UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K/A





Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of

1934 for the fiscal year ended January 31, 2008.

Commission File Number 0-22102





CYGNE DESIGNS, INC.

(Exact name of Registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 04-2843286                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|                                         |  |           
|---------------------------------------- |  | ----------
|11 West 42ndStreet, New York, New York   |  | 10036     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (212) 997-7767





Securities registered pursuant to Section 12(b) of the Act: None

(Title
of class)

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title
of class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.    Yes   ̈    No  x

Indicate by check mark whether
the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Act. Check one)



|                           |  |                      |  |                                             |  |                             
|-------------------------- |  | -------------------- |  | ------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈                    |  | Smaller reporting company  x
|                           |  |                      |  | (Do not check if smaller reporting company) |  |                             

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12 b-2 of the
Act).    Yes   ̈    No  x

Based on the closing sale price as reported by The Nasdaq Capital Market on July 31, 2007 the last business day of the registrants most recently completed second fiscal quarter, the aggregate market value
of the registrants Common Stock, par value $.01 per share, held by non-affiliates of the registrant was approximately $14,899,147*.



|* | For purposes of this calculation, the number of shares held by non-affiliates was determined by aggregating the number of shares held by officers and directors of the registrant,
and by others who, to the registrants knowledge, own more than 10% of the registrants Common Stock, and subtracting those shares from the total number of shares outstanding.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of May 2, 2008, 37,917, 682 shares of Common Stock, $0.01 par value, of the registrant were outstanding.

Documents incorporated by reference: None









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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

Executive Officers of the Registrant

Our executive officers are as follows:



|                  |  |     |  |                                                                        
|----------------- |  | --- |  | -----------------------------------------------------------------------
|Name              |  | Age |  | Position with the Company                                              
|Bernard M. Manuel |  | 60  |  | Director, Chairman of the Board                                        
|Jay Furrow        |  | 34  |  | Director, President and Chief Executive Officer                        
|Roy E. Green      |  | 75  |  | Senior Vice President-Chief Financial Officer, Treasurer, and Secretary

On April 25, 2008, Cygne Designs, Inc. appointed Mr. Jay Furrow as President and Chief
Executive Officer of the Company. Mr. Furrow became a member of the Companys Board of Directors on April 25, 2008.

Bernard
M. Manuel currently serves as the Chairman of the Board and a director. Mr. Manuel served as our Chief Executive Officer from October 1988, when he joined us, until April 25, 2008, and has served in several additional executive positions
since he joined us. Mr. Manuel is a director of several private companies in the U.S. and Europe. From 1983 until he joined the Company, Mr. Manuel was involved, through Amvent, a company he founded, in the transfer of technology between
Europe and the U.S. and related venture capital and merger and acquisition activities, as well as in the apparel industry. Mr. Manuel earned a Bachelors of Science in Mathematics and several graduate degrees in Mathematics and in
Economics from the University of Paris, an M.S. in Political Science from the Institute dEtudes Politiques in Paris and an M.B.A. with high honors (Baker Scholar) from the Harvard Business School, where he was awarded both the Loeb
Rhodes Fellowship for excellence in finance and the Melvin T. Copeland prize for top performance in marketing.

Jay Furrow, 34, is a
principal in the Furrow Realty Fund, LP, a real estate fund focused on investing in commercial and industrial real estate. Additionally, Mr. Furrow is a founder of and on the board of Regents Secret, Inc., an online fashion retailer,
where he has served as chief executive officer and as chairman of the Board of Directors since its inception in May 2007. Since January 2006, Mr. Furrow has served as managing member and founder of JFJ Holdings LLC, a private equity company.
From July 2002 until January 2006, Mr. Furrow served as Chief Executive Officer, from December 2000 until July 2002 as President, and from April 1999 until March 2003 as Chief Operating Officer of Joes Jeans Inc. (JOEZ), a publicly traded
apparel company, in addition to serving as a member of its Board of Directors from 1999 until July 2007. Mr. Furrow received his J.D. degree from Southern Methodist University School of Law and his B.S. degree in Political Science from
Vanderbilt University.

Roy E. Green has served as Chief Financial Officer of the Company, as well as in various additional executive
capacities, since October 1987. He currently serves as our Senior Vice President-Chief Financial Officer, Treasurer and Secretary. From 1974 until he joined us, Mr. Green was employed by Cluett Peabody & Co., first as the Chief
Financial Officer of its Arrow Co. division until 1979, then as Vice President and Controller until 1985, and finally as Chief Financial Officer. He has also worked as a certified public accountant for J. K. Lasser & Co. and
Hurdman & Cranston. Mr. Green received a Bachelors degree in Business Administration from Rutgers University. Mr. Green is a certified public accountant.

BOARD OF DIRECTORS

The board of directors had four members at January 31, 2008. On
April 25, 2008, Jay Furrow became the fifth member of the board of directors.



|                       |  |     |  |                          
|---------------------- |  | --- |  | -------------------------
|Director               |  | Age |  | Year FirstBecame Director
|James G. Groninger (1) |  | 64  |  | 1993                     
|Bernard M. Manuel      |  | 60  |  | 1988                     
|Jay Furrow             |  | 34  |  | 2008                     
|Michel Collet (1)      |  | 41  |  | 2005                     
|Guy Kinberg (1)        |  | 52  |  | 2005                     



|(1) | Member of the Audit Committee, Compensation and Stock Option Committee and Nominating and Corporate Governance Committee of the Board of directors.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



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Mr. Groninger has been the President of Bay South Company since January 1995. Mr. Groninger is
a director and Chief Executive Officer of LBS Technologies, Inc. and a director of Layton BioScience, Inc., NPS Pharmaceuticals, Inc. and Expression Pathology, Inc. LBS Technologies, Inc. and Layton BioScience, Inc. are privately held companies
engaged in genomics and neuronal cell therapy, respectively. NPS Pharmaceuticals, Inc. is a publicly traded biotechnology company engaged in the discovery, development, and commercialization of therapeutic small molecules and recombinant proteins.
Expression Pathology Inc. is a private biotechnology company leading the development of innovative tissue protein analysis methods for research and diagnostic applications.

Mr. Manuel has been our Chairman of the Board since 1988 and served as our Chief Executive Officer from 1988 until April 25, 2008. See
Executive Officers of the Registrant.

Mr. Jay Furrow became a director and Chief Executive Officer on
April 25, 2008. See Executive Officers of the Registrant.

Mr. Collet is a partner with CMS Bureau Francis
Lefebvre (CMS), a leading law firm in France. Mr. Collet headed the New York office from 2002 to 2007 and he is now with the International Tax Group of the firm in France. He is still responsible for the development of the firm in
the United States. Mr. Collet originally joined CMS in 1994. In 2000, Mr. Collet left CMS to join Linklaters, a leading European law firm, in Paris and London. He rejoined CMS in September 2002.

Mr. Kinberg joined Theory, Inc., a manufacturer and retailer of better womens and mens apparel, in September 2006 and currently serves
as its Vice-President of Manufacturing, Mr. Kinberg was a consultant to various apparel companies from April 2006 through October 2006. Mr. Kinberg was a founder and shareholder of Creative Associates LLC which created the brand FRx
Clothing. He served as its President from January 2002 through March 2006.

Board Meetings

During the fiscal year ended January 31, 2008, our board of directors held 14 meetings. Each director (other than Mr. Furrow, who was not
a director during the period) attended all meetings of the board of directors, except the May 17, 2007 meeting, which Mr. Manuel could not attend, and the July 27, 2007 meeting, which Mr. Collet could not attend.

Board Committees

The board of
directors has a Compensation and Stock Option Committee, Audit Committee and Nominating and Corporate Governance Committee to assist it in the discharge of its responsibilities.

The Audit Committee reviews our annual audit and meets with our independent auditors to review our internal controls and financial management practices.
The Audit Committee is comprised of three non-employee directors, Messrs. Groninger, Collet and Kinberg. The Nominating and Corporate Governance Committee of the board of directors has determined that all members of the Audit Committee are
independent under the rules and regulations of the Nasdaq Capital Market. Mr. Groninger serves as the chairman of the Audit Committee. The Audit Committee held nine meetings during the fiscal year ended January 31, 2008. Each
member attended all meetings of the Audit Committee except for the July 27, 2007 meeting, which Mr. Collet could not attend. Mr. Groninger is an audit committee financial expert as defined in Regulation 240.401
(h) (1) (i) (A) of Regulation S-K.

The board of directors adopted a written charter for the Audit Committee. The
charter has not changed from the charter filed with our 2005 proxy statement.

The Compensation and Stock Option Committee reviews
compensation practices, recommends compensation for our executives and key employees and functions as the committee under our 2006 Incentive Plan. The Compensation and Stock Option Committee is comprised of three non-employee directors, Messrs.
Groninger, Collet and Kinberg. Mr. Groninger acts as the chairman of the Compensation and Stock Option Committee. The Compensation and Stock Option Committee held two meetings during the fiscal year ended January 31, 2008. Each director
attended all meetings of the Compensation and Stock Option Committee.

The board of directors adopted a written charter for the
Compensation and Stock Option Committee. The charter has not changed from the charter filed with our 2005 proxy statement.

In November,
2005 we established a Nominating and Corporate Governance Committee of the board of directors, which was established for the purpose of assisting the board in its selection of individuals as nominees for election to the



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board at meetings of our stockholders and/or to fill any vacancies or newly created directorships on the board and assisting the board in its oversight of
our corporate governance. The Nominating and Corporate Governance Committee held one meeting during the fiscal year ended January 31, 2008. Each director attended the meeting. The Nominating and Corporate Governance Committee is comprised of
three non-employee directors, Messrs. Groninger, Collet and Kinberg. Mr. Collet serves as Chairman. All members of the Nominating and Corporate Governance Committee are independent as independence is currently defined by the Nasdaq listing
standards.

The board of directors adopted a written charter for the Nominating and Corporate Governance Committee. The charter has not
changed from the charter filed with our 2005 proxy statement.

The Nominating and Corporate Governance Committee uses a variety of methods
to identify and evaluate nominees for election to the board. Candidates may come to the attention of the Nominating and Corporate Governance Committee through members of our board, professional search firms, stockholders and other interested
parties. From time to time, the Nominating and Corporate Governance Committee may engage consulting firms to perform searches for director candidates who meet the needs of the board. If a consulting firm were retained to assist in the search process
for a director, a fee would typically be paid to such firm.

The Nominating and Corporate Governance Committee believes that all candidates
should have personal and professional integrity, experience with businesses and other organizations of comparable size or in related industries, a college or professional degree, demonstrated exceptional ability and judgment, and the ability to act
in the best interests of our stockholders.

A stockholder wishing to nominate an individual for election to our board should send the
nomination, together with a statement of the individuals experience and qualifications and a signed consent of the individual to serve if nominated and elected, to Cygne Designs, Inc., 11 West 42nd Street, New York, NY 10036, Attention:
Chairman, Nominating and Corporate Governance Committee.

