe Acquisition LLC and the CIT
Group/Commercial Services, Inc., dated November 11, 2004.
(incorporated by reference to Exhibit 10.118 of the Companys form 10-Q the quarter ended
December 31, 2004).10.119
    
    Amendment No.5 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial Services, Inc. dated May 12, 2005. (incorporated
by reference to Exhibit 10.119 of the 2005 Form 10-K).10.120
    
    Stock Purchase Agreement between Bernard Chaus, Inc. and Kenneth Cole Productions,
Inc. dated June 13, 2005 (incorporated by reference to Exhibit 10.120 of the 2005 Form 10-K).10.121
    
    License Agreement between Kenneth Cole Productions (LIC), Inc. and Bernard Chaus,
Inc. dated June 13, 2005 (filed in redacted form since confidential treatment
was requested pursuant to Rule 24b-2 for certain portions thereof).
(incorporated by reference to Exhibit 10.121 of the 2005 Form 10-K).10.122
    
    Amendment No.6 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial
Services, Inc. dated September 15, 2005. (incorporated by
reference to Exhibit 10.122 of the 2005 Form 10-K).10.123
    
    Amendment No.7 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial
Services, Inc. dated May 8, 2006. (incorporated by
reference to Exhibit 10.123 of the 2006 Form 10-K).
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10.124
    
    Amendment No.8 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial
Services, Inc. dated September 21, 2006. (incorporated by
reference to Exhibit 10.124 of the 2006 Form 10-K).10.125
    
    Amendment No.9 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial
Services, Inc. dated August 31, 2007. (incorporated by
reference to Exhibit 10.125 of the 2007 Form 10-K).10.126
    
    Amendment No. 1 License Agreement between Kenneth Cole Productions (LIC), Inc. and
Bernard Chaus, Inc. dated September 26, 2007 (filed in redacted form since
confidential treatment was requested pursuant to Rule 24b-2 for certain
portions thereof). (incorporated by reference to Exhibit 10.126 of the 2007 Form 10-K).10.127
    
    Amendment No.10 to Financing Agreement among the Company, S.L. Danielle, Cynthia
Steffe Acquisition, LLC and the CIT Group/Commercial Services, Inc. dated
January 31, 2008. (incorporated by reference to Exhibit 10.127 of the Companys
form 10-Q the quarter ended December 31, 2007).10.128
    
    Amendment 2 to License Agreement between Kenneth Cole Productions (LIC), Inc. and
Bernard Chaus, Inc. dated December 31, 2007 (filed in redacted form since
confidential treatment was requested pursuant to Rule 24b-2 for certain
portions thereof). (incorporated by reference to Exhibit 10.1 of the Companys Form 8-K filed on
January 16, 2008).10.129
    
    Amendment No.11 to Financing Agreement among the Company, S.L. Danielle, Cynthia Steffe
Acquisition, LLC and the CIT Group/Commercial
Services, Inc. dated September 02, 2008. (incorporated by
reference to Exhibit 10.129 of the 2008 Form 10-K).10.130
    
    Financing Agreement between the Company and CIT/Commercial Services, Inc., as Agent, dated
September 18, 2008. (incorporated by reference to Exhibit 10.130 of the 2008
Form 10-K).10.131
    
    Factoring Agreement between the Company and CIT/Commercial Services, Inc., dated September
18, 2008. (filed in redacted form since confidential treatment was
requested pursuant to Rule 24b-2 for certain portions there of) (incorporated by
reference to Exhibit 10.131 of the 2008 Form 10-K).10.132
    
    Lease modification agreement between the Company and G&S Realty 1, LLC dated October 7, 2008
with respect to the Companys executive offices and
showrooms at 530 Seventh Avenue, New York, New York. (incorporated by
reference to Exhibit 10.132 of the Companys form 10-Q the quarter ended September 30, 2008).10.133
    
