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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                  FORM 10-K/A

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[x]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the fiscal year-ended February 1, 2003.

                                       or

[_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from ___________ to ___________

                         Commission file number: 0-26229

                             BARNEYS NEW YORK, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                    DELAWARE                                     13-4040818
------------------------------------------------             -------------------
(State or Other Jurisdiction of Incorporation or              (I.R.S. Employer
                 Organization)                               Identification No.)

                575 FIFTH AVENUE                                    10017
               NEW YORK, NEW YORK
    ----------------------------------------                      ----------
    (Address of Principal Executive Offices)                      (Zip Code)

      Registrant's telephone number, including area code: (212) 450-8700

      Securities registered pursuant to Section 12(b) of the Act:
                                                           Name of Each Exchange
                    Title of Each Class                     on Which Registered


                           NONE

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

                     COMMON STOCK, $.01 PAR VALUE PER SHARE
                                (Title of Class)

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 an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [_] No [X]

                            [Cover page 1 of 2 pages]
<PAGE>
BARNEY'S NEW YORK, INC. HEREBY RESTATES AND AMENDS ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED FEBRUARY 1, 2003 TO READ IN ITS ENTIRETY AS SET
FORTH HEREINBELOW.

                          ---------------------------

The common stock of the registrant is quoted on the Nasdaq Over-The-Counter
Bulletin Board service. The common stock of the registrant is only traded on a
limited or sporadic basis and there is no established public trading market for
such common stock. As of August 2, 2002, the aggregate market value of the
registrant's voting common equity held by non-affiliates of the registrant,
based on the $3.675 last average bid and asked price of the common stock on
August 2, 2002, as reported on the Over-the-Counter Bulletin Board service, was
approximately $11.8 million. For purposes of this computation, shares of common
stock of the registrant beneficially owned by each officer and director of the
registrant and by each of Whippoorwill Associates, Inc. (on behalf of its
Discretionary Accounts) and Bay Harbour Management L.C. (on behalf of its
Managed Accounts) and their respective affiliates are deemed to be beneficially
owned by affiliates.

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [x] No [_]

On April 21, 2003, the registrant had outstanding 14,103,227 shares of common
stock, par value $0.01 per share, which is the registrant's only class of common
stock.

                      DOCUMENTS INCORPORATED BY REFERENCE:


Certain portions of the registrant's definitive Proxy Statement filed pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as amended, in
connection with the Annual Meeting of Stockholders of the registrant held on
June 20, 2003 are incorporated by reference into Part III of this report.

                            [Cover page 2 of 2 pages]
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<TABLE>
<S>                                                                                                             <C>
         Item 1.    Business.............................................................................        1

         Item 2.    Properties...........................................................................        7

         Item 3.    Legal Proceedings....................................................................        7

         Item 4.    Submission of Matters to a Vote of Security Holders..................................        8

         Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters................       10

         Item 6.    Selected Financial Data..............................................................       11

         Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
                    Operations...........................................................................       15

         Item 8.    Financial Statements and Supplementary Data..........................................       37

         Item 9.    Changes In and Disagreements with Accountants on Accounting and Financial
                    Disclosure...........................................................................       37

         Item 10.   Directors and Executive Officers of the Registrant...................................       38

         Item 11.   Executive Compensation...............................................................       38

         Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters..................................................................       38

         Item 13.   Certain Relationships and Related Transactions.......................................       40

         Item 14.   Controls and Procedures..............................................................       40

         Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K......................       41
</TABLE>




                                        i
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Unless otherwise expressly stated herein or the context otherwise requires, all
references in this Form 10-K to (i) "Holdings" refer to Barneys New York, Inc.,
a Delaware corporation and the sole shareholder of Barney's, Inc., a New York
corporation, (ii) "Barney's, Inc." refer to such New York corporation and (iii)
"Barneys," "we," "us," "our," "our company" or "the company" refer to Holdings
and its direct and indirect subsidiaries, including Barney's, Inc. and its
subsidiaries.

FORWARD-LOOKING STATEMENTS

Certain statements discussed in Item 1 (Business), Item 3 (Legal Proceedings),
Item 7 (Management's Discussion and Analysis of Financial Condition and Results
of Operations), and elsewhere in this Form 10-K constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements that are not historical facts, including statements about
our beliefs and expectations, are forward-looking statements. Forward-looking
statements include statements preceded by, followed by or that include the words
"may," "could," "would," "should," "believe," "expect," "anticipate," "plan,"
"estimate," "target," "project," "intend," or similar expressions. These
statements include, among others, statements regarding our expected business
outlook, anticipated financial and operating results, our business strategy and
means to implement the strategy, our objectives, the amount and timing of future
store openings and capital expenditures, the likelihood of our success in
expanding our business, financing plans, working capital needs and sources of
liquidity.

Forward-looking statements are only estimates or predictions and are not
guarantees of performance. These statements are based on our management's
beliefs and assumptions, which in turn are based on currently available
information. Important assumptions relating to the forward-looking statements
include, among others, assumptions regarding demand for the merchandise we sell,
the introduction of new merchandise, store opening costs, expected pricing
levels, the timing and cost of planned capital expenditures, competitive
conditions and general economic conditions. These assumptions could prove
inaccurate. Forward-looking statements also involve risks and uncertainties,
which could cause actual results to differ materially from those contained in
any forward-looking statement. Many of these factors are beyond our ability to
control or predict. These factors include, but are not limited to, the
following:

        -       the continued appeal of luxury apparel and merchandise;

        -       economic conditions and their effect on consumer spending;

        -       our dependence on our relationships with some designers;

        -       our ability and the ability of our designers to design and
                introduce new merchandise that appeals to consumer tastes and
                demands;

        -       events and conditions in the New York City area;

        -       new competitors entering the market or existing competitors
                expanding their market presence;

        -       our ability to accurately predict our sales;

        -       the continued service of our key executive officers and
                managers;

        -       our being controlled by our principal stockholders;

        -       our ability to enforce our intellectual property rights and
                defend infringement claims;
<PAGE>
        -       interruptions in the supply of the merchandise we sell;

        -       changing preferences of our customers;

        -       our ability to borrow additional funds;

        -       our substantial indebtedness;

        -       significant operating and financial restrictions placed on us by
                the indenture governing Barney's, Inc.'s 9% senior secured notes
                and our credit facility; and

        -       other factors referenced in this 10-K, including those set forth
                under "Item 7 - Management's Discussion and Analysis of
                Financial Condition and Results of Operations - Forward-Looking
                Statements."

We believe the forward-looking statements in this Form 10-K are reasonable.
However, they are based on current expectations, speak only as of the date they
are made and are subject to change by reason of the factors and risks noted
above, the passage of time or other circumstances. We undertake no obligation to
update publicly any forward-looking statements in light of new information or
future events, except as required by applicable laws, including the securities
laws of the United States.


<PAGE>
                                     PART I

ITEM 1. BUSINESS

GENERAL

     We are a leading upscale retailer of men's, women's and children's apparel
and accessories and items for the home. We provide our customers with a wide
variety of merchandise across a broad range of prices, including a diverse
selection of Barneys label merchandise. Our preferred arrangements with
established and emerging designers, combined with our creative merchandising,
store designs and displays, advertising campaigns, publicity events and emphasis
on customer service, have positioned us as a pre-eminent retailer of men's and
women's fashion, cosmetics, jewelry and home furnishings.

     As of February 1, 2003, we operated 20 inter-related stores in the United
States under the "Barneys New York" trade name. These stores cater to
fashion-conscious customers and include three flagship stores in prime retail
locations in New York, Beverly Hills and Chicago, and three smaller regional
stores in Manhasset, NY, Seattle, WA and Chestnut Hill, MA. Our two CO-OP
Barneys New York stores in New York City are extensions of the CO-OP
departments in our flagship stores. They cater to customers seeking
contemporary, urban casual apparel and accessories. Our 12 outlet stores cater
to budget-minded yet fashion-conscious customers. In addition, our noted
semi-annual warehouse sale events in New York City and Santa Monica, California
enable us to sell our end-of-the-season residual merchandise and extend the
Barneys New York brand to a wider range of customers. We have entered into a
licensing arrangement pursuant to which a third party operates two retail
stores in Japan and a single in-store department in Singapore, all under the
"Barneys New York" name.

     We drive sales by providing our customers with a carefully edited selection
of high-fashion quality merchandise from leading and emerging designers. Our
merchandising philosophy reflects a variety of fashion viewpoints and a culture
of seeking out creative and innovative products. It has established Barneys as a
premiere destination for fashion-conscious customers. We also strive to enhance
our sales by expanding and reallocating existing space within our stores,
attracting new customers, building upon our strong existing customer
relationships and selectively increasing the number of our stores. Our
experienced management team, led by Howard Socol, the former Chairman and Chief
Executive Officer of Burdines, a division of Federated Department Stores, Inc.,
emphasizes disciplined financial management throughout our operations. We
carefully monitor and have significantly reduced operating costs through a
variety of initiatives, including a rationalization of personnel hours, a
reduction in the number of our administrative employees and the renegotiation of
supply, service and benefit plan contracts.

     We were founded in 1923 under the name "Barney's Clothes, Inc." Barneys
consummated a plan of reorganization under Chapter 11 of the Bankruptcy Code on
January 28, 1999. Pursuant to the plan, Holdings was formed and all the equity
interests in Barney's, Inc. were transferred to Holdings, making Barney's, Inc.
a wholly-owned subsidiary of Holdings. Holdings has no independent operations
and its primary asset consists of shares of Barney's, Inc.

BUSINESS STRENGTHS

     Strong Designer Relationships.  We sell merchandise from leading designers,
including Giorgio Armani, Manolo Blahnik, Marc Jacobs, Prada, Jil Sander and
Ermenegildo Zegna. We were the first to introduce a number of designers,
including both Giorgio Armani and Prada, into the high-fashion market in the
United States. Our stores are also a showcase for emerging designers, whom we
identify and help to develop. By cultivating strong relationships with emerging
designers, we are able to introduce their merchandise to the high-fashion
market, often on an initially exclusive basis. We further strengthen our
relationships with both established and emerging designers through design and
product suggestions and by providing them with detailed feedback on their
collections that we gather from our customers.

     Barneys Label Merchandise.  We complement our designer merchandise with a
diverse selection of Barneys label merchandise, including ready-to-wear apparel,
handbags, shoes, dress shirts, ties and sportswear. Barneys label merchandise is
manufactured by independent third parties according to our specifications. We
are intensively involved in all aspects of the design and manufacture of this
collection. This merchandise complements and is of comparable quality to our
designer merchandise. Our Barneys label merchandise

                                       1
<PAGE>

constituted approximately 15% of our net sales for our fiscal year ended
February 1, 2003, is generally less expensive than our designer merchandise and
generates higher margins.

     Strong Brand Image.  We benefit greatly from the strong Barneys New York
brand image as a fashion leader, which we have developed during the past three
decades. We believe that our brand image is further enhanced through our
consistently creative and innovative merchandising, store designs and displays,
including our renowned flagship store windows, advertising campaigns and
publicity events, all of which emphasize taste, luxury and humor. Our flagship
stores reflect the luxury and distinct style of the merchandise we sell and
establish and promote the Barneys New York brand image as a pre-eminent retailer
of men's and women's fashion. In addition to our direct advertising, we receive
frequent press coverage from independent publications. This coverage features
our merchandise and reports our launches of new collections and new designers,
further strengthening our brand image.

     Relationship-Driven Customer Service.  We maintain a strong focus on
providing consistently high levels of service to our customers. Our sales
associates, particularly those at our flagship stores, maintain customer profile
books to serve specific customers better by providing merchandise suggestions
tailored to their personal tastes and by making them aware of new merchandise
and sales events. These sales associates also receive extensive in-house product
training and participate in vendor clinics to familiarize themselves with the
styles, fabrics and workmanship of our designer collections. In addition, our
customer loyalty program provides incentives to customers who use our
proprietary credit card.

     Prime Store Locations.  The location of our flagship stores in prime retail
locations contributes to the strong Barneys New York brand image. These
locations are Madison Avenue in New York City, Wilshire Boulevard off Rodeo
Drive in Beverly Hills and Oak Street in Chicago. We believe that our three
flagship stores are premiere destinations for fashion-conscious customers. All
of our flagship stores are leased under long-term leases, with initial terms
ranging from ten to twenty years and multiple ten-year renewal options.

     Proven Management Team.  We have a strong and dedicated management team
with significant experience in the upscale fashion market and retailing
industry. Our Chief Executive Officer, Howard Socol, brings more than 30 years
of industry experience to Barneys. Mr. Socol previously served as Chairman and
Chief Executive Officer of Burdines Department Stores from 1984 to 1997. During
that time, Burdines' business expanded from 25 stores as of January 28, 1984 to
48 stores as of February 1, 1997 and its sales grew from approximately $692
million in 1984 to approximately $1.3 billion in 1996. Additionally, Thomas
Kalenderian, our Executive Vice-President -- Men's Merchandising, has been with
us for 22 years, and Judith Collinson, our Executive Vice-President -- Women's
Merchandising, has been with us for 15 years. During their tenure with Barneys,
Mr. Kalenderian and Ms. Collinson have been instrumental in developing and
implementing our merchandising strategy, including our relationships with
designers and the design and procurement of Barneys label merchandise.

BUSINESS STRATEGY

     Our business strategy is focused on increasing comparable store sales,
reducing operating expenses and selectively expanding our store base.

     Increase Comparable Store Sales.  We are focused on maximizing the
profitability of existing space, particularly in our flagship stores. We
constantly consider opportunities to reallocate floor space to merchandise that
can provide higher sales per square foot or higher profit margins. For example,
in October 2001 we moved the restaurant in our New York City flagship store from
the lower level to the then unused ninth floor. This enabled us to expand our
main floor women's accessories business and to utilize the lower level space to
expand our more profitable cosmetics sales area, without adversely affecting the
restaurant's revenues. In June 2002 we also reallocated floor space in our New
York City flagship store to expand our women's shoe department. During the
fiscal year ended February 2, 2002, this department generated approximately
three times more sales per square foot than the merchandise previously sold in
the area that has been incorporated into our expanded women's shoe department.
We plan to implement this strategy of maximizing existing space in our other
flagship stores and regional and outlet locations, tailoring the enhancements to
individual store sales trends and tastes. In addition, our continued focus on
customer service and expanded marketing efforts,

                                      2
<PAGE>

including increased advertising, are designed to increase sales to our existing
customers and to attract new customers.

     Reduce Operating Expenses.  We have a highly-disciplined approach to
managing expenses throughout our operations. Since February 2001, we have
reduced fixed costs by implementing a number of expense reduction initiatives,
including reducing the number of our administrative personnel, which eliminated
approximately $4.3 million in annual payroll costs, rebidding repair and
maintenance contracts, reducing employee benefits and reducing our packaging and
general office overhead costs, which eliminated approximately $2.0 million in
annual expenses. We also upgraded the inventory controls and security measures
in our stores in an effort to reduce inventory shrinkage. In addition, we
constantly review our operations for opportunities to implement further expense
reduction initiatives.

     Limited and Disciplined New Store Openings.  In May 2000 we opened a new
CO-OP store in the Chelsea neighborhood of New York City, and in March 2002 we
opened a second new CO-OP store in the SoHo neighborhood of New York City. These
stores, which are extensions of the CO-OP departments in our flagship stores,
achieved aggregate net sales of $8.7 million in the fiscal year ended February
1, 2003, reflecting twelve months of operations for our Chelsea CO-OP store and
eleven months of operations for our SoHo CO-OP store. We will continue to
evaluate opportunities to expand our CO-OP store base in a selective and
financially disciplined manner. We expect to open approximately ten additional
CO-OP stores over the next five years, including one store which opened in
August 2003, at a cost of between $1.0 million and $1.5 million per store. We
believe that the new CO-OP stores will increase customer awareness of the
Barneys New York name and enhance the strong Barneys New York brand image.

RETAILING OPERATIONS

     We sell to consumers primarily through three inter-related distribution
channels, consisting of full-price stores, outlet stores, and warehouse sale
events. While these three distribution channels differ in both size and
price-points, each is merchandised in its own way, with a wide range of
high-quality merchandise that generally appeals to fashion-conscious customers.
Our inventory supply chain is managed throughout these three distribution
channels, which are discussed in more detail below.

     Full-Price Stores.  We operate eight full-price stores consisting of:

          Flagship Stores -- We operate three large flagship stores in prime
     retail locations in New York, Beverly Hills and Chicago. The three large
     flagship stores establish and promote the Barneys New York brand image as a
     pre-eminent retailer of men's and women's fashion. These stores offer
     customers a wide variety of merchandise, including apparel, accessories,
     cosmetics and items for the home, catering to affluent, fashion-conscious
     customers. We also seek to ensure that the ambience of our flagship stores
     reflects the luxury and distinct style of the merchandise that we sell. The
     flagship stores in New York and Beverly Hills also include restaurants
     managed by third-party contractors.

          Regional Stores -- We operate three smaller regional stores in the
     following locations: Manhasset, NY, Seattle, WA and Chestnut Hill, MA. The
     three smaller regional stores, which provide a limited selection of the
     merchandise offered in the flagship stores, cater to similar customers as
     our flagship stores in more localized markets.

          CO-OP Stores -- We operate two smaller CO-OP stores in New York City.
     These free-standing stores are extensions of the CO-OP departments in our
     flagship stores and focus on providing customers with a selection of
     high-end, contemporary, urban casual apparel and accessories, often at
     price points that are slightly lower than our non-CO-OP merchandise.
     Similar to our CO-OP departments, our CO-OP stores offer merchandise from
     established and emerging designers, as well as our Barneys label.

     Outlet Stores.  We operate twelve outlet stores across the country. The
outlet stores leverage the Barneys New York brand to reach a wider audience by
providing a lower priced version of the sophistication, style and quality of the
retail experience provided in the full-price stores. These stores, which
typically operate with a low cost structure, also provide a clearance vehicle
for residual merchandise from the full-price stores.

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     The outlet stores, which sell designer and Barneys label apparel and
accessories, serve budget-minded yet fashion-conscious customers. They are
located in high-end outlet centers and serve a high number of destination
shoppers and tourists.

     Warehouse Sale Events.  We operate four warehouse sale events annually, one
each spring and fall season in both New York and Santa Monica, California. The
warehouse sale events provide another vehicle for liquidation of end of season
residual merchandise, as well as a low cost extension of the Barneys New York
brand to a wider audience. The events attract a wide range of shoppers, mostly
bargain hunters who value quality and fashion.

LICENSING ARRANGEMENTS

     BNY Licensing Corp., a wholly-owned subsidiary of Barneys, is party to
licensing arrangements pursuant to which:

     - two retail stores are operated in Japan and a single in-store department
       is operated in Singapore under the name "Barneys New York," each by an
       affiliate of Isetan Company Limited; and

     - Barneys Asia Co. LLC, which is 70% owned by BNY Licensing and 30% owned
       by an affiliate of Isetan, has the exclusive right to sublicense the
       Barneys New York trademark throughout Asia, excluding Japan.

These arrangements were established, under the plan of reorganization pursuant
to which Barneys emerged from bankruptcy, as part of the settlement of claims
filed by Isetan and its affiliates in the bankruptcy aggregating more than $365
million and pending litigation and arbitration proceedings involving Barneys and
Isetan and its affiliates. The amount of the annual royalty assigned to Isetan
increases each year from $2,832,220 for the first twelve months of the agreement
to $4,597,295 for the final license year ending in December 2015. As a result of
the assignment, Barneys only receives ten percent (10%) of the total royalty
payable pursuant to the trademark license agreement. As the royalty is paid in
Japanese Yen, Barneys determined the U.S. dollar equivalent of the royalty as of
February 1, 2003 using a conversion rate of 119.8. For a description of the
terms of the licensing arrangements, please see note 7(b) to our audited
consolidated financial statements.

TRADEMARKS AND SERVICE MARKS

     We own our trademarks and service marks, including the "Barneys New York"
and "Barneys" marks. Our trademarks and service marks are registered in the
United States and some countries in Asia. The term of these registrations is
generally ten years, and they are renewable for additional ten-year periods
indefinitely, so long as the marks are still in use at the time of renewal. We
are not aware of any claims of infringement or other challenges to our right to
register or use our marks in the United States. We regard our trademarks and
service marks as valuable assets in the marketing of our products and take
appropriate action when necessary to protect them.

