##### 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 July 3,
    2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT
    OF 1934For the transition period
    from          to   Commission file number 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 x
  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 OutstandingOctober 15, 2010

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 on December 7, 2010.




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




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Private Label
          Fiscal Year Ended2010


2009


2008Josephine Chaus and Chaus


23
%


38
%


38
%Private Labels


14



14



15Licensed Products


52



42



36Cynthia Steffe and Cynthia Cynthia Steffe


11



6



11Total


100
%


100
%


100
%   Business
    Segments
  page F-1.
  Customers
     2




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Sales and
    Marketing
        Design
    Manufacturing
    and Distribution
       3




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and/or
  Exclusive
    Supply Agreement
    Imports
    and Import Restrictions
    time-to-time,
 4




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Backlog
    Trademarks
      Competition
        Employees
   5




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Executive
    Officers
    NAME

AGE

POSITIONJosephine Chaus


59


Chairwoman of the Board and Chief Executive OfficerDavid Stiffman


54


Chief Operating and Chief Financial Officer     Josephine Chaus
  David Stiffman
  Forward
    Looking Statements
  Form 10-K.
  Item 1A.
    Risk
    Factors.  We rely on the KCP License Agreement for a majority of our
    total revenue. We have agreed to an early termination of this
    agreement effective June 1, 2011. If we are unable to
    replace the revenue from this license agreement in a timely
    manner or incur significantly higher costs to do so, the
    termination could have a material adverse effect on our
    business.
 6




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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.
  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. and/or
 7




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
    Political and labor instability and terrorism, war and military
    conflict in countries in which our goods are manufactured;
    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; and
    A decrease in availability, or increase in the cost of, raw
    materials.  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.
  Our success is dependent on consumer demand and economic
    conditions stabilizing.
  Item 2.
    Properties.   8




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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 2009First Quarter

$
0.35


$
0.26Second Quarter


0.29



0.05Third Quarter


0.11



0.07Fourth Quarter


0.15



0.11Fiscal 2010First Quarter

$
0.20


$
0.12Second Quarter


0.29



0.19Third Quarter


0.29



0.10Fourth Quarter


0.15



0.01      10




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5-year
  
  6/05

6/06

6/07

6/08

6/09

6/10Bernard Chaus, Inc.


100.00



86.79



76.42



28.30



13.68



15.85S&P 500


100.00



108.63



131.00



113.81



83.98



96.09S&P Apparel, Accessories & Luxury Goods


100.00



98.34



135.51



84.51



68.53



93.19   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 Ended2010


2009


2008


2007


2006(In thousands, except per share amounts)Net revenue

$
100,153


$
112,096


$
118,028


$
146,772


$
136,827Cost of goods sold


75,730



83,415



85,893



104,076



99,697Gross profit


24,423



28,681



32,135



42,696



37,130Selling, general and administrative expenses


29,597



35,360



38,798



41,023



40,867Goodwill impairment






2,257











Interest expense, net


811



951



921



1,076



914Income (loss) before income tax provision (benefit)


(5,985
)


(9,887
)


(7,584
)


597



(4,651
)Income tax provision (benefit)


48



(310
)


94



75



223Net income (loss)

$
(6,033
)

$
(9,577
)

$
(7,678
)

$
522


$
(4,874
)Basic earnings (loss)per
    share(1)

$
(0.16
)

$
(0.26
)

$
(0.21
)

$
0.01


$
(0.13
)Diluted earnings (loss)per
    share(2)

$
(0.16
)

$
(0.26
)

$
(0.21
)

$
0.01


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


37,481



37,481



37,429



37,479



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


37,481



37,481



37,429



37,930



37,017   Balance
    Sheet Data
  As of Fiscal Year Ended,2010

2009

2008

2007

2006Working capital (deficiency)

$
(2,300
)

$
15


$
5,876


$
14,664


$
15,932Total assets


32,489



17,051



27,750



37,491



39,914Short-term debt, including current portion of long-term debt


11,175



6,606



7,023



1,700



4,079Long-term debt














2,225



3,925Stockholders equity (deficiency)


(5,532
)


