##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 WASHINGTON, D. C. 20549
   FORM 10-K
   x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 1-9169
   BERNARD CHAUS, INC.
 (Exact name of registrant as
    specified in its charter)
  New York

13-2807386(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification No.)530 Seventh Avenue, New York, New York

10018(Address of principal executive
    offices)

(Zip Code)    Registrants telephone number, including area code
 (212) 354-1280
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

o

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 x
  o x
  x o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer  o
    Accelerated
    filer  o
    Non-accelerated
    filer  o
    Smaller
    reporting
    company  x   rule 12b-2 o x
      Date

Class

Shares OutstandingSeptember 19, 2008

Common Stock, $0.01 par value

37,481,373   Documents Incorporated by Reference

Location in Form 10-K in which incorporatedPortions of registrants Proxy Statement for the Annual
    Meeting of Stockholders to be held November 13, 2008.

Part III




---



##### Table of Contents





PART I
  Item 1.
    Business.  General
  ® ® ® ® ®
    Products
    Chaus and Josephine Chaus
  Cynthia Steffe and Cynthia Cynthia Steffe
  Kenneth Cole
 1




---



##### Table of Contents



Private Label
          Fiscal Year Ended June 30,2008


2007


2006Josephine Chaus and Chaus


37
%


40
%


46
%Private Labels


24



27



33Licensed Products


28



17



5Cynthia Steffe and Cynthia Cynthia Steffe


11



16



16Total


100
%


100
%


100
%   Business
    Segments
  page F-1.
  Customers
     2




---



##### Table of Contents



Sales and
    Marketing
        Design
    Manufacturing
    and Distribution
   3




---



##### Table of Contents



work-in-process order-by-order
          and/or
  Imports
    and Import Restrictions
   4




---



##### Table of Contents



Backlog
    Trademarks
      Competition
     5




---



##### Table of Contents



Employees
  89-22-1
    Executive
    Officers
    NAME

AGE

POSITIONJosephine Chaus


57


Chairwoman of the Board and Chief Executive OfficerDavid Stiffman


52


Chief Operating OfficerBarton Heminover


54


Chief Financial Officer     Josephine Chaus
  David Stiffman
  Barton Heminover
  Forward
    Looking Statements
   6




---



##### Table of Contents



Form 10-K.
  Item 1A.
    Risk
    Factors.  We rely on a few significant customers and 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
    consumers buying patterns
  We use foreign suppliers for the manufacturing of our
    products. order-by-order
 7




---



##### Table of Contents




    Political and labor instability with foreign countries
    Terrorism, military conflict or war
    Changes in quotas, duty rates or other politically imposed
    restrictions by 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 Kenneth Cole licensed products depends on
    the value of the licensed brands and our achieving sufficient
    sales to offset the minimum royalty payments 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.
  We Will Be Subject To Cyclical Variations In The Apparel
    Markets.
  Our Success Is Dependent Upon Our Ability To Attract New Key
    Personnel.
 8




---



##### Table of Contents



Item 2.
    Properties.            Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   9




---



##### Table of Contents



PART II
  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities.    mark-up,
  High


LowFiscal 2007First Quarter

$
0.95


$
0.75Second Quarter


1.00



0.76Third Quarter


1.16



0.80Fourth Quarter


1.09



0.75Fiscal 2008First Quarter

$
0.95


$
0.56Second Quarter


0.69



0.55Third Quarter


0.65



0.27Fourth Quarter


0.55



0.28Fiscal 2009July 1- September 12, 2008

$
0.35


$
0.27      10




---



##### Table of Contents



5-year
  
  6/03

6/04

6/05

6/06

6/07

6/08Bernard Chaus, Inc.


100.00



100.00



111.58



96.84



85.26



31.58S&P 500


100.00



119.11



126.64



137.57



165.90



144.13S&P Apparel, Accessories & Luxury Goods


100.00



128.23



158.39



155.76



214.64



133.85    The stock price performance included in this graph is not
    necessarily indicative of future stock price performance.
  Item 6.  Selected
    Financial Data.
   11




---



##### Table of Contents



Statement
    of Operations Data:
  Fiscal Year Ended June 30,2008


2007


2006


2005


2004(In thousands, except per share amounts)Net revenue

$
118,028


$
146,772


$
136,827


$
143,255


$
157,107Cost of goods sold


85,893



104,076



99,697



103,661



117,451Gross profit


32,135



42,696



37,130



39,594



39,656Selling, general and administrative expenses


38,798



41,023



40,867



39,240



34,894Interest expense, net


921



1,076



914



1,328



1,355Income (loss) before income tax provision


(7,584
)