SEASONALITY

     The specialty retail industry is seasonal in nature, with a high proportion
of sales and operating income generated in the November and December holiday
season. As a result, our operating results are significantly affected by the
holiday selling season. Seasonality also affects working capital requirements,
cash flow and borrowings as inventories build in September and peak in October
in anticipation of the holiday selling season. Our dependence on the holiday
selling season is mitigated by the sales and income generated by our warehouse
sale events held in February and August.


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The following table sets forth net sales and net income (loss) for the fiscal
years ended February 1, 2003 and February 2, 2002. This quarterly financial data
is unaudited but gives effect to all adjustments necessary, in the opinion of
Barneys' management, to present fairly this information.

<TABLE>
<CAPTION>
                                   FISCAL 2002 - QUARTER ENDED                            FISCAL 2001 - QUARTER ENDED
                         ------------------------------------------------     --------------------------------------------------
     ($ in thousands)      5/4/02       8/3/02       11/2/02       2/1/03       5/5/01        8/4/01       11/3/01        2/2/02
                           ------       ------       -------       ------       ------        ------       -------        ------
<S>                      <C>          <C>           <C>          <C>          <C>           <C>           <C>           <C>
Net Sales                $ 92,475     $ 81,603      $103,299     $105,986     $ 94,069      $ 85,146      $ 89,408      $102,546

As % of period                 24%          21%           27%          28%          25%           23%           24%           28%

Net Income (loss)             478         (439)        2,877        5,550       (3,301)       (3,860)       (8,448)          438
                         ========     ========      ========     ========     ========      ========      ========      ========
</TABLE>

COMPETITION

     The retail industry, in general, and the upscale retail apparel business,
in particular, are intensely competitive. Competition is strong for customers,
sales and vendor resources.

     Generally, our flagship, regional and CO-OP stores compete with both
specialty stores and department stores, while our outlet stores and warehouse
sale events compete with off-price and discount stores, in the geographic areas
in which they operate. Several department store, specialty store, and vendor
store competitors also offer catalog and internet shopping that also compete
with us.

     We compete for customers principally on the basis of quality, fashion,
assortment and presentation of merchandise, customer service, marketing and, at
times, store ambiance. In our luxury retail business, merchandise assortment is
a critical competitive factor, and retail stores compete for exclusive,
preferred and limited distribution arrangements with key designers. In addition,
we face increasing competition from our designer resources, which have
established or expanded their market presence with their own dedicated stores.
Some of the retailers with which we compete have substantially greater financial
resources than we have and may have other competitive advantages over us.

MERCHANDISING

     In addition to selling the products of a number of leading designers,
including Giorgio Armani, Manolo Blahnik, Marc Jacobs, Prada, Jil Sander and
Ermenegildo Zegna, we offer a diverse selection of unique, Barneys label
merchandise, primarily under the "Barneys New York" and "CO-OP" labels. In the
fiscal year ended February 1, 2003, our ten top designers, including all brands
owned by those designers, accounted for approximately 28% of our total sales,
and our two top designers, including all brands owned by those designers,
accounted for approximately 11% and 4%, respectively, of our total sales. If one
or more of our top designers were to cease providing us with adequate supplies
of merchandise, our business might, in the short term, be adversely affected.
However, we believe that alternative supply sources exist to fulfill our
requirements in the event of a disruption. In addition, if one or more of our
top designers were to increase sales of merchandise through its own stores or to
the stores of our competitors, our business could be materially adversely
affected.

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<PAGE>
EMPLOYEES

As of February 1, 2003, we employed approximately 1,300 people. Our staffing
requirements fluctuate during the year as a result of the seasonality of the
retail apparel industry, and we add approximately 100 employees during the
holiday selling season. Approximately 500 of our employees are represented by
unions, and we believe that overall our relationship with our employees and
these unions is good. During our more than fifty-year relationship with unions
representing our employees, we have never been subjected to a strike or work
stoppage.

GOVERNMENT REGULATION

Our proprietary credit card operations, as well as those of third-party credit
card providers, are subject to numerous federal and state laws, including laws
that impose disclosure and other requirements upon the origination, servicing
and enforcement of credit accounts and limitations on the maximum amount of
finance charges that may be charged by a credit provider. Any change in these
regulations that would materially limit the availability of credit to our
customers could adversely affect our business, financial condition and results
of operations. Our practices, as well as our competitors' practices, are also
subject to review in the ordinary course of business by the Federal Trade
Commission. We believe that we are currently in material compliance with all
applicable state and federal regulations.

Additionally, we are subject to certain customs, truth-in-advertising and other
laws, including consumer protection regulations and zoning and occupancy
ordinances, that regulate retailers generally and/or govern the importation,
promotion and sale of merchandise and the operation of retail stores and
warehouse facilities. We undertake to monitor changes in these laws and believe
that we are in material compliance with applicable laws with respect to these
practices.


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<PAGE>


ITEM 2. PROPERTIES

Our principal facilities include corporate offices, a central alterations
facility, a distribution center and three flagship stores. We lease all of our
facilities. All of our flagship stores are leased under long-term leases, with
initial terms ranging from ten to twenty years and multiple ten-year renewal
options. The following table lists the location, type, and approximate gross and
selling square footage of each of our facilities as of February 1, 2003:

<TABLE>
<CAPTION>
                                                                                   APPROXIMATE    APPROXIMATE
                                                                                      GROSS         SELLING
    LOCATION                                                  TYPE                 SQUARE FEET    SQUARE FEET
    --------                                    -------------------------------    -----------    -----------
<S>                                             <C>                                <C>            <C>
    New York, NY............................    Corporate Offices                      46,000            --
    New York, NY............................    Central Alterations Facility           32,968            --
    Lyndhurst, NJ...........................    Distribution Center                   180,000            --
    New York, NY............................    Flagship Store                        240,000        113,920
    Beverly Hills, CA.......................    Flagship Store                        120,000         60,671
    Chicago, IL.............................    Flagship Store                         50,000         21,913
    Manhasset, NY...........................    Regional Store                         19,052         12,646
    Chestnut Hill, MA.......................    Regional Store                          6,234          4,165
    Seattle, WA.............................    Regional Store                         11,113          6,406
    New York, NY (Wooster Street)...........    CO-OP Store                             7,000          3,782
    New York, NY (17th Street)..............    CO-OP Store                             7,038          5,800
    Harriman, NY............................    Outlet Store                            9,576          7,468
    Cabazon, CA.............................    Outlet Store                            7,026          4,930
    Camarillo, CA...........................    Outlet Store                            7,500          5,471
    Clinton, CT.............................    Outlet Store                            7,525          4,898
    Riverhead, NY...........................    Outlet Store                            7,500          5,077
    Wrentham, MA............................    Outlet Store                            7,500          5,012
    Waikele, HI.............................    Outlet Store                            6,295          4,766
    Carlsbad, CA............................    Outlet Store                            7,500          4,969
    Napa Valley, CA.........................    Outlet Store                            5,500          3,877
    Orlando, FL.............................    Outlet Store                            6,000          3,965
    Allen, TX...............................    Outlet Store                            7,000          4,801
    Leesburg, VA............................    Outlet Store                            6,000          4,224
</TABLE>

We also license, on a short-term basis, facilities for our semi-annual Santa
Monica, CA warehouse sale events. We believe that all of our facilities are
suitable and adequate for the current and anticipated conduct of our operations.

ITEM 3. LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

     On or about July 31, 2002, Maggie MacBeth filed an action against the us in
the Superior Court for the State of California, County of San Diego on behalf of
herself and all others similarly situated. The complaint alleged that we
violated Civil Code Section 1747.8(a)(2) by requesting personal information from
customers who use credit cards to make store purchases. The complaint further
alleged the alleged violations took place on July 16, 2002 and on numerous dates
before that date and that by virtue of the purported violations of Section
1747.8(a)(2), Barneys was engaged in unlawful acts and practices in violation of
California's unfair competition law. The complaint sought relief on a class
basis under the statutes permitting a plaintiff to recover a fine, in the
discretion of the court, and such other damages which each member of the class
may have suffered as a result of our alleged conduct. The complaint further
sought an accounting of all moneys and profits received by us in connection with
the alleged violations as well as injunctive relief with respect to the alleged
practices. Certification of the class and attorneys fees were sought by the
complaint as well. On August 28, 2003, this matter was settled by order of the
court for an immaterial amount.

     In addition, we are involved in various legal proceedings which are routine
and incidental to the conduct of our business. Management believes that none of
these proceedings, if determined adversely to us, would have a material effect
on our financial condition or results of operations.



                                       7
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names, ages, positions and business backgrounds of all
of the executive officers of Holdings. Except as otherwise indicated, each
executive officer has held his current position for the past five years.

<TABLE>
<CAPTION>
NAME                         AGE AT FEBRUARY 1, 2003                        POSITION
----                         -----------------------                        --------
<S>                          <C>                       <C>
Howard Socol...............             57             Chairman, President and Chief Executive Officer
Judith Collinson...........             51             Executive Vice President -- Women's Merchandising
Thomas Kalenderian.........             45             Executive Vice President -- Men's Merchandising
Marc H. Perlowitz..........             48             Executive Vice President -- General Counsel and Human
                                                       Resources, Secretary
Karl Hermanns..............             38             Executive Vice President -- Operations
Michael Celestino..........             46             Executive Vice President -- Store Operations
Steven M. Feldman..........             39             Executive Vice President and Chief Financial Officer
David New..................             46             Executive Vice President -- Creative Services
Vincent Phelan.............             37             Senior Vice President -- Treasurer
</TABLE>

Howard Socol has been the Chairman, President and Chief Executive Officer of
Holdings since January 8, 2001. Mr. Socol was the Chief Executive Officer of J.
Crew Group, Inc., a retailer of women's and men's apparel, shoes and
accessories, from February 1998 through January 1999. From 1969 to 1997, Mr.
Socol served in various management positions at Burdines, a division of
Federated Department Stores, Inc., becoming President in 1981 and Chairman and
Chief Executive Officer in 1984, a position he held until his retirement in
1997. Mr. Socol is also a director of Guess?, Inc.

Judith Collinson started with Barneys in 1989 as an Accessories Buyer. Prior to
her current position, she had been responsible for Accessories and Private Label
Collections. She was promoted to Executive Vice President and General
Merchandising Manager for all women's merchandising in May 1998. Ms. Collinson
is also responsible for women's shoes and cosmetics.

Thomas Kalenderian has been at Barneys for 22 years. His responsibilities have
increased over time until he was promoted to Executive Vice President and
General Merchandising Manager for all men's merchandising in July 1997. Mr.
Kalenderian is responsible for developing and implementing menswear


                                       8
<PAGE>
strategy and manages many of the key vendor relationships for the menswear,
children's and gifts for the home businesses.

Marc H. Perlowitz joined Barneys in September 1985. He was promoted to Executive
Vice President, General Counsel and Human Resources of Barneys in October 1997.
Mr. Perlowitz' responsibilities include direct responsibility for all legal
matters of Holdings and its affiliates. He is responsible for Human Resources
which includes compensation, benefits, labor relations, training, recruiting,
employee policies and procedures and company communications. He is also
responsible for real estate and risk management.

Karl Hermanns has been with Barneys since July 1996 and previously was
responsible for Financial and Strategic Planning. During his tenure, he has
assumed other responsibilities and is currently responsible for Marketing,
Merchandise Planning, Management Information Systems, Distribution, Imports and
our Central Alterations department. Mr. Hermanns was promoted to Executive Vice
President in February 2000. Prior to joining Barneys, Mr. Hermanns spent 10
years with Ernst & Young LLP in their audit and corporate finance practices.

Michael Celestino has been with Barneys since November 1991 and has served in a
number of store operations capacities during that period. Mr. Celestino is
currently responsible for all store operations including full-price stores,
outlet stores and our warehouse sale events. He was promoted to Executive Vice
President in February 2000.

Steven M. Feldman has been with Barneys since May 1996 when he joined as
Controller. During his tenure he assumed additional responsibilities and was
appointed as Chief Financial Officer in May of 1999. Prior to joining Barneys,
Mr. Feldman was a Senior Manager at Ernst & Young LLP principally serving retail
engagements. Mr. Feldman was promoted to Executive Vice President in March 2000.

David New has been with Barneys since 1992 when he joined as Men's Display
Manager of the 17th Street store in New York City. Mr. New's responsibilities
have increased over time and in March of 2000 he was promoted to Executive Vice
President -- Creative Services. In that capacity, Mr. New is responsible for
Store Design, Display, Advertising and Publicity.

Vincent Phelan has been with Barneys since August 1995 when he joined as
Director of Finance. Prior to joining Barneys, Mr. Phelan was the Deputy
Director of Finance at the United States Tennis Association, Inc. in White
Plains, NY from January 1993 to July 1995. Mr. Phelan was promoted to Vice
President -- Treasurer in January 1999 and Senior Vice President in March 2000.
Mr. Phelan is a certified public accountant and is responsible for financial
planning and analysis, cash management, banking relations, taxes and facilities.


                                       9
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Holdings common stock is quoted on the Nasdaq Over-The-Counter Bulletin Board
service under the symbol "BNNY." Holdings common stock is only traded on a
limited or sporadic basis and there is no established public trading market for
such common stock. The following table sets forth the reported high and low bid
prices of Holdings common stock on the Nasdaq Over-The-Counter Bulletin Board
service for each fiscal quarter during the period from February 4, 2001 through
February 1, 2003. The quotations listed below reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
                                                                                      HIGH BID   LOW BID
                                                                                      --------   -------
<S>                                                                                   <C>       <C>
FISCAL YEAR ENDED FEBRUARY 2, 2002:
First Quarter (Feb. 4, 2001 - May 5, 2001)......................................      $  8.00   $  6.00
Second Quarter (May 6, 2001 - August 4, 2001)...................................         7.00      5.75
Third Quarter (August 5, 2001 - November 3, 2001)...............................         6.00      4.25
Fourth Quarter (November 4, 2001 - February 2, 2002)............................         5.00      1.50

FISCAL YEAR ENDED FEBRUARY 1, 2003:
First Quarter (February 3, 2002 - May 4, 2002)..................................         5.40      1.50
Second Quarter (May 5, 2002 - August 3, 2002)...................................         3.90      3.01
Third Quarter (August 4, 2002 - November 2, 2002)...............................         3.55      2.65
Fourth Quarter (November 3, 2002 - February 1, 2003)............................         4.26      3.00
</TABLE>


HOLDERS

As of April 21, 2003, there were 949 holders of record of Holdings common stock.

DIVIDENDS

The terms of the indenture governing Barney's, Inc.'s 9% Senior Secured Notes
and our credit facility restrict the ability of Barney's, Inc. to make
distributions to Holdings and, consequently, restrict the ability of Holdings to
pay dividends on shares of Holdings common stock. In addition, the guarantee by
Holdings of the credit facility prohibits Holdings from declaring dividends on
shares of its capital stock, with the exception of dividends payable to holders
of shares of Holdings preferred stock. Holdings has no present intention to
declare dividends on shares of its common stock.

RECENT SALES OF UNREGISTERED SECURITIES

Pursuant to an amendment to Howard Socol's employment agreement, dated January
10, 2003, Holdings made a restricted stock award on February 2, 2003 of 200,000
shares of Holdings common stock to Howard Socol, Holdings' Chairman, President
and Chief Executive Officer. The issuance by Holdings of these securities were
not registered under the Securities Act of 1933 pursuant to the exemption
contemplated by Section 4(2) thereof for transactions not involving a public
offering.


                                       10
<PAGE>
On April 1, 2003, we completed an offering to sell 106,000 units at a price of
$850 per unit, for gross proceeds of $90.1 million. Each unit consisted of
$1,000 principal amount at maturity of 9% senior secured notes due April 1, 2008
of Barney's, Inc. and one warrant to purchase 3.412 shares of common stock of
Holdings at an exercise price of $0.01 per share. The units were sold in a
private placement to qualified institutional investors pursuant to Rule 144A and
Regulation S of the Securities Act of 1933, as amended, and to institutional
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under
such statute. Jefferies & Company, Inc. acted as initial purchaser of the units.
In addition to commissions of approximately $2.7 million, which we paid the
initial purchaser in connection with the sale of the units, we also paid
Jeffries & Company, Inc. an approximate $3.3 million fee for certain financial
advisory and investment banking services provided by it to us. Net proceeds to
us were approximately $81.7 million after deducting commissions, financial
advisory fees and estimated expenses of the offering. The warrants are
exercisable at any time after the earliest to occur of:

      -     180 days after April 1, 2003;

      -     the date on which a registration statement for a registered exchange
            offer with respect to the 9% senior secured notes is declared
            effective under the Securities Act;

      -     the date on which a shelf registration statements with respect to
            the shares issuable upon exercise of the warrants is declared
            effective under the Securities Act; and

      -     such date as the initial purchaser of the units in its sole
            discretion may determine.

The warrants will expire on April 1, 2008. The exercise price and number of
shares issuable upon exercise of a warrant are subject to adjustment from time
to time upon the occurrence of certain events with respect to the common stock
of Holdings, issuances of options or other convertible securities, dividends and
distributions and certain changes in options and convertible securities of
Holdings.

In connection with the offering, we entered into a registration rights
agreement, pursuant to which we agreed to file a registration statement within
90 days of the offering with respect to an exchange offer pursuant to which the
holders of the notes will be able to exchange the notes for freely transferable
notes having terms substantially identical to the notes. In addition, in certain
circumstances we have agreed to file a shelf registration statement that would
allow some or all of the notes to be offered to the public. If we do not comply
with the terms of the registration rights agreement, we will be required to pay
liquidated damages to holders of the notes in the form of additional cash
payments until all defaults under the registration rights agreement have been
cured.

In connection with the offering, Holdings agreed that upon receipt of a written
request from the holders of at least 5% of the shares issuable upon exercise of
the warrants, Holdings will, as promptly as practicable, file a shelf
registration statement covering the resale of the shares issuable upon exercise
of the warrants. Holdings may, at its option, file a registration statement
covering the resale of the shares issuable upon exercise of the warrants.

ITEM 6. SELECTED FINANCIAL DATA

     The selected consolidated financial data set forth in the table below as of
and for each of the four fiscal years in the period ended February 1, 2003, for
the six months ended January 30, 1999, and the fiscal year ended August 1, 1998,
are derived from our consolidated financial statements for those periods, as
audited by Ernst & Young LLP.

     The selected consolidated financial data set forth below for the twelve
months ended January 30, 1999 and as of and for the six months ended January 28,
1998 are derived from our unaudited internal financial statements.

     The selected consolidated financial data should be read in conjunction with
the financial statements and the related notes and other information contained
elsewhere in this Form 10-K, including information set forth herein under "Item
7-Management's Discussion and Analysis of Financial Condition and Results of
Operations."

     In conjunction with our emergence from Chapter 11 in January 1999, we
changed our fiscal year-end to the Saturday closest to January 31. Previously,
the fiscal year-end fell on the Saturday closest to July 31. Unless otherwise
specified, all historical information as of or prior to August 1, 1998 reflects
the July fiscal year-end. The six-month period ended January 30, 1999 represents
the six month transition period to the new fiscal year.

     As hereinafter used, "Successor Company" refers to Holdings and
subsidiaries subsequent to January 30, 1999 and "Predecessor Company" refers to
Barney's, Inc. and subsidiaries prior to January 30, 1999.

     Our consolidated financial statements during the bankruptcy proceedings are
presented in accordance with American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," known as SOP 90-7. Pursuant to guidance provided by
SOP 90-7, we adopted fresh start reporting as of January 28, 1999 upon our
emergence from bankruptcy.

     Under fresh start reporting, a new reporting entity is deemed to be created
and the recorded amounts of assets and liabilities are adjusted to reflect their
estimated fair values at the effective date. Black lines have been drawn to
separate the Successor Company's financial information from that of the
Predecessor Company to signify that they are different reporting entities and
that the Successor Company's financial information has not been prepared on the
same basis as that of the Predecessor Company. The operating results of the
Successor Company for the intervening period from January 28, 1999 to January
30, 1999 were immaterial and therefore included in the operations of the
Predecessor Company.

     The balance sheet data as of January 30, 1999 in the following table
reflect the plan of reorganization and the application of the principles of
"fresh start" reporting in accordance with the provisions of SOP 90-7.
Accordingly, that financial information is not comparable to our historical
financial information prior to January 28, 1999.