    Amendment No. 1 to Amendment and Restated Financing Agreement and Waiver, dated
February  , 2009, between the Company and the CIT Group/Commercial Services, Inc.
(incorporated by reference to Exhibit 10.133 of the Companys form 10-Q the quarter ended
December 31, 2008).10.1
    
    Amendment to the Financing Agreement by and among Bernard Chaus, Inc., Cynthia Steffe
Acquisition LLC, S.L. Danielle Acquisition, LLC and The CIT Group/Commercial
Services, Inc., dated May 12, 2009. (incorporated by reference to
Exhibit 10.1 of the Companys form 10-Q the quarter ended March 31, 2009).10.2
    
    Amendment to the Factoring Agreement by and among Bernard Chaus, Inc., Cynthia Steffe
Acquisition LLC, S.L. Danielle Acquisition, LLC and The CIT Group/Commercial
Services, Inc., dated May 12, 2009. (incorporated by reference to Exhibit
10.2 of the Companys form 10-Q the quarter ended March 31, 2009).10.3
    
    Amended and Restated Factoring and Financing Agreement by and among Bernard Chaus, Inc.,
Cynthia Steffe Acquisition LLC, S.L. Danielle Acquisition, LLC and The CIT
Group/Commercial Services, Inc., dated September 10, 2009. (filed in redacted form since
confidential treatment was requested pursuant to Rule 24b-2 for certain portions thereof). )
(incorporated by reference to Exhibit 10.3 of the Companys 2009 Form 10-K).
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10.4
    
    Amended and Restated Factoring and Financing Agreement by and among Bernard Chaus, Inc.,
Cynthia Steffe Acquisition LLC, S.L. Danielle Acquisition, LLC and The CIT
Group/Commercial Services, Inc., dated March 29, 2010. (filed in redacted form
since confidential treatment was requested pursuant to Rule 24b-2 for certain portions
thereof). ) (incorporated by reference to Exhibit 10.1 of the Companys Form 8-K filed on
March 30, 2010).10.5
    
    Agreement, dated October 19, 2010, between Kenneth Cole
Productions (LIC) and Bernard Chaus, Inc., related to the
termination of the Kenneth Cole licensing agreement (filed in
redacted form since confidential treatment was requested
pursuant to Rule 24b-2 for certain portions thereof).
(incorporated by reference to Exhibit 10.5 of the Companys
2010 Form 10-K).10.6
    
    Trademark License Agreement, dated November 18, 2010,
between Bernard Chaus, Inc. and Camuto Consulting, Inc. d/b/a
Camuto Group (filed in redacted form since confidential
treatment was requested pursuant to Rule 24b-2 for certain
portions thereof). (incorporated by reference to Exhibit 10.6
of the Companys form 10-Q the quarter ended October 2, 2010).*21
    
    List of Subsidiaries of the Company.*23.1
    
    Consent of Mayer Hoffman McCann CPAs (The New York Practice of Mayer Hoffman McCann P.C.), Independent Registered Public
Accounting Firm.*31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Josephine Chaus.*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William P. Runge.*32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 for Josephine Chaus.*32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 for William P. Runge.
 
 
    
    Management agreement or compensatory plan or arrangement required to be filed as an exhibit.*
    
    Filed herewith. 22




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BERNARD CHAUS, INC.By:
    /s/ Josephine ChausJosephine ChausDate:
    Chairwoman of the Board and
Chief Executive Officer

September 30, 2011  SIGNATURE
    
    TITLE
    
    DATE/s/ Josephine Chaus

Josephine Chaus
    
    Chairwoman of the Board and  
Chief Executive Officer
    
    September 30, 2011/s/ William P. Runge

William P. Runge
    
    Interim Chief Financial Officer
    
    September 30, 2011/s/ Philip G. Barach

Philip G. Barach
    
    Director
    
    September 30, 2011/s/ Robert Flug

Robert Flug
    
    Director
    
    September 30, 2011
 23




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BERNARD CHAUS, INC. AND SUBSIDIARIES
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
  Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets  July 2, 2011 and July 3, 2010
    