597



(4,651
)


(974
)


3,407Income tax provision


94



75



223



183



303Net income (loss)

$
(7,678
)

$
522


$
(4,874
)

$
(1,157
)

$
3,104Basic earnings (loss) per
    share(1)

$
(0.21
)

$
0.01


$
(0.13
)

$
(0.04
)

$
0.11Diluted earnings (loss) per
    share(2)

$
(0.21
)

$
0.01


$
(0.13
)

$
(0.04
)

$
0.10Weighted average number of
    common shares outstanding
      basic


37,429



37,479



37,017



28,363



27,504Weighted average number of
    common and common equivalent shares outstanding 
    diluted


37,429



37,930



37,017



28,363



30,490    Balance
    Sheet Data
  As of June 30,2008


2007


2006


2005


2004Working capital

$
5,876


$
14,664


$
15,932


$
21,456


$
17,191Total assets


27,750



37,491



39,914



44,298



46,376Short-term debt, including current portion of long-term debt


7,023



1,700



4,079



1,700



10,263Long-term debt






2,225



3,925



5,625



7,325Stockholders equity


10,450



18,252



17,823



21,639



16,699     (1)
    
    Computed by dividing the applicable net income(loss) by the
    weighted average number of shares of Common Stock outstanding
    during the year.(2)
    
    Computed by dividing the applicable net income (loss) by the
    weighted average number of Common Shares outstanding and Common
    Stock equivalents outstanding during the year. 12




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Overview
  ® ® ® ® ®
  Results
    of Operations
    Fiscal Year Ended June 30,2008


2007


2006Net revenue


100.0
%


100.0
%


100.0
%Gross profit


27.2
%


29.1
%


27.1
%Selling, general and administrative expenses


32.9
%


28.0
%


29.9
%Interest expense


0.8
%


0.7
%


0.7
%Net income (loss)


(6.5
)%


0.4
%


(3.6
)%   Fiscal 2008
    Compared to Fiscal 2007
   13




---



##### Table of Contents



14




---



##### Table of Contents



Financial
    Condition, Liquidity and Capital Resources
  General
   15




---



##### Table of Contents



Financing
    Agreements
    1 2
        1 2
   16




---



##### Table of Contents



Factoring
    Agreements
      Future
    Financing Requirements
      Off-Balance
    Sheet Arrangements
    Inflation
    Seasonality
    of Business and Fashion Risk
   17




---



##### Table of Contents



Foreign
    Operations
    Critical
    Accounting Policies and Estimates
          first-in,
 18




---



##### 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.   19




---



##### Table of Contents



Item 9A(T).
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
    Rule 13a-15.
  Changes
    in Internal Control over Financial Reporting
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f).
        Item 9B.  Other
    Information
   20




---



##### Table of Contents



PART III
  Item 10.
    Directors
    and Executive Officers of the Registrant.  Form 10-K.
    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.   21




---



##### Table of Contents



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).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). 22




---



##### Table of Contents



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).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 April 1, 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). 23




---



##### Table of Contents



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).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).*21


List of Subsidiaries of the Company.*23
.1

Consent of Mahoney Cohen & Company, CPA,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 Barton Heminover.*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 Barton Heminover.     
    
    Management agreement or compensatory plan or arrangement
    required to be filed as an exhibit.*
    
    Filed herewith. 24




---



##### Table of Contents



SIGNATURES
    BERNARD CHAUS, INC.
  By:
    /s/  Josephine
    Chaus          SIGNATURE

TITLE

DATE/s/  Josephine
    ChausJosephine
    Chaus

Chairwoman of the Board and
    Chief Executive Officer

September 19, 2008/s/  David
    StiffmanDavid
    Stiffman

Chief Operating Officer

September 19, 2008/s/  Barton
    HeminoverBarton
    Heminover

Chief Financial Officer

September 19, 2008/s/  Philip
    G. BarachPhilip
    G. Barach

Director

September 19, 2008/s/  Harvey
    M. KruegerHarvey
    M. Krueger

Director

September 19, 2008  25




---



##### 



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
  INDEX TO
    FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
     
 Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets 
    June 30, 2008 and 2007


F-3Consolidated Statements of Operations 
    Years Ended June 30, 2008, 2007 and 2006


F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)  Years Ended
    June 30, 2008, 2007 and 2006