588



10,450



18,252



17,823     (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 shares of Common Stock 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
  ® ® ® ® ® ® ® ®
    Exclusive
    Supply Agreement
    Results
    of Operations
    Fiscal Year Ended2010


2009


2008Net revenue


100.0
%


100.0
%


100.0
%Gross profit


24.4
%


25.6
%


27.2
%Selling, general and administrative expenses


29.6
%


31.5
%


32.9
%Goodwill impairment






2.0
%


Interest expense


0.8
%


0.8
%


0.8
%Net loss


(6.0
)%


(8.5
)%


(6.5
)%   Fiscal 2010 Compared to Fiscal 2009
   13




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14




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Fiscal 2009 Compared to Fiscal 2008
               15




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Financial
    Condition, Liquidity and Capital Resources
  Financing
    Considerations
    General
         16




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Financing
    Agreements
          Factoring
    Agreements
    Future
    Financing Requirements
   17




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Off-Balance
    Sheet Arrangements
    Inflation
    Seasonality
    of Business and Fashion Risk
      Foreign
    Operations
    Critical
    Accounting Policies and Estimates
   18




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receivable-net
  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.    Item 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
    Rule 13a-15.
 20




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Changes
    in Internal Control over Financial Reporting
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f).
        Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors
    and Executive Officers of the Registrant.      Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholders Matters.   21




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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).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). 24




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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 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).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). 25




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*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).*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.*23
.2

Consent of 25 MAD LIQUIDATION CPA, P.C. (formerly known as
    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 David Stiffman.*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 David Stiffman.     
    
    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

October 29, 2010/s/  David
    StiffmanDavid
    Stiffman

Chief Operating, Chief Financial Officer and Director

October 29, 2010/s/  Philip
    G. BarachPhilip
    G. Barach

Director

October 29, 2010/s/  Robert
    FlugRobert
    Flug

Director

October 29, 2010  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 
    July 3, 2010 and June 30, 2009


F-4Consolidated Statements of Operations 
    Years Ended July 3, 2010, June 30, 2009 and
    June 30, 2008


F-5Consolidated Statements of Stockholders
    Equity (Deficiency) and Comprehensive Loss  Years
    Ended July 3, 2010, June 30, 2009 and June 30,
    2008


F-6Consolidated Statements of Cash Flows 
    Years Ended July 3, 2010, June 30, 2009 and
    June 30, 2008


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-10.5EX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2     F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               
 F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
               
 F-3




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (In
    thousands, except number of shares and per share amounts)
  July 3,


June 30,2010


2009AssetsCurrent AssetsCash

$
4


$
126Accounts receivable  factored


19,404



10,589Accounts receivable  net


1,789



207Inventories  net


8,846



3,839Prepaid expenses and other current assets


536



275Total current assets


30,579



15,036Fixed assets  net


885



857Other assets


25



158Trademarks


1,000



1,000Total assets

$
32,489


$
17,051Liabilities and Stockholders Equity (Deficiency)Current LiabilitiesRevolving credit borrowings

$
11,175


$
6,606Accounts payable


19,399



6,251Accrued expenses


2,305



2,164Total current liabilities


32,879



15,021Deferred income


3,234



Long term liabilities


1,735



1,295Deferred income taxes


173



147Total liabilities


38,021



16,463Commitments and Contingencies (Notes 6, 8, and 10)Stockholders Equity (Deficiency)Preferred 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 3,
    2010 and June 30, 2009


375



375Additional paid-in capital


133,440



133,416Deficit


(136,827
)


(130,794
)Accumulated other comprehensive loss


(1,040
)


(929
)Less: Treasury stock at cost  62,270 shares at
    July 3, 2010 and June 30, 2009


(1,480
)


(1,480
)Total stockholders equity (deficiency)


(5,532
)


588Total liabilities and stockholders equity (deficiency)

$
32,489


$
17,051   See accompanying notes to consolidated financial
    statements.
 F-4




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##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    OPERATIONS (In
    thousands, except number of shares and per share amounts)
  Fiscal Year Ended2010