    F-3Consolidated Statements of Operations  Years Ended July 2, 2011 and July 3, 2010
    
    F-4Consolidated Statements of Stockholders Equity (Deficiency) and Comprehensive Loss 
Years Ended July 2, 2011 and July 3, 2010
    
    F-5Consolidated Statements of Cash Flows  Years Ended July 2, 2011 and July 3, 2010
    
    F-6Notes to Consolidated Financial Statements
    
    F-7The following consolidated financial statement schedule of Bernard Chaus, Inc. and subsidiaries is included in Item 15:Schedule II  Valuation and Qualifying Accounts
    
    S-1
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/      Mayer Hoffman McCann CPAs(The New York Practice of Mayer Hoffman McCann P.C.) 
 F-2




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BERNARD CHAUS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  July 2,
    
    
    July 3,2011
    
    
    2010AssetsCurrent AssetsCash
    
    $
    3
    
    
    $
    4Accounts receivable  factored
    
    
    6,466
    
    
    
    19,404Accounts receivable  net
    
    
    1,004
    
    
    
    1,789Inventories  net
    
    
    5,077
    
    
    
    8,846Prepaid expenses and other current assets
    
    
    1,476
    
    
    
    536Total current assets
    
    
    14,026
    
    
    
    30,579Fixed assets  net
    
    
    1,159
    
    
    
    885Other assets
    
    
    
    
    
    
    25Trademarks
    
    
    1,000
    
    
    
    1,000Total assets
    
    $
    16,185
    
    
    $
    32,489Liabilities and Stockholders DeficiencyCurrent LiabilitiesRevolving credit borrowings
    
    $
    2,577
    
    
    $
    11,175Accounts payable
    
    
    20,605
    
    
    
    19,399Accrued expenses
    
    
    1,473
    
    
    
    2,305Total current liabilities
    
    
    24,655
    
    
    
    32,879Deferred income
    
    
    2,834
    
    
    
    3,234Long term liabilities
    
    
    1,927
    
    
    
    1,735Deferred income taxes
    
    
    200
    
    
    
    173Total liabilities
    
    
    29,616
    
    
    
    38,021Commitments and Contingencies (Notes 6, 8, and 10)Stockholders DeficiencyPreferred
stock, $.01 par value, authorized shares  1,000,000; issued and
outstanding shares  none
    
    
    
    
    
    
    Common stock, $.01 par value, authorized shares  50,000,000;
issued shares  37,543,643 at July 2, 2011 and July 3, 2010
    
    
    375
    
    
    
    375Additional paid-in capital
    
    
    133,443
    
    
    
    133,440Deficit
    
    
    (144,684
    )
    
    
    (136,827
    )Accumulated other comprehensive loss
    
    
    (1,085
    )
    
    
    (1,040
    )Less: Treasury stock at cost  62,270 shares at July 2, 2011
and July 3, 2010
    
    
    (1,480
    )
    
    
    (1,480
    )Total stockholders deficiency
    
    
    (13,431
    )
    
    
    (5,532
    )Total liabilities and stockholders deficiency
    
    $
    16,185
    
    
    $
    32,489
 See accompanying notes to consolidated financial statements.
 F-3




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BERNARD CHAUS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Fiscal Year Ended2011
    
    
    2010Net revenue
    
    $
    84,818
    
    
    $
    100,153Cost of goods sold
    
    
    68,730
    
    
    
    75,730Gross profit
    
    
    16,088
    
    
    
    24,423Selling, general and administrative expenses
    
    
    27,557
    
    
    
    29,597Gain on early termination of license agreement
    
    
    (4,355
    )
    
    
    Loss from operations
    
    
    (7,114
    )
    
    
    (5,174
    )Interest expense
    
    
    726
    
    
    
    811Loss before income tax provision
    
    
    (7,840
    )
    
    
    (5,985
    )Income tax provision
    
    
    17
    
    
    
    48Net loss
    
    $
    (7,857
    )
    