F-5Consolidated Statements of Cash Flows 
    Years Ended June 30, 2008, 2007 and 2006


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-1EX-10.129: AMENDMENT NO. 11 TO FINANCING AGREEMENTEX-10.130: FINANCING AGREEMENTEX-10.131: FACTORING AGREEMENTEX-21  : SUBSIDIARIESEX-23.1: CONSENT OF MAHONEY COHEN & COMPANYEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION     F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
 
           
 F-2




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
   June 30,


June 30,2008


2007AssetsCurrent AssetsCash and cash equivalents

$
61


$
3,377Accounts receivable  net


13,350



16,605Accounts receivable  due from factor


839



1,638Inventories  net


7,482



8,876Prepaid expenses and other current assets


596



462Total current assets


22,328



30,958Fixed assets  net


2,053



2,960Other assets  net


112



316Trademarks


1,000



1,000Goodwill


2,257



2,257Total assets

$
27,750


$
37,491Liabilities and Stockholders EquityCurrent LiabilitiesRevolving credit borrowings

$
4,798


$
Accounts payable


6,844



10,012Accrued expenses


2,585



4,582Term loan  current


2,225



1,700Total current liabilities


16,452



16,294Term loan






2,225Long term liabilities


386



347Deferred income taxes


462



373Total liabilities


17,300



19,239Commitments and Contingencies (Notes 6, 7, and 9)Stockholders EquityPreferred 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 June 30,2008
    and 37,443,643 at June 30,2007


375



374Additional paid-in capital


133,373



133,331Deficit


(121,217
)


(113,539
)Accumulated other comprehensive loss


(601
)


(434
)Less: Treasury stock at cost  62,270 shares at
    June 30, 2008 and 2007


(1,480
)


(1,480
)Total stockholders equity


10,450



18,252Total liabilities and stockholders equity

$
27,750


$
37,491   See accompanying notes to consolidated financial
    statements.
 F-3




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Fiscal Year Ended June 30,2008


2007


2006Net revenue

$
118,028


$
146,772


$
136,827Cost of goods sold


85,893



104,076



99,697Gross profit


32,135



42,696



37,130Selling, general and administrative expenses


38,798



41,023



40,867Income (loss) from operations


(6,663
)


1,673



(3,737
)Interest expense


921



1,076



914Income (loss) before income tax provision


(7,584
)


597



(4,651
)Income tax provision


94



75



223Net income (loss)

$
(7,678
)

$
522


$
(4,874
)Basic earnings (loss) per share

$
(0.21
)

$
0.01


$
(0.13
)Diluted earnings (loss) per share

$
(0.21
)

$
0.01


$
(0.13
)Weighted average number of common shares outstanding  basic


37,429,000



37,479,000



37,017,000Weighted average number of common and common equivalent shares
    outstanding  diluted


37,429,000



37,930,000



37,017,000   See accompanying notes to consolidated financial
    statements.
 F-4




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
 AND COMPREHENSIVE INCOME (LOSS)
   Common Stock








Treasury StockAccumulatedAdditional











OtherNumber





Paid-in





Number





Comprehensiveof Shares


Amount


Capital


(Deficit)


of Shares


Amount


Loss


TotalBalance at July 1, 2005


36,004,359


$
360


$
132,621


(
$ 109,187
)


62,270


($
1,480
)

($
675
)

$
21,639Issuance of common stock upon exercise of stock options


1,607,500



16



650



















666Repurchase and retirement of common stock


(21,774
)






(21
)


















(21
)Stock option compensation expense










199



















199Net change in pension liability


























214



214Net loss














(4,874
)














(4,874
)Comprehensive loss






























(4,660
)Balance at June 30, 2006


37,590,085



376



133,449



(114,061
)


62,270



(1,480
)


(461
)


17,823Issuance of common stock upon exercise of stock options


41,248







24



















24Repurchase and retirement of common stock


(187,690
)


(2
)


(192
)


















(194
)Stock option compensation expense










50



















50Net change in pension liability


























27



27Net income














522















522Comprehensive income






























549Balance at June 30, 2007


37,443,643



374



133,331



(113,539
)


62,270



(1,480
)


(434
)


18,252Issuance of restricted common stock


100,000



1























1Stock option compensation expense










42



















42Net change in pension liability


























(167
)


(167
)Net loss














(7,678)















(7,678
)Comprehensive loss






























(7,845
)Balance at June 30, 2008


37,543,643


$
375


$
133,373


(
$ 121,217
)