2009


2008Net revenue

$
100,153


$
112,096


$
118,028Cost of goods sold


75,730



83,415



85,893Gross profit


24,423



28,681



32,135Selling, general and administrative expenses


29,597



35,360



38,798Goodwill impairment






2,257



Loss from operations


(5,174
)


(8,936
)


(6,663
)Interest expense


811



951



921Loss before income tax (benefit) provision


(5,985
)


(9,887
)


(7,584
)Income tax (benefit) provision


48



(310
)


94Net loss

$
(6,033
)

$
(9,577
)

$
(7,678
)Basic loss per share

$
(0.16
)

$
(0.26
)

$
(0.21
)Diluted loss per share

$
(0.16
)

$
(0.26
)

$
(0.21
)Weighted average number of common shares outstanding 
    basic


37,481



37,481



37,429Weighted average number of common and common equivalent shares
    outstanding  diluted


37,481



37,481



37,429   See accompanying notes to consolidated financial
    statements.
 F-5




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##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    STOCKHOLDERS EQUITY (DEFICIENCY)
    AND COMPREHENSIVE LOSS (In
    thousands, except number of shares)
  Common Stock








Treasury StockAccumulatedAdditional











OtherNumber of





Paid-in





Number





ComprehensiveShares


Amount


Capital


(Deficit)


of Shares


Amount


Loss


TotalBalance at July 1, 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
)


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
)   See accompanying notes to consolidated financial
    statements
 F-6




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##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
    FLOWS (In
    thousands)
  Fiscal Year Ended2010


2009


2008Operating ActivitiesNet loss

$
(6,033
)

$
(9,577
)

$
(7,678
)Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:Goodwill impairment






2,257



Depreciation and amortization


618



1,190



1,272Loss on disposal and impairment of fixed assets


43



272



Amortization of deferred income


(366
)






Stock compensation expense


24



43



42Gain from insurance recovery






(464
)


Proceeds from insurance recovery






215



Deferred rent expense


297



489



(129
)Deferred income taxes


26



(315
)


89Changes in operating assets and liabilities:Accounts receivable  factored


(8,815
)


(9,750
)


799Accounts receivable


(1,582
)


13,143



3,255Inventories


(5,007
)


3,643



1,394Prepaid expenses and other assets


(230
)


288



56Accounts payable


13,148



(593
)


(3,168
)Accrued expenses and long term liabilities


(227
)


(362
)


(1,995
)Net cash provided by (used in) operating activities


(8,104
)


479



(6,063
)Investing ActivitiesPurchases of fixed assets


(587
)


(189
)


(351
)Proceeds from insurance recovery






192



Net cash provided by (used in) investing activities


(587
)


3



(351
)Financing ActivitiesNet proceeds from revolving credit borrowings


4,569



8



4,798Principal payments on term loan






(425
)


(1,700
)Proceeds from supply agreement


4,000







Net cash provided by (used in) financing activities


8,569



(417
)


3,098Increase (decrease) in cash and cash equivalents


(122
)


65



(3,316
)Cash and cash equivalents, beginning of year


126



61



3,377Cash and cash equivalents, end of year

$
4


$
126


$
61Supplemental Disclosure of Cash Flow Information:Cash paid for:Taxes

$
14


$
25


$
55Interest

$
743


$
879


$
881Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:       See accompanying notes to consolidated financial
    statements.
 F-7




---



##### Table of Contents



BERNARD
    CHAUS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED JULY 3, 2010, JUNE 30, 2009 AND JUNE 30,
    2008
  1.
    Business  ® ® ® ® ® ® ® ®
     F-8




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##### Table of Contents



2.
    Summary
    of Significant Accounting Policies  Fiscal
    Year:
    Principles
    of Consolidation:
    Use of
    Estimates:
    Revenue
    Recognition:
      Shipping
    and Handling:
   F-9




---



##### Table of Contents



Cooperative
    Advertising:
    Factoring
    Agreement and Accounts Receivable:
  receivable-net
    Inventories:
  first-in,
  Cost of
    goods sold:
   F-10