Nominations received by the Nominating and Corporate Governance Committee will be
reviewed by the Chairman of the Nominating and Corporate Governance Committee to determine whether the candidate possesses the director qualifications, and if so, whether the candidates expertise and particular set of skills and background fit
the current needs of the board and whether the candidate will be effective, together with the other nominees and directors, in serving our long-term interests and our stockholders. The process of reviewing and evaluating candidates submitted by
stockholders is designed to ensure that the board includes members with diverse backgrounds, skills and experience including appropriate financial and other expertise relevant to our business.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission (the SEC). Executive officers, directors, and greater than ten percent beneficial owners are required by the SEC to furnish us with copies of all Section 16(a) forms they
file.

Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and
directors, we believe that during the fiscal year ended January 31, 2008, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than ten percent beneficial owners were complied with.

Code of Ethics

We have adopted a code of ethics
applicable to our officers, who include our principal executive officer, principal financial officer and financial professionals. A copy of our code of ethics has been filed with the Securities and Exchange Commission. We undertake to provide to any
person without charge, upon request, a copy of our code of ethics. Requests for such copy should be made in writing to us at our principal office, which is set forth on the first page of our Form 10-K, attention Corporate Secretary.



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|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Compensation Discussion and Analysis

In this compensation discussion and analysis, we discuss our compensation objectives, our decisions and the rational behind these
decisions relating to 2007 compensation for our executive officers.

Objectives of Our Compensation Program

The objective of our compensation program is to compensate executive officers in a manner that: (i) links compensation to the achievement of our
business and strategic goals; (ii) aligns their interests with those of our stockholders; (iii) recognizes individual contributions and (iv) attracts, motivates and retains highly talented executives.

What our Compensation Program is Designed to Reward

Our compensation program is designed to reward performance that contributes to the achievement of our business objectives and business strategies on both a short-term and long-term basis. In addition, we reward qualities that we believe
help achieve our business objectives and business strategies such as teamwork, individual performance in light of general economic and industry specific conditions, level of responsibility and tenure.

Our compensation program is comprised of four elements:



| |  |  | base salary, which is intended to provide a stable annual salary at a level consistent with competitive market practice, to reflect each executive officers
position and level of responsibility and to recognize each executive officers unique value and historical contributions to our success;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | annual bonuses, which are designed to help motivate management to achieve key operational objectives by rewarding achievement of these objectives;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | equity-linked awards, which are designed to align executives interests with the interests of our stockholders, thereby encouraging actions to maximize
short-term and long-term stockholder value; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | benefits which we have determined are necessary in order to provide a competitive remuneration package.
| | - |  | -------------------------------------------------------------------------------------------------------

The relative proportion of total compensation paid or awarded to our executive officers for each individual component of compensation (salary, annual
bonuses and equity-linked awards) varies for each executive officer based on the executives level in the organization. The level correlates with the executives ability to impact business results through the executives performance
and leadership role. Our chairman and chief executive officer has a greater impact on achievement of the business strategy and overall business performance.

The compensation committee of our board of directors oversees our compensation program. The compensation committee periodically compares our executive compensation components with market information. The purpose of
this comparison is to ensure that our total compensation package operates effectively, remains both reasonable and competitive within our industry and is generally comparable to the compensation offered by companies of similar size and scope as us.
The compensation committee also keeps abreast of current trends, developments and emerging issues in executive compensation and, if appropriate, will obtain advice and assistance from outside compensation advisors.

Components of Compensation

Base Salary.Our policy is to position each executives base salary at levels that are comparable to salaries provided to other executives in our industry, with consideration for the industrys standards, the size and scope of our operations,
individual performance factors and the scope of an individuals responsibilities. We consider these factors subjectively in the aggregate and none of the factors is accorded a specific weight, and we are not precluded from considering other
factors as we consider relevant. Because Messrs. Manuel and Green have agreed, since 1995, to a freeze in their salaries below the levels specified in their employment agreements, we did not engage in any benchmarking of these salaries against those
of other companies.

Annual Bonuses.We do not have a formal bonus plan. Rather, the compensation committee considers whether to
award cash bonuses at the end of the year based upon our determination of the success achieved by us, and managements role in such success. At the request of Messrs. Manuel and Green, we have not considered the payment of bonuses since 1995
due to our financial condition.

Equity-Linked Awards. On January 20, 2006, our stockholders approved our 2006 Incentive Plan
(the Incentive Plan).



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The Incentive Plan will enable us to make certain types of equity-based compensation awards to our
employees and non-employee directors. We believe that the ability to award equity-based compensation and cash incentive awards in addition to stock options will increase our ability to create effective short and longer-term incentive programs for
our employees while reducing dilution to existing stockholders that results from the grant of options. We also believe the Incentive Plan will allow us to match developing trends in long-term incentive compensation, particularly in light of the
expected requirement to expense stock options.

The Incentive Plan will also enable us to make performance-based equity and cash incentive
awards that qualify as performance-based remuneration under section 162(m) of the Code. Section 162(m) of the Code limits the deductibility of compensation in excess of $1 million paid by a publicly held corporation to
certain covered employees unless that compensation qualifies as performance-based remuneration. Notwithstanding the adoption of the Incentive Plan, we reserve the right to pay our employees, including recipients of
equity-based or cash awards under the Incentive Plan, amounts which may or may not be deductible under section 162(m) or other provisions of the Code.

General Description of the Incentive Plan

Purpose. The purpose of the Incentive Plan is to enable us to
attract, motivate, reward and retain key personnel through the use of equity-based and cash incentive compensation awards, including options to purchase shares of our common stock, stock appreciation rights (SARs), restricted stock
awards, restricted stock unit awards, performance-based awards, dividend equivalent payment rights and other forms of equity-based compensation and cash incentive awards.

Available Shares. A total of 3,000,000 shares of our common stock may be issued pursuant to the Incentive Plan. The number of shares that may be issued under the Incentive Plan is subject to adjustments
to reflect any increase or decrease in the number of issued shares of common stock resulting from a split-up or consolidation of shares or any like capital adjustment, or the payment of any stock dividend, and/or to reflect a change in the character
or class of shares covered by the Incentive Plan arising from a readjustment or recapitalization of our capital stock. In determining the number of authorized shares available for issuance under the Incentive Plan the following shares shall be
deemed not to have been issued (and will remain available for issuance) pursuant to the Incentive Plan: (i) shares that are subject to an award that is forfeited, canceled, terminated or settled in cash, (ii) shares repurchased by us
from the recipient of an award for not more than the original purchase price of such shares or forfeited to us by the recipient of an award or (iii) shares withheld or tendered by the recipient of an award as payment of the exercise or purchase
price under an award or the tax withholding obligations associated with an award.

Individual Award Limitations. In any
single calendar year, no employee may be granted under the Incentive Plan options relating to more than 600,000 shares of our common stock or SARs relating to more than 600,000 shares of our common stock (subject to adjustments to reflect any
increase or decrease in the number of issued shares of common stock resulting from a split-up or consolidation of shares or any like capital adjustment, or the payment of any stock dividend, and/or to reflect a change in the character or class of
shares covered by the Incentive Plan arising from a readjustment or recapitalization of our capital stock). With respect to performance-based awards valued by reference to our common stock at the date of grant, the maximum number of shares of
our common stock that may be earned by any employee during any calendar year is 600,000 (subject to adjustments to reflect any increase or decrease in the number of issued shares of common stock resulting from a split-up or consolidation of shares
or any like capital adjustment, or the payment of any stock dividend, and/or to reflect a change in the character or class of shares covered by the Incentive Plan arising from a readjustment or recapitalization of our capital stock). With
respect to performance-based awards not valued by reference to our common stock at the date of grant, the maximum amount that may be earned by any employee during any calendar year is $1,000,000. Any unused portion of the annual limitation on
performance-based awards that may be earned by an employee shall be carried forward on a cumulative basis.

Eligibility.
Awards may be made under the Incentive Plan to our employees (including prospective employees), directors and consultants and its affiliates. As of April 30, 2008, approximately 50 employees, directors and consultants are eligible to
receive awards under the Incentive Plan.

Administration. The Incentive Plan will be administered by a committee (the
Committee) comprised of at least two (2) members of our Board, as chosen by the Board. Subject to the Incentive Plan, the Committee will have the authority to select the persons to whom awards will be made, to prescribe the
terms and conditions of such awards and to construe, interpret and apply the provisions of the Incentive Plan and of any award made under the plan. Notwithstanding the foregoing, our Board of Directors will have sole responsibility and
authority for matters relating to the grant and administration of awards to our non-employee directors. Our Compensation and Stock Option Committee will serve as the Committee administering the Incentive Plan.



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Discretionary Awards

Stock Options. Options granted under the Incentive Plan may either be incentive stock options within the meaning of section 422 of the Code (ISOs) or options which do not qualify as ISOs
(non-ISOs); provided, however, that ISOs may only be granted to our employees or employees of any of our subsidiary corporations (within the meaning of section 424(f) of the Code).

The exercise price for shares covered by an option may not be less than 100% of the fair market value (as defined in the Incentive Plan) of our common
stock on the date of grant (110% in the case of an ISO granted to an employee who owns 10% or more of our outstanding stock or the outstanding stock of any of our subsidiary corporations (a 10% Stockholder)).

The Committee, acting in its sole discretion, may permit the exercise price of an option to be paid in whole or in part in cash or by check, by means of
a cashless exercise procedure, in the form of unrestricted shares of our common stock or, subject to applicable law, by any other form of consideration deemed appropriate.

Options may not be transferred during the lifetime of an option holder; provided, however, that the Committee may, in its sole discretion, permit an
option holder to transfer a non-ISO, in whole or in part, to such person as approved by the Committee and subject to the terms and conditions as the Committee may determine.

The Incentive Plan provides that the Committee may establish such exercisability and other conditions applicable to an option following the termination
of the option holders employment or other service with us as the Committee deems appropriate on a grant-by-grant basis.

All options
must expire no later than ten years (five years in the case of an ISO granted to a 10% Stockholder) from the date of grant.

The Incentive
Plan prohibits the repricing of options granted under the Incentive Plan without stockholder approval.

Stock Appreciation
Rights. A stock appreciation right (SAR) constitutes a right of the holder to receive, in cash and/or shares of our common stock of equivalent value, as determined by the Committee in its sole discretion, an amount equal to
the fair market value (as defined in the Incentive Plan) of a share of common stock on the applicable exercise or designated settlement date minus a specified base price. SARs may be awarded in conjunction with a stock option award
(tandem SARs) or independent of any stock option award (stand-alone SARs). A tandem SAR may be awarded either at or after the time the related option award is granted, provided that a tandem SAR awarded in conjunction
with an ISO may only be awarded at the time the ISO is granted. Generally, a tandem SAR will be exercisable only at the same time and to the same extent and subject to the same conditions as the related option is exercisable. The exercise
of a tandem SAR will terminate the related option to the extent of the shares of our common stock with respect to which the SAR is exercised, and vice versa.

The base price per share of our common stock covered by an SAR may not be less than 100% of the fair market value (as defined in the Incentive Plan) of a share of our common stock on the date the SAR is granted (110%
in the case of a tandem SAR awarded in conjunction with an ISO granted to a 10% Stockholder).

SARs may not be assigned or transferred
except upon the SAR holders death. The Incentive Plan provides that the Committee may establish such exercisability and other conditions applicable to an SAR following the termination of the recipients employment or other service
with us as the Committee deems appropriate on a grant-by-grant basis. All stand-alone SARs expire no later than ten years from the date of grant and tandem SARs expire upon the expiration of the related option.