                                       11
<PAGE>
<Table>
<Caption>
                                                  PREDECESSOR COMPANY                        SUCCESSOR COMPANY
                                 -----------------------------------------------------   -------------------------
                                  FISCAL                        SIX          TWELVE                      FISCAL
                                   YEAR       SIX MONTHS      MONTHS         MONTHS      FISCAL YEAR      YEAR
                                   ENDED        ENDED          ENDED         ENDED          ENDED         ENDED
                                 AUGUST 1,   JANUARY 28,    JANUARY 30,   JANUARY 30,    JANUARY 29,   FEBRUARY 3,
                                   1998          1998        1999(1,2)    1999(1,2,3)       2000          2001
                                 ---------   ------------   -----------   ------------   -----------   -----------
                                             (UNAUDITED)                  (UNAUDITED)
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
                                                          AND OPERATING DATA AND RATIOS)
<S>                              <C>         <C>            <C>           <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net Sales......................  $345,935      $183,760      $ 182,615     $ 344,790      $366,802      $404,321
Gross Profit...................   164,212        89,930         86,573       160,855       173,515       187,596
Selling, General and
  Administrative Expenses
  (including occupancy
  expenses)(4).................   151,191        78,123         73,634       146,702       152,445       161,523
Depreciation and
  Amortization.................     9,635         4,838          4,671         9,468        17,440        18,027
Other Income -- Net(5).........    (4,675)       (3,208)        (2,033)       (3,500)       (4,355)       (4,833)
Interest and Financing Costs,
  Net of Interest Income.......    11,967         5,578          4,758        11,147        12,968        11,723
Reorganization Costs...........    15,970         8,683         13,834        21,121            --            --
Income Taxes...................        77            39             38            76           363           546
Extraordinary Item -- Gain on
  Debt Discharge...............        --            --       (285,905)     (285,905)           --            --
Net (Loss) Income..............   (19,953)       (4,123)       277,576       261,746        (5,346)          610
Basic and Diluted (Loss)
  Earnings Per Share(6)........                                                           $  (0.42)     $   0.04
SELECTED OPERATING DATA:
Comparable Store Net Sales
  Increase (Decrease)(7).......      9.3%          1.0%           1.0%          4.3%          9.0%          9.7%
Number of Stores...............        20            20             20            20            16            18
OTHER FINANCIAL DATA:
EBITDA(8)......................  $ 17,696      $ 15,015      $  14,972     $  17,653      $ 25,425      $ 30,906
Net Cash (Used in) Provided by
  Operating Activities.........   (10,444)       (2,009)       (18,250)      (26,685)       15,005        23,042
Net Cash Provided by (Used in)
  Financing Activities.........    11,324         2,175         26,902        36,051        (7,911)       (9,750)
Net Cash Used in Investing
  Activities...................     2,844         1,631          5,306         6,519         3,585         6,256
Capital Expenditures...........     3,047         2,167          2,112         2,992         6,224         8,499

<Caption>
                                      SUCCESSOR COMPANY
                                 -------------------------
                                   FISCAL        FISCAL
                                    YEAR          YEAR
                                    ENDED         ENDED
                                 FEBRUARY 2,   FEBRUARY 1,
                                    2002          2003
                                 -----------   -----------

                                   (DOLLARS IN THOUSANDS,
                                    EXCEPT PER SHARE AND
                                  OPERATING DATA AND RATIOS)
<S>                              <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net Sales......................   $371,169      $383,363
Gross Profit...................    162,324       179,348
Selling, General and
  Administrative Expenses
  (including occupancy
  expenses)(4).................    154,818       154,813
Depreciation and
  Amortization.................     18,802        10,760
Other Income -- Net(5).........     (6,957)       (6,327)
Interest and Financing Costs,
  Net of Interest Income.......     10,393        11,036
Reorganization Costs...........         --            --
Income Taxes...................        439           600
Extraordinary Item -- Gain on
  Debt Discharge...............         --            --
Net (Loss) Income..............    (15,171)        8,466
Basic and Diluted (Loss)
  Earnings Per Share(6)........   $  (1.09)     $   0.61
SELECTED OPERATING DATA:
Comparable Store Net Sales
  Increase (Decrease)(7).......       (7.7)%        2.9%
Number of Stores...............         19            20
OTHER FINANCIAL DATA:
EBITDA(8)......................   $ 14,463      $ 30,862
Net Cash (Used in) Provided by
  Operating Activities.........     14,011        14,141
Net Cash Provided by (Used in)
  Financing Activities.........     (9,176)       (6,983)
Net Cash Used in Investing
  Activities...................     11,369        10,882
Capital Expenditures...........     11,982        11,082
</Table>

                                        12
<PAGE>
<Table>
<Caption>
                          PREDECESSOR COMPANY                              SUCCESSOR COMPANY
                                 AS OF                                           AS OF
                        -----------------------   -------------------------------------------------------------------
                        AUGUST 1,   JANUARY 28,   JANUARY 30,   JANUARY 29,   FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                          1998         1998         1999(2)        2000          2001          2002          2003
                        ---------   -----------   -----------   -----------   -----------   -----------   -----------
                                    (UNAUDITED)
                                                           (DOLLARS IN THOUSANDS)
<S>                     <C>         <C>           <C>           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Cash and Cash
 Equivalents..........  $   3,478    $   3,977     $  6,824      $ 10,333      $ 17,369      $ 10,835      $  7,111
Fixed Assets at Cost,
 Less Accumulated
 Depreciation and
 Amortization.........    114,639      115,837       51,356        48,974        48,170        50,141        50,463
Total Assets..........    217,043      212,637      343,954       324,482       323,859       296,980       301,793
Total Debt(11)........     75,437       66,290      118,533       105,915        89,315        81,048        75,956
Redeemable Preferred
 Stock................         --           --          500           500           500           500           500
Total Stockholders'
   (Deficit) Equity...   (467,634)    (451,805)     154,340       153,996       161,793       146,622       155,584
</Table>

---------------

(1) Effective January 1999, we changed our fiscal year-end to coincide with the
    Saturday closest to the end of January.

(2) The statement of operations data presented above reflects the results of
    operations for the Predecessor Company. The plan of reorganization for
    Barneys and some of its affiliates became effective on January 28, 1999 and
    the results of operations for the Successor Company for the two-day period
    are immaterial and are not shown separately. The balance sheet data
    presented as of January 30, 1999 is that of the Successor Company.

(3) For comparison purposes, statement of operations data for the twelve months
    ended January 30, 1999 (unaudited) was prepared using management's internal
    financial statements for the six months ended August 1, 1998 (unaudited) and
    the audited financial statements for the six months ended January 30, 1999.

(4) Selling, General and Administrative Expenses for the fiscal year ended
    February 3, 2001 include the benefit of a $1.5 million reversal of a
    Predecessor Company liability favorably settled in that fiscal year.

(5) Other Income -- Net primarily includes finance charge income generated from
    our proprietary credit card operations. Other Income -- Net for the fiscal
    year ended February 2, 2002 includes a non-recurring gain of $926,000
    related to insurance recoveries associated with the loss of one of our
    stores due to the September 11 events and the benefit of a $913,000 reversal
    of a Predecessor Company liability favorably settled in that fiscal year.
    Other Income -- Net for the fiscal year ended February 1, 2003 includes a
    non-recurring gain of $523,000 related to additional insurance recoveries
    associated with the loss of one of our stores in the prior fiscal year due
    to the September 11 events and the benefit of a $400,000 non-recurring gain
    from the sale of a trademark.

(6) Basic and Diluted (Loss) Earnings Per Share of the Predecessor Company has
    not been included because the computation would not provide meaningful
    results, as the capital structure of the Successor Company is not comparable
    to that of the Predecessor Company.

(7) All stores that are open as of the beginning and end of the pertinent fiscal
    periods, regardless of relocation or expansion of existing square footage,
    are considered to be comparable stores for purposes of determining the
    comparable net store sales increases (decreases). All stores closed during a
    fiscal period are excluded from the determination of the comparable net
    store sales increases (decreases) on a prospective basis effective with the
    date of closing.

(8) EBITDA for each period represents the sum of (a) the respective amounts of
    Net (Loss) Income set forth above for that period; plus (b) the respective
    amounts of Interest and Financing Costs, Net of Interest Income, Income
    Taxes and Depreciation and Amortization and (c) with respect to the
    Predecessor Company only, the respective amounts of Extraordinary
    Item -- Gain on Debt Discharge and Reorganization Costs. The following table
    reconciles Net (Loss) Income to EBITDA:

                                        13
<PAGE>
<Table>
<Caption>
                                       PREDECESSOR COMPANY                                     SUCCESSOR COMPANY
                       ---------------------------------------------------   -----------------------------------------------------
                        FISCAL         SIX           SIX         TWELVE                      FISCAL        FISCAL        FISCAL
                         YEAR        MONTHS        MONTHS        MONTHS      FISCAL YEAR      YEAR          YEAR          YEAR
                         ENDED        ENDED         ENDED         ENDED         ENDED         ENDED         ENDED         ENDED
                       AUGUST 1,   JANUARY 28,   JANUARY 30,   JANUARY 30,   JANUARY 29,   FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                         1998         1998          1999*         1999*         2000          2001          2002          2003
                       ---------   -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                   (UNAUDITED)
                                                                 (DOLLARS IN THOUSANDS)
<S>                    <C>         <C>           <C>           <C>           <C>           <C>           <C>           <C>
Net (Loss) Income....  $(19,953)     $(4,123)     $277,576      $261,746       $(5,346)      $   610      $(15,171)      $ 8,466
Interest and
 Financing Costs, Net
 of Interest
 Income..............    11,967        5,578         4,758        11,147        12,968        11,723        10,393        11,036
Income Taxes.........        77           39            38            76           363           546           439           600
Depreciation and
 Amortization........     9,635        4,838         4,671         9,468        17,440        18,027        18,802        10,760
Extraordinary Item --
 Gain on Debt
 Discharge...........        --           --      (285,905)     (285,905)           --            --            --            --
Reorganization
 Costs...............    15,970        8,683        13,834        21,121            --            --            --            --
                       --------      -------      --------      --------       -------       -------      --------       -------
EBITDA...............  $ 17,696      $15,015      $ 14,972      $ 17,653       $25,425       $30,906      $ 14,463       $30,862
                       ========      =======      ========      ========       =======       =======      ========       =======
</Table>

---------------

 *   See Note (2) above.

     EBITDA is not an alternative measure of operating results or cash flows
     from operations, as determined in accordance with accounting principles
     generally accepted in the United States. We have included EBITDA because we
     believe it is an indicative measure of our operating performance and our
     ability to meet our debt service requirements and is used by investors and
     analysts to evaluate companies in our industry. EBITDA is also a measure
     utilized in a covenant contained in our restated credit facility and in a
     covenant in the indenture governing the 9.000% senior secured notes that
     limits our ability to incur indebtedness.

     As presented by us, EBITDA may not be comparable to similarly titled
     measures reported by other companies. EBITDA should be considered in
     addition to, not as a substitute for, operating income, net (loss) income,
     cash flow and other measures of financial performance and liquidity
     reported in accordance with accounting principles generally accepted in the
     United States. In addition, a substantial portion of our EBITDA must be
     dedicated to the payment of interest on our indebtedness and to service
     other commitments, thereby reducing the funds available to us for other
     purposes. Accordingly, EBITDA does not represent an amount of funds that is
     available for management's discretionary use. See "Management's Discussion
     and Analysis of Financial Condition and Results of Operations."

(9) Predecessor Company balance sheet data does not include liabilities subject
     to compromise set forth on the balance sheet of the Predecessor Company.

                                        14
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

     We are a leading upscale retailer of men's, women's and children's apparel
and accessories and items for the home. We provide our customers with a wide
variety of merchandise across a broad range of prices, including a diverse
selection of Barneys label merchandise.

     Barneys consummated a plan of reorganization under Chapter 11 of the
Bankruptcy Code on January 28, 1999. Pursuant to the plan, Holdings was formed
and all the equity interests in Barney's, Inc. were transferred to Holdings,
making Barney's, Inc. a wholly-owned subsidiary of Holdings. Holdings has no
independent operations and its primary asset consists of shares of Barney's,
Inc. In connection with its acquisition of Barney's, Inc., Holdings made an
election under Section 338(g) of the Internal Revenue Code, as a result of which
Barney's, Inc. and its subsidiaries are generally treated, for federal income
tax purposes, as having sold their assets at the time the plan of reorganization
was consummated and thereafter as a new corporation which purchased the same
assets as of the beginning of the following day. Consequently, Barney's, Inc.
recognized a gain at the time of the deemed sale in an amount equal to the
difference between the fair market value of its assets and its collective tax
basis of the assets at the time of the sale. We used existing net operating loss
carryforwards to eliminate the taxable gain recognized as a result of the deemed
sale. Nevertheless, we were subject to alternative minimum tax. Furthermore, as
a result of the Section 338(g) election, Barney's, Inc. surrendered some
remaining tax attributes, including all unutilized net operating loss
carryforwards, and surrendered some tax credits. See note 6 to our audited
consolidated financial statements.

RECENT DEVELOPMENTS

     On April 1, 2003, we completed an offering of 106,000 units at a price of
$850 per unit, for gross proceeds of $90.1 million. Each unit consisted of
$1,000 principal amount at maturity of 9.000% senior secured notes due April 1,
2008 of Barney's, Inc., a wholly owned subsidiary of Holdings, and one warrant
to purchase 3.412 shares of common stock of Holdings at an exercise price of
$0.01 per share. Net proceeds to us were approximately $81.7 million after
deducting commissions, financial advisory fees and estimated expenses of the
offering. These commissions, fees and expenses of approximately $8.4 million
were deferred, are included in other assets and are being amortized to interest
expense over the term of the notes. We used the net proceeds to repay a
substantial portion of our outstanding indebtedness and deferred lease
obligations. Holdings and all of our domestic restricted subsidiaries have
guaranteed the 9.000% senior secured notes on a senior secured basis.

     As part of the offering process, we requested a rating on the above
referenced obligation of the Company. Standard and Poor's assigned a rating of
B- and Moody's assigned a rating of B3.

     In connection with the offering, we entered into a new restated credit
facility. The restated credit facility, which matures on July 15, 2006, is a
$70.0 million revolving credit facility under which we may borrow up to $66
million, which may be increased to $70.0 million with the consent of the
required lenders, subject to a borrowing base test.

     The restated credit facility and its related guarantees are secured by a
first-priority lien on substantially all of our assets, other than real property
leaseholds. The 9.000% senior secured notes are guaranteed by Holdings and each
of the existing and future domestic restricted subsidiaries of Barney's, Inc.
The 9.000% senior secured notes and the related guarantees are secured by a
second-priority lien on the same assets as secure the restated credit facility.

GENERAL

     Comparable Store Net Sales.  We determine comparable store net sales
increases or decreases using the net sales of all stores that are open as of the
beginning and end of both the pertinent fiscal period, regardless of store
relocation or expansion of existing square footage. Net sales of all stores
closed during a

                                        15
<PAGE>

fiscal period are excluded from the determination of the comparable net store
sales increases (decreases) on a prospective basis effective with the date of
closing.

     Expense classification.  Cost of sales includes the cost of merchandise
sold as well as costs associated with the purchase of that merchandise,
primarily including inbound freight and duty costs, buying agent costs, foreign
exchange gains and losses on settlement of foreign denominated purchases, sample
costs and label costs. All other expenses, except depreciation and amortization,
interest and income taxes, but including internal transfer costs and warehousing
and distribution expenses, are included in selling, general and administrative
expenses, because the predominant costs associated with these expenses, most
notably occupancy costs and personnel costs, are general and administrative in
nature. Based on these classifications, our gross margins may not be comparable
to those of other entities, since some entities include the costs related to
their distribution network and retail store rent expenses in cost of sales,
whereas others, like us, exclude these costs from gross margin, including them
instead in selling, general and administrative expenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements is based on the
application of significant accounting policies, many of which require us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and
liabilities. See note 2 to our audited consolidated financial statements. On an
ongoing basis, we evaluate our estimates, including those related to goodwill,
including excess reorganization value and other intangible assets, bad debt,
inventory, taxes, contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions.

     We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. The Company's management has discussed the selection of
these critical accounting policies with the Audit Committee of the Board of
Directors and the Audit Committee has reviewed the disclosure relating to these
critical accounting policies in this Management Discussion and Analysis.

     Excess Reorganization Value.  Excess reorganization value represents the
amount of goodwill attributed to a company under accounting principles generally
accepted in the United States upon its emergence from Chapter 11, as adjusted
from time to time pursuant to SFAS No. 142, "Goodwill and Other Intangible
Assets," which was issued in June 2001. As of February 1, 2003, the amount of
excess reorganization value which we recognized in our financial statements was
$147.8 million, and our total stockholders' equity, including the excess
reorganization value, was $155.6 million.

     SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets, including excess reorganization value.
Among other things, SFAS No. 142 requires that goodwill no longer be amortized,
but rather be tested annually for impairment. This statement was effective for
fiscal years beginning after December 15, 2001. Accordingly, on February 3,
2002, we adopted SFAS No. 142, and were required to analyze our excess
reorganization value for impairment issues during the first six months of the
fiscal year ended February 1, 2003, and then on a periodic basis thereafter. In
accordance with SFAS No. 142, in the fiscal year ended February 1, 2003, we
completed the required testing for impairment of our excess reorganization value
as of both the beginning and end of the fiscal year ended February 1, 2003.
Based upon our re-evaluation of the first step of the impairment test which
screens for potential impairment, we concluded that the fair value of our
enterprise exceeded its book value. Accordingly, we did not need to perform the
second step of the test, which measures the amount of any impairment. For the
fiscal year ended February 1, 2003, we did not record an impairment loss related
to excess reorganization value. However, our excess reorganization value was
reduced by approximately $1.7 million during the fiscal year ended February 1,
2003

                                        16
<PAGE>

due to a reversal of a tax reserve resulting from the resolution of tax
contingencies existing at the time of our emergence from bankruptcy.

     During the fiscal year ended February 2, 2002 and prior fiscal years, when
SFAS No. 142 was not in effect, we amortized excess reorganization value over a
twenty-year period. If excess reorganization value had not been amortized during
the fiscal years ended February 3, 2001 and February 2, 2002, our adjusted net
income (loss) and basic and diluted income (loss) per share would have been as
follows:

<Table>
<Caption>
                                                         FISCAL YEAR ENDED        FISCAL YEAR ENDED
                                                          FEBRUARY 3, 2001         FEBRUARY 2, 2002
                                                        --------------------   ------------------------
                                                                                             BASIC AND
                                                                  BASIC AND                   DILUTED
                                                                   DILUTED                     (LOSS)
                                                          NET       INCOME     NET (LOSS)      INCOME
                                                        INCOME    PER SHARE      INCOME      PER SHARE
                                                        -------   ----------   -----------   ----------
                                                         (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                     <C>       <C>          <C>           <C>
As Reported...........................................  $  610      $0.04       $(15,171)      $(1.09)
Amortization of Excess Reorganization Value...........   8,741       0.64          8,791         0.63
                                                        ------      -----       --------       ------
As Adjusted...........................................  $9,351      $0.68       $ (6,380)      $(0.46)
                                                        ======      =====       ========       ======
</Table>

     Bad Debt.  We maintain allowances for doubtful accounts for estimated
losses resulting from the failure of our customers to make required payments on
their outstanding proprietary credit card balances. Accounts are generally
written off automatically after 180 days have passed without our having received
a full scheduled monthly payment. Accounts are written off sooner in the event
of bankruptcy or other factors that make collection seem unlikely. We estimate
the appropriate allowance using a model that considers the current aging of the
accounts, historical write-off and recovery rates and other portfolio data. This
estimate is then reviewed by management to assess whether additional analysis is
required to appropriately estimate expected losses. We believe that our
allowance for doubtful accounts is adequate to cover anticipated losses in our
proprietary credit card portfolio under current conditions. Significant
deterioration in any of the factors noted above or in the economy could require
us to provide additional allowances that would reduce our net earnings. At
February 1, 2003, a 0.5% increase in our net historical write-off rate would not
have a material impact on our net earnings.