    $
    (6,033
    )Basic loss per share
    
    $
    (0.22
    )
    
    $
    (0.16
    )Diluted loss per share
    
    $
    (0.22
    )
    
    $
    (0.16
    )Weighted average number of common shares
outstanding  basic
    
    
    36,484
    
    
    
    37,481Weighted average number of common and common
equivalent shares outstanding  diluted
    
    
    36,484
    
    
    
    37,481
 See accompanying notes to consolidated financial statements.
 F-4




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##### Table of Contents



BERNARD CHAUS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
AND COMPREHENSIVE LOSS
 Common Stock
    
    
    
    
    
    
    
    Treasury StockAdditional
    
    
    
    
    
    
    
    
    
    AccumulatedOtherNumber
    
    
    
    
    
    
    Paid-in
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Comprehensiveof Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    of Shares
    
    
    Amount
    
    
    Loss
    
    
    TotalBalance at July 1, 2009
    
    
    37,543,643
    
    
    $
    375
    
    
    $
    133,416
    
    
    $
    (130,794
    )
    
    
    62,270
    
    
    $
    (1,480
    )
    
    $
    (929
    )
    
    $
    588Stock option compensation
expense
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Net change in pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    (111
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,033
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,033
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,144
    )Balance at July 3, 2010
    
    
    37,543,643
    
    
    
    375
    
    
    
    133,440
    
    
    
    (136,827
    )
    
    
    62,270
    
    
    
    (1,480
    )
    
    
    (1,040
    )
    
    
    (5,532
    )Stock option compensation
expense
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000,000
    
    
    
    600
    
    
    
    
    
    
    
    600Reissuance of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )
    
    
    (600
    )
    
    
    
    
    
    
    (600
    )Net change in pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    (45
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,857
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,857
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,902
    )Balance at July 2, 2011
    
    
    37,543,643
    
    
    $
    375
    
    
    $
    133,443
    
    
    $
    (144,684
    )
    
    
    62,270
    
    
    $
    (1,480
    )
    
    $
    (1,085
    )
    
    $
    (13,431
    )
 See accompanying notes to consolidated financial statements
 F-5




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##### Table of Contents



BERNARD CHAUS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Year End2011
    
    
    2010Operating ActivitiesNet loss
    
    $
    (7,857
    )
    
    $
    (6,033
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    373
    
    
    
    618Loss on disposal of fixed assets
    
    
    
    
    
    
    43Amortization of deferred income
    
    
    (400
    )
    
    
    (366
    )Stock compensation expense
    
    
    3
    
    
    
    24Deferred rent expense
    
    
    96
    
    
    
    297Deferred income taxes
    
    
    27
    
    
    
    26Changes in operating assets and liabilities:Accounts receivable  factored
    
    
    12,938
    
    
    
    (8,815
    )Accounts receivable
    
    
    785
    
    
    
    (1,582
    )Inventories
    
    
    3,769
    
    
    
    (5,007
    )Prepaid expenses and other assets
    
    
    (940
    )
    
    
    (230
    )Accounts payable
    
    
    1,206
    
    
    
    13,148Accrued expenses and long term liabilities
    
    
    (781
    )
    
    
    (227
    )Net cash provided by (used in) operating activities
    
    
    9,219
    
    
    
    (8,104
    )Investing ActivitiesPurchases of fixed assets
    
    
    (622
    )
    
    
    (587
    )Cash used in investing activities
    
    
    (622
    )
    
    
    (587
    )Financing ActivitiesNet proceeds
from (repayments of) revolving credit borrowings
    
    
    (8,598
    )
    
    
    4,569Purchase of treasury stock
    
    
    (600
    )
    
    
    Proceeds from reissuance of treasury stock
    
    
    600
    
    
    
    Proceeds from supply premium
    
    
    
    
    
    
    4,000Net cash provided by (used in) financing activities
    
    
    (8,598
    )
    
    
    8,569Decrease in cash
    
    
    (1
    )
    