---



##### Table of Contents



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




---



##### Table of Contents



Fiscal 2008Weighted average fair value of stock options granted

$0.79Risk-free interest rate

5.03%Expected dividend yield

0%Expected life of options

10.0 yearsExpected volatility

131%   Earnings(Loss)
    Per Share:
    For the Year EndedJuly 3,


June 30,


June 30,2010


2009


2008Denominator for earnings(loss) per share (in millions):Denominator for basic earnings (loss) per share weighted-average
    shares outstanding


37.5



37.4



37.4Assumed exercise of potential common shares










Denominator for diluted earnings (loss) per share


37.5



37.4



37.4     Advertising
    Expense:
    Fixed
    Assets:
    Other
    Assets:
   F-12




---



##### Table of Contents



Foreign
    Currency Transactions:
    Fair
    Value Measurements:
    Fair
    Value of Financial Instruments:
    Deferred
    Rent Obligations:
    Other
    Comprehensive Loss:
    Segment
    Reporting:
    New
    Accounting Pronouncements:
     F-13




---



##### Table of Contents



2010-06, Improving Disclosures about Fair Measurements 820-10 2010-06 820-10 2010-06 2010-06
  2010-20, Receivables (Topic 310) Disclosures about the Credit
    Quality of Financing Receivables and the Allowance for Credit
    Losses 2010-20 2010-20
  3.
    Inventories 
    net  July 3,


June 30,2010


2009(In thousands)Raw materials

$
457


$
306Work-in-process


63



71Finished goods


8,326



3,462Total

$
8,846


$
3,839  F-14




---



##### Table of Contents



first-in
  4.
    Fixed
    Assets  July 3,


June 30,2010


2009(In thousands)Computer hardware and software

$
4,733


$
4,523Furniture and equipment


1,567



1,591Leasehold improvements


3,402



3,6669,702



9,780Less: accumulated depreciation and amortization


8,817



8,923$
885


$
857   5.
    Income
    Taxes    Fiscal Year Ended2010


2009


2008(In thousands)Current:Federal

$
0


$
0


$
0State


21



5



521



5



5Deferred:Federal


23



(271
)


75State


4



(44
)


1427



(315
)


89Total

$
48


$
(310
)

$
94     July 3,


June 30,2010


2009(In thousands)Deferred tax assets:Net federal, state and local operating loss carryforwards

$
29,300


$
37,300Costs capitalized to inventory for tax purposes


900



400Inventory valuation


200



300Excess of book over tax depreciation


1,500



1,600Sales allowances not currently deductible


1,100



1,500Reserves and other items not currently deductible


600



70033,600



41,800Less: valuation allowance for deferred tax assets


(33,600
)


(41,800
)Net deferred tax asset

$



$
   F-15




---



##### Table of Contents



July 3,


June 30,2010


2009(In thousands)Deferred tax liability:Deferred tax liability related to indefinite lived intangibles

$
(173
)

$
(147
)         Fiscal Year Ended2010


2009


2008(In thousands)Benefit for federal income taxes at the statutory rate

$
(2,035
)

$
(2,594
)

$
(2,611
)State and local taxes, net of federal benefit


14



3



4Other


73



68



73Effects of tax loss carryforwards


1996



2,213



2,628Provision (benefit) for income tax

$
48


$
(310
)

$
94     6.
    Financing
    Agreements     F-16




---



##### Table of Contents



sub-limit
    Factoring
    Agreements
      7.
    Deferred
    Income   F-17




---



##### Table of Contents



8.
    Employee
    Benefit Plans  Pension
    Plan:
      Obligations
    and Funded Status
    2010


2009(in thousands)Change in benefit obligation  projected and
    accumulatedBenefit obligation at beginning of year

$
1,945


$
1,890Service cost


8



17Interest cost


114



111Actuarial loss


11



5Change in assumption


116



Benefits paid


(88
)


(78
)Benefit obligation at end of year

$
2,106


$
1,945Change in plan assetsFair value of plan assets at beginning of year

$
1,399


$
1,612Actual return on plan assets


89



(241
)Employer contributions






106Benefits paid


(88
)


(78
)Fair value of plan assets at end of year

$
1,400


$
1,399Funded status

$
(706
)

$
(546
)Unrecognized net actuarial loss


1,040



929Net amount recognized

$
334


$
383Amounts recognized in the statement of financial position
    consist of:Accrued benefit cost