Restricted Stock Awards and Restricted Stock Unit Awards. The Committee may grant stock awards upon such terms and conditions as the
Committee may determine. Stock awards may take the form of a transfer of shares of restricted stock or an award of restricted stock units representing a right to receive shares of our common stock in the future and, in either case, may be
subject to designated vesting conditions, repurchase rights and transfer restrictions.

The purchase price payable for shares transferred
pursuant to a stock award must be at least equal to their par value, unless other lawful consideration is received or treasury shares are delivered.

Unless the Committee determines otherwise, a non-vested stock award will be forfeited upon the recipients termination of employment or other service. If a non-vested stock award is forfeited, the recipient
will be entitled to receive from us an amount equal to any cash purchase price paid for the shares covered by the forfeited award. With respect to any stock award, unless and until all applicable vesting conditions, if any, are satisfied and
vested shares are issued, neither the stock award nor any shares of our common stock issued pursuant to the award may be sold, assigned, transferred, disposed of, pledged or otherwise hypothecated other than to us.



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Unless otherwise determined by the Committee, the recipient of a restricted stock award will be entitled
to receive dividend payments on the shares of restricted stock and the recipient of restricted stock units will be entitled to receive dividend equivalent payments on or with respect to the shares that remain covered by the award (which the
Committee may specify are payable on a deferred basis and are forfeitable to the same extent as the underlying award), and may exercise voting rights, but will have no other rights as a stockholder with respect to such shares unless and until the
shares are issued to the recipient free of all conditions and restrictions under the Incentive Plan.

Performance-Based
Awards. The Committee may condition the grant, exercise, vesting or settlement of equity-based awards made under the Incentive Plan on the achievement of specified objective performance goals. In addition, incentive awards,
including annual incentive awards and long-term incentive awards, denominated as and paid in cash amounts, may be granted under the Incentive Plan, which awards may be earned by achievement of specified performance goals. The performance period
during which achievement of such performance goals may be measured may be any period specified by the Committee. A performance goal must be prescribed in writing by the Committee before the beginning of the applicable performance period or at
such later date (when fulfillment is substantially uncertain) not later than 90 days after the commencement of the performance period and in any event before completion of 25% of the performance period and must be based on any one or more of the
following business criteria (which may be applied to an individual, a subsidiary, a business unit or division, or us and any one or more of our subsidiaries, business units or divisions as a group, as determined by the Committee):



| |  |  | total revenue or any key component thereof;
| | - |  | -------------------------------------------



| |  |  | operating income, pre-tax or after-tax income from continuing operations, EBIT, EBITDA or net income;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | cash flow (including, without limitation, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations or cash flow in
excess of cost of capital);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | earnings per share or earnings per share from continuing operations (basic or diluted);
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | return on capital employed, return on invested capital, return on assets or net assets;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | after-tax return on stockholders equity;
| | - |  | -----------------------------------------



| |  |  | economic value created;
| | - |  | -----------------------



| |  |  | value of our common stock or total return to stockholders;
| | - |  | ----------------------------------------------------------



| |  |  | value of an investment in our common stock assuming the reinvestment of dividends;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | strategic business criteria, consisting of one or more objectives based on meeting specified market penetration goals, geographic business expansion goals,
implementation of efficiencies or cost savings, cost targets, or goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures; and/or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a combination of any or all of the foregoing criteria.
| | - |  | ------------------------------------------------------

The targeted level or levels of performance with respect to such business criteria may be established at such levels and on such terms as the Committee may determine in its discretion, including in absolute terms, as
a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. If and to the extent permitted for awards intended to qualify as
performance-based under section 162(m) of the Code, the Committee may provide for the adjustment of such performance goals to reflect changes in accounting methods, corporate transactions (including, without limitation, acquisitions
and dispositions) and other similar types of events or circumstances occurring during the applicable performance period. At the expiration of the applicable performance period, the Committee shall determine the extent to which the performance
goals are achieved and the extent to which each performance-based award has been earned. The Committee may not exercise its discretion to enhance the value of an award that is subject to performance-based conditions.

Other Equity-Based Awards. The Committee may grant dividend equivalent payable rights, phantom shares, bonus shares and other forms of
equity-based awards to eligible persons. These awards may entail the transfer of shares of our common stock to an award recipient or the payment in cash or otherwise of amounts based on the value of shares of our common stock and may include,
without limitation, awards designed to comply with or take advantage of applicable tax and/or other laws.



8



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Change of Control

The Incentive Plan also provides that all options and SARs will become exercisable upon a change of control of our Company and that the Board, acting in its discretion, may accelerate vesting of all other non-vested
awards. For purposes of the Incentive Plan, a change of control is deemed to occur if:

(1) there occurs
(A) any consolidation or merger in which we are not the continuing or surviving entity or pursuant to which shares of our common stock would be converted into cash, securities or other property, other than (x) a consolidation or merger in
which the holders of our common stock immediately prior to the consolidation or merger have the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger, or (y) a consolidation or
merger which would result in our voting securities outstanding immediately prior thereto continuing to represent (by being converted into voting securities of the continuing or surviving entity) more than 50% of the combined voting power of the
voting securities of the surviving or continuing entity immediately after such consolidation or merger and that would result in the members of our Board immediately prior to such consolidation or merger (including, for this purpose, any individuals
whose election or nomination for election was approved by a vote of at least two-thirds of such members), constituting a majority of the board of directors (or equivalent governing body) of the surviving or continuing entity immediately after such
consolidation or merger; or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all our assets;

(2) our stockholders approve any plan or proposal for our liquidation or dissolution;

(3) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the beneficial owner (within the meaning
of Rule 13d-3 under said Act) of 40% or more of our common stock other than pursuant to a plan or arrangement entered into by such person and us; or

(4) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors cease for any reason to constitute a majority of the Board unless the election
or nomination for election by our stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

Amendment and Termination

The Board
of Directors may amend or terminate the Incentive Plan. Subject to certain limitations set forth in the Incentive Plan, any amendment which would increase the aggregate number of shares of our common stock issuable under the Incentive Plan or
the maximum number of shares with respect to which options, SARs or other performance-based equity awards may be granted to any employee in any calendar year, modify a class of persons eligible to receive awards under the Incentive Plan or otherwise
require stockholder approval under applicable law or exchange or market requirements shall, to the extent required by applicable law or exchange or market requirements, be subject to the approval of our stockholders. No amendment or termination
may adversely affect any outstanding award without the written consent of the award recipient.

Unless sooner terminated by the Board, the
Plan shall terminate on January 20, 2016.

Benefits.We provide company benefits, or perquisites, that we believe are standard
in industry. These benefits consist of a group medical and dental insurance program for employees and their qualified employees and dependents, group life insurance for employees and their spouses, accidental death and dismemberment and long-term
disability coverage for employees and a 401(k) employee savings plan. Our executive officers do not participate in a supplemental employment retirement benefit of any kind.

On January 1, 2006, we implemented a 401(k) plan that permits eligible employees to make voluntary, pre-tax contributions to the plan up to a
specified percentage of compensation, subject to applicable tax limitations. We will make a contribution to the plan for each employee equal to 10% of the employees contribution. The plan is intended to be tax-qualified under
Section 401(a) of the Internal Revenue Code so that contributions to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan, and so that contributions, if any, will be deductible when made.
We made contributions to the plan for the years ended January 31, 2008, 2007 and 2006 for approximately $15,000, $12,000 and $4,000, respectively.

How Elements of Our Compensation Program are Related to Each Other

We view the various components of compensation as
related but distinct and emphasize pay for performance with a significant portion of total compensation reflecting a risk aspect tied to long- and short-term financial and strategic goals. Our compensation philosophy is to foster
entrepreneurship at all levels of the organization by making long-term equity-based incentives. We determine the appropriate level for each compensation component based in part, but not exclusively, on our



9



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view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance. Our compensation committee
has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

Other Compensation Related Matters

Equity
Ownership. As of January 31, 2008, our chief executive officer owned approximately 13.05% of our outstanding common stock. Although we encourage our executive officers to retain ownership in Cygne, we do not have a policy requiring
maintenance of a specified equity ownership level. Our policies prohibit our executive officers from using puts, calls or options to hedge the economic risk of their ownership.

Recovery of Prior Awards. Except as provided by applicable laws and regulations, we do not have a policy with respect to adjustment or recovery of
awards or payments if relevant company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment.

Section 162(m). Section 162(m) of the Internal Revenue Code of 1986, as amended, generally denies publicly held corporations a federal
income tax deduction for compensation exceeding $1,000,000 paid to the chief executive officer or any of the four other highest-paid executive officers, excluding performance-based compensation. The compensation for each of our executive officers is
substantially less than the Section 162(m) threshold of $1,000,000 and we intend, to the extent compensation for these persons could exceed $1,000,000, to try to have at least that portion of compensation in excess of $1,000,000 qualify for
performance-based compensation under Reg. 1.162-27(e) and therefore would not be additive to salaries for purposes of measuring the $1,000,000 tax limitation. However, we reserve the right to use our judgment to authorize compensation payments that
do not comply with the exemptions in Section 162(m) when we believe that such payments are appropriate and in the best interest of our stockholders, after taking into consideration changing business conditions or the executives individual
performance and/or changes in specific job duties and responsibilities.

Compensation Committee Report

We have reviewed and discussed with management the compensation discussion and analysis required by Item 402(b) of Regulation S-K. Based on the
review and discussion referred to above, we recommend to the board of directors that the compensation discussion and analysis be included in this Form 10-K/A.

Compensation Committee:

James Groninger (Chairman)

Michel Collet

Guy Kinberg

Compensation Committee
Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive officers serving as a member of our board of directors or compensation committee.

None of the members of the compensation committee have served as an officer or employee of us. Furthermore, except for compensation arrangements discussed in this proxy statement, we have not participated in any contracts, loans, fees,
awards or financial interests, direct or indirect, with any committee member, nor are we aware of any means, directly or indirectly, by which a committee member could receive a material benefit from us.