     Inventory.  We value our inventory at the lower of cost or market, or LCM,
as determined on the first-in, first-out method using the retail inventory
method, or RIM. Under RIM, the valuations of inventory at cost and the resulting
gross margins are calculated by applying a cost-to-retail ratio to the retail
value of our inventories. RIM is inherently an averaging method that is widely
used in the retail industry. The use of RIM will result in inventories being
valued at the LCM as markdowns are currently recorded as a reduction of the
retail inventory value.

     Based on a review of historical business trends, on-hand inventory levels,
discontinued merchandise categories and assumptions regarding future demand and
market conditions, we calculate a markdown reserve for our inventory to reflect
additional markdowns which are estimated to be necessary for obsolescence and to
reduce our inventories to the LCM. If our estimates prove to be incorrect and
our markdown reserve is therefore inadequate, we may be required to increase our
markdown reserve which would reduce our net earnings. At February 1, 2003, a
0.5% increase in our markdown reserve as a percentage of our inventory would
increase our cost of sales and decrease our net earnings by approximately
$300,000.

     Deferred Taxes.  The operating period after emergence from bankruptcy and
the cumulative losses incurred by us make our future utilization of deferred tax
assets uncertain. Accordingly, we record a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not to be realized.
In the event we were to determine that we would be able to realize our deferred
tax assets in the future in excess of the net recorded amount, an adjustment to
the deferred tax asset would increase income in the period that determination
was made. At February 1, 2003, we recorded a $5.7 million valuation allowance.

     Derivative Instruments and Hedging Activities.  In June 1998, the Financial
Accounting Standards Board, or FASB, issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative

                                        17
<PAGE>

Instruments and for Hedging Activities", or SFAS No. 133, which we adopted, as
amended, on February 4, 2001. SFAS No. 133, as amended, establishes accounting
and reporting standards for derivative instruments. Specifically, SFAS No. 133
requires an entity to recognize all derivative instruments as either assets or
liabilities in the balance sheet and to measure those instruments at fair value.
Additionally, the fair value adjustments will affect either stockholders' equity
or net income depending on whether the derivative instrument qualifies as a
hedge for accounting purposes and, if so, the nature of the hedging activity.

RESULTS OF OPERATIONS

     The following table includes Earnings before Interest and Financing Costs,
Net of Interest Income, Income Taxes and Depreciation and Amortization, or
EBITDA, as a percentage of Net Sales and also includes Net Income (Loss) as a
percentage of Net Sales. EBITDA is not an alternative measure of operating
results or cash flows from operations, as determined in accordance with
accounting principles generally accepted in the United States. We have included
EBITDA because we believe it is an indicative measure of our operating
performance and our ability to meet our debt service requirements and is used by
investors and analysts to evaluate companies in our industry. EBITDA is also a
measure utilized in a covenant contained in our credit facility and in a
covenant in the indenture governing the 9.000% senior secured notes that limits
our ability to incur indebtedness. As presented by us, EBITDA may not be
comparable to similarly titled measures reported by other companies. EBITDA
should be considered in addition to, not as a substitute for, operating income,
net income (loss), cash flow and other measures of financial performance and
liquidity reported in accordance with accounting principles generally accepted
in the United States. In addition, a substantial portion of our EBITDA must be
dedicated to the payment of interest on our indebtedness and to service other
commitments, thereby reducing the funds available to us for other purposes.
Accordingly, EBITDA does not represent an amount of funds that is available for
management's discretionary use.

<Table>
<Caption>
                                                      FISCAL YEAR ENDED
                                           ---------------------------------------
                                           FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                                              2001          2002          2003
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Net Sales................................     100.0%        100.0%        100.0%
Cost of Sales............................      53.6          56.3          53.2
                                              -----         -----         -----
Gross Profit.............................      46.4          43.7          46.8
Selling, General and Administrative
  Expenses (Including Occupancy
  Expenses)(1)...........................      40.0          41.7          40.4
Other Income -- Net(2)...................      (1.2)         (1.9)         (1.7)
                                              -----         -----         -----
Earnings before Interest and Financing
  Costs, Net of Interest Income, Income
  Taxes and Depreciation and Amortization
  (EBITDA)(3)............................       7.6           3.9           8.1
Interest and Financing Costs, Net of
  Interest Income, Income Taxes and
  Depreciation and Amortization..........       7.4           8.0           5.9
                                              -----         -----         -----
Net Income (loss)........................       0.2%         (4.1)%         2.2%
                                              =====         =====         =====
</Table>

---------------

(1) Selling, General and Administrative Expenses for the fiscal year ended
    February 3, 2001 include the benefit of a $1.5 million reversal of a
    Predecessor Company liability favorably settled in that fiscal year.

(2) Other Income -- Net primarily includes finance charge income generated from
    our proprietary credit card operations. Other Income -- Net for the fiscal
    year ended February 2, 2002 also includes a non-recurring gain of $926,000
    related to insurance recoveries associated with the loss of one of our
    stores due to the September 11 events and the benefit of a $913,000 reversal
    of a Predecessor Company liability favorably settled in that fiscal year.
    Other Income -- Net for the fiscal year ended February 1, 2003 also includes
    a non-recurring gain of $523,000 related to additional insurance recoveries
    associated with the loss of one of our stores in the prior fiscal year due
    to the September 11 events and the benefit of a

                                        18
<PAGE>

(3) EBITDA as a percentage of net sales for each period represents the sum of
    (a) the respective amounts of Net Income (Loss) set forth above for such
    period plus (b) the respective amounts of Interest and Financing Costs, Net
    of Interest Income, Income Taxes and Depreciation and Amortization for such
    period. The following table reconciles Net Income (Loss) as a percentage of
    net sales to EBITDA as a percentage of net sales:

<Table>
<Caption>
                                                  FISCAL YEAR ENDED
                                       ---------------------------------------
                                       FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                                          2001          2002          2003
                                       -----------   -----------   -----------

    <S>                                <C>           <C>           <C>
    Net Income (Loss)................      0.2%         (4.1)%         2.2%
    Plus:
      Interest and Financing Costs,
         Net of Interest Income......      2.9%          2.8%          2.9%
      Income Taxes...................      0.1%          0.1%          0.2%
      Depreciation and
         Amortization................      4.4%          5.1%          2.8%
                                           ---          ----           ---
    EBITDA...........................      7.6%          3.9%          8.1%
                                           ===          ====           ===
</Table>
                                      19
<PAGE>
  FISCAL YEAR ENDED FEBRUARY 1, 2003 COMPARED TO FISCAL YEAR ENDED FEBRUARY 2,
  2002

     We returned to profitability in the fiscal year ended February 1, 2003,
despite a continued weak economy and retail sector. Our operating results for
the fiscal year ended February 2, 2002 reflect the impact of a weak economy
exacerbated by the events of September 11, 2001. The business disruption caused
by the terrorist attacks and the indirect impact the attacks had on consumer
spending and tourism were significant factors that adversely affected our
operating results for the fiscal year ended February 2, 2002.

     Net sales for the fiscal year ended February 1, 2003 were $383.4 million
compared to $371.2 million for the fiscal year ended February 2, 2002, an
increase of 3.3%. Comparable stores sales increased approximately 2.9% in the
fiscal year ended February 1, 2003. Net sales for the fiscal year ended February
1, 2003 benefited from increased full-price sales as compared to the fiscal year
ended February 2, 2002 and particularly benefited from strong third and fourth
quarter sales which had been adversely affected in the prior year by the
business disruption caused by the September 11 events. In addition, in the
fiscal year ended February 1, 2003 sales were positively impacted by, among
other things, continued maximization of retail selling space in our stores,
particularly in our flagship stores, and additional direct mail and print
marketing campaigns throughout the year.

     Gross profit on sales increased 10.5% to $179.3 million in the fiscal year
ended February 1, 2003 from $162.3 million in the fiscal year ended February 2,
2002. This net increase is primarily attributable to the following:
the sales increase discussed above, which improved our gross profit by
approximately $5 million; decreased promotional selling, which improved our
gross profit by approximately

                                        20
<PAGE>

$11 million; foreign exchange losses (driven by the weakening US dollar) on
settlement of foreign currency denominated purchases, which impacted our gross
profit by approximately $1 million and decreased inventory shortage, which
improved our gross profit by approximately $1 million. As a percentage of net
sales, gross profit was 46.8% in the fiscal year ended February 1, 2003,
compared to 43.7% in the fiscal year ended February 2, 2002.

     Selling, general and administrative expenses, including occupancy expenses,
were $154.8 million in the fiscal year ended February 1, 2003, unchanged from
the fiscal year ended February 2, 2002. In the fiscal year ended February 1,
2003, personnel and related costs decreased in the aggregate by approximately
$550,000. This net decrease occurred as we offset higher personnel related
costs, particularly related to our bonus program, which was cancelled during the
fiscal year ended February 2, 2002 in the aftermath of the September 11 events,
and higher commission costs in line with higher sales, by approximately $800,000
of savings from a one-time concession related to a renegotiated collective
bargaining agreement and the annualized benefit of the personnel cost reduction
measures implemented in the fiscal year ended February 2, 2002. Various
additional reductions in expenses including packaging, supplies, postage and
travel aggregating approximately $1.9 million primarily reflect the benefit of
expense reduction initiatives implemented in the prior and current fiscal year,
including, among other things, re-bidding products and services, and general
reductions in the consumption of products and services, as well as a $400,000
reduction in bad debt expense associated with our proprietary credit card
operations. The above expense reductions were in part offset by higher variable
operating costs commensurate with higher sales, increased advertising costs of
approximately $500,000, increased professional fees of approximately $200,000,
increased insurance premiums of approximately $600,000 and increased occupancy
and related costs of approximately $700,000, principally as a result of higher
real estate taxes and the costs attributed to opening one new CO-OP store in the
period.

     Other income, net, which principally includes finance charge income
generated by our proprietary credit card operations, decreased 9.1% in the
fiscal year ended February 1, 2003 to $6.3 million from $7.0 million in the
fiscal year ended February 2, 2002. Other income in the fiscal year ended
February 1, 2003 and the fiscal year ended February 2, 2002 also includes
approximately $500,000 and $900,000, respectively, related to insurance
recoveries associated with the loss of one of our stores in the fiscal year
ended February 2, 2002 due to the September 11 events. In addition, other income
in the fiscal year ended February 1, 2003 includes approximately $400,000
related to the assignment of a subsidiary's interest in a trademark unrelated to
our business.

     Depreciation and amortization expense decreased in the fiscal year ended
February 1, 2003 to $10.8 million from $18.8 million in the fiscal year ended
February 2, 2002. This decrease was due to SFAS No. 142, which first became
effective for the fiscal year ended February 1, 2003, and which eliminated the
mandatory amortization of excess reorganization value.

     Interest expense, net increased 6.2% in the fiscal year ended February 1,
2003 to $11.0 million from $10.4 million a year ago, primarily as a result of
our write-off of approximately $600,000 in unamortized fees associated with the
replacement of our prior revolving credit facility in the second quarter of the
fiscal year ended February 1, 2003. Generally, interest associated with
borrowings under our credit facility declined principally as a result of lower
average borrowings. Average borrowings under the credit facility for the fiscal
year ended February 1, 2003 and the fiscal year ended February 2, 2002 were
$30.7 million and $35.2 million, respectively.

     We continue to have significant net operating losses available to us to
offset future taxable earnings. In the current year, we were able to reduce our
deferred tax asset valuation allowance primarily as a result of the significant
increase in our deferred tax liabilities principally related to fixed asset
depreciation. The reported state taxes were principally franchise and capital
taxes that, for the most part, are not based on income. As a result, there is no
consistent correlation between the amount of income and the amount of state
taxes reported. As a percentage of our income, this tax expense will decrease
with an increase in income and increase with a decrease in income. Our effective
tax rate for the year ended February 1, 2003 and February 2, 2002 was 7.0% and
(3.0)%, respectively.

                                        21
<PAGE>

     Our net income for the fiscal year ended February 1, 2003 was $8.5 million
compared to a net loss of $15.2 million for the fiscal year ended February 2,
2002. Basic and diluted net income per common share was $0.61 per common share
for the fiscal year ended February 1, 2003 compared to a $1.09 loss per common
share for the fiscal year ended February 2, 2002.

  FISCAL YEAR ENDED FEBRUARY 2, 2002 COMPARED TO FISCAL YEAR ENDED FEBRUARY 3,
  2001

     Net sales for the fiscal year ended February 2, 2002, including $7.8
million related to new stores, were $371.2 million compared to $404.3 million
for the fiscal year ended February 3, 2001, a decrease of 8.2%. The fiscal year
ended February 3, 2001 included 53 weeks; after adjusting for the impact of the
53rd week, sales decreased 6.9%. Comparable store sales decreased approximately
7.7% in the fiscal year ended February 2, 2002 principally due to reduced
consumer spending in response to a weak economy which became more magnified
after the September 11 events.

     Gross profit on sales decreased 13.5% to $162.3 million in the fiscal year
ended February 2, 2002 from $187.6 million in the fiscal year ended February 3,
2001. This net decrease is primarily attributable to the following: the sales
decrease discussed above, which impacted our gross profit by approximately $15
million; increased promotional selling, which impacted our gross profit by
approximately $9 million; and increased inventory shortage, which impacted our
gross profit by approximately $1 million. As a percentage of net sales, gross
profit was 43.7% in the fiscal year ended February 2, 2002 compared to 46.4% in
the fiscal year ended February 3, 2001. The decline from the fiscal year ended
February 3, 2001 principally relates to the effect of increased markdowns to
both drive sales and cleanse the inventory pipeline in light of weak consumer
demand.

     Selling, general and administrative expenses, including occupancy expenses,
decreased 4.2% in the fiscal year ended February 2, 2002 to $154.8 million from
$161.5 million in the fiscal year ended February 3, 2001. This decrease was
driven by personnel expense reductions of approximately $6.8 million as a result
of position eliminations; reductions in and eliminations of some employee
benefits, including the annual bonus program; lower commission expenses
commensurate with reduced sales; reduced hours for many employees; and temporary
pay cuts for senior executives. In addition to reductions in other expenses
commensurate with the sales decline, most notably an approximate $600,000
reduction in third-party credit card fees, we were able to further reduce other
expenses in the fiscal year ended February 2, 2002 by, among other things,
re-bidding products and services including insurance, packaging supplies, also
impacted by the lower sales volume, and maintenance contracts; and by general
reductions in consumption of products and services including office supply and
telephone usage, training, and travel, also impacted by the September 11 events.
Expense reductions in these other areas aggregated in excess of $2.0 million.
Overall, expense reductions were offset by additional costs to operate four new
outlet stores during the year, as well as higher operating costs attributable
principally to increased real estate taxes, common area maintenance charges and
utilities. Incremental costs in the latter areas approximated $1.0 million. As a
percentage of net sales, selling, general and administrative expenses increased
to 41.7% in the fiscal year ended February 2, 2002 from 40.0% in the fiscal year
ended February 3, 2001, reflecting a reduction in the leveraging of expenses,
principally due to the dramatic sales decline in the period.

     Other income, net increased 43.9% in the fiscal year ended February 2, 2002
to $7.0 million from $4.8 million in the fiscal year ended February 3, 2001.
This increase was principally driven by a non-recurring gain of $900,000 related
to insurance recoveries associated with the loss of one of our stores due to the
September 11 events and the benefit of a $900,000 reversal of a Predecessor
Company liability favorably settled in the fiscal year ended February 2, 2002.

     Depreciation and amortization expense increased 4.3% in the fiscal year
ended February 2, 2002 to $18.8 million from $18.0 million in the fiscal year
ended February 3, 2001. This increase was primarily due to higher depreciation
on new assets placed in service.

     Interest expense, net decreased 11.3% in the fiscal year ended February 2,
2002 to $10.4 million from $11.7 million in the fiscal year ended February 3,
2001 principally as a result of lower average borrowings under our credit
facility and reduced interest rates. Average borrowings under the credit
facility for the fiscal
                                        22
<PAGE>

year ended February 2, 2002 and the fiscal year ended February 3, 2001 were
$35.2 million and $44.4 million, respectively.

     We continue to have significant net operating loss carry forwards available
to offset future taxable earnings. In the current year, we were able to reduce
our deferred tax asset valuation allowance primarily as a result of the
significant increase in our deferred tax liabilities principally related to
fixed asset depreciation. The reported state taxes were principally franchise
and capital taxes that, for the most part, are not based on income. As a result,
there is no consistent correlation between the amount of income and the amount
of state taxes reported. As a percentage of our income, this tax expense will
decrease with an increase in income and increase with a decrease in income. The
effective tax rate for the year ended February 2, 2002 and February 3, 2001 was
(3.0)% and 47%, respectively.

     Our net loss for the fiscal year ended February 2, 2002 was $15.2 million
compared to net income of $0.6 million in the fiscal year ended February 3,
2001. Basic and diluted net loss per common share for the fiscal year ended
February 2, 2002 was $1.09 per common share compared to net income of $0.04 per
common share for the fiscal year ended February 3, 2001.

                        LIQUIDITY AND CAPITAL RESOURCES

CASH PROVIDED BY OPERATIONS AND WORKING CAPITAL

     For the reporting periods below, Net Cash Provided by Operating Activities,
on a consolidated basis, was as follows:

<Table>
<Caption>
                                                      FISCAL YEAR ENDED
                                           ---------------------------------------
                                           FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                                              2001          2002          2003
                                           -----------   -----------   -----------
                                            (DOLLARS IN THOUSANDS)
<S>                                        <C>           <C>           <C>
Net Income (Loss)........................    $   610      $(15,171)      $ 8,466
Depreciation and Amortization............     19,107        19,994        12,020
Other Non-Cash Charges...................      2,999         2,667         2,825
Changes in Current Assets and
  Liabilities............................        326         6,521        (9,170)
                                             -------      --------       -------
Net Cash Provided by (Used in) Operating
  Activities.............................    $23,042      $ 14,011       $14,141
                                             =======      ========       =======
</Table>

     Our consolidated working capital position at each of the dates shown below
was as follows:

<Table>
<Caption>
                                                  FISCAL YEAR ENDED
                                       ---------------------------------------
                                       FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                                          2001          2002          2003
                                       -----------   -----------   -----------
                                               (DOLLARS IN THOUSANDS)
<S>                                    <C>           <C>           <C>
Working Capital......................    $23,519       $16,485       $37,547
</Table>

     For the reporting periods below, Net Cash Used in Financing Activities was
as follows:

<Table>
<Caption>
                                                  FISCAL YEAR ENDED
                                       ---------------------------------------
                                       FEBRUARY 3,   FEBRUARY 2,   FEBRUARY 1,
                                          2001          2002          2003
                                       -----------   -----------   -----------
                                               (DOLLARS IN THOUSANDS)
<S>                                    <C>           <C>           <C>
Net Cash (Used in) Provided by
  Financing Activities...............    $(9,750)      $(9,176)      $(6,983)
</Table>

     Net cash used in financing activities for the fiscal year ended February 3,
2001 includes proceeds of approximately $7.2 million from the exercise of stock
options and warrants principally by Bay Harbour and Whippoorwill. Exclusive of
those amounts, the significant decline in the net repayment of debt for the
fiscal year ended February 2, 2002 is directly attributable to the decline in
operating results and the resulting reduction in cash flow during that year.

                                        23
<PAGE>

CAPITAL EXPENDITURES

     We have principally funded our capital expenditures through a combination
of borrowings under our prior credit facilities and the use of cash received in
connection with the exercise of options and warrants in the fiscal years ended
February 3, 2001, as described above, and January 29, 2000.

     During the fiscal year ended February 1, 2003, we incurred capital
expenditures of approximately $11.1 million. Of the total capital expenditures,
$5.8 million was spent on leasehold improvements, $3.2 million was spent on
furniture, fixtures and equipment and $2.1 million was spent on management
information systems, including new point-of-sale registers. During the fiscal
year ended February 2, 2002, we incurred capital expenditures of approximately
$12.3 million, without giving effect to approximately $400,000 of offsetting
construction allowances which we received from our landlords. Of the total
capital expenditures, $6.9 million was spent on leasehold improvements, $2.8
million was spent on furniture, fixtures and equipment and $2.6 million was
spent on management information systems, including new point of sale registers.
During the fiscal year ended February 3, 2001, we incurred approximately $8.5
million of capital expenditures, net of approximately $200,000 of offsetting
construction allowances which we received from our landlords, of which $6.1
million was spent on leasehold improvements, $1.6 million was spent on
furniture, fixtures and equipment and approximately $800,000 was spent on
management information systems. A significant portion of the amounts spent in
each fiscal year pertained to building out and reconfiguring existing retail
space and/or new store openings. The increase in management information systems
capital expenditures for the fiscal years ended February 1, 2003 and February 2,
2002, as compared to the fiscal year ended February 3, 2001, relates primarily
to the upgrade and replacement of all point-of-sale registers in our stores
which occurred during the two fiscal years which ended on February 1, 2003.