62,270


(
$ 1,480
)

($
601
)

$
10,450   See accompanying notes to consolidated financial
    statements.
 F-5




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Year Ended June 30,2008


2007


2006Operating ActivitiesNet income (loss)

$
(7,678
)

$
522


$
(4,874
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


1,272



1,300



1,213Stock compensation expense


42



50



199Deferred income taxes


89



91



103Changes in operating assets and liabilities:Accounts receivable


3,255



5,259



(5,533
)Accounts receivable due from factor


799



(248
)


299Inventories


1,394



263



1,528Prepaid expenses and other assets


56



172



227Accounts payable


(3,168
)


708



(175
)Accrued expenses and long term liabilities


(2,124
)


455



(961
)Net Cash Provided By (Used In) Operating Activities


(6,063
)


8,572



(7,974
)Investing ActivitiesPurchases of fixed assets


(351
)


(1,066
)


(962
)Net Cash Used In Investing Activities


(351
)


(1,066
)


(962
)Financing ActivitiesNet proceeds (repayments)from revolving credit borrowings


4,798



(2,379
)


2,379Principal payments on term loan


(1,700
)


(1,700
)


(1,700
)Repurchases and retirement of Common Stock






(194
)


(21
)Net proceeds from issuance of stock






24



666Net Cash Provided By (Used In) Financing Activities


3,098



(4,249
)


1,324Increase (Decrease) in Cash and Cash Equivalents


(3,316
)


3,257



(7,612
)Cash and Cash Equivalents, Beginning of Year


3,377



120



7,732Cash and Cash Equivalents, End of Year

$
61


$
3,377


$
120Supplemental Disclosure of Cash Flow Information:Cash paid for:Taxes

$
55


$
40


$
74Interest

$
881


$
1,017


$
839Non Cash Transaction:     See accompanying notes to consolidated financial
    statements.
 F-6




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
 YEARS ENDED JUNE 30, 2008, 2007 AND 2006
  1.
    Business  ® ® ® ® ®
  2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation:
    Use of
    Estimates:
    Revenue
    Recognition:
      Shipping
    and Handling:
   F-7




---



##### Table of Contents



Cooperative
    Advertising:
    Credit
    Terms:
      Accounts
    Receivable:
     F-8




---



##### Table of Contents



Inventories:
  first-in,
  Cost of
    goods sold:
    Cash and
    Cash Equivalents:
    Goodwill
    and Trademarks:
    Long-Lived
    Assets:
   F-9




---



##### Table of Contents



Income
    Taxes:
    Stock-based
    Compensation:
      For the Year EndedJune 30,

June 30,

June 30,2008

2007

2006Weighted average fair value of stock options granted

$0.79

$0.92

$0.90Risk-free interest rate

5.03%

5.15%

3.97%Expected dividend yield

0%

0%

0%Expected life of options

10.0 years

10.0 years

10.0 yearsExpected volatility

131%

170%

86%   Earnings
    Per Share:
    F-10




---



##### Table of Contents



For the Year EndedJune 30,


June 30,


June 30,2008


2007


2006Denominator for earnings(loss) per share (in millions):Denominator for basic earnings (loss) per share weighted-average
    shares outstanding


37.4



37.5



37.0Assumed exercise of potential common shares






.4



Denominator for diluted earnings (loss) per share


37.4



37.9



37.0   Advertising
    Expense:
    Fixed
    Assets:
    Other
    Assets:
    Foreign
    Currency Transactions:
    Fair
    Value of Financial Instruments:
    Deferred
    Rent Obligations:
    Other
    Comprehensive Income (Loss):
   F-11




---



##### Table of Contents



Segment
    Reporting:
  Disclosures about Segments of an
    Enterprise and Related Information
  New
    Accounting Pronouncements:
  157-1, FSP 157-2,
         F-12




---



##### Table of Contents



3.
    Inventories 
    net  June 30,


June 30,2008


2007(In thousands)Raw materials

$
172


$
472Work-in-process


29



39Finished goods


7,281



8,365Total

$
7,482


$
8,876   first-in
  4.
    Fixed
    Assets  June 30,


June 30,2008


2007(In thousands)Computer hardware and software

$
4,376


$
4,463Furniture and equipment


2,236



2,090Leasehold improvements


4,509



4,60311,121



11,156Less: accumulated depreciation and amortization


9,068



8,196$
2,053


$
2,960  F-13




---



##### Table of Contents



5.
    Income
    Taxes    Fiscal Year Ended June 30,2008


2007


2006Current:Federal

$
0


$
22


$
28State


5



(38
)