$
(706
)

$
(546
)Accumulated other comprehensive loss


1,040



929Net amount recognized

$
334


$
383    F-18




---



##### Table of Contents



Fiscal Year(In thousands)

2010


2009


2008Components of Net Periodic Benefit Cost:Service cost

$
8


$
17


$
22Interest cost


114



111



108Expected return on plan assets


(105
)


(128
)


(132
)Amortization of accumulated unrecognized loss


32



45



26Net periodic benefit cost

$
49


$
45


$
24   Additional
    Information
    Assumptions
    Net periodic benefit (cost) for the fiscal years ended:

2010


2009


2008Discount Rate


6.00
%


6.00
%


6.00
%Expected Long Term Rate of Return on plan assets


7.75
%


8.00
%


8.00
%   Benefit Obligation at end of year:

2010


2009Discount Rate


5.50
%


6.00
%Expected Long Term Rate of Return on plan assets


7.75
%


7.75
%     Plan
    Assets
    Plan Assets


Plan Assetsat July 3,


at June 30,Asset Category

2010


2009Equity securities


40
%


37
%Debt securities


37
%


34
%Cash equivalents


23
%


29
%Total


100
%


100
%    F-19




---



##### Table of Contents



Percentage ofTotal Portfolio

Asset Category25  35%

Cash and short term investments25  35%

Long-term fixed income/debt securities25  40%

Common stock/equity securities     Level 1


Level 2


Level 3


TotalPooled separate accounts

$



$
1,400


$



$
1,400     Contributions
    Estimated
    Future Benefit Payments
    Fiscal Year

Pension Benefits2011

$
972012


1082013


1182014


1242015


1332016  2020


741   Savings
    Plan
    9.
    Stock
    Based Compensation  Stock
    Option Plan
   F-20




---



##### Table of Contents



Stock OptionsWeightedAverageWeighted


RemainingNumber


Average


Contractualof Shares


Exercise Price


Life (Years)Outstanding at July 1, 2009


982,012


$
.62Options forfeited/expired


(168,408
)

$
.75Outstanding at July 3, 2010


813,604


$
.59



1.72Vested and exercisable at July 3, 2010


808,604


$
.59



1.69       Weighted-AverageGrant DateNonvested Shares

Shares


Fair ValueNonvested July 1, 2009


36,250


$
0.87Vested


(31,250
)


0.87Nonvested, July 3, 2010


5,000


$
0.81     Restricted
    Stock Inducement Plan
  and/or
 F-21




---



##### Table of Contents



10.
    Commitments,
    Contingencies and Other Matters  Lease
    Obligations:
      Fiscal year ending:2011

$
1,9202012


1,9412013


1,9512014


1,7762015


1,804Thereafter


7,432$
16,824   Letters
    of Credit:
    Inventory
    purchase commitments:
    Kenneth
    Cole License Agreement:
   F-22




---



##### Table of Contents



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

Second

Third

FourthQuarter

Quarter

Quarter

QuarterFiscal 2010Net revenue

$
23,710


$
21,097


$
27,781


$
27,565Gross profit


6,471



4,701



8,059



5,192Net income (loss)


(943
)


(2,471
)


16



(2,635
)Basic earnings (loss) per share


(0.03
)


(0.07
)


0.00



(0.06
)Diluted earnings (loss) per share


(0.03
)


(0.07
)


0.00



(0.06
)Fiscal 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
)    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 July 3, 2010Allowance for doubtful accounts

$
11


$
0


$
111


$
0Reserve for customer allowance and deductions

$
3,404


$
10,940


$
12,1002


$
2,244Year ended June 30, 2009Allowance for doubtful accounts

$
25


$
0


$
141


$
11Reserve for customer allowance and deductions

$
2,916


$
12,182


$
11,6942


$
3,404Year ended June 30, 2008Allowance for doubtful accounts

$
60


$
0


$
351


$
25Reserve for customer allowance and deductions

$
2,785


$
12,444


$
12,3132


$
2,916     1
    
    Uncollectible accounts written off2
    
    Allowances charged to reserve and granted to customers S-1