     The amount of capital expenditures that we make in any year depends on a
number of factors, including general economic conditions. Pursuant to the
covenants contained in our restated credit facility, our total capital
expenditures for the fiscal year ending January 31, 2004 were established at a
base level of $10 million subject to permitted adjustments. We currently
estimate that capital expenditures for the fiscal year ending January 31, 2004
will be approximately $12.4 million, consisting of approximately $8.6 million
for leasehold improvements, approximately $3.0 million for furniture, fixtures
and equipment, and approximately $800,000 for management information systems. We
will fund our capital expenditures principally through borrowings under our
restated credit facility.

CREDIT FACILITY

     On July 15, 2002, we entered into a $105.0 million credit facility, which
replaced our prior credit facility. At February 1, 2003, we had approximately
$29.8 million of availability under the credit facility and approximately $18.1
million and $28.3 million of loans and letters of credit, respectively,
outstanding. Contemporaneously with the consummation of the offering discussed
under "Recent Developments" above, we repaid the term loan outstanding under our
credit facility and entered into the Restated Credit Facility on the terms of
the existing credit facility as amended on April 1, 2003, to provide for a $70.0
million revolving credit facility pursuant to which we may borrow up to $66.0
million, with a $40.0 million sub-limit for the issuance of letters of credit,
subject to a borrowing base test. With the consent of the required lenders under
the Restated Credit Facility, the maximum borrowing amount may be increased to
up to $70.0 million. After giving effect to the offering as if it occurred on
February 1, 2003 and the restatement of our credit facility, we would have had
approximately $6.2 million and $28.3 million of short-term borrowings and
letters of credit, respectively, outstanding, and approximately $26.6 million of
availability under the Restated Credit Facility as of February 1, 2003. In
addition, upon consummation of the offering we wrote off approximately $0.4
million in deferred financing costs relating to the credit facility. A summary
of the financial covenants and other terms of the Restated Credit Facility are
as follows:

     Our Restated Credit Facility is secured by a first-priority lien on
substantially all of our assets, other than real property leaseholds. The assets
that secure our Restated Credit Facility include, but are not limited to, our
accounts receivable, inventories, general intangibles (including software),
equipment and fixtures, equity interests of subsidiaries owned by us,
intellectual property and cash. In addition, each borrower under the Restated
Credit Facility is required to cross-guarantee each of the other borrowers'
obligations under the Restated Credit Facility, and the assets of each borrower
secure such borrower's cross guarantee.

     Availability under the Restated Credit Facility is calculated as a
percentage of eligible inventory and receivables, including finished inventory
covered by undrawn documentary letters of credit and Barneys private label
credit card receivables, less certain reserves.

     Interest rates on borrowings under the Restated Credit Facility are either
the "base rate," as defined in the Restated Credit Facility, plus 1.00% or LIBOR
plus 2.50%, subject to quarterly adjustment after August 2, 2004. The Restated
Credit Facility also provides for a fee of 2.0% per annum on the maximum amount
available to be drawn under each outstanding letter of credit and a tiered
unused commitment fee with a weighted average of approximately 0.45% on the
unused portion of the credit facility.

     The Restated Credit Facility contains financial covenants relating to net
worth, earnings (specifically, earnings before interest, taxes, depreciation and
amortization, or "EBITDA"), capital expenditures and minimum excess borrowing
base availability as outlined below. With the exception of the capital
expenditures covenant, with which compliance is measured on an annual basis, and
the minimum excess borrowing base availability covenant, with which we must be
in compliance at all times, the covenants discussed below are required to be
satisfied on a quarterly basis.

-   Minimum consolidated net worth - As of the last day of every fiscal quarter,
     starting with the first fiscal quarter of 2002, consolidated net worth must
     not be less than specified minimum amounts. The minimum amount is $132.0
     million at the end of the fiscal year ended February 1, 2003; $136.0
     million at the end of the fiscal year ending January 31, 2004; $147.0
     million at the end of the fiscal year ending January 29, 2005; and $147.0
     million at the end of the fiscal year ending January 28, 2006.

-    Minimum consolidated EBITDA - As of the last day of every fiscal quarter
     (for defined trailing periods), starting with the first quarter of the
     fiscal year ended February 1, 2003, EBITDA must not be less than certain
     minimum amounts, measured on a quarterly basis. The minimum amount at the
     end of the fiscal year ended February 1, 2003 is $16.0 million; $25.0
     million at the end of the fiscal year ending January 31, 2004; $29.0
     million at the end of the fiscal year ending January 29, 2005; and $30.0
     million at the end of the fiscal year ending January 28, 2006.

-    Capital expenditures - Our total capital expenditures for the fiscal year
     ended February 1, 2003 were limited to $5.0 million. For the fiscal year
     ending January 31, 2004 and thereafter, the limitation on capital
     expenditures is $10.0 million per fiscal year, subject to increase if
     certain conditions are met.

-    Minimum excess borrowing base availability - We are required to maintain
     minimum excess borrowing base availability of $8.0 million at all times.

The Restated Credit Facility matures on July 15, 2006.

     Based on our current level of operations, we believe our cash flow from
operations, available cash and available borrowings under our Restated Credit
Facility will be adequate to meet our liquidity needs for at least the next 12
months, including scheduled payments of interest on the 9% senior secured notes
issued in the offering and payments of interest on borrowings under the Restated
Credit Facility. Our ability to make payments on and to refinance our
indebtedness and to fund planned capital expenditures will depend on our ability
to generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, regulatory and other factors that are beyond
our control. See "Forward-Looking Statements - Due to events that are beyond our
control, we may not be able to generate sufficient cash flow to make interest
payments on our indebtedness" below.

                                        24
<PAGE>

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

     After giving effect to the offering described above under "Recent
Developments", our material obligations under firm contractual arrangements,
including commitments for future payments under long-term debt arrangements and
operating lease arrangements, as of February 1, 2003, are summarized below and
are more fully disclosed in notes 4, 5, and 12 of our consolidated financial
statements. Total Debt does not include commitments under unexpired letters of
credit under our credit facility. As of February 1, 2003, we had approximately
$28.3 million of such letters of credit outstanding.


<Table>
<Caption>
                                                                Payments Due by Period
--------------------------------------    ---------------------------------------------------------------------
                                                         Less than                                  After 5
Contractual Obligations                    Total           1 year       2-3 years     4-5 years       years
--------------------------------------    ---------------------------------------------------------------------
                                                                 (dollars in thousands)

<S>                                       <C>            <C>           <C>            <C>          <C>
Total Debt..........................      $112,177        $ 6,177      $    --        $    --      $106,000
Operating Leases....................       389,890         25,460       47,803         42,731       273,896
Total Contractual Obligations.......      $502,067        $31,637      $47,803        $42,731      $379,896
</Table>

     As reflected in the February 1, 2003 balance sheet and inclusive of current
amounts due, we had approximately $18.1 million of loans outstanding under our
credit facility, consisting of approximately $10.5 million of borrowings under
the revolving portion of the facility and $7.6 million in term loan borrowings.
Effective February 2, 2003, we made a principal repayment on the term loan of
approximately $0.4 million. Additionally, at February 1, 2003, long-term debt
also included amounts outstanding under our $22.5 million subordinated note and
approximately $35.8 million of obligations under our 11 1/2% promissory notes,
all of which were scheduled to mature on January 28, 2004.

     We used the net proceeds from the offering discussed above to repay a
substantial portion of our outstanding indebtedness, including our obligations
pursuant to our $22.5 million subordinated note, approximately $35.8 million due
under our 11 1/2% promissory notes, the remaining portion of term loan
borrowings and a portion of the revolver loans outstanding under our credit
facility and to pay a substantial portion of the deferred lease obligations
discussed below. After giving effect to the offering as if it occurred on
February 1, 2003 and the restatement of our credit facility, we would have had
$88.2 million of long-term debt (representing the issuance of the 9% senior
secured notes) and approximately $6.2 million and $28.3 million of short-term
borrowings and letters of credit, respectively, outstanding under the Restated
Credit Facility as of February 1, 2003. After giving effect to the offering, all
of our long-term debt will mature in approximately five years and the Restated
Credit Facility will expire on July 15, 2006.

     We lease real property and equipment under agreements that expire at
various dates. After giving effect to the offering, as of February 1, 2003,
minimum rent payments at contractual rates over the next five years aggregated
approximately $389.9 million. In accordance with SFAS No. 13 "Accounting for
Leases," we account for the rental payments due under our operating leases on a
straight-line basis, and record an annual rent expense for each lease by
dividing the total rent payments due during the term of the lease by the number
of years in the term of the respective lease.


                                        25
<PAGE>

     Pursuant to an agreement between Holdings and Howard Socol, our Chairman,
President and Chief Executive Officer, Mr. Socol receives a base salary of $1.0
million per year and annual performance bonuses. For the fiscal year ended
February 2, 2002, Mr. Socol was guaranteed and paid a $1.0 million performance
bonus, and for the annual period ended January 31, 2003, he is entitled to a
performance bonus of up to 125% of his base salary. In addition, for the period
commencing on February 1, 2003 and ending on January 31, 2005, Mr. Socol is
entitled to an annual performance bonus based on the amount by which Holdings
exceeds financial target amounts, which bonus is not limited to 125% of his base
salary. See "Certain Relationships and Related Transactions."

OTHER COMMERCIAL COMMITMENTS

     At February 1, 2003, our primary commercial commitments included
commitments of approximately $18.0 million under unexpired letters of credit
under our restated credit facility related to purchases of merchandise primarily
from foreign vendors. In addition, as collateral for performance on some of its
leases and as credit guarantees, Barney's, Inc. is contingently liable under
standby letters of credit under our restated credit facility in the amount of
$10.3 million. These standby letters of credit generally mature within one year
and generally contain provisions for annual renewals. At February 1, 2003, we
had total letters of credit outstanding under our restated credit facility of
approximately $28.3 million, consisting of the commitments described in this
paragraph which include a $3.5 million letter of credit issued to Citibank, N.A.
as security for letters of credit previously issued under our prior credit
facility.

NEW ACCOUNTING PRONOUNCEMENTS

     SFAS No. 145.  In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections," known as SFAS No. 145. This statement, among other
things, rescinded SFAS No. 4, "Reporting Gains and Losses from Extinguishment of
Debt," which required all gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of tax. In
accordance with the provisions of SFAS No. 145, we have elected to adopt this
statement early. Accordingly, in connection with the early extinguishment of a
prior revolving credit facility, the unamortized fees of approximately $600,000
related to that facility were written off and are included in interest expense
for the fiscal year ended February 1, 2003.

     SFAS No. 146.  In July 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," which changes the accounting
for costs, such as lease termination costs and some employee severance costs,
that are associated with a restructuring, discontinued operation, plant closing,
or other exit or disposal activity initiated after December 31, 2002. The
standard requires companies to recognize the fair value of costs associated with
exit or disposal activities when they are incurred rather than at the date

                                        26
<PAGE>

of a commitment to an exit or disposal plan. We do not expect the adoption of
this standard to have a material effect on our results of operations.

     EITF No. 02-16.  In 2002, the FASB Emerging Issues Task Force, issued EITF
No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor." EITF 02-16 addresses the accounting by a
reseller for consideration received from a vendor. A consensus was reached that
cash consideration is presumed to be a reduction in the price of a vendor's
product that should be recognized as a reduction of cost of sales. However, this
presumption can be overcome when the consideration received is for the
reimbursement of specific, identifiable and incremental costs of the reseller.
In that event, the consideration, subject to a threshold, is recognized as a
reduction in selling, general and administrative expenses. The provisions of
EITF 02-16 are effective for all new arrangements, or modifications to existing
arrangements, entered into after December 31, 2002.


                                        27
<PAGE>
INFLATION

During recent years, inflation has not had a significant impact on our sales or
profitability.

FORWARD-LOOKING STATEMENTS

Certain statements discussed under the captions "Item 1 - Business," "Item 3 -
Legal Proceedings," "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Form 10-K constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of results to differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others:

  PURCHASES OF THE MERCHANDISE WE SELL ARE GENERALLY DISCRETIONARY AND ARE
  THEREFORE PARTICULARLY SUSCEPTIBLE TO ECONOMIC SLOWDOWNS. IF CURRENT ECONOMIC
  CONDITIONS DO NOT IMPROVE, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED.

     The merchandise we sell generally consists of luxury retail products, the
purchase of which is generally discretionary for consumers. Consumers are
generally more willing to make discretionary purchases, including purchases of
fashion products, during periods in which favorable economic conditions prevail.
Currently, there is a general slowdown in the United States economy, which has
adversely affected consumer confidence and spending habits, as well as our
sales.

     The outlook for the United States economy is highly uncertain and is
directly affected by a large number of factors that are beyond our control. If
current economic conditions do not improve, our business, financial condition
and results of operations could be materially adversely affected.

  OUR BUSINESS IS HIGHLY SENSITIVE TO EVENTS AND CONDITIONS IN THE NEW YORK CITY
  AREA.

     Our New York City stores generate, in the aggregate, approximately 56% of
our annual revenues. Our business will be materially adversely affected if we
experience a significant decrease in revenues from these stores. Changes in the
demographic or retail environment of our New York City stores, particularly our
Madison Avenue flagship store, could result in a significant decrease in our
revenues. In addition, our New York City store sales are highly sensitive to
events and conditions in the New York City area, and any terrorist event,
prolonged period of extreme or unseasonable weather conditions or sustained
downturn in economic conditions in the New York City area could cause our New
York City stores to suffer a decrease in sales and materially adversely affect
our business, financial condition and results of operations. Similarly, the
recent blackout which disrupted the supply of electricity in New York City had a
negative effect on our sales and operations for several days and any similar
adversity would be likely to have a similar impact on us.

  THE EVENTS OF SEPTEMBER 11, 2001 CONTINUE TO HAVE A NEGATIVE IMPACT ON OUR
  BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The business disruption caused by the terrorist attacks of September 11,
2001, including the destruction of one of our New York City stores, and the
indirect impact the attacks have had on consumer spending and tourism had, and
continue to have, an adverse effect on our business. These attacks were a
significant factor that adversely affected our operating results for the fiscal
year ended February 2, 2002. Following the events of September 11, 2001, we
experienced a significant decline in sales from the prior fiscal year. Any
similar terrorist attacks could have a similar material adverse effect on our
business, financial condition and results of operations.


                                       28
<PAGE>

  THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO RESPOND TO CONSTANTLY
  CHANGING FASHION TRENDS AND CONSUMER DEMANDS.

     Our success depends in large part on our ability to identify fashion trends
as well as to anticipate, gauge and react to changing consumer demands in a
timely manner. The products we sell must appeal to consumers whose preferences
cannot be predicted with certainty and are subject to rapid change.
Consequently, we depend in part upon the continuing favorable market response to
the creative efforts of our purchasing and marketing divisions, as well as the
design team for our Barneys label merchandise, to anticipate trends and fashions
that will appeal to our consumer base. Any failure on our part to anticipate,
identify and respond effectively to changing consumer demands and fashion trends
will adversely affect our sales.

  IF WE DO NOT ACCURATELY PREDICT OUR SALES AND THEY ARE SIGNIFICANTLY LOWER
  THAN WE EXPECT, OUR PROFITABILITY MAY BE MATERIALLY ADVERSELY AFFECTED.

     We make decisions regarding the purchase and production of our merchandise
well in advance of the season in which it will be sold, particularly for the
November and December holiday season. We incur significant additional expenses
leading up to the months of November and December in anticipation of higher
sales in those periods, including for acquiring additional inventory,
advertising and hiring additional employees. If our sales during any season,
particularly our peak seasons, are significantly lower than we expect for any
reason, we may not be able to adjust our expenses in a timely fashion and we may
be left with a substantial amount of unsold inventory. If that occurs, we may be
forced to rely on markdowns or promotional sales to dispose of excess inventory.
This could have a material adverse effect on our business, financial condition
and results of operations. At the same time, if we fail to purchase a sufficient
quantity of merchandise, we may not have an adequate supply of products to meet
consumer demand. This may cause us to lose sales.

  WE ARE DEPENDENT ON OUR RELATIONSHIPS WITH SOME DESIGNERS.

     Our relationships with established and emerging designers are a key factor
in our position as a pre-eminent retailer of high-fashion merchandise and a
substantial portion of our revenues is attributable to our sales of designer
merchandise. For example, in the fiscal year ended February 1, 2003, our two top
designers, including all brands owned by those designers, accounted for
approximately 11% and 4%, respectively, of our total retail sales, and our ten
top designers, including all brands owned by those designers, accounted for
approximately 28% of our total retail sales. Hence, our success is in part
dependent on our relationships with our designers. Most of these relationships
are not subject to contractual arrangements, and we have no legal assurance that
these relationships will continue. Moreover, all of the brands of our top
designers are sold by competitor retailers, and nine of our top ten designers,
including both of our top two designers, also have their own dedicated retail
stores. If one or more of our top designers were to cease providing us with
adequate supplies of merchandise or, conversely, were to increase sales of
merchandise through its own stores or to the stores of our competitors, our
business, financial condition and results of operations could be materially
adversely affected. In addition, any decline in the popularity of any of our
designer brands could also have a material adverse effect upon us.

  OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE ADVERSELY
  AFFECTED IF THE MANUFACTURERS OF OUR DESIGNER OR BARNEYS LABEL MERCHANDISE
  EXPERIENCE OPERATIONAL DIFFICULTIES.

     Our continued supply of designer and Barneys label merchandise is subject
to a number of risks, including:

     - operational issues at the manufacturers' facilities or in the
       transportation infrastructure;

     - a work stoppage or strike by employees of manufacturers or transporters;

     - the failure of manufacturers to provide merchandise of the requisite
       quality; and

     - the failure of essential manufacturing or transportation equipment.

                                        29
<PAGE>

     If one or more of our more important designers or manufacturers were to
interrupt or cease providing us with merchandise on a timely basis, due to one
of the circumstances described above or otherwise, our business, financial
condition and results of operations could be materially adversely affected.

     In addition, some of our suppliers rely on sole or limited sources of
materials for their merchandise. Their inability to obtain sufficient quantities
of these materials or to develop alternative sources if required may prevent
them from continuing to supply the merchandise in the quantities and at the
quality levels and times we require, or at all. This could result in delays,
increased costs or our inability to maintain our existing level of operations.
Any of these results could have a material adverse effect on our business,
financial condition and results of operations.

  CONDITIONS IN EUROPE COULD ADVERSELY AFFECT OUR SUPPLY OF MERCHANDISE. THIS
  COULD DECREASE OUR SALES.

     A significant portion of our merchandise is manufactured in Europe,
particularly Italy. As a result, political instability or other events resulting
in the disruption of trade from Europe, particularly Italy, or the imposition of
additional regulations relating to imports from Europe could cause significant
delays or interruptions in the supply of our merchandise and have a material
adverse effect on our business. There can be no assurance that we could replace
the merchandise currently sourced in Europe with merchandise produced elsewhere
without a material adverse effect on our business, financial condition and
results of operations.

  OUR BUSINESS COULD SUFFER IF WE DO NOT RETAIN OUR KEY PERSONNEL.

     Our future success depends, in large part, on the continued service of our
key executive officers and managers who possess significant expertise and
knowledge of our business, customers and markets. We do not maintain key person
insurance on any of our executive officers or managers and our executive
officers and managers, other than our Chief Executive Officer, are not bound by
employment contracts. Any loss or interruption of the services of these
individuals could significantly reduce our ability to manage our operations
effectively because we might not be able to find appropriate replacements for
our key executive officers and managers should the need arise.

  OUR BUSINESS IS SUSCEPTIBLE TO EXTREME AND/OR UNSEASONABLE WEATHER CONDITIONS.