10



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Summary Compensation Table

The following table sets forth certain information with respect to compensation of our two executive officers:



|                                                                                     |  |                |  |           |                         |          |       |                |       |                 |       |                                         |       |                                                                       |       |                          |       |                       |                      |  |       |                        
|------------------------------------------------------------------------------------ |  | -------------- |  | --------- | ----------------------- | -------- | ----- | -------------- | ----- | --------------- | ----- | --------------------------------------- | ----- | --------------------------------------------------------------------- | ----- | ------------------------ | ----- | --------------------- | -------------------- |  | ----- | -----------------------
|Name and Principal Position                                                          |  | Year           |  | Salary($) |                         | Bonus($) |       | StockAwards($) |       | OptionAwards($) |       | Non-EquityIncentive PlanCompensation($) |       | Change inPension ValueandNon-QualifiedDeferredCompensationEarnings($) |       | All OtherCompensation($) |       |                       | Total($)            
|Bernard ManuelChairman of the Board                                                  |  | 2007 2006 2005 |  | $ $ $     | 400,000 400,000 400,000 |          |    |                |    |                 |    |                                         |    |                                                                       |    |                          | $ $ $ | 36,314 40,439 41,125  | (1)(2) (1)(2) (1)(2) |  | $ $ $ | 436,314 440,439 441,125
|Roy GreenSenior Vice PresidentChief Financial Officer (Principal Financial Officer) |  | 2007 2006 2005 |  | $ $ $     | 245,000 245,000 245,000 |          |    |                |    |                 |    |                                         |    |                                                                       |    |                          | $ $ $ | 12,695 13,467 350,971 | (3) (3) (3)(4)       |  | $ $ $ | 257,695 258,467 595,971



|(1) | Includes $11,599, $11,599, and $11,438 for the lease of a personal automobile, $6,043, $6,901 and $6,804 for parking and $2,574, $2,398 and $5,492, for auto insurance for years
2007, 2006 and 2005, respectively
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes health insurance premiums paid by us of $15,918, $19,541 and $17,391 for years 2007, 2006 and 2005, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | Includes health insurance premiums paid by us of $12,695, $13,467 and $11,748 for years 2007, 2006 and 2005, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(4) | Includes a retention bonus paid by us of $339,223 to Mr. Green in connection with the termination of his employment agreement.
|--- | ------------------------------------------------------------------------------------------------------------------------------

Mr. Furrow, who joined the Company as Chief Executive Officer in April 2008, will receive an annual salary of $400,000 per year, and will
participate in all employee benefit programs offered by the Company to its executives. As an inducement to join us, the Company granted to Mr. Furrow a fully vested 10-year option to purchase one million shares of the Companys common
stock at a price of $0.30 per share.

Employment Agreements

The employment agreement with Bernard M. Manuel, our chairman, was terminated by mutual agreement on April 25, 2008. We had an employment agreement with Roy E. Green, our senior vice president-chief financial
officer, treasurer, and secretary. Mr. Greens employment agreement was terminated by mutual agreement as of July 31, 2005 and, since that time, Mr. Green has been our at will employee and continues to serve as our
Senior Vice-President, Chief Financial Officer, Treasurer and Secretary.

In connection with the appointment of Mr. Furrow as the
Companys President and Chief Executive Officer, on April 25, 2008 the Company and Mr. Manuel entered into a letter agreement which provides that:



| |  |  | Mr. Manuels employment agreement (including without limitation the non-competition provisions thereof) was terminated;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Mr. Manuel will continue to serve as a director and chairman of the Board of Directors of the Company until October 31, 2008, and thereafter until either
the Company requests that he resign as a director or Mr. Manuel resigns, upon thirty (30) days prior written notice to the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mr. Manuel remains an employee of the Company through January 31, 2010, advising the Companys senior executive officers with respect to
international sourcing, for which Mr. Manuel will receive a salary of $12,500 per month, and will be entitled to continue to participate, at the Companys expense, in the Companys health insurance plan; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in recognition of Mr. Manuels past services to the Company and his agreement to forego bonuses and contractually mandated annual salary increases for
over ten years, upon termination of his employment the Company will pay him severance in the amount of $1,200,000, payable in 12 equal quarterly installments of $100,000, with the first payment commencing on February 15, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Mr. Manuels employment agreement, which would have expired on April 30, 2009 had it not been terminated
as provided above, provided for the automatic renewal for successive one-year terms unless either party notified the other to the contrary at least 90 days prior to its expiration. The employment agreement required Mr. Manuel to devote
substantially all of his time and attention to our business as necessary to fulfill his duties. Under the employment agreement, Mr. Manuel was entitled to an annual salary of $702,593 subject to annual cost of living increases and a bonus to be
determined by the Board of Directors in its sole discretion. Since 1995 Mr. Manuel had accepted a reduction in salary to $400,000 and had not



11



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received any bonuses. Under the employment agreement, Mr. Manuel could terminate his employment upon 30 days notice. The employment agreement
provided that in the event Mr. Manuels employment was terminated by us at any time for any reason other than justifiable cause, disability, or death, or we failed to renew the agreement at any time within two years following a
Change in Control of the Company, we would pay Mr. Manuel his base salary, and permit participation in benefit programs for two years. In the event we elected not to renew the agreement (other than within two years following a
Change in Control of the Company) we would pay Mr. Manuel a severance payment equal to the lesser of (i) two months salary plus one-sixth of his most recently declared bonus for each year he has been employed by the
Company or (ii) one years annual salary. The employment agreement contained confidentiality provisions, whereby Mr. Manuel agreed not to disclose any confidential information regarding us, as well as non-competition covenants. The
non-competition covenants would have survived the termination of Mr. Manuels employment for two years, but were terminated pursuant to the letter agreement discussed above.

For purposes of the employment agreement, a Change in Control of the Company was deemed to occur if (i) there was consummated
(x) any consolidation or merger of Cygne in which Cygne is not the continuing or surviving corporation or pursuant to which our shares of common stock would be converted into cash, securities or other property, other than a merger of Cygne in
which the holders of our common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all, of our assets, or (ii) our stockholders approved any plan or proposal for liquidation or dissolution of Cygne, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), became the beneficial owner (within the meaning of Rule 13(d)(3) under the Exchange Act) of 40% or more of our outstanding common stock
other than pursuant to a plan or arrangement entered into by such person and us, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the entire board of directors ceased for any reason
to constitute a majority thereof unless the election, or the nomination for election by our stockholders, of each new director was approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of the
period.

The employment agreement also provided that if, in connection with a change of ownership or control of Cygne or a change in
ownership of a substantial portion of our assets (all within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the Code)), an excise tax is payable by the employee under Section 4999 of the
Code, then we would pay to Mr. Manuel additional compensation which will be sufficient to enable him to pay such excise tax as well as the income tax and excise tax on such additional compensation, such that, after the payment of income and
excise taxes, Mr. Manuel would be in the same economic position in which he would have been if the provision of Section 4999 of the Code had not been applicable.

Mr. Greens employment agreement, which was terminated by mutual agreement as of July 31, 2005, contained substantially similar provisions
to Mr. Manuels employment agreement; provided that, Mr. Greens annual salary under his agreement at the time it was terminated was $339,223, subject to annual cost of living increases. Mr. Green had accepted a salary
reduction to $245,000 in 1995 and has continued to receive such salary since 1995. In connection with the termination of Mr. Greens employment agreement, he received a cash payment of $339,223 in lieu of all amounts which might be due and
owing under his employment agreement, including any severance payments. Such payment was contingent on Mr. Green remaining employed by us and performing his customary functions as Senior Vice PresidentChief Financial Officer, Treasurer
and Secretary and assisting in the consummation of our purchase of certain assets of Diversified Apparel Resources, LLC. Notwithstanding the termination of Mr. Greens employment agreement, he remains bound by the confidentiality and
non-competition provisions which were contained in the agreement.

Mr. Furrow does not have an employment agreement with the Company.

Grants of Plan-Based Awards Table

This table has been omitted because no plan-based awards were made during the year ended January 31, 2008. See Compensation Discussion and Analysis.

Outstanding Equity Awards at Fiscal Year-End

This table has been omitted because there were no
outstanding equity awards to our executive officers at January 31, 2008. As an inducement to join us, on April 25, 2008 the Company granted to Mr. Furrow a fully vested 10-year option to purchase one million shares of the
Companys common stock at a price of $0.30 per share.



12



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Option Exercises and Stock Vested Table

This table has been omitted because there were no options exercised by or stock vested for our executive officers during the year ended January 31,
2008.

Pension Benefits

We sponsor a
401(k) plan that is available to all U.S. employees, but do not maintain a pension or defined benefit program. We do not have a nonqualified deferred compensation plan or program for its officers or employees.

Potential Payments upon Termination or Change-in-Control

As described above under Employment Agreements, at January 31, 2008, Mr. Manuel was entitled to certain payments upon termination of employment under certain circumstances. The following table sets forth
potential amounts payable to our executive officers at January 31, 2008 upon termination of employment under various circumstances, and as if terminated on January 31, 2008.



|                 |  |                                 |  |                                                                                                         |         |                                                                                                                  |   |          
|---------------- |  | ------------------------------- |  | ------------------------------------------------------------------------------------------------------- | ------- | ---------------------------------------------------------------------------------------------------------------- | - | ---------
|Termination:     |  | By Reason of Deathor Disability |  | By Reason ofNon-renewal ofEmployment Agreement(other than within twoyears following
aChange in Control) |         | By Company withoutJustifiable Cause orUpon Termination ofEmployment withinTwo Years
Followinga Change in Control
|Bernard Manuel   |  |                                 |  |                                                                                                         |         |                                                                                                                  |   |          
|Salary and Bonus |  |                                |  | $                                                                                                       | 702,593 |                                                                                                                  | $ | 1,405,086
|Health Benefits  |  |                                |  |                                                                                                         | 15,918  |                                                                                                                  |   | 31,836   
|Total            |  |                                |  | $                                                                                                       | 718,461 |                                                                                                                  | $ | 1,436,922
|Roy Green        |  |                                 |  |                                                                                                         |         |                                                                                                                  |   |          
|Salary and Bonus |  |                                |  |                                                                                                         |        |                                                                                                                  |   |         
|Health Benefits  |  |                                |  |                                                                                                         |        |                                                                                                                  |   |         
|Total            |  |                                |  |                                                                                                         |        |                                                                                                                  |   |         

As described above under Employment Agreements,
Mr. Manuels employment agreement was terminated as of April 25, 2008, and he is no longer entitled to the severance payments described above. We have agreed with Mr. Manuel that in recognition of Mr. Manuels past
services to the Company and his agreement to forego bonuses and contractually mandated annual salary increases for over ten years, upon termination of his employment the Company will pay him severance in the amount of $1,200,000, payable in 12 equal
quarterly installments of $100,000, with the first payment commencing on February 15, 2010. Mr. Greens employment agreement was terminated as of July 31, 2005. Mr. Jay Furrow does not have an employment agreement with the
Company.

Compensation of Directors

Based upon the detailed analysis of the practices of companies within our peer group as well as emerging trends occurring within the director compensation arena, and other factors considered by the Board, the Board of Directors approved the
following changes, effective November 29, 2005, to the cash compensation payable to our non-employee directors:



| |  |  | payment of an $8,000 annual retainer to each director;
| | - |  | ------------------------------------------------------



| |  |  | payment of a $4,000 annual retainer to the members of each committee of the Board other than the audit committee;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | payment of an $8,000 annual retainer to the members of the audit committee;
| | - |  | ---------------------------------------------------------------------------



| |  |  | payment of a $2,000 annual retainer to the chair of each committee of the Board other than the chair of the audit committee;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | payment of a $4,000 annual retainer to the chair of the audit committee; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | payment of a $1,000 meeting fee payable for each Board meeting and meeting of a committee of the Board attended.
| | - |  | ----------------------------------------------------------------------------------------------------------------

Directors are also reimbursed for expenses actually incurred in attending Board, stockholder and committee meetings.



13



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On January 20, 2006, we issued under the 2006 Incentive Plan an aggregate of 60,000 shares of
restricted Common Stock to our non-employee directors, which shares vested ratably over eight quarters in the two year period ending October 31, 2007. Each of Messrs. Collet and Kinberg received 18,750 shares and Mr. Groninger received
22,500 shares. The shares were valued at $4.85 a share. In connection therewith, we recorded deferred compensation of $291,000, representing the fair value of the shares, which was being amortized over the vesting period. During the year ended
January 31, 2006, January 31, 2007 and January 31, 2008 approximately $36,000, $145,000 and $110,000 respectively, were amortized.