92$
5


$
(16
)

$
120Deferred:Federal

$
75


$
75


$
88State


14



16



15$
89


$
91


$
103Total

$
94


$
75


$
223     June 30,


June 30,2008


2007(In thousands)Deferred tax assets:Net federal, state and local operating loss carryforwards

$
42,900


$
38,600Costs capitalized to inventory for tax purposes


700



1,000Inventory valuation


300



300Excess of book over tax depreciation


1,200



1,500Sales allowances not currently deductible


1,300



1,100Reserves and other items not currently deductible


800



50047,200



43,000Less: valuation allowance for deferred tax assets


(47,200
)


(43,000
)Net deferred tax asset

$



$
   June 30,

June 30,2008

2007(In thousands)Deferred tax liability:Deferred tax liability related to indefinite lived intangibles

$
(462
)

$
(373
)    F-14




---



##### Table of Contents



Fiscal Year Ended June 30,2008


2007


2006(In thousands)Expense (benefit) for federal income taxes at the statutory rate

$
(2,611
)

$
209


$
(1,645
)State and local taxes, net of federal benefit


4



(25
)


29Other


73



18



41Effects of tax loss carryforwards


2,628



(127
)


1,798Provision for income taxes

$
94


$
75


$
223       6.
    Financing
    Agreements    1 2
 F-15




---



##### Table of Contents



1 2
        Factoring
    Agreements
     F-16




---



##### Table of Contents



Future
    Financing Requirements
    7.
    Employee
    Benefit Plans  Pension
    Plan:
     F-17




---



##### Table of Contents



Obligations
    and Funded Status
    2008


2007(in thousands)Change in benefit obligationBenefit obligation at beginning of year

$
1,844


$
1,704Service cost


22



26Interest cost


108



105Change in assumption






55Actuarial loss/(gain)


(10
)


19Benefits paid


(74
)


(65
)Benefit obligation at end of year

$
1,890


$
1,844Change in plan assetsFair value of plan assets at beginning of year

$
1,631


$
1,347Actual return on plan assets


(70
)


187Employer contributions


125



162Benefits paid


(74
)


(65
)Fair value of plan assets at end of year

$
1,612


$
1,631Funded status

$
(278
)

$
(213
)Unrecognized net actuarial loss


601



434Net amount recognized

$
323


$
221Amounts recognized in the statement of financial position
    consist of:Accrued benefit cost

$
(278
)

$
(213
)Accumulated other comprehensive loss


601



434Net amount recognized

$
323


$
221     June 30,


June 30,(In thousands)

2008


2007Projected and accumulated benefit obligation

$
1,890


$
1,844Fair value of plan assets

$
1,612


$
1,631   Fiscal Year(In thousands)

2008


2007


2006Components of Net Periodic Benefit Cost:Service cost

$
22


$
26


$
40Interest cost


108



105



95Expected return on plan assets


(132
)


(115
)


(104
)Amortization of accumulated unrecognized net loss


26



29



45Net periodic benefit cost

$
24


$
45


$
76  F-18




---



##### Table of Contents



Additional
    Information
    Assumptions
    Net periodic benefit cost for the years ended June 30,

2008


2007


2006Discount Rate


6.00
%


6.25
%


5.25
%Expected Long Term Rate of Return on plan assets


8.00
%


8.25
%


8.50
%   Benefit Obligation at June 30,

2008


2007Discount Rate


6.00
%


6.00
%Expected Long Term Rate of Return on plan assets


7.75
%


8.00
%     Plan
    Assets
    Plan Assets


Plan Assetsat June 30


at June 30Asset Category

2008


2007Equity securities


52
%


57
%Debt securities


27
%


30
%Other


21
%


13
%Total


100
%


100
%       Percentage ofTotal Portfolio

Asset Category5  15%

Cash and short term investments25  35%

Long-term fixed income50  65%

Common stock      F-19




---



##### Table of Contents



Estimated
    Future Benefit Payments
    Fiscal Year

Pension Benefits2009

$
832010


922011


962012


1082013


1182014  2018


694   Savings
    Plan:
    8.
    Stock
    Based Compensation:  Stock
    Option Plan
      Stock OptionsWeightedNumber