     Extreme weather conditions in the areas in which our stores are located
could have a material adverse effect on our business, financial condition or
results of operations. For example, heavy snowfall or other extreme weather
conditions over a prolonged period might make it difficult for our customers to
travel to our stores. Our business is also susceptible to unseasonable weather
conditions. For example, extended periods of unseasonably warm temperatures
during the winter season or cool weather during the summer season could render a
portion of our inventory incompatible with those unseasonable conditions. These
prolonged unseasonable weather conditions could adversely affect our business,
financial condition and results of operations.

  OUR BUSINESS IS HIGHLY COMPETITIVE.

     The retail industry, in general, and the upscale retail apparel business,
in particular, are intensely competitive. Competition is strong for customers,
sales and vendor resources. In addition, during periods of unfavorable economic
conditions, we also compete with other discretionary goods in general, and
consumers may curtail discretionary purchases, such as fashion merchandise, and
instead opt to limit their discretionary spending to other types of
discretionary purchases.

     We compete for customers principally on the basis of quality, fashion,
assortment and presentation of merchandise, customer service, marketing and, at
times, store ambiance. In our luxury retail business, merchandise assortment is
a critical competitive factor, and retail stores compete for exclusive,
preferred and limited distribution arrangements with key designers. In addition,
we face increasing competition from our designer resources, which have
established or expanded their market presence with their own dedicated stores.

                                        30
<PAGE>

Some of the retailers with which we compete have substantially greater financial
resources than we have and may have other competitive advantages over us.

  FUTURE STORE OPENINGS MAY NOT BE SUCCESSFUL.

     We expect to open approximately ten additional CO-OP stores over the next
five years, including the store which opened in August 2003. These stores, and
any other stores that we might open in the future, may not be successful and our
overall gross profit may not increase as a result of opening these stores. Our
failure to predict accurately the demographic or retail environment at any
future store location could have a material adverse effect on our business,
financial condition and results of operations.

     From time to time we receive and review proposals with respect to the
opening of additional flagship and regional stores. We do not have any current
plan or intention to open any new flagship or regional stores, but we might
consider doing so in the event that a compelling opportunity, consistent with
our financial resources and business objectives, were to come to our attention.
If we were to open a new flagship or regional store, we would have to incur
significant expenses to acquire a facility, either through construction or
long-term lease, make the necessary store improvements and acquire inventory.
There can be no assurance that any investment would be profitable or otherwise
successful.

  IF WE ARE UNABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, OR IF WE ARE
  ACCUSED OF INFRINGING ON A THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS, OUR NET
  INCOME MAY DECLINE.

     We currently own our trademarks and service marks, including the "Barneys
New York" and "Barneys" marks. Our trademarks and service marks are registered
in the United States and in some countries in Asia. The laws of some foreign
countries do not protect proprietary rights to the same extent as do the laws of
the United States. Moreover, we are unable to predict the effect that any future
foreign or domestic intellectual property legislation or regulation may have on
our existing or future business. The loss or reduction of any of our significant
proprietary rights could have a material adverse effect on our business,
financial condition and results of operations.

     Additionally, third parties may assert claims against us alleging
infringement, misappropriation or other violations of their trademark or other
proprietary rights, whether or not the claims have merit. Claims like these may
be time consuming and expensive to defend and could result in our being required
to cease using the trademark or other rights and selling the allegedly
infringing products. This might have a significant impact on our sales and cause
us to incur significant litigation costs and expenses.

  A SMALL NUMBER OF STOCKHOLDERS OWN A SIGNIFICANT PERCENTAGE OF OUR COMMON
  STOCK AND THUS CONTROL ALL MAJOR CORPORATE DECISIONS.

     Bay Harbour Management L.C. and Whippoorwill Associates, Inc.,
collectively, beneficially own approximately 77.7% of the outstanding shares of
common stock of Holdings. As a result, Bay Harbour and Whippoorwill are in a
position to control the outcome of actions requiring stockholder approval,
including the election and removal of directors. Bay Harbour and Whippoorwill
have entered into a stockholders agreement with respect to their ownership and
voting of the capital stock of Holdings. This concentration of ownership could
also facilitate or hinder a negotiated change of control of Holdings.

  OUR CREDIT CARD OPERATIONS AND THOSE OF THIRD PARTIES COULD BE AFFECTED BY
  REGULATIONS THAT ALTER THE USE OR LIMIT THE AVAILABILITY OF CREDIT TO OUR
  CUSTOMERS.

     Sales of our merchandise are facilitated by the use of credit cards,
including the use of our proprietary credit card. Our proprietary credit card
operations also generate revenue from fees related to extending credit. Our
credit card operations are affected by numerous federal and state laws that
impose disclosure and other requirements upon the origination, servicing and
enforcement of credit accounts and limitations on the maximum amount of finance
charges that may be charged by a credit provider. In addition to our proprietary
credit card, credit to our customers is provided primarily through third parties
such as American Express(R), Visa(R), MasterCard(R) and Japanese Credit
Bureau(R). Any change in the regulation of credit that would

                                        31
<PAGE>

materially limit the availability of credit to our customer base could adversely
affect our business, financial condition and results of operations. In addition,
changes in credit card use, payment patterns, and default rates may result from
a variety of economic, legal, social, and other factors that we cannot control
or predict with certainty.

  WE ARE SUBJECT TO NUMEROUS OTHER REGULATIONS THAT COULD AFFECT OUR OPERATIONS.

     We are subject to customs, truth-in-advertising and other laws, including
consumer protection regulations and zoning and occupancy ordinances, that
regulate retailers generally and/or govern the importation, promotion and sale
of merchandise and the operation of retail stores and warehouse facilities.
Although we undertake to monitor changes in these laws, if these laws change
without our knowledge, or are violated by importers, designers, manufacturers or
distributors, we could experience delays in shipments and receipt of goods or be
subject to fines or other penalties under the controlling regulations, any of
which could have a material adverse effect on our business, financial condition
and results of operations.

  OUR BUSINESS IS EXPOSED TO FOREIGN CURRENCY FLUCTUATIONS.

     A substantial portion of our inventory purchases is denominated in foreign
currencies, particularly the Euro and, to a lesser extent, the British pound.
Changes in currency exchange rates may also affect the relative prices at which
we and our competitors sell products in the same market. Although we hedge some
exposures to changes in foreign currency exchange rates arising in the ordinary
course of business, foreign currency fluctuations may have a material adverse
effect on our business, financial condition and results of operations.

  WE HAVE A SUBSTANTIAL AMOUNT OF EXCESS REORGANIZATION VALUE, WHICH IS AN
  INTANGIBLE ASSET AND MUST BE TESTED ANNUALLY FOR IMPAIRMENT. IF WE ARE
  REQUIRED TO REDUCE OUR EXCESS REORGANIZATION VALUE, WE WILL TREAT THE
  REDUCTION AS AN EXPENSE. THIS WOULD REDUCE OUR STOCKHOLDERS' EQUITY BY AN
  AMOUNT EQUAL TO THE AMOUNT OF THE REDUCTION.

     As of February 1, 2003, the amount of excess reorganization value which we
recognized in our financial statements was $147.8 million, and our total
stockholders' equity was $155.6 million. Pursuant to SFAS No. 142, "Goodwill and
Other Intangible Assets," we must test excess reorganization value annually for
impairment. If we are required to reduce the amount of excess reorganization
value as a result of our annual impairment tests, we will treat the reduction as
an expense. This would reduce our stockholders' equity by an amount equal to the
amount of the reduction. Furthermore, inasmuch as excess reorganization value is
an intangible asset, there can be no assurance that all or any portion thereof
could be realized in the event of a sale or liquidation of our company,
regardless of the value at which it is reported in our financial statements.

                                        32
<PAGE>
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.

We have a substantial amount of indebtedness. At February 1, 2003, after giving
effect to our issuance of the units described above under "Recent Developments"
and our use of proceeds of the offering, the amount of our outstanding
indebtedness is approximately $94.3 million, which could have important
consequences. For example, it could:

      -     make it more difficult for us to satisfy our obligations with
            respect to our 9% senior secured notes;

      -     limit our ability to obtain additional financing, if needed, for
            working capital, capital expenditures and general corporate
            purposes;

      -     increase our vulnerability to adverse economic and industry
            conditions;


                                       33
<PAGE>
      -     require us to dedicate a substantial portion of our cash flow from
            operations to payments on our indebtedness, thereby reducing funds
            available for working capital, capital expenditures, expansions and
            other purposes;

      -     limit our flexibility in planning for, or reacting to, changes in
            our business and/or our industry; and

      -     place us at a competitive disadvantage compared to our competitors
            that have less indebtedness.

The terms of the indenture governing our outstanding 9% senior secured notes
allow us to incur additional indebtedness, subject to some limitations. Our
Restated Credit Facility permits borrowings under that facility of up to $66.0
million, with a $40.0 million sub-limit for the issuance of letters of credit,
subject to a borrowing base test. Any additional indebtedness incurred as
permitted under the indenture could increase the risks associated with our
substantial leverage.

THE INDENTURE AND OUR CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING AND FINANCIAL
RESTRICTIONS ON US.

The indenture and our credit facility impose significant operating and financial
restrictions on us. These restrictions limit our ability and the ability of our
restricted subsidiaries to do the following, among other things:

      -     incur additional indebtedness or issue capital stock having a
            maturity or redemption date on or prior to 91 days after the
            scheduled maturity date of the notes;

      -     pay dividends or make other restricted payments;

      -     issue capital stock of some of our subsidiaries;

      -     enter into transactions with affiliates;

      -     create or incur liens;

      -     transfer or sell some of our assets;

      -     incur dividend or other payment restrictions affecting some of our
            subsidiaries;

      -     make capital expenditures; and

      -     consummate a merger, consolidation or sale of all or substantially
            all of our or our subsidiaries' assets.

Our ability to comply with these covenants may be affected by events beyond our
control, and any material deviations from our forecasts could require us to seek
waivers or amendments of covenants or alternative sources of financing or to
reduce expenditures. We cannot be certain that any of these waivers, amendments
or alternative financing could be obtained, or if obtained, would be on terms
acceptable to us.

In addition to the covenants listed above, our credit facility also limits our
ability to enter into sale and leaseback transactions and requires us to
maintain compliance with specified financial covenants relating to net worth,
earnings, capital expenditures and minimum excess borrowing base availability.


                                       34
<PAGE>
A breach of any of the covenants contained in our credit facility, including our
inability to comply with the required financial covenants, could result in an
event of default, which would allow the lenders under our credit facility to
discontinue lending and/or to declare all borrowings outstanding to be due and
payable. We have granted the lenders under our credit facility a first-priority
security interest in substantially all of our assets, other than real property
leaseholds. In the event of any default under our credit facility, the lenders
could elect to foreclose upon the assets pledged to them and to require us to
apply all of our available cash to repay our borrowings. If the maturity of the
indebtedness outstanding under our credit facility or the notes were to be
accelerated, our assets might not be sufficient to repay our indebtedness in
full.

DUE TO EVENTS THAT ARE BEYOND OUR CONTROL, WE MAY NOT BE ABLE TO GENERATE
SUFFICIENT CASH FLOW TO MAKE INTEREST PAYMENTS ON OUR INDEBTEDNESS.

Our ability to make payments on and to refinance our indebtedness, including the
9% senior secured notes, and to fund planned capital expenditures will depend on
our ability to generate cash in the future. This, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. There can be no assurance, however,
that our business will generate sufficient cash flow from operations or that
future borrowings will be available to us under our credit facility in an amount
sufficient to enable us to pay our indebtedness or to fund our other liquidity
needs. A significant reduction in operating cash flow would likely increase the
need for alternative sources of liquidity. If we are unable to generate
sufficient cash flow to make payments on the 9% senior secured notes or our
other indebtedness, we will have to pursue one or more alternatives, such as
reducing or delaying capital expenditures, refinancing the notes or such other
indebtedness, selling assets or raising equity. There can be no assurance that
any of these alternatives could be accomplished on satisfactory terms or that
they would yield sufficient funds to repay the 9% senior secured notes and our
other indebtedness.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in
interest rates and foreign exchange rates. To address some of these risks we
enter into various hedging transactions as described below. We do not use
financial instruments for trading purposes and are not a party to any leveraged
derivative transactions.

Foreign Currency Risk. We purchase outside of the United States approximately
40% to 50% of the goods which we sell, and we generally pay for those goods in
foreign currencies, particularly the Euro, but also the British pound. We
periodically enter into foreign exchange forward contracts and option contracts
in order to hedge some of our foreign exchange exposure. Absent our hedging
transactions, a uniform 10% weakening as of February 3, 2002 in the value of the
dollar relative to the currencies in which our purchases are denominated would
have resulted in an $8.1 million decrease in gross profit for the fiscal year
ended February 1, 2003. After factoring in the effect of our hedging
transactions, a uniform 10% weakening as of February 3, 2002 in the value of the
dollar relative to the currencies in which our purchases are denominated would
have resulted in a $1.6 million decrease in gross profit for the fiscal year
ended February 1, 2003. Absent our hedging transactions, a uniform 10% weakening
as of February 4, 2001 in the value of the dollar relative to the currencies in
which our purchases are denominated would have resulted in an $8.3 million
decrease in gross profit for the fiscal year ended February 2, 2002. After
factoring in the effect of our hedging transactions, a uniform 10% weakening as
of February 4, 2001 in the value of the dollar relative to the currencies in
which our purchases are denominated would have resulted in a $1.7 million
decrease in gross profit for the fiscal year ended February 2, 2002. Absent our
hedging transactions, a uniform 10% weakening as of January 30, 2000 in the
value of the dollar relative to the currencies in which our purchases are
denominated would have


                                       35
<PAGE>
resulted in an $8.7 million decrease in gross profit for the fiscal year ended
February 3, 2001. After factoring in the effect of our hedging transactions, a
uniform 10% weakening as of January 30, 2000 in the value of the dollar relative
to the currencies in which our purchases are denominated would have resulted in
a $1.7 million decrease in gross profit for the fiscal year ended February 3,
2001.

This calculation assumes that each exchange rate would change in the same
direction relative to the United States dollar. In addition to the direct effect
of changes in exchange rates, which is a changed dollar value of the resulting
purchases, changes in exchange rates also affect the volume of purchases or the
foreign currency purchase price as competitors' prices become more or less
attractive.

Interest Rate Risk. Our earnings are affected by changes in short-term interest
rates as a result of our revolving credit facility. If short-term interest rates
averaged 2% more in the fiscal year ended February 1, 2003, our interest expense
would have increased, and net income before taxes would have decreased by $0.6
million. If short-term interest rates averaged 2% more in the fiscal year ended
February 2, 2002, our interest expense would have increased, and net loss before
taxes would have increased by $0.7 million. If short-term interest rates
averaged 2% more in the fiscal year ended February 3, 2001, our interest expense
would have increased, and income before taxes would have decreased by $0.9
million. In the event of a change of that magnitude, we would likely take
actions to mitigate our exposure to the change. However, due to uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no changes in our financial structure.


                                       36
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data listed below are included in the
report on the page indicated.

                                      Index

<TABLE>
<S>                                                                          <C>
Report of Independent Auditors ...........................................   F-1
Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002 ..   F-2
Consolidated Statements of Operations for each of the three fiscal
  years in the period ended February 1, 2003 .............................   F-3
Consolidated Statements of Changes in Stockholders' Equity for each of
  the three fiscal years in the period ended February 1, 2003 ............   F-4
Consolidated Statements of Cash Flows for each of the three fiscal
  years in the period ended February 1, 2003 .............................   F-5
Notes to Consolidated Financial Statements ...............................   F-6
Schedule I - Condensed Financial Information of Registrant ...............   F-34
Schedule II - Valuation and Qualifying Accounts ..........................   F-37
</TABLE>

All other schedules are omitted either because they are not applicable or the
required information is disclosed in the consolidated financial statements or
notes thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

                                      37
<PAGE>
                                   PART III.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the definitive proxy statement involving the election
of directors in connection with the Annual Meeting of Stockholders of Holdings
held on June 20, 2003 (the "Proxy Statement"), which section (other than the
Compensation Committee Report and the Audit Committee Report) is incorporated
herein by reference. The Proxy Statement was filed with the Securities and
Exchange Commission not later than 120 days after February 1, 2003, pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended.

The information required with respect to executive officers is set forth in Part
I of this report under the heading "Executive Officers of the Registrant,"
pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the information set forth in the section entitled "Election
of Directors" in the Proxy Statement, which section (other than the Compensation
Committee Report and the Audit Committee Report) is incorporated herein by
reference.

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

Reference is made to the information set forth in the section entitled "Voting
Rights and Security Ownership of Certain Beneficial Owners and Management" in
the Proxy Statement, which section is incorporated herein by reference.


                                       38
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information on securities that were authorized for
issuance under equity compensation plans as of February 1, 2003:

<TABLE>
<CAPTION>
                                                                            NUMBER OF SECURITIES
                                                                            REMAINING AVAILABLE
                                                                            FOR FUTURE ISSUANCE
                                                                                 UNDER EQUITY
                           NUMBER OF SECURITIES TO    WEIGHTED-AVERAGE       COMPENSATION PLANS
                           BE ISSUED UPON EXERCISE    EXERCISE PRICE OF     (EXCLUDING SECURITIES
                           OF OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,     REFLECTED IN COLUMN
   PLAN CATEGORY             WARRANTS AND RIGHTS     WARRANTS AND RIGHTS              (A))
                                    (A)                     (B)                       (C)
------------------------   -----------------------   --------------------   ---------------------
<S>                        <C>                       <C>                    <C>
EQUITY COMPENSATION
PLANS APPROVED BY
SECURITY HOLDERS:
   Employee Stock
   Option Plan                    1,357,234               $   9.80                   392,766

EQUITY COMPENSATION
PLANS NOT APPROVED BY
SECURITY HOLDERS:
   Stock Option Plan for
   Non-Employee
   Directors(1)                     270,000                   9.47                    30,000
   Restricted Stock
   Award Agreement
   with Howard Socol(2)             200,000                    N/A                       N/A
                           ----------------------------------------------------------------------
   TOTAL:                         1,827,234                   9.74                   422,766
                           ======================================================================
</TABLE>

----------
   (1) In the fiscal year ended January 29, 2000, we adopted a stock option plan
that provides for the granting of non-qualified stock options to non-employee
members of Holdings' board of directors. Each "eligible director," as defined in
the plan, is granted an option to purchase 5,000 shares of Holdings common stock
upon his initial appointment to the board of directors of Holdings, which is
exercisable at the fair market value of Holdings common stock on the date of
grant. At the discretion of the board of directors of Holdings, additional
options may be granted to eligible directors on the date of the annual meeting
of Holdings' stockholders that takes place after the initial grant, provided the
grantee is an eligible director in office immediately following such annual
meeting. The options granted under this plan are exercisable at the fair market
value, as determined by Holdings' board of directors, and expire ten years after
the date of grant. These options are exercisable:

   -  as to one-half of the total number of shares subject to the grant on the
      date of grant; and

   -  as to the remaining shares subject to the grant on the first anniversary
      of the date of grant.

   (2) Pursuant to an amendment to Mr. Socol's employment agreement, on January
10, 2003, Holdings agreed to make a restricted stock award of 200,000 shares of
Holdings common stock to Mr. Socol on February 2, 2003. Pursuant to the
restricted stock award agreement between Holdings and Mr. Socol, until the
shares vest, the shares will be held in escrow and Mr. Socol may not transfer
the shares. In addition, until the shares vest, the shares are subject to a
right of repurchase by Holdings upon Mr. Socol's resignation without good reason
or termination by Holdings for cause. 100,000 of the shares vest on January 31,
2004 and the other 100,000 shares vest on January 31,


                                       39
<PAGE>

2005, provided that Mr. Socol does not terminate his employment before those
dates. In addition, upon a change of control of Holdings before Mr. Socol's
service terminates, if Holdings terminates Mr. Socol's employment without cause
or if Mr. Socol terminates his employment for good reason, all 200,000 shares
will fully vest. In addition, a portion of the restricted shares will vest upon
Mr. Socol's death or disability. As a restricted stock award, no amounts are
payable by Mr. Socol upon the vesting of such shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the Proxy Statement, which section (other than the
Compensation Committee Report and the Audit Committee Report) is incorporated
herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

Holdings' management evaluated, with the participation of Holdings' principal
executive and principal financial officers, the effectiveness of Holdings'
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as
of August 2, 2003. Based on their evaluation, Holdings' principal executive and
principal financial officer concluded that Holdings' disclosure controls and
procedures were effective as of February 1, 2003.

