##### Table of Contents





UNITED STATES 
    SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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, 2009oro

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(State or other jurisdiction
    of
    incorporation or organization)

13-2807386(I.R.S. Employer Identification
    No.)530 Seventh Avenue, New York, New York(Address of principal executive
    offices)

10018(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

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

Class

Shares OutstandingSeptember 23, 2009

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

Part IIIMeeting of Stockholders to be held November 12, 2009.




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##### Table of Contents





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




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##### Table of Contents



Private Label
          Fiscal Year Ended June 30,2009


2008


2007Josephine Chaus and Chaus


38
%


37
%


40
%Private Labels


18



24



27Licensed Products


38



28



17Cynthia Steffe and Cynthia Cynthia Steffe


6



11



16Total


100
%


100
%


100
%   Business
    Segments
  page F-1.
  Customers
       2




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Sales and
    Marketing
        Design
    Manufacturing
    and Distribution
    work-in-process
 3




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##### Table of Contents



order-by-order
          and/or
  Imports
    and Import Restrictions
    time-to-time,
 4




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Backlog
    Trademarks
      Competition
       5




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##### Table of Contents



Employees
      Executive
    Officers
    NAME

AGE

POSITIONJosephine Chaus


58


Chairwoman of the Board and Chief Executive OfficerDavid Stiffman


53


Chief Operating OfficerBarton Heminover


55


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




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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 rely on our lender CIT to borrow money in order to fund
    our operations.
  We rely on our ability to execute our plans in order to have
    access to capital to fund our operations
  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. and/or
 7




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##### 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 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 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 and
    retain existing key personnel.
 8




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Our success is dependent on consumer demand and economic
    conditions stabilizing.
  Item 2.
    Properties.            Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   9




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


LowFiscal 2008First Quarter

$
0.95


$
0.56Second Quarter


0.69



0.55Third Quarter


0.65



0.27Fourth Quarter


0.55



0.28Fiscal 2009First Quarter

$
0.35


$
0.26Second Quarter


0.29



0.05Third Quarter


0.11



0.07Fourth Quarter


0. 15



0.11Fiscal 2010July 1- September 16, 2009

$
0.19


$
0.12      10




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5-year
  
  6/04

6/05

6/06

6/07

6/08

6/09Bernard Chaus, Inc.


100.00



111.58



96.84



85.26



31.58



15.26S&P 500


100.00



106.32



115.50



139.28



121.01



89.29S&P Apparel, Accessories & Luxury Goods


100.00



123.52



121.47



167.39



104.38



84.65   The stock price performance included in this graph is not
    necessarily indicative of future stock price performance.
 11




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Item 6.
    Selected
    Financial Data.    Statement
    of Operations
    Data :
  Fiscal Year Ended June 30,2009


2008


2007


2006


2005(In thousands, except per share amounts)Net revenue

$
112,096


$
118,028


$
146,772


$
136,827


$
143,255Cost of goods sold


83,415



85,893



104,076



99,697



103,661Gross profit


28,681



32,135



42,696



37,130



39,594Selling, general and administrative expenses


35,360



38,798



41,023



40,867



39,240Goodwill impairment


2,257















Interest expense, net


951



921



1,076



914



1,328Income (loss) before income tax (benefit) provision


(9,887
)


(7,584
)


597



(4,651
)


(974
)Income tax (benefit) provision


(310
)


94



75



223



183Net income (loss)

$
(9,577
)

$
(7,678
)

$
522


$
(4,874
)

$
(1,157
)Basic earnings (loss)per
    share(1)

$
(0.26
)

$
(0.21
)

$
0.01


$
(0.13
)

$
(0.04
)Diluted earnings (loss)per
    share(2)

$
(0.26
)

$
(0.21
)

$
0.01


$
(0.13
)

$
(0.04
)Weighted average number of common shares outstanding 
    basic


37,481



37,429



37,479



37,017



28,363Weighted average number of common and common equivalent shares
    outstanding  diluted


37,481



37,429



37,930



37,017



28,363   Balance
    Sheet Data
  As of June 30,2009


2008


2007


2006


2005Working capital

$
15


$
5,876


$
14,664


$
15,932


$
21,456Total assets


17,051



27,750



37,491



39,914



44,298Short-term debt, including current portion of long-term debt


6,606



7,023



1,700



4,079



1,700Long-term debt










2,225



3,925



5,625Stockholders equity


588



10,450



18,252



17,823



21,639     (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




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Overview
  ® ® ® ® ® ®
  Results
    of Operations
    Fiscal Year Ended June 30,2009