Under the 2006 Incentive Plan, an annual restricted stock unit (RSU) compensation amount will be credited to members of our Board of Directors who are not our employees. An RSU is a unit of measurement equivalent to one share of
Common Stock, but with none of the attendant rights of a stockholder of a share of Common Stock. The annual RSU compensation amount will vest with the director while he is serving as a non-employee director of the company in quarterly installments
as of the last business day of the calendar quarter to which it applies. Payment of a directors RSU account will be made in a lump sum in shares of common stock equal to the number of RSUs in the RSU account as soon as practicable after
the directors Board service terminates. During the year ended January 31, 2008, we issued 19,744 RSUs to each of Messrs. Collet, Groninger and Kinberg. The RSU expense recognized in the year ended January 31, 2008 was $60,000.

The following table sets forth the compensation paid to our non-employee directors during the year ended January 31, 2008. In
addition, we reimbursed these directors for their out-of-pocket expenses in attending Board and committee meetings.



|                   |  |                            |        |                 |   |        |  |   |        
|------------------ |  | -------------------------- | ------ | --------------- | - | ------ |  | - | -------
|Name               |  | Fees Earned orPaid in Cash |        | Stock Awards(1) |   | Total 
|Michel Collet(2)   |  | $                          | 50,000 |                 | $ | 54,102 |  | $ | 110,102
|James Groninger(3) |  | $                          | 56,000 |                 | $ | 60,922 |  | $ | 110,922
|Guy Kinberg(2)     |  | $                          | 50,000 |                 | $ | 54,102 |  | $ | 104,102



|(1) | Represents the dollar amount recognized for financial statement reporting purposes under SFAS 123R for the year ended January 31, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(2) | On January 20, 2006, we issued under the 2006 Incentive Plan 18,750 shares of restricted Common Stock to each of Messrs. Collet and Kinberg, which shares became vested and
cease to be subject to forfeiture over a period of eight quarters of continued service, beginning with the quarter ended January 31, 2006. The grant date fair market value of the shares issued to each of Messrs. Collet and Kinberg was $4.85. At
January 31, 2008, each of Messrs. Collet and Kinberg owned 18,750 shares of restricted Common Stock. In 2007, we issued under the 2006 Incentive Plan 19,744 RSUs to each of Messrs. Collet and Kinberg which were vested at date of issuance.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On January 20, 2006, we issued under the 2006 Incentive Plan 22,500 shares of restricted Common Stock to Mr. Groninger, which shares became vested and cease to be subject
to forfeiture over a period of eight quarters of continued service, beginning with the quarter ended January 31, 2006. The grant date fair market value of the shares issued to Mr. Groninger was $4.85. At January 31, 2008,
Mr. Groninger owned 22,500 shares of restricted Common Stock. In 2007, we issued under the 2006 Incentive Plan 19,744 RSUs to Mr. Groninger which became vested at date of issuance.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



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|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The following table sets forth information as of May 15, 2008 regarding the beneficial ownership of our common stock by (i) each person known by
us to own beneficially more than five percent of our outstanding common stock; (ii) each director and nominee for election as our director; (iii) each executive officer named in the Summary Compensation Table (see Item 11. Executive
Compensation); and (iv) all of our directors and executive officers as a group. Except as otherwise specified, the named beneficial owner has the sole voting and investment power over the shares listed.



|                                                        |  |                                                                |  |                             |  
|------------------------------------------------------- |  | -------------------------------------------------------------- |  | --------------------------- | -
|Name and Address                                        |  | Amount and Natureof BeneficialOwnership of OurCommon Stock (1) |  | Percentage ofOurCommonStock |  
|Serge Kraif (2)                                         |  | 8,937,600                                                      |  | 23.57                       | %
|Hubert Guez (3)                                         |  | 8,026,560                                                      |  | 21.17                       | %
|Diversified Apparel Resources, LLC (3)(4)               |  | 650,000                                                        |  | 1.70                        | %
|Guez Living Trust dated December 6, 1996 (3)(5)         |  | 2,995,140                                                      |  | 7.90                        | %
|James G. Groninger (6)                                  |  | 30,650                                                         |  | *                           |  
|Guy Kinberg (7)                                         |  | 48,750                                                         |  | *                           |  
|Michel Collet (8)                                       |  | 18,750                                                         |  | *                           |  
|Bernard M. Manuel (9)                                   |  | 4,946,975                                                      |  | 13.05                       | %
|Roy Green (10)                                          |  | 0                                                              |  | *                           |  
|Jay Furrow(11)                                          |  | 1,000,000                                                      |  | 2.57                        | %
|Directors and executive officers as a group (6 persons) |  | 6,045,125                                                      |  | 15.94                       | %



|* | Less than one percent
|- | ---------------------

|(1) | A person has beneficial ownership over shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means
the power to direct the sale or other disposition of the shares.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Does not include 4,400,000 warrants exercisable at any time between February 15, 2009 and January 31, 2012 or 1,964,286 shares issuable upon conversion of a Convertible
Note with a principal balance due of $6,875,000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | According to Schedule 13D/A filed January 23, 2008, of the 8,026,560 shares of Common Stock, (i) Mr. Guez directly owns 4,381,420 shares, (ii) 650,000 shares are
held by Diversified Apparel Resources, LLC, of which Mr. Guez is a 32.2% owner and the manager and, as such, may be deemed to beneficially own the shares owned by Diversified Apparel, (iii) 1,615,915 shares are held by the Guez Living
Trust dated December 6, 1996 of which Mr. Guez is co-trustee and co-beneficiary and, as such, Mr. Guez may be deemed to be the beneficial owner of the shares owned by the trust, and (iv) 1,379,225 shares are owned by 215 GZ
Partners, which is 100% owned by The Guez Living Trust dated December 6, 1996, and accordingly Mr. Guez may be deemed to beneficially own the shares held by 215 GZ Partners. Mr. Guezs address is c/o Diversified Apparel
Resources, LLC, 5804 E. Slauson Ave., Commerce, CA 90040.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The address of this entity is 5804 E. Slauson Ave., Commerce, CA 90040.
|--- | -----------------------------------------------------------------------

|(5) | The address of this entity is c/o Diversified Apparel Resources, LLC, 5804 E. Slauson Ave., Commerce, CA 90040.
|--- | ---------------------------------------------------------------------------------------------------------------

|(6) | Mr. Groningers address is c/o Cygne Designs, Inc., 11 West 42ndStreet, NY, NY 10036.
|--- | -------------------------------------------------------------------------------------

|(7) | Mr. Kinbergs address is c/o Cygne Designs, Inc., 11 West 42ndStreet, New York, New York 10036.
|--- | -----------------------------------------------------------------------------------------------

|(8) | Mr. Collets address is c/o Cygne Designs, Inc., 11 West 42ndStreet, New York, New York 10036.
|--- | ----------------------------------------------------------------------------------------------

|(9) | Mr. Manuels address is c/o Cygne Designs, Inc., 11 West 42ndStreet, New York, New York 10036.
|--- | ----------------------------------------------------------------------------------------------

|(10) | Mr. Greens address is c/o Cygne Designs, Inc., 11 West 42ndStreet, New York, New York 10036.
|---- | ---------------------------------------------------------------------------------------------

|(11) | Consists of shares issuable upon exercise of an option granted to Mr. Furrow as an inducement for him to join the
Company. Mr. Furrows address is c/o Cygne Designs, Inc., 11 West 42ndStreet, New York, New York 10036.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 14. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ------------------------------------------------------------------------

We have adopted a written policy requiring that any material transaction between us and persons or entities affiliated with officers, directors or principal common stockholders of our company be on terms no less
favorable to us than reasonably could have been obtained in arms length transactions with independent third parties and all transactions between us and related parties must be approved by our Audit Committee.

On July 31, 2005, we, Commerce Clothing Company LLC (whose name was subsequently changed to Diversified Apparel Resources, LLC [Diversified
Apparel]), and the members of Diversified Apparel including Mr. Guez (Guez),



15



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Diversified Apparels managing member and Chief Executive Officer, entered into an asset purchase agreement (the Agreement), and
simultaneously closed the transactions contemplated thereby, providing for the purchase by us from Diversified Apparel of the assets (the Assets) used in Diversified Apparels business of the designing, merchandising and wholesaling
of branded and private label denim apparel (the Acquired Business), which includes, among other things, all of Diversified Apparels (i) tangible personal property, (ii) open purchase orders, (ii) New York showroom
leases (for the property located on the fourth floor of 215 West 40th Street) and (iii) trademarks and intellectual property associated with the Acquired Business.

The Assets did not include any cash, accounts receivable, prepaid expenses, deposits (other than the lease deposit for the showrooms), inventories or stock of any Diversified Apparel subsidiaries.

Under the Agreement, we assumed the following liabilities of Diversified Apparel:

1. any and all liabilities, obligations and commitments arising after the Closing under the Diversified Apparel agreements included in the
Assets (including the Showroom Leases); and

2. any liability or obligation arising from the operation of the Acquired
Business, ownership of the Assets or showroom leases after the Closing Date.

In consideration for the Assets, we (i) issued to
Diversified Apparel 10.5 million shares of our Common Stock, $0.01 par value per share, (ii) issued to Diversified Apparel a secured subordinated promissory note (the Note) in the principal amount of $47.5 million,
(iii) paid $2 million in cash at the Closing and (iv) agreed to pay to Diversified Apparel $1,750,000 in seven monthly installments of $250,000 each, without interest, on the last day of each month commencing with August 2005.

We entered into a Supply Agreement, which was subsequently amended (the Supply Agreement), with AZT International S. de R.L. de C.V.
(AZT), an affiliate of Diversified Apparel and a related party to us. Under the terms of the Supply Agreement, as amended: Prior to July 31, 2007, AZT, an affiliate of Hubert Guez, manufactured on a non-exclusive basis branded and
private label denim apparel for us in Mexico at specified gross margins to us. Pursuant to the Supply Agreement, AZT shipped its manufactured apparel to the United States and invoiced Diversified Apparel, an affiliate of Hubert Guez. Diversified
Apparel invoiced us for the apparel when it was shipped to our customers. At the end of each month, Diversified Apparel invoiced us for the apparel it had on hand that we estimated that we would ship to our customers in the subsequent month. We
renewed the Supply Agreement for one year until July 31, 2008. We ceased sourcing products from AZT on December 18, 2007. The Supply Agreement specified that the guarantee of our gross margins for products manufactured by AZT for Target
and American Eagle Outfitters (AEO) expired on January 31, 2008.

On July 31, 2007 we purchased from Diversified
Apparel all of the fabric located at AZT allocated to our production. Starting August 1, 2007, we purchased all of the fabric for the garments to be manufactured for us in the AZT facilities. In addition, on July 31, 2007, we purchased
from Diversified Apparel the entire finished stock inventory located in the warehouse located in Commerce, California, which was not included in the contractual month-end inventory purchases. The apparel purchased under the Supply Agreement from
Diversified Apparel for the year ended January 31, 2008 and January 31, 2007 was approximately $32,224,000 and $64,246,000, respectively. There was no inventory manufactured under the Supply Agreement at January 31, 2008. The
purchases for the year ended January 31, 2008 exclude the fabric purchased at July 31, 2007.