    
    (122
    )Cash, beginning of year
    
    
    4
    
    
    
    126Cash, end of year
    
    $
    3
    
    
    $
    4Supplemental Disclosure of Cash Flow Information:Cash paid for:Taxes
    
    $
    13
    
    
    $
    14Interest
    
    $
    650
    
    
    $
    743
 See accompanying notes to consolidated financial statements.
 F-6




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##### Table of Contents



BERNARD CHAUS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 2, 2011 AND JULY 3, 2010
 1. Business
 ® ® ® ® ® ® ® ®
   F-7




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##### Table of Contents



2. Summary of Significant Accounting Policies
 Fiscal Year:
 th th
 Principles of Consolidation:
  Use of Estimates:
  Revenue Recognition:
   Shipping and Handling:
  Cooperative Advertising:
  Factoring Agreement and Accounts Receivable:
  F-8




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##### Table of Contents



Inventories:
  Cost of goods sold:
  Cash and Cash Equivalents:
  F-9




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##### Table of Contents



Long-Lived Assets and Trademarks:
  Income Taxes:
  Stock-based Compensation:
  Earnings (Loss) Per Share:
  For the Year EndedJuly 2,
    
    
    July 3,2011
    
    
    2010Denominator for earnings (loss) per share (in millions):Denominator
for basic earnings (loss) per share weighted-average shares outstanding
    
    
    36.5
    
    
    
    37.5Assumed exercise of potential common shares
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share
    
    
    36.5
    
    
    
    37.5
 F-10




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##### Table of Contents



Advertising Expense:
  Fixed Assets:
  Foreign Currency Transactions:
  Fair Value Measurements:
  Fair Value of Financial Instruments:
  Deferred Rent Obligations:
  F-11




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##### Table of Contents



Other Comprehensive Loss:
  Segment Reporting:
  New Accounting Pronouncements:
    F-12




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##### Table of Contents



3. Inventories  net
  July 2,
    
    
    July 3,2011
    
    
    2010(In thousands)Raw materials
    
    $
    184
    
    
    $
    457Work-in-process
    
    
    7
    
    
    
    63Finished goods
    
    
    4,886
    
    
    
    8,326Total
    
    $
    5,077
    
    
    $
    8,846
  4. Fixed Assets
  July 2,
    
    
    July 3,2011
    
    
    2010(In thousands)Computer hardware and software
    
    $
    4,947
    
    
    $
    4,733Furniture and equipment
    
    
    1,969
    
    
    
    1,567Leasehold improvements
    
    
    3,405
    
    
    
    3,40210,321
    
    
    
    9,702Less: accumulated depreciation and amortization
    
    
    9,162
    
    
    
    8,817$
    1,159
    
    
    $
    885
 5. Income Taxes
  Fiscal Year Ended2011
    
    
    2010(In thousands)Current:Federal
    
    $
    
    
    
    $
    State
    
    
    (10
    )
    
    
    21(10
    )
    
    
    21Deferred:Federal
    
    
    23
    
    
    
    23State
    
    
    4
    
    
    
    427
    
    
    
    27Total
    
    $
    17
    
    
    $
    48
 F-13




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##### Table of Contents



July 2,
    
    
    July 3,2011
    
    
    2010(In thousands)Deferred tax assets:Net federal, state and local operating loss carryforwards
    
    $
    23,800
    
    
    $
    29,300Costs capitalized to inventory for tax purposes
    
    
    400
    
    
    
    900Inventory valuation
    
    
    100
    
    
    
    200Excess of book over tax depreciation
    
    
    1,300
    
    
    
    1,500Sales allowances not currently deductible
    
    
    1,000
    
    
    
    1,100Reserves and other items not currently deductible
    
    
    600
    
    
    
    60027,200
    
    
    
    33,600Less: valuation allowance for deferred tax assets
    
    
    (27,200
    )
    
    
    (33,600
    )Net deferred tax asset
    
    $
    
    
    