2008


2007Net revenue


100.0
%


100.0
%


100.0
%Gross profit


25.6
%


27.2
%


29.1
%Selling, general and administrative expenses


31.5
%


32.9
%


28.0
%Goodwill impairment


2.0
%






Interest expense


0.8
%


0.8
%


0.7
%Net income (loss)


(8.5
)%


(6.5
)%


0.4
%  13




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Fiscal 2009 Compared to Fiscal 2008
             14




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Fiscal 2008 Compared to Fiscal 2007
             15




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Financial
    Condition, Liquidity and Capital Resources
  Financing
    Considerations
    General
       16




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Financing
    Agreements
  sub-limit
              Factoring
    Agreements
   17




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Future
    Financing Requirements
      Off-Balance
    Sheet Arrangements
    Inflation
    Seasonality
    of Business and Fashion Risk
      Foreign
    Operations
   18




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Critical
    Accounting Policies and Estimates
        first-in,
   19




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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.   20




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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   21




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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 Stockholder Matters.      Item 13.
    Certain
    Relationships and Related Transactions.    Item 14.
    Principal
    Accounting Fees and Services.   22




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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). 23




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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). 24




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##### 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).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 1, 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). 25




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##### Table of Contents



*21


List of Subsidiaries of the Company.*23
.1

Consent of MHM Mahoney Cohen CPAs (The New York Practice of
    Mayer Hoffman McCann P.C.), Independent Registered  Public
    Accounting Firm.*23
.2

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. 26




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##### 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 23, 2009/s/  David
    StiffmanDavid
    Stiffman

Chief Operating Officer and Director

September 23, 2009/s/  Barton
    HeminoverBarton
    Heminover

Chief Financial Officer

September 23, 2009/s/  Philip
    G. BarachPhilip
    G. Barach

Director

September 23, 2009/s/  Harvey
    M. KruegerHarvey
    M. Krueger

Director

September 23, 2009/s/  Robert
    FlugRobert
    Flug

Director

September 23, 2009  27




---



##### 



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


F-2Consolidated Balance Sheets  June 30,
    2009 and 2008


F-4Consolidated Statements of Operations 
    Years Ended June 30, 2009, 2008 and 2007


F-5Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)  Years Ended
    June 30, 2009, 2008 and 2007


F-6Consolidated Statements of Cash Flows 
    Years Ended June 30, 2009, 2008 and 2007


F-7Notes to Consolidated Financial Statements


F-8The following consolidated financial statement schedule of
    Bernard Chaus, Inc. and subsidiaries is included in Item 15:Schedule II  Valuation and
    Qualifying Accounts


S-1EX-10.3EX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2     F-1




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REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               
 F-2




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              
 F-3




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##### Table of Contents



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


June 30,2009


2008AssetsCurrent AssetsCash and cash equivalents

$
126


$
61Accounts receivable  factored (Note 6)


10,589



839Accounts receivable  net


207



13,350Inventories  net


3,839



7,482Prepaid expenses and other current assets


275



596Total current assets


15,036



22,328Fixed assets  net


857



2,053Other assets  net


158



112Trademarks


1,000



1,000Goodwill






2,257Total assets

$
17,051


$
27,750Liabilities and Stockholders EquityCurrent LiabilitiesRevolving credit borrowings

$
6,606


$
4,798Accounts payable


6,251



6,844Accrued expenses


2,164



2,585Term loan  current






2,225Total current liabilities


15,021



16,452Long term liabilities


1,295



386Deferred income taxes


147



462Total liabilities


16,463



17,300Commitments 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,
    2009 and 2008


375



375Additional paid-in capital


133, 416



133,373Deficit


(130,794
)


(121,217
)Accumulated other comprehensive loss


(929
)


(601
)Less: Treasury stock at cost  62,270 shares at
    June 30, 2009 and 2008


(1,480
)


(1,480
)Total stockholders equity


588



10,450Total liabilities and stockholders equity

$
17,051


$
27,750   See accompanying notes to consolidated financial
    statements.
 F-4




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF
    OPERATIONS
 
  Fiscal Year Ended June 30,2009


2008


2007Net revenue

$
112,096


$
118,028


$
146,772Cost of goods sold


83,415



85,893



104,076Gross profit


28,681



32,135



42,696Selling, general and administrative expenses


35,360



38,798



41,023Goodwill impairment


2,257







Income (loss) from operations


(8,936
)