Under the Supply Agreement, we were
obligated to advance to Diversified Apparel up to 50% of the amount of purchase orders outstanding, if Diversified Apparel requested such advance in writing. The repayment terms for the outstanding advances were to deduct the advances from the
payments made in connection with future inventory purchases. At January 31, 2008 and January 31, 2007, outstanding advances to Diversified Apparel were zero and $7,917,000, respectively.

On December 18, 2007, a creditor company of AZT, a related party to us and the Mexican contractor for our vendor, Diversified Apparel, which is also
a related party to us, obtained a court decree against AZT which allowed this creditor company to obtain possession of all of Cygnes fabric, trim, work-in-process and finished goods located at the AZT manufacturing facility in Mexico.
Mr. Manuel, Cygnes CEO, immediately entered into intensive discussion with the creditor company as well as Cygnes two customers serviced by the AZT Mexican manufacturing facility. The court decree to AZT was not due to any
wrongdoing of ours but a claim by the creditor company against AZT.

American Eagle Outfitters (AEO), one of the
customers, response was to cancel all orders issued to us and to issue new orders for the same garments to the creditor company. Shipments to AEO are estimated to be $2,700,000. We no longer have AEO as a customer.

Mr. Manuel negotiated an agreement with the creditor company whereby the creditor company would continue to ship to us the second customers
garments with sales estimated at $2,600,000 and invoice us his costs for the garments shipped which shipment was completed in April 2008. We, in turn, invoiced our customer for these garments. We agreed to pay the creditor company thirty days after
shipment of garments. At January 31, 2008, we owed the creditor company $954,000.



16



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Diversified Apparel agreed to reimburse us for the cost of the lost fabric and the normal gross profit
lost on the sales to AEO and our second customer. The cost of the fabric of $2,480,000, which is included in our cost of goods sold, and the lost gross profit of $754,000, are shown on the financial statements as an increase to Due from Related
Parties and an increase to paid-in-capital of $3,234,000. Had we not had this situation with our vendor, we would have shipped to our customers and collected trade receivables of $5,000,000. Although Diversified Apparel agreed to reimburse us at
wholesale prices for the lost shipments, the reimbursement was included in the Due from Related Parties account on the balance sheet. The Due from Related Parties already included advances made to Diversified Apparel under the Supply Agreement for
costs to make the product. The net financial result of the transaction is that we did recoup our losses through reductions in amounts owed by us on the Convertible Note which was assigned to Diversified Apparel. We have not received any cash
reimbursement from Diversified Apparel in relation to our losses which adversely affected our cash flows.

We entered into a Distribution
Agreement, which was subsequently amended (the Distribution Agreement), with Diversified Apparel. Under the Distribution Agreement, Diversified Apparel provides us with certain distribution and operating services including building
occupancy costs. We renewed the Distribution Agreement, which had an expiration date of July 31, 2007, for a one-year period until July 31, 2008. The distribution agreement cost for the years ended January 31, 2008, 2007 and 2006 was
$2,493,000, $2,934,000 and $1,672,000, respectively. We and Diversified Apparel agreed to cancel this agreement effective February 1, 2008. In addition, the cost of the packing materials purchased from Diversified Apparel for the years ended
January 31, 2008, 2007 and 2006 was $248,000, $284,000 and $193,000, respectively. All amounts are included in Selling, General and Administrative expenses in the statement of operations.

Pursuant to the Distribution Agreement, we purchased all of our denim apparel manufactured outside of Mexico from Diversified Apparel. Diversified
Apparel received this apparel in its United States warehouse and retained the physical risk of loss while the inventory was in its possession. The Distribution Agreement provided that at the end of each month, Diversified Apparel invoiced us for the
apparel it had on hand that we estimated that it would ship to our customers in the subsequent month. On July 31, 2007, we purchased from Diversified Apparel the entire finished stock inventory located in the warehouse located in Commerce,
California which was not included in the contractual month-end inventory purchases. We are invoiced by Diversified Apparel for all finished garment inventory on the date that the finished garments are delivered to the warehouse. Effective
December 5, 2007, we notified Diversified Apparel that all its purchase orders to Diversified Apparel for Far East vendors would be cancelled and replaced by Cygne purchase orders made directly with the Far East vendors.

Under the Distribution Agreement, prior to December 5, 2007, we were obligated to advance to Diversified Apparel up to 50% of the amount of purchase
orders outstanding, if Diversified Apparel requested such advance in writing. The repayment terms for the outstanding advances were to deduct the advances from the payments made in connection with future inventory purchases.

The apparel purchased from Diversified Apparel under the Distribution Agreement for the years ended January 31, 2008, 2007 and 2006 was
approximately $26,459,000, $19,462,000 and $10,536,000, respectively.

We and Hubert Guez entered into a restrictive covenant
agreement whereby we pay Mr. Guez one percent (1%) of net sales, not including non-denim sales to New York & Company, and not including sales of denim apparel resulting from subsequent business acquisitions. We recorded an expense
of $466,000 for the year ended January 31, 2008, $626,000 for the year ended January 31, 2007 and $386,000 for the year ended January 31, 2006. All amounts expensed are included in Selling, General and Administrative expenses in the
statement of operations. Cash payments made under this agreement during the years ended January 31, 2008, 2007 and 2006 were zero, $500,000 and zero, respectively. Cygnes payable to Hubert Guez at January 31, 2008 and 2007 was
approximately $980,000 and $514,000, respectively. This payable is included in due to (due from) Related Parties.

We issued to Diversified
Apparel a $47.5 million note bearing interest at 4.7% per annum. On January 3, 2006, we and Diversified Apparel entered into a Note Conversion Agreement providing for the conversion of $7,500,000 principal amount due under the Note to
Diversified Apparel into 1,428,571 shares of our common stock. Accordingly, we canceled the principal note payments due October 31, 2011, January 31, 2012 and April 30, 2012. On October 31, 2006, we made a principal payment
of $1,500,000 due on the Note and interest payment due of $2,530,000 through reduction of the amounts owed by Diversified Apparel. We recorded interest expense to Diversified Apparel for the years ended January 31, 2008, 2007 and 2006 of zero,
$1,410,000 and $1,120,000, respectively.

Diversified Apparel transferred the Note to Mr. Kraif effective November 1, 2006.
Effective January 31, 2007, we entered into an agreement with Mr. Kraif (the Conversion Agreement) which was approved by our stockholders on



17



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August 9, 2007, pursuant to which Cygne issued 8,800,000 shares of our common stock to Mr. Kraif in payment of $22.0 million of the Note; Cygne
issued a convertible note in the principal amount of $15.0 million (the Convertible Note) that is convertible into shares of our common stock at a conversion price of $3.50 per share in payment of $15.0 million of the Note; and Cygne
issued to Mr. Kraif a warrant to purchase up to 4,400,000 shares of our common stock at a price of $3.00 per share (the Warrant). As of October 31, 2007, Mr. Serge Kraif assigned to Diversified Apparel the $625,000
principal payments on the Convertible Note due April 30, 2008, July 31, 2008 and October 31, 2008 totaling $1,875,000. As of October 31, 2007, Diversified Apparel agreed to accept $1,422,000 in exchange for immediate payment
of these three payments, which was offset against the related party receivable. As of January 31, 20008, Mr. Serge Kraif assigned to Diversified Apparel the $625,000 principal payments on the Convertible Note due January 31,
2009, April 30, 2009, July 31, 2009, October 31, 2009, January 31, 2010, April 30, 2010, July 31, 2010, October 31, 2010, January 31, 2011, and April 30, 2011,
totaling $6,250,000. As of January 31, 2008, Diversified Apparel agreed to accept $4,738,125 in exchange for immediate payment of these ten payments, which was offset against the related party receivable. At January 31, 2008, the principal
amount of the Convertible Note outstanding was $6.8 million.

We filed a registration statement which was declared effective on
May 14, 2007 for resale by certain of our stockholders of an aggregate of 13,928,571 shares of Cygnes common stock. 11,928,571 shares were acquired by Diversified Apparel directly from us in connection with our acquisition of the branded
and private label denim apparel business from Diversified Apparel and the subsequent conversion of $7,500,000 principal amount of the Note, and 2,000,000 shares were acquired by Hubert Guez and Paul Guez from Cygne in connection with our acquisition
of certain assets of the private label apparel division of Innovo Group, Inc. on May 12, 2006. The selling stockholders (other than Diversified Apparel and Paul Guez) are members of Diversified Apparel who acquired the shares of common stock by
distribution from Diversified Apparel. The 13,928,571 shares offered constitute, in the aggregate, approximately 36.7% of Cygnes shares outstanding as of January 31, 2008.

We filed a registration statement which was declared effective on January 11, 2008 for resale by certain of our stockholders of an aggregate of
23,888,364 shares of Cygnes common stock. 15,164,286 shares were acquired by Mr. Kraif in exchange for $37.0 million principal amount of an outstanding promissory note, 3,717,103 shares were beneficially acquired by certain stockholders
in a private placement consummated in August 2007 in connection with Cygnes entering into a new credit arrangement and 60,000 shares were acquired by non-employee directors pursuant to grants of restricted stock under our 2006 Incentive Plan.
The remaining 4,946,975 shares are owned by Mr. Manuel, our Chairman. The 23,888,364 shares offered constitute, in the aggregate, approximately 52.7% of Cygnes shares outstanding (including shares issuable upon conversion of the
Convertible Note and exercise of warrants held by these stockholders) as of January 31, 2008.

First Finish Inc., an affiliate of
Mr. Guez up to June 30, 2007, operates a fabric finishing testing and development facility in California. We used this facility to develop and test substantially all our fabric finishing. The cost for services rendered to Cygne by First
Finish Inc. for the five months ended June 30, 2007 was approximately $58,000, compared to $177,000 during the year ended January 31, 2007. Payments to reduce prior amounts due to First Finish, Inc. during the five months ended
June 30, 2007 and the year ended January 31, 2008 were $87,000 and $102,000, respectively. The amount due to First Finish as a related party at January 31, 2008 was zero as compared to $34,000 at January 31, 2007.

On March 31, 2006, we entered into an Asset Purchase Agreement (APA) with Innovo Group, Inc. (Innovo) and Innovo Azteca
Apparel, Inc., a wholly owned subsidiary of Innovo. Azteca Productions International, Inc. (Azteca Productions), was a party to certain ancillary agreements related to the APA because they are an interested party in the transaction. We
closed this transaction on May 12, 2006.

Innovo is a designer, developer and worldwide marketer of apparel products. Pursuant to the
APA, Innovo sold to us certain assets related to its private label apparel division. These assets were purchased by Innovo from Azteca Productions in July 2003 pursuant to an asset purchase agreement referred to as the Blue Concept Asset Purchase
Agreement.

Hubert Guez, the managing member and Chief Executive Officer of Diversified Apparel, is also one of Innovos stockholders,
a stockholder of Azteca Productions and a party to the Blue Concept Asset Purchase Agreement that Innovo originally entered into for its purchase of the private label division from Azteca Productions. Hubert Guez beneficially owns, has the power to
dispose or direct the disposition of, and to vote or direct the voting of shares, personally, through various trusts and Diversified, representing approximately 21.2% of the shares of our common stock.