There has been no change in Holdings' internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during Holdings' fiscal year ended February 1, 2003, that has
materially affected, or is reasonably likely to materially affect, Holdings'
internal control over financial reporting.



                                       40
<PAGE>

                                     PART IV

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

(a) (1) and (2) - The response to this portion of Item 15 is submitted
                  as a separate section of this report entitled "List of
                  Financial Statements and Financial Statement Schedules."

    (3)           Exhibits:


<TABLE>
<CAPTION>
EXHIBIT                           NAME OF EXHIBIT
-------                           ---------------
<S>               <C>
2.1               Second Amended Joint Plan of Reorganization for Barney's, Inc.
                  and certain of its affiliates proposed by Whippoorwill
                  Associates, Inc. ("Whippoorwill"), Bay Harbour Management L.C.
                  ("Bay Harbour") and the Official Committee of Unsecured
                  Creditors dated November 13, 1998 (the "Plan of
                  Reorganization") (1)

2.2               Supplement to the Plan of Reorganization dated December 8,
                  1998 (1)

2.3               Second Supplement to the Plan of Reorganization dated December
                  16, 1998 (1)

3.1               Certificate of Incorporation of Barneys New York, Inc.
                  ("Holdings"), filed with the Secretary of State of the State
                  of Delaware on November 16, 1998 (1)

3.2               Certificate of Designation for Series A Preferred Stock of
                  Holdings filed with the Secretary of State of the State of
                  Delaware on December 24, 1998 (1)

3.3               By-laws of Holdings (1)

4.1               Specimen of Holdings' Common Stock Certificate (1)

4.2               Indenture, dated as of April 1, 2003, among Barney's, Inc.,
                  Holdings, Barneys America, Inc., Barneys (CA) Lease Corp.,
                  Barneys (NY) Lease Corp., Basco All-American Sportswear Corp.,
                  BNY Licensing Corp., Barneys America (Chicago) Lease Corp. and
                  Wilmington Trust Company (2)

4.3(a)            Form of Note (included in Exhibit 4.2 hereto)

4.3(b)            Form of Note Guarantee (included in Exhibit 4.2 hereto)

4.4               Registration Rights Agreement, dated April 1, 2003, by and
                  among Holdings, Barney's, Inc., Barneys America, Inc., Barneys
                  (CA) Lease Corp., Barneys (NY) Lease Corp., Basco All-American
                  Sportswear Corp., BNY Licensing Corp., Barneys America
                  (Chicago) Lease Corp. and Jefferies & Company, Inc. (2)

4.5               Warrant Agreement, dated April 1, 2003, between Holdings and
                  Wilmington Trust Company (2)

4.6               Form of Warrant Certificate (included in Exhibit 4.5 hereto)

4.7               Equity Registration Rights Agreement, dated April 1, 2003, by
                  and between Holdings and Jefferies & Company, Inc. (2)

4.8               Security Agreement, dated April 1, 2003, by and among
                  Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease
                  Corp., Barneys (NY) Lease Corp., Basco All-American Sportswear
                  Corp., BNY Licensing Corp., Barneys America (Chicago) Lease
                  Corp. and Wilmington Trust Company (2)

4.9               Security Agreement, dated April 1, 2003, by and between
                  Holdings and Wilmington Trust Company (2)
</TABLE>


                                       41
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                           NAME OF EXHIBIT
-------                           ---------------
<S>               <C>
4.10              Pledge Agreement, dated as of April 1, 2003, by and among
                  Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease
                  Corp., Barneys (NY) Lease Corp., Basco All-American Sportswear
                  Corp., BNY Licensing Corp., Barneys America (Chicago) Lease
                  Corp. and Wilmington Trust Company (2)

4.11              Pledge Agreement, dated as of April 1, 2003, by and among
                  Holdings and Wilmington Trust Company (2)

4.12              Intellectual Property Security Agreement, dated as of April 1,
                  2003, by Barney's, Inc., Barneys America, Inc., Barneys (CA)
                  Lease Corp., Barneys (NY) Lease Corp., Basco All-American
                  Sportswear Corp., BNY Licensing Corp., Barneys America
                  (Chicago) Lease Corp. and Wilmington Trust Company (2)

10.1              Credit Agreement, among Barney's, Inc., Barneys (CA) Lease
                  Corp., Barneys (NY) Lease Corp., Basco All-American Sportswear
                  Corp., BNY Licensing Corp. and Barneys America (Chicago) Lease
                  Corp., as Borrowers, the lenders party thereto, Citicorp USA,
                  Inc. ("CUSA"), as Administrative Agent for such lenders, and
                  General Electric Capital Corporation, as Documentation Agent
                  (the "1999 Credit Agreement"), dated as of January 28, 1999
                  (1)

10.2              First Amendment to the 1999 Credit Agreement dated as of March
                  23, 1999 (1)

10.3              Second Amendment to the 1999 Credit Agreement dated as of June
                  2, 1999 (3)

10.4              Third Amendment to the 1999 Credit Agreement dated as of
                  November 30, 1999 (4)

10.5              Fourth Amendment to the 1999 Credit Agreement dated as of
                  March 17, 2000 (6)

10.6              Fifth Amendment to the 1999 Credit Agreement dated as of March
                  30, 2001 (9)

10.7              Sixth Amendment to the 1999 Credit Agreement dated as of
                  December 12, 2001 (8)

10.8              Guarantee by Holdings in favor of CUSA as the Administrative
                  Agent dated as of January 28, 1999 (1)

10.9              Security Agreement by Holdings in favor of CUSA as the
                  Administrative Agent dated as of January 28, 1999 (1)

10.10             Pledge Agreement by Holdings in favor of CUSA as the
                  Administrative Agent dated as of January 28, 1999 (1)

10.11             Pledge Agreement by Barney's, Inc. in favor of CUSA as the
                  Administrative Agent dated as of January 28, 1999 (1)

10.12             Security Agreement by Barney's, Inc. in favor of CUSA as the
                  Administrative Agent dated as of January 28, 1999 (1)

10.13             Trademark Security Agreement by Barney's, Inc. and BNY
                  Licensing Corp. in favor of CUSA as the Administrative Agent
                  dated as of January 28, 1999 (1)

10.14             Cash Collateral Pledge Agreement by Barney's, Inc. in favor of
                  CUSA as the Administrative Agent dated as of January 28, 1999
                  (1)
</TABLE>


                                       42
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                           NAME OF EXHIBIT
-------                           ---------------
<S>               <C>
10.15             Pledge Agreement by Barneys America, Inc. in favor of CUSA as
                  the Administrative Agent dated as of January 28, 1999 (1)

10.16             Security Agreement by Barneys America, Inc. in favor of CUSA
                  as the Administrative Agent dated as of January 28, 1999 (1)

10.17             Security Agreement by PFP Fashions Inc. in favor of CUSA as
                  the Administrative Agent dated as of January 28, 1999 (1)

10.18             Security Agreement by Barneys (CA) Lease Corp. in favor of
                  CUSA as the Administrative Agent dated as of January 28, 1999
                  (1)

10.19             Security Agreement by Barneys (NY) Lease Corp. in favor of
                  CUSA as the Administrative Agent dated as of January 28, 1999
                  (1)

10.20             Security Agreement by Basco All-American Sportswear Corp. in
                  favor of CUSA as the Administrative Agent dated as of January
                  28, 1999 (1)

10.21             Security Agreement by Barneys America (Chicago) Lease Corp. in
                  favor of CUSA as the Administrative Agent dated as of January
                  28, 1999 (1)

10.22             Security Agreement by BNY Licensing Corp. in favor of CUSA as
                  Administrative Agent dated as of January 28, 1999 (1)

10.23             Subordinated Note issued by Barney's, Inc. and payable to
                  Isetan of America, Inc. ("Isetan") dated January 28, 1999 (the
                  "Isetan Note") (1)

10.24             Guarantee by Holdings of the Isetan Note dated January 28,
                  1999 (1)

10.25             Subordinated Note issued by Barney's, Inc. and payable to
                  Bi-Equipment Lessors LLC, dated January 28, 1999 (the
                  "Bi-Equipment Lessors Note") (1)

10.26             Guarantee by Holdings of the Bi-Equipment Lessors Note dated
                  as of January 28, 1999 (1)

10.27             Security Agreement by Barney's, Inc. in favor of Bi-Equipment
                  Lessors LLC dated as of January 28, 1999 (1)

10.28             License Agreement among Barney's, Inc., BNY Licensing Corp.
                  and Barneys Japan Co. Ltd. dated as of January 28, 1999 (1)

10.29             Stock Option Plan for Non-Employee Directors effective as of
                  March 11, 1999 (1)*

10.30             Employee Stock Option Plan (7)*

10.31             Registration Rights Agreement by and among Holdings and the
                  Holders party thereto dated as of January 28, 1999 (the
                  "Registration Rights Agreement") (1)

10.32             Amendment No.1 dated as of February 1, 2000, to the
                  Registration Rights Agreement (4)

10.33             Letter Agreement, dated January 28, 1999, among Bay Harbour,
                  Whippoorwill, Isetan and Holdings (5)
</TABLE>


                                       43
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                           NAME OF EXHIBIT
-------                           ---------------
<S>               <C>
10.34             Employment Agreement between Holdings and Howard Socol
                  effective as of January 8, 2001 (9)*

10.35             First Amendment to Employment Agreement, effective as of
                  January 10, 2003, between Holdings and Howard Socol (2)*

10.36             Registration Rights Agreement between Holdings and Howard
                  Socol dated as of January 8, 2001 (9)

10.37             Restricted Stock Award Agreement, dated February 2, 2003,
                  between Holdings and Howard Socol (2)*

10.38             Option Award Agreement, dated January 8, 2001, between
                  Holdings and Howard Socol (2)*

10.39             Credit Agreement, among Barney's Inc., Barneys America, Inc.,
                  Barneys (CA) Lease Corp., Barneys (NY) Lease Corp., Basco
                  All-American Sportswear Corp., BNY Licensing Corp. and Barneys
                  America (Chicago) Lease Corp., as Borrowers, the Lenders party
                  thereto, and General Electric Capital Corporation, as the
                  Administrative Agent for such lenders ("GE Capital"), dated as
                  of July 15, 2002 (the "2002 Credit Agreement") (10)

10.40             Guaranty by Holdings in favor of GE Capital, dated as of July
                  15, 2002 (10)

10.41             Security Agreement by the Borrowers under the 2002 Credit
                  Agreement, in favor of GE Capital, dated as of July 15, 2002
                  (10)

10.42             Pledge Agreement by the Borrowers under the 2002 Credit
                  Agreement, in favor of GE Capital, dated as of July 15, 2002
                  (10)

10.43             Security Agreement by Holdings in favor of GE Capital, dated
                  as of July 15, 2002 (10)

10.44             Pledge Agreement by Holdings in favor of GE Capital, dated as
                  of July 15, 2002 (10)

10.45             Intellectual Property Security Agreement by the Borrowers
                  under the 2002 Credit Agreement, in favor of GE Capital, dated
                  as of July 15, 2002 (10)

10.46             First Amendment, dated as of April 1, 2003, to Security
                  Agreement by the Borrowers under the 2002 Credit Agreement, in
                  favor of GE Capital (2)

10.47             Purchase Agreement, dated March 26, 2003, by and among
                  Holdings, Barney's, Inc., Barneys America, Inc., Barneys (CA)
                  Lease Corp., Barneys (NY) Lease Corp., Basco All-American
                  Sportswear Corp., BNY Licensing Corp., Barneys America
                  (Chicago) Lease Corp. and Jefferies & Company, Inc. (2)
</TABLE>



                                       44
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                           NAME OF EXHIBIT
-------                           ---------------
<S>               <C>
10.48             Restated Credit Agreement, dated as of April 1, 2003, among
                  Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease
                  Corp., Barneys (NY) Lease Corp., Basco All-American Sportswear
                  Corp., BNY Licensing Corp., and Barneys America (Chicago)
                  Lease Corp., as borrowers, the institutions party thereto from
                  time to time as lenders, and General Electric Capital
                  Corporation, for itself, as Lender, and as the Administrative
                  Agent for such lenders (2)

10.49             Omnibus Amendment and Confirmation of Collateral Documents,
                  dated as of April 1, 2003, by and among Holdings, Barney's,
                  Inc., Barneys America, Inc., Barneys (CA) Lease Corp., Barneys
                  (NY) Lease Corp., Basco All-American Sportswear Corp., BNY
                  Licensing Corp., and Barneys America (Chicago) Lease Corp.,
                  and General Electric Capital Corporation, as administrative
                  agent for the lenders (2)

10.50             First Amendment to License Agreement, dated as of February 5,
                  2003, by and between Barney's, Inc., BNY Licensing Corp. and
                  Barneys Japan Co., Ltd. (2)

21                Subsidiaries of the Registrant (2)

23                Consent of Independent Auditors (11)

31.1              Certification of Chief Executive Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002 (11)

31.2              Certification of Chief Financial Officer pursuant  to Section
                  302 of the Sarbanes-Oxley Act of 2002 (11)

32.1              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (11)

32.2              Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (11)

</TABLE>

(1)   Incorporated by reference to Holdings' Registration Statement on Form 10
      (the "Form 10") filed with the Securities and Exchange Commission (the
      "Commission") on June 1, 1999.

(2)   Filed with initial Form 10-K.

(3)   Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended May 1, 1999.

(4)   Incorporated by reference to Amendment No. 2 to the Form 10 filed with the
      Commission on February 15, 2000.

(5)   Incorporated by reference to Amendment No. 1 to the Form 10 filed with the
      Commission on October 13, 1999.

(6)   Incorporated by reference to Amendment No. 3 to the Form 10 filed with the
      Commission on April 21, 2000.

(7)   Incorporated by reference to Exhibit A to the Proxy Statement of Holdings
      for its annual meeting of Stockholders held on June 27, 2000.

(8)   Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended November 3, 2001.

(9)   Incorporated by reference to Holdings' Annual Report on Form 10-K for the
      year ended February 3, 2001.

(10)  Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended August 3, 2002.

(11)  Filed with this Form 10-K/A

*     Management contracts or compensatory plans or arrangements.


(b)   Reports on Form 8-K - Holdings did not file any reports on Form 8-K during
      the quarter ended February 1, 2003.



                                       45
<PAGE>

                                   SIGNATURES

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

                                      BARNEYS NEW YORK, INC.
                                      (Registrant)


                                      By:   /s/ Steven M. Feldman
                                            -----------------------------------
                                            Name:  Steven M. Feldman
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                      Date: September 26, 2003



                                       46
<PAGE>
                          Annual Report on Form 10-K/A

                       Item 15(a) (1) and (2), (c) and (d)

         List of Financial Statements and Financial Statement Schedules

                                Certain Exhibits

                          Financial Statement Schedules



                           Year-ended February 1, 2003

                             Barneys New York, Inc.

                               New York, New York
<PAGE>
Form 10-K/A -- Item 15(a) (1) and (2)

BARNEYS NEW YORK, INC. AND SUBSIDIARIES

List of Financial Statements and Financial Statement Schedules

The following consolidated financial statements of Barneys New York, Inc. and
subsidiaries, included in the Annual Report on Form 10-K of the Company for the
year ended February 1, 2003, are incorporated by reference in Item 8:

Consolidated Balance Sheets -- February 1, 2003 and February 2, 2002

Consolidated Statements of Operations --
            Year ended February 1, 2003, February 2, 2002 and February 3, 2001

Consolidated Statements of Changes in Stockholders' Equity --
            Year ended February 1, 2003, February 2, 2002 and February 3, 2001

Consolidated Statements of Cash Flows
            Year ended February 1, 2003, February 2, 2002 and February 3, 2001

Notes to Consolidated Financial Statements

The following consolidated financial statement schedules of Barneys New York,
Inc. and subsidiaries, are included in Item 15(d):

Schedule I                 Condensed Financial Information of Registrant

Schedule II                Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
   of Barneys New York, Inc.

      We have audited the accompanying consolidated balance sheets of Barneys
New York, Inc. and subsidiaries as of February 1, 2003 and February 2, 2002, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended February
1, 2003. Our audits also included the financial statement schedules listed in
the index at Item 15(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Barneys New
York, Inc. and subsidiaries as of February 1, 2003 and February 2, 2002, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended February 1, 2003, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

      As discussed in Note 2 to the consolidated financial statements, effective
February 3, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

                                ERNST & YOUNG LLP

New York, New York

March 21, 2003, except for the first paragraph of Note 4 and
   Note 12, as to which the date is April 1, 2003


                                      F-1
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                              FEBRUARY 1,   FEBRUARY 2,
                                                                 2003          2002
                                                              -----------   -----------
                                                                (IN THOUSANDS, EXCEPT
                                                                     SHARE DATA)
<S>                                                           <C>           <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................   $  7,111      $ 10,835
  Restricted cash...........................................         --           200
  Receivables, less allowances of $4,225 and $4,488.........     24,957        26,689
  Inventories...............................................     62,252        52,449
  Other current assets......................................      7,908         5,773
                                                               --------      --------
          Total current assets..............................    102,228        95,946
Fixed assets at cost, less accumulated depreciation and
  amortization of $37,290 and $26,530.......................     50,463        50,141
Excess reorganization value, less accumulated amortization
  of $26,372................................................    147,764       149,439
Other assets................................................      1,338         1,454
                                                               --------      --------
                                                               $301,793      $296,980
                                                               ========      ========
                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt......................   $    425      $     --
  Revolving credit facility.................................     10,480        23,581
  Accounts payable..........................................     20,747        23,634
  Accrued expenses..........................................     33,029        32,246
                                                               --------      --------
          Total current liabilities.........................     64,681        79,461
Long-term debt..............................................     65,051        57,467
Other long-term liabilities.................................     15,977        12,930
Series A Redeemable Preferred Stock-- Aggregate liquidation
  preference $2,000.........................................        500           500
Commitments and contingencies
Stockholders' equity:
  Common stock -- $.01 par value; authorized 25,000,000
     shares -- shares issued 13,903,227 and 13,903,227......        139           139
Additional paid-in capital..................................    166,390       166,390
Accumulated other comprehensive income......................        496            --
Retained deficit............................................    (11,441)      (19,907)
                                                               --------      --------
          Total stockholders' equity........................    155,584       146,622
                                                               --------      --------
                                                               $301,793      $296,980
                                                               ========      ========
</Table>

          The accompanying notes to consolidated financial statements
              are an integral part of these financial statements.
                                     F-2
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                        FISCAL YEARS ENDED
                                                              ---------------------------------------
                                                              FEBRUARY 1,   FEBRUARY 2,   FEBRUARY 3,
                                                                 2003          2002          2001
                                                              -----------   -----------   -----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>           <C>
Net sales...................................................   $383,363      $371,169      $404,321
Cost of sales...............................................    204,015       208,845       216,725
                                                               --------      --------      --------
  Gross profit..............................................    179,348       162,324       187,596
Expenses:
  Selling, general and administrative (including occupancy
     expense of $32,421, $31,367, and $29,120)..............    154,813       154,818       161,523
  Depreciation and amortization.............................     10,760        18,802        18,027
  Other income -- net.......................................     (6,327)       (6,957)       (4,833)
                                                               --------      --------      --------
Operating income (loss).....................................     20,102        (4,339)       12,879
Interest and financing costs, net of interest income........     11,036        10,393        11,723
                                                               --------      --------      --------
Income (loss) before income taxes...........................      9,066       (14,732)        1,156
Income taxes................................................        600           439           546
                                                               --------      --------      --------
Net income (loss)...........................................   $  8,466      $(15,171)     $    610
                                                               ========      ========      ========
Basic and diluted earnings (loss) per share.................   $   0.61      $  (1.09)     $   0.04
                                                               ========      ========      ========
Weighted average number of common shares....................     13,903        13,903        13,627
                                                               ========      ========      ========
</Table>