(6,663
)


1,673Interest expense


951



921



1,076Income (loss) before income tax (benefit) provision


(9,887
)


(7,584
)


597Income tax (benefit) provision


(310
)


94



75Net income (loss)

$
(9,577
)

$
(7,678
)

$
522Basic earnings (loss) per share

$
(0.26
)

$
(0.21
)

$
0.01Diluted earnings (loss) per share

$
(0.26
)

$
(0.21
)

$
0.01Weighted average number of common shares outstanding 
    basic


37,481,000



37,429,000



37,479,000Weighted average number of common and common equivalent shares
    outstanding  diluted


37,481,000



37,429,000



37,930,000   See accompanying notes to consolidated financial
    statements.
 F-5




---



##### 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, 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
)


10,450Stock option compensation expense










43



















43Net change in pension liability


























(328
)


(328
)Net loss














(9,577
)














(9,577
)Comprehensive loss






























(9,905
)Balance at June 30, 2009


37,543,643


$
375


$
133,416


$
(130,794
)


62,270


$
(1,480
)

$
(929
)

$
588   See accompanying notes to consolidated financial
    statements
 F-6




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
  Year Ended June 30,2009


2008


2007Operating ActivitiesNet income (loss)

$
(9,577
)

$
(7,678
)

$
522Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


1,190



1,272



1,300Goodwill impairment


2,257







Loss on disposal and impairment of fixed assets


272







Stock compensation expense


43



42



50Gain from insurance recovery


(464
)






Proceeds from insurance recovery


215







Deferred income taxes


(315
)


89



91Changes in operating assets and liabilities:Accounts receivable


13,143



3,255



5,259Accounts receivable  factored


(9,750
)


799



(248
)Inventories


3,643



1,394



263Prepaid expenses and other assets


288



56



172Accounts payable


(593
)


(3,168
)


708Accrued expenses and long term liabilities


127



(2,124
)


455Net cash provided by (used in) operating activities


479



(6,063
)


8,572Investing ActivitiesPurchases of fixed assets


(189
)


(351
)


(1,066
)Proceeds from insurance recovery


192







Net cash provided by (used in) investing activities


3



(351
)


(1,066
)Financing ActivitiesNet proceeds (repayments) from revolving credit borrowings


8



4,798



(2,379
)Principal payments on term loan


(425
)


(1,700
)


(1,700
)Repurchases and retirement of Common Stock










(194
)Net proceeds from issuance of stock










24Net cash provided by (used in) financing activities


(417
)


3,098



(4,249
)Increase (decrease) in cash and cash equivalents


65



(3,316
)


3,257Cash and cash equivalents, beginning of year


61



3,377



120Cash and cash equivalents, end of year

$
126


$
61


$
3,377Supplemental Disclosure of Cash Flow Information:Cash paid for:Taxes

$
25


$
55


$
40Interest

$
879


$
881


$
1,017Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:       See accompanying notes to consolidated financial
    statements.
 F-7




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
  1.
    Business  ® ® ® ® ® ®
     F-8




---



##### Table of Contents



2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation:
    Use of
    Estimates:
    Revenue
    Recognition:
      Shipping
    and Handling:
    Cooperative
    Advertising:
    Factoring
    Agreement and Accounts Receivable:
   F-9




---



##### Table of Contents



Inventories:
  first-in,
  Cost of
    goods sold:
  and/or
 F-10




---



##### Table of Contents



Cash and
    Cash Equivalents:
    Long-Lived
    Assets, Goodwill and Trademarks:
    Income
    Taxes:
    Stock-based
    Compensation:
   F-11




---



##### Table of Contents



For the Year EndedJune 30,

June 30,2008

2007Weighted average fair value of stock options granted

$0.79

$0.92Risk-free interest rate

5.03%

5.15%Expected dividend yield

0%

0%Expected life of options

10.0 years

10.0 yearsExpected volatility

131%

170%   Earnings
    Per Share:
    For the Year EndedJune 30,


June 30,


June 30,2009


2008


2007Denominator for earnings(loss) per share (in millions):Denominator for basic earnings (loss) per share weighted-average
    shares outstanding


37.4



37.4



37.5Assumed exercise of potential common shares










.4Denominator for diluted earnings (loss) per share


37.4



37.4



37.9   Advertising
    Expense:
    Fixed
    Assets:
    Other
    Assets:
    Foreign
    Currency Transactions:
   F-12