The assets acquired by us included the private label divisions customer list, the assumption of current workforce related to the private label
division, the assumption of all existing purchase orders and inventory related to the private label division, and the assumption of the benefit of a non-compete clause with Azteca Productions. In exchange for the purchased assets, we assumed certain
liabilities associated with Innovos private label division, including the remaining obligation



18



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under the original promissory note executed by Innovo in favor of Azteca Productions under the Blue Concept Asset Purchase Agreement, all other liabilities,
other than the original promissory note, owed in connection with the private label division to Azteca Productions in excess of $1,500,000, all liabilities associated with Innovos outstanding purchase orders and inventory scheduled in the Asset
Purchase Agreement, and the obligations to continue to pay the earn-out under the Blue Concept Asset Purchase Agreement. The aggregate value of the assumed liabilities was $2,500,000, which excluded the remaining unpaid principal amount of the
original promissory note of $7.9 million, which was paid through the issuance of shares of our common stock, as described below, and any amounts which might be owed under the earn-out.

In connection with the Asset Purchase Agreement, we entered into a Letter Agreement dated April 24, 2006 among Azteca Productions, Hubert Guez, Paul
Guez and Sweet Sportswear, LLC. Pursuant to the Letter Agreement and in connection with the closing of the Innovo transaction, on May 12, 2006 we issued 1,000,000 shares of our common stock to each of Hubert Guez and Paul Guez, for an aggregate
issuance of 2,000,000 shares, in lieu of assuming the remaining outstanding balance of the promissory note issued by Innovo to Azteca Productions. Under the Letter Agreement, the 2,000,000 shares have piggy-back registration rights on any future
registration statements on Form S-3 filed by us. These shares were registered on Form S-3 dated May 14, 2007. Messrs. Hubert and Paul Guez also agreed not to offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any such shares until the close of trading on April 23, 2007. In addition, 250,000 of the shares issued to Paul Guez and 250,000 of the shares issued to Hubert Guez were placed in an escrow account until the
expiration of the lock-up period, with the escrowed shares being returned to us in the event that our common stock is traded on Nasdaq (or any other stock exchange, market or trading facility on which the shares are traded) at an average price above
$5.00 per share during the one month period ended April 23, 2007. Our shares did not reach the average target price and the shares were released from escrow to Paul Guez and Hubert Guez.

In connection with the Innovo Acquisition, we assumed the obligations under an earn-out agreement with Paul and Hubert Guez for sales to American Eagle
Outfitters. We pay to each of Paul Guez and Hubert Guez 1.25% of sales to American Eagle Outfitters. The Company recorded an expense of $771,000 for the year ended January 31, 2008, and an expense of $792,000 for the year ended January 31,
2007. We ceased doing business with American Eagle Outfitters in December 2007. All amounts expensed are included in Selling, General and Administrative expenses in the statement of operations. Cash payments made under this agreement to Paul Guez
during the year ended January 31, 2008 and 2007 were zero and $330,000, respectively. Our payable to Paul Guez at January 31, 2008 and 2007 was approximately $450,000 and $64,000, respectively. Cash payments made under this agreement to
Hubert Guez during the year ended January 31, 2008 and 2007 were zero. Our payable to Hubert Guez at January 31, 2008 and 2007 was approximately $780,000 and $394,000, respectively. These payables are included in due to (due from) Related
Parties.

Payments to Cygne employees: As part of the Agreement, we, on July 31, 2005, hired approximately fifty employees who worked
for Diversified Apparel. On January 1, 2006, the employees had been transferred onto the payroll of Cygne. We reimbursed Diversified Apparel $1,393,000 during the year ended January 31, 2006 for all costs associated with this group of
employees for the period following the acquisition and before the payroll transfer.

Each of the foregoing transactions was approved by our
Audit Committee, which determined that the terms of such transaction were no less favorable to us than reasonably could have been obtained in arms length transactions with independent third parties.

Due to/(due from) Related Parties with the right of offset is comprised of the following amounts:



|                                                                                      |  |                 |         |   |                 |   |         |  
|------------------------------------------------------------------------------------- |  | --------------- | ------- | - | --------------- | - | ------- | -
|                                                                                      |  | (In thousands)  |        
|                                                                                      |  | January 31,2008 |         |   | January 31,2007 |  
|Due from Diversified Apparel under the Supply Agreement                               |  | $               | (18,004 | ) |                 | $ | (11,325 | )
|Due from Diversified ApparelMexico incident                                          |  |                 | (3,234  | ) |                 |   |        |  
|Due to Diversified Apparelassumption of liability under Innovo Acquisition Agreement |  |                 | 2,500   |   |                 |   | 2,500   |  
|Due to Mr. Hubert Guezrestricted covenant                                            |  |                 | 980     |   |                 |   | 514     |  
|Due to Mr. Hubert Guezearn-out agreement                                             |  |                 | 780     |   |                 |   | 394     |  
|Due to Mr. Paul Guezearn-out agreement                                               |  |                 | 450     |   |                 |   |        |  
|Due to Diversified Apparelassumption of vendor liabilities                           |  |                 | 2,477   |   |                 |   |        |  
|Due to Diversified Apparelassumption of Secured Promissory Note Payable              |  |                 | 1,500   |   |                 |   |        |  
|Due to Diversified Apparelassumption of Convertible Note Payable                     |  |                 | 6,159   |   |                 |   |        |  
|                                                                                      |  |                 |         |   |                 |   |         |  
|Due to/(due from) Related Parties with the right of offset                            |  | $               | (6,392  | ) |                 | $ | (7,917  | )
|                                                                                      |  |                 |         |   |                 |   |         |  

Due to/(due from) Related Parties with no right of offset is comprised of the following amounts:



19



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|                                        |  |                 |   |                 |   |   
|--------------------------------------- |  | --------------- | - | --------------- | - | --
|                                        |  | (In thousands) 
|                                        |  | January 31,2008 |   | January 31,2007
|Due to First Finish Inc                 |  | $               |  |                 | $ | 34
|Due to Mr. Paul Guezearn-out agreement |  |                 |  |                 |   | 64
|                                        |  |                 |   |                 |   |   
|                                        |  | $               |  |                 | $ | 98
|                                        |  |                 |   |                 |   |   

Director Independence

The Board has two members of management and three persons, Messrs. Collet, Groninger and Kinberg, whom the Board has determined are independent under applicable Nasdaq and SEC rules.



20



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PART IV



|ITEM 15. | EXHIBIT, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
|-------- | --------------------------------------------------------------

(a). Financial Statements

(1) and (2) See Index to Consolidated Financial Statements and Financial Statements
Schedule on page F-1.

(3). Exhibits



|            |  |                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                          
|2.1         |  | Asset Purchase Agreement, dated as of July 31, 2005, by and among Commerce Clothing Company LLC, Mr. Guez, 215 GZ Partners, Guez Living Trust dated December 6, 1996, Griffin James Aron Guez
Irrevocable Trust dated January 1, 1996, Stephan Avner Felix Guez Irrevocable Trust dated January 1, 1996 and Cygne Designs, Inc. * (1)
|            | 
|2.2         |  | Asset Purchase Agreement, dated as of March 31, 2006, by and among Innovo Azteca Apparel, Inc., Innoco Group, Inc. and Azteca Production International, Inc. and Cygne Designs, Inc. *
(8)                                                                                                                                           
|            | 
|3.1         |  | Restated Certificate of Incorporation of Cygne Designs, Inc.* (1)                                                                                                                                                                                                                                                                    
|            | 
|3.2         |  | Certificate of Amendment of the Restated Certificate Of Incorporation Of Cygne Designs, Inc. * (7)                                                                                                                                                                                                                                   
|            | 
|3.3         |  | Bylaws of Cygne Designs, Inc. * (1)                                                                                                                                                                                                                                                                                                  
|            | 
|3.4         |  | Amendment to Bylaws of Cygne Designs, Inc., effective as of July 31, 2005. * (1)                                                                                                                                                                                                                                                     
|            | 
|3.5         |  | Form of Warrant issued by Cygne Designs, Inc. pursuant to Securities Agreement. * (17)                                                                                                                                                                                                                                               
|            | 
|10.1        |  | Registration Rights Agreement, dated as of July 31, 2005, by and between Commerce Clothing Company LLC and Cygne Designs, Inc. * (1)                                                                                                                                                                                                 
|            | 
|10.2        |  | Subordinated Secured Promissory Note, dated as of July 31, 2005, to Commerce Clothing Company LLC in an original principal amount of $47,500,000 * (1)                                                                                                                                                                               
|            | 
|10.3        |  | Security Agreement, dated as of July 31, 2005, by and between Commerce Clothing Company LLC and Cygne Designs, Inc. * (1)                                                                                                                                                                                                            
|            | 
|10.4        |  | Stock Transfer Restriction Agreement, dated as of July 31, 2005, by and among Commerce Clothing Company LLC, Bernard Manuel and Cygne Designs, Inc. * (1)                                                                                                                                                                            
|            | 
|10.5        |  | Supply Agreement, dated as of July 31, 2005, by and between AZT International S. de R.L. de C.V. and Cygne Designs, Inc. * (1)                                                                                                                                                                                                       
|            | 
|10.6        |  | Restrictive Covenant Agreement, dated as of July 31, 2005, between Mr. Guez and Cygne Designs, Inc. * (1)                                                                                                                                                                                                                            
|            | 
|10.7        |  | Distribution Agreement, dated as of July 31, 2005, by and between Commerce Clothing Company LLC and Cygne Designs, Inc. * (1)                                                                                                                                                                                                        
|            | 
|10.8        |  | Factoring Agreement, dated as of July 31, 2005, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (1)                                                                                                                                                                                                                  
|            | 
|10.9        |  | Security AgreementGoods and Chattels, dated as of July 31, 2005, by and between Milberg Factors, Inc. and Cygne Designs, Inc. * (1)                                                                                                                                                                                                 
|            | 
|10.10       |  | Security Interest in Inventory Under Uniform Commercial Code Supplement to Financing or Factoring Contract, dated as of July 31, 2005, by and between Milberg Factors, Inc. and Cygne Designs,
Inc. * (1)                                                                                                                            
|            | 
|10.11       |  | Guaranty, dated as of July 31, 2005, by Cygne Designs, Inc. in favor of Milberg Factors, Inc. * (1)                                                                                                                                                                                                                                  
|            | 
|10.12       |  | Client Subordination Agreement, dated as of July 31, 2005, by and between Commerce Clothing Company LLC and Cygne Designs, Inc. * (1)                                                                                                                                                                                                