    $
    
 July 2,
    
    
    July 3,2011
    
    
    2010(In thousands)Deferred tax liability:Deferred tax liability related to indefinite lived intangibles
    
    $
    (200
    )
    
    $
    (173
    )
     Fiscal Year Ended2011
    
    
    2010(In thousands)Benefit for federal income taxes at the statutory rate
    
    $
    (2,660
    )
    
    $
    (2,035
    )State and local taxes, net of federal benefit
    
    
    (6
    )
    
    
    14Other
    
    
    68
    
    
    
    73Changes in valuation allowance
    
    
    2,615
    
    
    
    1,996Provision for income taxes
    
    $
    17
    
    
    $
    48
  F-14




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##### Table of Contents



6. Financing Agreements
  th
    Factoring Agreement
  7. Deferred Income
  F-15




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##### Table of Contents



8. Employee Benefit Plans
 Pension Plan:
  Obligations and Funded Status
  2011
    
    
    2010(in thousands)Change in benefit obligation  projected and accumulatedBenefit obligation at beginning of year
    
    $
    2,106
    
    
    $
    1,945Service cost
    
    
    6
    
    
    
    8Interest cost
    
    
    113
    
    
    
    114Actuarial loss
    
    
    31
    
    
    
    11Change in assumption
    
    
    131
    
    
    
    116Benefits paid
    
    
    (93
    )
    
    
    (88
    )Benefit obligation at end of year
    
    $
    2,294
    
    
    $
    2,106Change in plan assetsFair value of plan assets at beginning of year
    
    $
    1,400
    
    
    $
    1,399Actual return on plan assets
    
    
    184
    
    
    
    89Employer contributions
    
    
    
    
    
    
    Benefits paid
    
    
    (93
    )
    
    
    (88
    )Fair value of plan assets at end of year
    
    $
    1,491
    
    
    $
    1,400Funded status
    
    $
    (803
    )
    
    $
    (706
    )Unrecognized net actuarial loss
    
    
    1,085
    
    
    
    1,040Net amount recognized
    
    $
    282
    
    
    $
    334
 F-16




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##### Table of Contents



2011
    
    
    2010(in thousands)Amounts recognized in the statement of financial position consist of:Accrued benefit cost
    
    $
    (803
    )
    
    $
    (706
    )Accumulated other comprehensive loss
    
    
    1,085
    
    
    
    1,040Net amount recognized
    
    $
    282
    
    
    $
    334
  Fiscal Year2011
    
    
    2010(In thousands)Components of Net Periodic Benefit Cost:Service cost
    
    $
    7
    
    
    $
    8Interest cost
    
    
    113
    
    
    
    114Expected return on plan assets
    
    
    (105
    )
    
    
    (105
    )Amortization of accumulated unrecognized net loss
    
    
    37
    
    
    
    32Net periodic benefit cost
    
    $
    52
    
    
    $
    49
   AssumptionsWeighted average assumptions used to determine:Net periodic benefit cost for the fiscal years ended:
    
    2011
    
    
    2010Discount Rate
    
    
    5.50
    %
    
    
    6.00
    %Expected Long Term Rate of Return on plan assets
    
    
    7.75
    %
    
    
    7.75
    %
 Benefit Obligation at end of year:
    
    2011
    
    
    2010Discount Rate
    
    
    5.50
    %
    
    
    5.50
    %Expected Long Term Rate of Return on plan assets
    
    
    7.75
    %
    
    
    7.75
    %
  F-17




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##### Table of Contents



Plan Assets
    
    
    Plan Assetsat July 2,
    
    
    at July 3,Asset Category
    
    2011
    
    
    2010Equity securities
    
    
    50
    %
    
    
    40
    %Debt securities
    
    
    36
    %
    
    
    37
    %Cash equivalents
    
    
    14
    %
    
    
    23
    %Total
    
    
    100
    %
    
    
    100
    %
   Percentage of
    
    AssetTotal Portfolio
    
    Category25-35%
    
    Cash and short term investments25-35%
    
    Long-term fixed income / debt securities25-40%
    
    Common stock / equity securities
  Investments at Fair Value as of July 2, 2011Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalPooled separate accountsLarge US Equity
    