---



##### Table of Contents



Fair
    Value of Financial Instruments:
    Deferred
    Rent Obligations:
    Other
    Comprehensive Income (Loss):
    Segment
    Reporting:
  Disclosures about Segments of an
    Enterprise and Related Information
  New
    Accounting Pronouncements:
  157-1, FSP 157-2,
   F-13




---



##### Table of Contents



No. FAS 107-1, (FSP 107-1). FSP 107-1 SFAS No. 107-1
 F-14




---



##### Table of Contents



SFAS No. 107-1
        3.
    Inventories 
    net  June 30,


June 30,2009


2008(In thousands)Raw materials

$
306


$
172Work-in-process


71



29Finished goods


3,462



7,281Total

$
3,839


$
7,482   first-in
 F-15




---



##### Table of Contents



4.
    Fixed
    Assets  June 30,


June 30,2009


2008(In thousands)Computer hardware and software

$
4,523


$
4,376Furniture and equipment


1,591



2,236Leasehold improvements


3,666



4,5099,780



11,121Less: accumulated depreciation and amortization


8,923



9,068$
857


$
2,053   5.
    Income
    Taxes    Fiscal Year Ended June 30,2009


2008


2007Current:Federal

$
0


$
0


$
22State


5



5



(38
)$
5


$
5


$
(16
)Deferred:Federal

$
(271
)

$
75


$
75State


(44
)


14



16$
(315
)

$
89


$
91Total

$
(310
)

$
94


$
75     June 30,


June 30,2009


2008(In thousands)Deferred tax assets:Net federal, state and local operating loss carryforwards

$
37,300


$
42,900Costs capitalized to inventory for tax purposes


400



700Inventory valuation


300



300Excess of book over tax depreciation


1,600



1,200Sales allowances not currently deductible


1,500



1,300Reserves and other items not currently deductible


700



80041,800



47,200Less: valuation allowance for deferred tax assets


(41,800
)


(47,200
)Net deferred tax asset

$



$
   June 30,


June 30,2009


2008(In thousands)Deferred tax liability:Deferred tax liability related to indefinite lived intangibles

$
(147
)

$
(462
)  F-16




---



##### Table of Contents



Fiscal Year Ended June 30,2009


2008


2007(In thousands)(Benefit) expense for federal income taxes at the statutory rate

$
(2,594
)

$
(2,611
)

$
209State and local taxes, net of federal benefit


3



4



(25
)Other


68



73



18Effects of tax loss carryforwards


2,213



2,628



(127
)(Benefit) provision for income taxes

$
(310
)

$
94


$
75     6.
    Financing
    Agreements   F-17




---



##### Table of Contents



sub-limit
              Factoring
    Agreements
     F-18




---



##### Table of Contents



7.
    Employee
    Benefit Plans  Pension
    Plan:
      Obligations
    and Funded Status
    2009


2008(in thousands)Change in benefit obligationBenefit obligation at beginning of year

$
1,890


$
1,844Service cost


17



22Interest cost


111



108Change in assumption






Actuarial loss/(gain)


5



(10
)Benefits paid


(78
)


(74
)Benefit obligation at end of year

$
1,945


$
1,890Change in plan assetsFair value of plan assets at beginning of year

$
1,612


$
1,631Actual return on plan assets


(241
)


(70
)Employer contributions


106



125Benefits paid


(78
)


(74
)Fair value of plan assets at end of year

$
1,399


$
1,612Funded status

$
(546
)

$
(278
)Unrecognized net actuarial loss


929



601Net amount recognized

$
383


$
323Amounts recognized in the statement of financial position
    consist of:Accrued benefit cost

$
(546
)

$
(278
)Accumulated other comprehensive loss


929



601Net amount recognized

$
383


$
323  F-19




---



##### Table of Contents



June 30,


June 30,(In thousands)

2009


2008Projected and accumulated benefit obligation

$
1,945


$
1,890Fair value of plan assets

$
1,399


$
1,612   Fiscal Year(In thousands)

2009


2008


2007Components of Net Periodic Benefit Cost:Service cost

$
17


$
22


$
26Interest cost


111



108



105Expected return on plan assets


(128
)


(132
)