21



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|            |  |                                                                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                 
|10.13      |  | Letter Agreement, dated as of July 31, 2005, by and between Roy Green and Cygne Designs, Inc. * (1)                                                                         
|            | 
|10.14       |  | Amendment to Supply Agreement, dated October 19, 2005, among Cygne Designs, Inc., Diversified Apparel Resources, LlC, and AZT International S. de R. L. de C.V. * (3)       
|            | 
|10.15       |  | Amendment to Registration Rights Agreement dated October 19, 2005, between Cygne Designs, Inc. and Diversified Apparel Resources, LLC. * (3)                                
|            | 
|10.16       |  | Lease between Blue River Associates, landlord and Cygne Designs, Inc. * (4)                                                                                                 
|            | 
|10.17       |  | Second Amendment to Supply Agreement, dated December 9, 2005, among Cygne Designs, Inc., Diversified Apparel Resources, LLC, and AZT International S. de R. L. de C.V. * (4)
|            | 
|10.18       |  | Amendment to the Distribution Agreement, dated December 9, 2005, between Cygne Designs, Inc. and Diversified Apparel Resources, LLC * (4)                                   
|            | 
|10.19       |  | Note Conversion Agreement, dated as of January 3, 2006, by and between Cygne Designs, Inc. and Diversified Apparel Resources LLC *(6)                                       
|            | 
|10.20      |  | Cygne Designs, Inc. 2006 Incentive Plan *(7)                                                                                                                                
|            | 
|10.21      |  | Form of Restricted Stock Agreement for Non-Employee Directors under the 2006 Incentive Plan *(7)                                                                            
|            | 
|10.22       |  | Amendment to Factoring Agreement, dated as of July 31, 2005, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (8)                                            
|            | 
|10.23       |  | Asset Purchase Agreement, dated March 31,2006, by and among Cygne Designs, Inc. Innovo Group, Inc. Innovo Axteca Apparel, Inc. and Azteca Production International*(9)      
|            | 
|10.24       |  | Letter Agreement dated as of April 24, 2006, by and among Cygne Designs, Inc., Azteca Production International, Inc., Hubert Guez, Paul Guez and Sweet Sportswear, LLC *(10)
|            | 
|10.26       |  | Third Amendment to Supply Agreement, dated April 27, 2006, among Cygne Designs, Inc., Diversified Apparel Resources, LLC, and AZT International S. de R. L. de C.V. * (12)  
|            | 
|10.27       |  | Second Amendment to the Distribution Agreement, dated April 27, 2006, between Cygne Designs, Inc. and Diversified Apparel Resources, LLC * (12)                             
|            | 
|10.28       |  | Fourth Amendment to Supply Agreement, dated August 1, 2006, among Cygne Designs, Inc., Diversified Apparel Resources, LLC, and AZT International S. de R. L. de C.V. * (13) 
|            | 
|10.29       |  | Third Amendment to the Distribution Agreement, dated August 1, 2006, between Cygne Designs, Inc. and Diversified Apparel Resources, LLC * (13)                              
|            | 
|10.30       |  | Amendment to Factoring Agreement, dated as of July 31, 2006, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (13)                                           
|            | 
|10.31       |  | Amendment to Factoring Agreement, dated as of September 30, 2006, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (14)                                      
|            | 
|10.32       |  | Waiver to Factoring Agreement, dated as of October 31, 2006, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (14)                                           
|            | 
|10.33       |  | Waiver to Factoring Agreement, dated as of January 31 2007, by and between Milberg Factors, Inc., and Cygne Designs, Inc. * (15)                                            
|            | 
|10.34       |  | Note Conversion Agreement, dated as of January 31, 2007, by and between Cygne Designs, Inc. and Serge Kraif *(16)                                                           
|            | 
|10.35       |  | Fifth Amendment to Supply Agreement dated June 12, 2007, among Cygne Designs, Inc., Diversified Apparel Resources, LLC *(16)                                                
|            | 
|10.36       |  | Loan and Security Agreement, dated as of July 30, 2007, by and between Cygne Designs, Inc. and Comerica Bank. *(17)                                                         
|            | 
|10.37       |  | Master Revolving Note, dated as of July 30, 2007, made by Cygne Designs, Inc. in favor of Comerica Bank *(17)                                                               



22



---

|      |  |                                                                                                                                                                                   
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.38 |  | Form of Warrant issued by Cygne Designs, Inc. pursuant to the Securities Purchase Agreement* (17)                                                                                 
|      | 
|10.39 |  | Form of Securities Purchase Agreement, dated as of August 3, 2007, between Cygne Designs, Inc. and each of the purchasers of the Private Investment in Public Equity. *(17)       
|      | 
|10.40 |  | Note Conversion Agreement, dated as of January 31, 2007, by and between Cygne Designs, Inc. and Serge Kraif, including the form of convertible note and form of warrant. *(18)    
|      | 
|10.41 |  | Amended and Restated Inventory Rider to Loan and Security Agreement with Comerica Bank dated as of November 7, 2007. *(18)                                                        
|      | 
|10.42 |  | Third modification to Loan and Security Agreement dated as of August 27,2007, with Comerica Bank *(20)                                                                            
|      | 
|10.43 |  | Memorandum of Understanding between Shipson, LLC and Cygne Designs, Inc. dated November 14, 2007 concerning fees for use of facilities at 4900 Zambrano Street, Commerce, CA
*(20)
|      | 
|10.44 |  | Amendment to Note, addendum and Pledge Security Agreement dated as of March 23, 2008, with Comerica Bank *(19)                                                                    
|      | 
|10.45 |  | Fourth modification to Loan and Security Agreement, dated as of December 20, 2007 with Comerica Bank *(20)                                                                        
|      | 
|10.46 |  | Amended and Restated Employment Agreement, dated as of January 1, 1995, between Bernard Manuel and Cygne Designs, Inc.*(21)                                                       
|      | 
|10.47 |  | Letter Agreement, dated April 25, 2008, between Bernard Manuel and Cygne Designs, Inc.*(22)                                                                                       
|      | 
|10.48 |  | Fourth modification to Loan and Security Agreement with Comerica Bank dated as of March 22, 2008 *(20)                                                                            
|      | 
|10.49 |  | Fifth modification to Loan and Security Agreement with Comerica Bank dated as of May 5, 2008 *(20)                                                                                
|      | 
|10.50 |  | Second Amended and Restated Inventory Rider to Loan and Security Agreement with Comerica Bank dated as of May 5, 2008. *(20)                                                      
|      | 
|10.51 |  | Consent of Mahoney Cohen & Company, CPA, P.C., Independent Registered Public Accounting Firm dated May 15, 2008* (20)                                                             
|      | 
|10.52 |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm dated May 15, 2008* (20)                                                                              



23



---

|            |  |                                                                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                               
|21.         |  | Subsidiaries of Cygne Designs, Inc. *(20)                                                                                                                                                 
|            | 
|31.1        |  | Certification of the Chairman of the Board *(23)                                                                                                                                          
|            | 
|31.2        |  | Certification of President and Principal Executive Officer *(23)                                                                                                                          
|            | 
|31.3        |  | Certification of Principal Financial Officer *(23)                                                                                                                                        
|            | 
|32.1        |  | Certification of Chairman of the Board pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 *(23)                                              
|            | 
|32.2        |  | Certification of President and Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 *(23)                          
|            | 
|32.3        |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 * (23)                                       
|            | 
|99.1        |  | Revised Audit Committee Charter of the Audit Committee of the Board of Directors of Cygne Designs, Inc., adopted by the Board of Directors of the Company on November 29, 2005 *
(5)      
|            | 
|99.2        |  | Charter of the Compensation and Stock Option Committee of the Board of Directors of Cygne Designs, Inc., adopted by the Board of Directors of the Company on November 29, 2005 *
(5)      
|            | 
|99.3        |  | Charter of the Nominating and Corporate Governance Committee of the Board of Directors of Cygne Designs, Inc., adopted by the Board of Directors of the Company no November 29, 2005 *
(5)



|* | Previously filed with the Commission as Exhibits to, and incorporated herein by reference from the following documents:
|- | -----------------------------------------------------------------------------------------------------------------------

| | Management Compensation Arrangement
|- | -----------------------------------



|            |   |  |                                                       
|----------- | - |  | ------------------------------------------------------
|Exhibit No. |   |  | Description                                           
|(1          | ) |  | Companys 8-K filed on August 4, 2005                 
|            |  
|(2          | ) |  | Companys 8-K filed on September 22, 2005             
|            |  
|(3          | ) |  | Companys 8-K filed on October 21, 2005               
|            |  
|(4          | ) |  | Companys Form 10-Q filed on December 15, 2005        
|            |  
|(5          | ) |  | Companys 8-K filed on December 5, 2005               
|            |  
|(6          | ) |  | Companys 8-K filed on January 5, 2006                
|            |  
|(7          | ) |  | Companys 8-K filed on January 26, 2006               
|            |  
|(8          | ) |  | Companys Annual Report on Form 10-K filed May 1, 2006
|            |  
|(9          | ) |  | Companys 8-K filed on April 6, 2006                  
|            |  
|(10         | ) |  | Companys 8-K filed on May 17, 2006                   
|            |  
|(11         | ) |  | Companys 8-K filed on July 27, 2006                  
|            |  
|(12         | ) |  | Companys Form 10-Q filed on June 14, 2006            
|            |  
|(13         | ) |  | Companys Form 10-Q filed on September 14, 2006       
|            |  
|(14         | ) |  | Companys Form 10-Q filed on December 19, 2006        
|            |  
|(15         | ) |  | Companys Form 8-K filed on February 15, 2007         
|            |  
|(16         | ) |  | Companys Form 10-Q filed on June 14, 2007            
|            |  
|(17         | ) |  | Companys Form 8-K filed on August 3, 2007            



24



---

|            |   |  |                                                               
|----------- | - |  | --------------------------------------------------------------
|Exhibit No. |   |  | Description                                                   
|(18         | ) |  | Companys Form 8-K filed on August 10, 2007                   
|            |  
|(19         | ) |  | Companys Form 10-Q/A filed on February 23, 2008              
|            |  
|(20         | ) |  | Companys Form 10-K filed on May 15, 2008                     
|            |  
|(21         | ) |  | Company Form 10-K filed for fiscal year ended January 28, 1995
|            |  
|(22         | ) |  | Companys 8-K filed on April 25, 2008                         
|            |  
|(23         | ) |  | Filed herewith                                                

Exhibits have been included in copies of this Report filed with the Securities and Exchange Commission.
Stockholders of the Company will be provided with copies of these exhibits upon written request to the Company.

(b) Reports on Form 8-K



|                  |  |           |  |                                                                                                                          
|----------------- |  | --------- |  | -------------------------------------------------------------------------------------------------------------------------
|Date              |  | Item      |  | Event                                                                                                                    
|November 8, 2007  |  | 2.05      |  | Close of manufacturing facility in Guatemala                                                                             
|                  |  |          
|December 21, 2007 |  | 2.02,9.01 |  | Announcement of financial results for the third quarter and nine month period ended October 31, 2007                     
|                  |  |          
|January 14, 2008  |  | 3.01      |  | NASDAQ notice of potential delisting of Cygne common stock if bid price doesnt meet NASDAQ requirements by July 14, 2008

(c) Exhibits

See (a) (3) above.

(d) Financial Statement Schedule

See Index to Consolidated Financial Statements and Supplemental Schedule appearing on F-1. Schedules not included herein are omitted because they are not applicable or the required information appears in
the Consolidated Financial Statement or notes thereto.



25



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Cygne Designs, Inc.(Registrant)By:

/s/ Roy E. GreenRoy E. GreenSenior Vice President Chief Financial Officer


Date: May 23, 2008



26