Exercise

Averageof Shares


Price Range

Exercise PriceOutstanding at June 30, 2005


4,171,527


$.38  $3.50

$
.64Options granted


30,000


$1.06

$
1.06Options exercised


(1,607,500
)

$.38  $.50

$
.41Options canceled


(65,000
)

$.75  $3.00

$
1.07Outstanding at June 30, 2006


2,529,027


$.50  $3.50

$
.77Options granted


30,000


$ .92

$
.92Options exercised


(41,248
)

$.50  $.75

$
.59Options canceled


(899,000
)

$.50  $.94

$
.90Outstanding at June 30, 2007


1,618,779


$.50  $3.50

$
.71Options granted


30,000


$.81

$
.81Options canceled


(571,967
)

$.50  $3.11

$
.85Outstanding at June 30, 2008


1,076,812


$.50  $3.50

$
.64  F-20




---



##### Table of Contents



Outstanding


ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageContractual


Exercise





ExerciseRange of Exercise Price

Shares


Life (Yrs.)


Price


Shares


Price$0.50


709,312



3.11


$
0.50



709,312


$
0.50$0.69


5,000



2.00


$
0.69



5,000


$
0.69$0.75


202,500



4.16


$
0.75



202,500


$
0.75$0.81


30,000



9.00


$
0.81







$0.92


30,000



8.00


$
0.92



7,500


$
0.92$0.95


30,000



6.00


$
0.95



22,500


$
0.95$0.98


30,000



5.00


$
0.98



30,000


$
0.98$1.06


30,000



7.00


$
1.06



15,000


$
1.06$3.00


5,000



1.00


$
3.00



5,000


$
3.00$3.50


5,000






$
3.50



5,000


$
3.501,076,812



3.80


$
0.64



1,001,812


$
0.61       Weighted-AverageGrant DateNonvested Shares:

Shares


Fair ValueNonvested, July 1, 2007


75,000


$
0.89Granted


30,000



0.79Vested


(30,000
)


0.88Nonvested, June 30, 2008


75,000


$
0.85     Restricted
    Stock Inducement Plan
   F-21




---



##### Table of Contents



and/or
  9.
    Commitments,
    Contingencies and Other Matters  Lease
    Obligations:
      Fiscal year ending:2009

$
2,0032010


7092011


4162012


3882013


349Thereafter


113$
3,978   Letters
    of Credit:
    Inventory
    purchase commitments:
    Kenneth
    Cole License Agreement:
   F-22




---



##### Table of Contents



Fiscal year ending:2009

$
1,5652010


1,7152011


1,3982012


1,227$
5,905   Korean
    Office Closing:
    Litigation:
    10.
    Unaudited
    Quarterly Results of Operations    (In thousands, except per share amounts)First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterFiscal 2008Net revenue

$
35,546


$
25,376


$
32,686


$
24,420Gross profit


10,395



5,280



10,278



6,182Net income (loss)


(354
)


(4,389
)


260



(3,195
)Basic earnings (loss) per share


(0.01
)


(0.12
)


0.01



(0.09
)Diluted earnings (loss) per share


(0.01
)


(0.12
)


0.01



(0.09
)Fiscal 2007Net revenue

$
39,509


$
39,387


$
38,243


$
29,633Gross profit


12,031



11,835



11,558



7,272Net income (loss)


1,244



1,265



563



(2,550
)Basic earnings (loss) per share


0.03



0.03



0.02



(0.07
)Diluted earnings (loss) per share


0.03



0.03



0.01



(0.07
)    F-23




---



##### Table of Contents



SCHEDULE II
    BERNARD CHAUS, INC. & SUBSIDIARIES
    VALUATION AND QUALIFYING ACCOUNTS(In
    thousands) AdditionsBalance at


Charged toBeginning of


Costs and





Balance atDescription

Year


Expenses


Deductions


End of YearYear ended June 30, 2008Allowance for doubtful accounts

$
60


$
0


$
351


$
25Reserve for customer allowances and deductions

$
2,785


$
12,444


$
12,3132


$
2,916Year ended June 30, 2007Allowance for doubtful accounts

$
137


$
0


$
771


$
60Reserve for customer allowances and deductions

$
2,516


$
12,403


$
12,1342


$
2,785Year ended June 30, 2006Allowance for doubtful accounts

$
150


$
0


$
131


$
137Reserve for customer allowances and deductions

$
1,675


$
10,303


$
9,4622


$
2,516     1
    
    Uncollectible accounts written off2
    
    Allowances charged to reserve and granted to customers S-1