(115
)Amortization of accumulated unrecognized net loss


45



26



29Net periodic benefit cost

$
45


$
24


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

2009


2008


2007Discount Rate


6.00
%


6.00
%


6.25
%Expected Long Term Rate of Return on plan assets


8.00
%


8.00
%


8.25
%   Benefit Obligation at June 30,

2009

2008Discount Rate


6.00
%


6.00
%Expected Long Term Rate of Return on plan assets


7.75
%


7.75
%     Plan
    Assets
    Plan Assets


Plan Assetsat June 30


at June 30Asset Category

2009


2008Equity securities


37
%


52
%Debt securities


34
%


27
%Other


29
%


21
%Total


100
%


100
%  F-20




---



##### Table of Contents



Percentage ofTotal Portfolio

Asset Category5  15%

Cash and short term investments25  35%

Long-term fixed income50  65%

Common stock   Contributions
    Estimated
    Future Benefit Payments
    Fiscal Year

Pension Benefits2010

$
922011


962012


1072013


1172014


1232015  2019


718   Savings
    Plan:
    8.
    Stock
    Based Compensation:  Stock
    Option Plan
   F-21




---



##### Table of Contents



Stock OptionsWeightedNumber


Exercise

Averageof Shares


Price Range

Exercise PriceOutstanding at June 30, 2006


2,529,027


$.50  $3.50

$
.77Options granted


30,000


$ .92

$
.92Options exercised


(41,248
)

$.50  $ .75

$
.59Options forfeited/expired


(899,000
)

$.50  $ .94

$
.90Outstanding at June 30, 2007


1,618,779


$.50  $3.50

$
.71Options granted


30,000


$ .81

$
.81Options forfeited/expired


(571,967
)

$.50  $3.11

$
.85Outstanding at June 30, 2008


1,076,812


$.50  $3.50

$
.64Options forfeited/expired


(94,800
)

$.50  $3.50

$
.82Outstanding at June 30, 2009


982,012


$.50  $3.00

$
.62     Outstanding


ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageContractual


Exercise





ExerciseRange of Exercise Price

Shares


Life (Yrs.)


Price


Shares


Price$0.50


672,012



2.11


$
0.50



672,012


$
0.50$0.69


5,000



1.00


$
0.69



5,000


$
0.69$0.75


165,000



3.16


$
0.75



165,000


$
0.75$0.81


22,500



8.00


$
0.81



5,625


$
0.81$0.92


25,000



7.00


$
0.92



12,500


$
0.92$0.95


30,000



5.00


$
0.95



30,000


$
0.95$0.98


30,000



4.00


$
0.98



30,000


$
0.98$1.06


27,500



6.00


$
1.06



20,625


$
1.06$3.00


5,000






$
3.00



5,000


$
3.00982,012



2.77


$
0.62



945,762


$
0. 61       Weighted-AverageGrant DateNonvested Shares:

Shares


Fair ValueNonvested, July 1, 2008


75,000


$
0.85Forfeited


(15,000
)


0.86Vested


(23,750
)


0.85Nonvested, June 30, 2009


36,250


$
0.87  F-22




---



##### Table of Contents



Restricted
    Stock Inducement Plan
  and/or
  9.
    Commitments,
    Contingencies and Other Matters  Lease
    Obligations:
      Fiscal year ending:2010

$
2,1372011


1,9462012


1,9642013


1,9552014


1,776Thereafter


9,236$
19,014   Letters
    of Credit:
   F-23




---



##### Table of Contents



Inventory
    purchase commitments:
    Kenneth
    Cole License Agreement:
      Fiscal year ending:2010


1,7152011


1,3982012


1,227$
4,340   Korean
    Office Closing:
    Litigation:
    10.
    Subsequent
    Events:   F-24




---



##### Table of Contents



11.
    Unaudited
    Quarterly Results of Operations    (In thousands, except per share amounts)First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterFiscal 2009Net revenue

$
33,898


$
26,049


$
33,107


$
19,042Gross profit


9,968



5,623



9,378



3,712Net income (loss)


126



(3,581
)


(126
)


(5,996
)Basic earnings (loss) per share


(0.00
)


(0.10
)


0.00



(0.16
)Diluted earnings (loss) per share


(0.00
)


(0.10
)


0.00



(0.16
)Fiscal 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
)    F-25




---



##### 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, 2009Allowance for doubtful accounts

$
25


$
0


$
141


$
11Reserve for customer allowances and deductions

$
2,916


$
12,182


$
11,6942


$
3,404Year 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


$
2,785     1
    
    Uncollectible accounts written off2
    
    Allowances charged to reserve and granted to customers S-1