    
    
    
    
    $
    535
    
    
    
    
    
    
    $
    535Small US Equity
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    74International Equity
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    130Money Market
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    221Fixed Income
    
    
    
    
    
    
    531
    
    
    
    
    
    
    
    531Total investments at Fair Value
    
    
    
    
    
    $
    1,491
    
    
    
    
    
    
    $
    1,491
 Investments at Fair Value as of July 3, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalPooled separate accountsLarge US Equity
    
    
    
    
    
    $
    414
    
    
    
    
    
    
    $
    414Small US Equity
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    54International Equity
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    97Money Market
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    318Fixed Income
    
    
    
    
    
    
    517
    
    
    
    
    
    
    
    517Total investments at Fair Value
    
    
    
    
    
    $
    1,400
    
    
    
    
    
    
    $
    1,400
  F-18




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##### Table of Contents



Fiscal
    
    PensionYear
    
    Benefits2012
    
    $
    1112013
    
    
    1222014
    
    
    1292015
    
    
    1382016
    
    
    1472017-2021
    
    
    818
 Savings Plan :
  9. Stockholders Equity:
 Treasury Stock:
  Stock Based Compensation:
 Stock Option Plan
  F-19




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##### Table of Contents



Stock OptionsWeightedAverageWeighted
    
    
    RemainingNumber
    
    
    Average
    
    
    Contractualof Shares
    
    
    Exercise Price
    
    
    Life (Years)Outstanding at July 4, 2010
    
    
    813,604
    
    
    $
    .59Options forfeited/expired
    
    
    (125,000
    )
    
    $
    .75Outstanding at July 2, 2011
    
    
    688,604
    
    
    $
    .56
    
    
    
    0.49Vested and exercisable at July 2, 2011
    
    
    688,604
    
    
    $
    .56
    
    
    
    0.56
   Weighted-AverageGrant Date FairNonvested Shares:
    
    Shares
    
    
    ValueNonvested, July 4, 2010
    
    
    5,000
    
    
    $
    0.81Vested
    
    
    (5,000
    )
    
    
    0.81Nonvested, July 2, 2011
    
    
    
  Restricted Stock Inducement Plan
  F-20




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##### Table of Contents



10. Commitments, Contingencies and Other Matters
 Lease Obligations:
    2012
    
    $
    1,9542013
    
    
    1,9642014
    
    
    1,7762015
    
    
    1,8042016
    
    
    1,858Thereafter
    
    
    5,574$
    14,930
 Letters of Credit:
  Inventory purchase commitments:
  Camuto License Agreement:
  F-21




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##### Table of Contents



Fiscal year ending:
    
    Amount(in thousands)2012
    
    $
    2,1402013
    
    
    1,3502014
    
    
    1,6352015
    
    
    1,8602016
    
    
    975Total
    
    $
    7,960
 Litigation:
  11. Subsequent Events
    F-22




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##### Table of Contents



AdditionsBalance at
    
    
    Charged toBeginning of
    
    
    Costs and
    
    
    
    
    
    
    Balance atDescription
    
    Year
    
    
    Expenses
    
    
    Deductions
    
    
    End of YearYear ended July 2, 2011Reserve for customer allowances and deductions
    
    $
    2,244
    
    
    $
    10,318
    
    
    $
    10,298
    2
    
    $
    2,264Year ended July 3, 2010Allowance for doubtful accounts
    
    $
    11
    
    
    $
    0
    
    
    $
    11
    1
    
    $
    0Reserve for customer allowances and deductions
    
    $
    3,404
    
    
    $
    10,940
    
    
    $
    12,100
    2
    
    $
    2,244
 
 1
    
    Uncollectible accounts written off2
    
    Allowances charged to reserve and granted to customers S-1