          The accompanying notes to consolidated financial statements
              are an integral part of these financial statements.
                                     F-3
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                  COMMON STOCK                              ACCUMULATED
                                     ISSUED        ADDITIONAL                  OTHER
                                 ---------------    PAID-IN     RETAINED   COMPREHENSIVE
                                 SHARES   AMOUNT    CAPITAL     DEFICIT       INCOME        TOTAL
                                 ------   ------   ----------   --------   -------------   --------
                                                           (IN THOUSANDS)
<S>                              <C>      <C>      <C>          <C>        <C>             <C>
Balances at January 29, 2000...  13,076    $131     $159,211    $ (5,346)      $ --        $153,996
Net income for Fiscal 2000.....      --      --           --         610         --             610
Exercise of Stock Options and
  Warrants.....................     827       8        7,179          --         --           7,187
                                 ------    ----     --------    --------       ----        --------
Balances at February 3, 2001...  13,903     139      166,390      (4,736)        --         161,793
Net loss for Fiscal 2001.......      --      --           --     (15,171)        --         (15,171)
                                 ------    ----     --------    --------       ----        --------
Balances at February 2, 2002...  13,903     139      166,390     (19,907)        --         146,622
Net income for Fiscal 2002.....      --      --           --       8,466         --           8,466
Forward Contracts..............      --      --           --          --        496             496
                                                                                           --------
Comprehensive income...........      --      --           --          --         --           8,962
                                 ------    ----     --------    --------       ----        --------
Balances at February 1, 2003...  13,903    $139     $166,390    $(11,441)      $496        $155,584
                                 ======    ====     ========    ========       ====        ========
</Table>

          The accompanying notes to consolidated financial statements
              are an integral part of these financial statements.
                                     F-4
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                       FISCAL YEAR ENDED
                                                            ---------------------------------------
                                                            FEBRUARY 1,   FEBRUARY 2,   FEBRUARY 3,
                                                               2003          2002          2001
                                                            -----------   -----------   -----------
                                                                        (IN THOUSANDS)
<S>                                                         <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).........................................   $   8,466     $ (15,171)    $     610
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Depreciation and amortization...........................      12,020        19,994        19,107
  Write-off of unamortized bank fees......................         641            --            --
  Deferred rent...........................................       2,184         2,667         2,999
Decrease (increase) in:
  Receivables.............................................       1,732         1,042           403
  Inventories.............................................      (9,803)        8,783        (2,543)
  Other current assets....................................        (778)          795           (31)
  Long-term assets........................................          --            (4)           19
(Decrease) increase in:
  Accounts payable and accrued expenses...................        (321)       (4,095)        2,478
                                                             ---------     ---------     ---------
     Net cash provided by operating activities............      14,141        14,011        23,042
                                                             ---------     ---------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed asset additions.....................................     (11,082)      (11,982)       (8,499)
Contributions from landlords..............................          --           613            --
Restricted cash...........................................         200            --         2,243
                                                             ---------     ---------     ---------
     Net cash used in investing activities................     (10,882)      (11,369)       (6,256)
                                                             ---------     ---------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt........................................     439,691       397,613       423,745
Repayments of debt........................................    (445,216)     (406,264)     (440,682)
Payment of bank fees......................................      (1,458)         (525)           --
Proceeds from exercise of stock options and warrants......          --            --         7,187
                                                             ---------     ---------     ---------
     Net cash used in financing activities................      (6,983)       (9,176)       (9,750)
                                                             ---------     ---------     ---------
Net (decrease) increase in cash and cash equivalents......      (3,724)       (6,534)        7,036
Cash and cash equivalents -- beginning of year............      10,835        17,369        10,333
                                                             ---------     ---------     ---------
Cash and cash equivalents -- end of year..................   $   7,111     $  10,835     $  17,369
                                                             =========     =========     =========
</Table>

          The accompanying notes to consolidated financial statements
              are an integral part of these financial statements.
                                     F-5
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND BASIS OF PRESENTATION

     Barneys New York, Inc. ("Holdings") and Subsidiaries (collectively the
"Company") is a leading upscale retailer of men's, women's and children's
apparel and accessories and items for the home. The Company operates 21 stores
throughout the United States, including its three flagship stores in New York,
Beverly Hills and Chicago. The Company has entered into a licensing arrangement
pursuant to which a third party operates two retail stores in Japan and a single
in-store department in Singapore, all under the "Barneys New York" name.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (A) PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Holdings and
its wholly-owned and majority-owned subsidiaries in which Holdings has a
controlling financial interest and exercises control over their operations.
Intercompany investments and transactions have been eliminated in consolidation.

  (B) FISCAL YEARS

     References in these financial statements to "2002", "2001" and "2000" are
for the 52 weeks ended February 1, 2003, the 52 weeks ended February 2, 2002 and
the 53 weeks ended February 3, 2001, respectively.

  (C) CASH AND CASH EQUIVALENTS

     All highly liquid investments with a remaining maturity of three months or
less at the date of acquisition are classified as cash equivalents. The carrying
value approximates their fair value.

  (D) ACCOUNTS RECEIVABLE AND FINANCE CHARGES

     The Company provides credit to its customers and performs on-going credit
reviews of its customers. Accounts are generally written off automatically after
180 days have passed without the Company having received a full scheduled
monthly payment. Accounts are written off sooner in the event of bankruptcy or
other factors that make collection seem unlikely. The Company estimates the
appropriate allowance using a model that considers the current aging of the
accounts, historical write-off and recovery rates and other portfolio data. This
estimate is then reviewed by Company management to assess whether additional
analysis is required to appropriately estimate expected losses. Concentration of
credit risk is limited because of the large number of customers. Finance charge
income recorded in Fiscal 2002, 2001 and 2000 approximated $4,608,000,
$4,661,000 and $4,462,000, respectively, and is included in other income-net in
the statement of operations. The costs of administering the Company's private
label credit card program are included in selling, general and administrative
expenses. Prior to any allocation of "in-store" costs related to the Company's
private label credit card program or any allocation of corporate overhead
expenses, these costs approximated $3,247,000, $4,005,000, and $3,742,000 for
the years ended February 1, 2003, February 2, 2002 and February 3, 2001,
respectively.

  (E) INVENTORIES

     Merchandise inventories, consisting primarily of finished goods, are stated
at the lower of FIFO (first-in, first-out) cost or market, as determined by the
retail inventory method. Merchandise is purchased from many different vendors
based throughout the world. Most of the Company's relationships with its vendors
are not subject to contractual arrangements. In the fiscal year ended February
1, 2003, our ten top designers (including all brands owned by such designers)
accounted for approximately 28% of our total sales, and out two top designers
(including all brands owned by such designers) accounted for approximately 11%
and 4%, respectively, of our total sales. If one or more of the Company's top
designers were to cease providing the Company with adequate supplies of
merchandise, the Company's business might, in the short term, be

                                     F-6
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adversely affected. However, management believes that alternative supply sources
exist to fulfill the Company's requirements in the event of a disruption.

  (F) FIXED ASSETS

     Pursuant to American Institute of Certified Public Accountants' Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), property and equipment were restated at
approximate fair market value at January 30, 1999. Fixed assets acquired after
January 30, 1999 are recorded at cost. Depreciation is computed using the
straight-line method. Fully depreciated assets are written off against
accumulated depreciation. Furniture, fixtures and equipment are depreciated over
their useful lives. Leasehold improvements are amortized over the shorter of the
useful life or the lease term.

  (G) EXCESS REORGANIZATION VALUE

     Excess reorganization value represents the adjustment of the Company's
balance sheet for reorganization value in excess of amounts allocable to
identifiable assets. In June 2001, SFAS No. 142, "Goodwill and Other Intangible
Assets" was issued. SFAS No. 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets, including excess
reorganization value. Among other things, SFAS No. 142 requires that goodwill no
longer be amortized, but rather be tested annually for impairment. This
statement was effective for fiscal years beginning after December 15, 2001.
Accordingly, on February 3, 2002, the Company adopted SFAS No. 142, and was
required to analyze its excess reorganization value for impairment issues during
the first six months of Fiscal 2002, and then on a periodic basis thereafter. In
accordance with SFAS No. 142, in Fiscal 2002 the Company completed the required
testing for impairment of its excess reorganization value as of both the
beginning and end of Fiscal 2002. Based upon the Company's re-evaluation of the
first step of the impairment test which screens for potential impairment, the
Company concluded that the fair value of the enterprise exceeded its book value.
Accordingly, the Company did not need to perform the second step of the test,
which measures the amount of the impairment. For the fiscal year ended February
1, 2003, the Company did not record an impairment loss related to excess
reorganization value. However, the excess reorganization value of the Company
was reduced by approximately $1.7 million during the fiscal year ended February
1, 2003 due to a reversal of a tax reserve resulting from the resolution of tax
contingencies existing at the time of the Company's emergence from bankruptcy.

     During the fiscal year ended February 2, 2002 (and prior fiscal years),
when SFAS No. 142 was not in effect, the Company amortized excess reorganization
value over a twenty-year period. If excess reorganization value had not been
amortized during the fiscal years ended February 2, 2002 and February 3, 2001
the Company's adjusted net (loss) income and basic and diluted (loss) income per
share would have been as follows:

<Table>
<Caption>
                                                        FISCAL YEAR ENDED         FISCAL YEAR ENDED
                                                        FEBRUARY 2, 2002          FEBRUARY 3, 2001
                                                   ---------------------------   -------------------
                                                                  BASIC AND               BASIC AND
                                                                DILUTED (LOSS)             DILUTED
                                                   NET (LOSS)     INCOME PER      NET       INCOME
                                                     INCOME         SHARE        INCOME   PER SHARE
                                                   ----------   --------------   ------   ----------
<S>                                                <C>          <C>              <C>      <C>
As Reported......................................   $(15,171)       $(1.09)      $  610     $0.04
Amortization of Excess Reorganization Value......      8,791          0.63        8,741      0.64
                                                    --------        ------       ------     -----
As Adjusted......................................   $ (6,380)       $(0.46)      $9,351     $0.68
                                                    ========        ======       ======     =====
</Table>

                                     F-7
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (H) EARNINGS PER COMMON SHARE ("EPS")

     Basic EPS is computed as net income (loss) available to common stockholders
divided by the weighted average number of common shares outstanding. Diluted EPS
reflects the incremental increase in common shares outstanding assuming the
exercise of stock options and warrants that would have had a dilutive effect on
earnings per common share. Options and warrants to acquire an aggregate of
1,704,834, 1,734,634 and 787,724 shares of common stock (issued pursuant to the
Company's stock option plans and other previously outstanding options and
warrants, all of which are discussed in Notes 8(b), 8(c) and 9(b)) were not
included in the computation of diluted EPS for Fiscal 2002, 2001 and 2000,
respectively, as including them would have been anti-dilutive. Net income (loss)
attributed to common stockholders is not materially affected by the 1% dividend
on the 5,000 issued and outstanding shares of preferred stock.

     Pro-forma disclosures, as required by Statement of Financial Accounting
Standard No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure", are computed as if the Company recorded compensation expense based
on the fair value for stock-based awards or grants. The following pro-forma
information includes the effects of the options discussed in Note 9(b).

<Table>
<Caption>
                                                              FISCAL 2002   FISCAL 2001   FISCAL 2000
                                                              -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
Net income (loss) -- as reported............................    $8,466       $(15,171)      $   610
Deduct: Stock-based employee compensation expense (income)
  determined under fair value method, net of related tax
  effects...................................................     1,410          1,596          (588)
                                                                ------       --------       -------
Pro-forma net income (loss).................................    $7,056       $(16,767)      $ 1,198
                                                                ======       ========       =======
Net income (loss) per share:
Basic and diluted -- as reported............................    $ 0.61       $  (1.09)      $  0.04
Basic and diluted -- pro-forma..............................      0.51          (1.21)         0.09
</Table>

  (I) IMPAIRMENT OF ASSETS

     The Company records impairment losses on long-lived assets (including
excess reorganization value) when events and circumstances indicate that the
assets might be impaired. For purposes of evaluating the recoverability of
long-lived assets (including excess reorganization value through February 2,
2002), the recoverability test is performed using undiscounted net cash flows of
the individual stores and consolidated undiscounted net cash flows for
long-lived assets, not identifiable to individual stores. An impairment loss
recognized will be measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset. If quoted market prices are not
available, the estimate of fair value will be based on the best information
available under the circumstances, such as prices for similar assets or the
present value of estimated expected future cash flows. Subsequent to February 2,
2002, the Company will determine any impairment in excess reorganization value
in accordance with SFAS No. 142 as discussed in Note 2(g).

     In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long Lived Assets" was issued. This statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001. Accordingly, the
Company adopted SFAS No. 144 effective Fiscal 2002 and did not record any
impairment as a result of the adoption of SFAS No. 144.

  (J) FOREIGN EXCHANGE CONTRACTS

     Derivative Instruments and Hedging Activities.  In June 1998, the Financial
Accounting Standards Board, or FASB, issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and for Hedging
Activities", or SFAS No. 133, which we adopted, as amended, on February 4, 2001.
SFAS No. 133, as amended, establishes accounting and reporting standards for
derivative instruments.

                                     F-8
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Specifically, SFAS No. 133 requires an entity to recognize all derivative
instruments as either assets or liabilities in the balance sheet and to measure
those instruments at fair value. Additionally, the fair value adjustments will
affect either stockholders' equity or net income depending on whether the
derivative instrument qualifies as a hedge for accounting purposes and, if so,
the nature of the hedging activity.

     The Company in the normal course of business routinely enters into forward
foreign currency contracts to reduce the risk associated with currency movements
related to committed inventory purchases denominated in foreign currency. The
Company does not enter into these contracts for the purpose of trading or
speculation.

     For the fiscal year ended February 2, 2002, the Company did not designate
the forward foreign currency contracts that it entered into as hedges of the
anticipated purchases, and therefore, unrealized gains and losses were
recognized currently in earnings. Accordingly, in connection with these forward
foreign currency contracts outstanding at February 2, 2002, the Company
recognized a loss of approximately $300,000 which was included in cost of sales
in the Statement of Operations and as a reduction to inventory as of February 2,
2002.

     For the fiscal year ended February 1, 2003, the Company designated its
forward foreign currency contracts as cash flow hedges. The Company recorded a
gain of approximately $496,000 in other comprehensive income in the Statement of
Changes in Stockholders' Equity and an increase to other current assets, to
recognize at fair value these forward foreign currency contracts that were
designated as cash flow hedging instruments in accordance with SFAS No. 133. No
components of the contracts were excluded in the measurement of the related
hedge effectiveness. Additionally, no gains or losses related to the
ineffectiveness of cash flow hedges were recognized in earnings during fiscal
2002. The Company expects to reclassify all of the unrealized gain from other
comprehensive income into earnings within the next eight month period due to the
actual usage of foreign exchange contracts to purchase merchandise and the
Company's ultimate sale of that merchandise.

     In order to qualify as cash flow hedges, the Company's forward foreign
currency contracts must satisfy various criteria as outlined in SFAS No. 133.
That criteria includes documenting at inception, the hedging relationship and
the risk management objective and strategy for undertaking the hedge. This
documentation includes identifying the hedged instrument, the hedged
transaction, the nature of the risk being hedged, and how the hedging
instrument's effectiveness in hedging the exposure to the hedged transaction's
variability in cash flows attributable to the hedged risk will be assessed.

     The Company enters into these foreign currency contracts with an unrelated
third party bank. The critical terms of the Company's foreign currency contracts
are the same as the underlying forecasted transactions, therefore, changes in
the fair value of the contracts should be highly effective in offsetting changes
in the expected cash flows from the forecasted transactions. In addition, the
forecasted transactions that are being hedged are specifically identifiable and
the occurrence of the forecasted transactions is probable.

     The gain in comprehensive income results in a deferred tax liability which
is offset by the Company's net operating loss carryforward. The deferred tax on
the gain and tax benefit from the use of the net operating loss carryforward
were recorded in comprehensive income as required by paragraph 37 of Statement
of Financial Accounting Standard No. 109.

     At February 1, 2003 and February 2, 2002, the notional amount and estimated
fair value, utilizing quotes from external sources, of the Company's outstanding
forward foreign currency contracts is detailed below:

<Table>
<Caption>
                                        FEBRUARY 1, 2003                         FEBRUARY 2, 2002
                             --------------------------------------   --------------------------------------
FOREIGN CURRENCY             NOTIONAL AMOUNT   ESTIMATED FAIR VALUE   NOTIONAL AMOUNT   ESTIMATED FAIR VALUE
----------------             ---------------   --------------------   ---------------   --------------------
<S>                          <C>               <C>                    <C>               <C>
Euro.......................     8,506,000           9,100,000           18,146,000           17,772,000
British Pound..............       160,000             153,000            1,625,000            1,549,000
</Table>

                                     F-9
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At February 1, 2003, the Company's forward exchange contracts have maturity
dates through September 2003.

     Cost of sales includes a $53,000 loss in the year ended February 1, 2003
and income of approximately $970,000 and $1,400,000 for the years ended February
2, 2002 and February 3, 2001, respectively, related to the settlement of foreign
denominated inventory purchases.

  (K) REVENUE RECOGNITION

     Sales, recognized at the point of sale, consist of sales of merchandise,
net of returns. Net sales in the Statement of Operations include an estimate for
merchandise returns, where a right of return exists, in accordance with SFAS No.
48, "Revenue Recognition When Right of Return Exists."

     In accordance with the licensing arrangements discussed in Note 7(b), the
Company's minimum royalty revenue is recognized monthly as the license fee
accrues. Any royalties above the minimum are recognized as earned.

  (L) ADVERTISING EXPENSES

     The Company expenses advertising costs upon first showing. Advertising
expenses were approximately $7,120,000, $6,647,000, and $6,558,000 in Fiscal
2002, 2001, and 2000, respectively.

  (M) INCOME TAXES

     The Company records income tax expense using the liability method. Under
this method, deferred tax assets and liabilities are estimated for the future
tax effects attributable to temporary differences between the financial
statement and tax basis of assets and liabilities.

  (N) ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

  (O) SHIPPING AND HANDLING COSTS

     Shipping and handling costs of the Company are not material to the
operations of the Company and are included in selling, general and
administrative expenses. These costs amounted to $1,332,000, 1,243,000 and
$1,336,000 for the fiscal year ended February 1, 2003, February 2, 2002 and
February 3, 2001, respectively.

  (P) INCOME STATEMENT EXPENSE CLASSIFICATION

     Cost of sales includes the cost of merchandise sold as well as costs
associated with the purchase of the merchandise primarily including inbound
freight and duty costs, buying agent costs, foreign exchange gains and losses on
settlement of foreign denominated purchases, sample costs and label costs. All
other expenses, except depreciation and amortization, interest and income taxes,
but including internal transfer costs and warehousing and distribution expenses
are included in selling, general and administrative expenses, because the
predominant costs associated with these expenses, most notably occupancy costs
and personnel costs, are general and administrative in nature. Based on these
classifications, the Company's gross margins may not be comparable to those of
other entities, since some entities include the costs related to their
distribution network and retail store rent expenses in cost of sales, whereas
others, like the Company, exclude these costs from gross margin, including them
instead in selling, general and administrative expenses. Expenses related to the
Company's distribution network which primarily include personnel, occupancy and
transportation costs were $5,770,000, $5,686,000, and $5,666,000 in Fiscal 2002,
2001, and 2000, respectively.

                                     F-10
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (Q) VENDOR ALLOWANCES

     The Company receives allowances from its vendors through a variety of
programs and arrangements, primarily including co-operative advertising,
markdown reimbursement programs, salary expense reimbursement programs and
promotional event reimbursement programs. Allowances received from vendors
included in selling, general administrative expenses, which are netted against
the related expense were $8,826,000, $8,164,000, and $5,847,000 in Fiscal 2002,
2001, and 2000, respectively. Markdown reimbursements are credited against cost
of sales in the period in which the related markdowns are taken.

     Through February 1, 2003, all other reimbursement programs discussed above
were credited against the related selling, general and administrative expense
when the purpose for which the vendor funds were intended to be used had been
fulfilled. Effective with the adoption of EITF 02-16, which covered
reimbursement arrangements entered into after December 31, 2002, the Company now
credits the aggregate portion of the vendor reimbursements received in excess of
third party incremental costs incurred against cost of sales, with the remainder
credited against the related selling, general and administrative expense for
which the vendor funds were intended to be used.

  (R) RECLASSIFICATION

     Certain amounts in the prior year have been reclassified to conform with
the current year financial statement presentation.

3.  FIXED ASSETS

     Fixed assets consist of the following:

<Table>
<Caption>
                                                              FEBRUARY 1,   FEBRUARY 2,   USEFUL LIFE
                                                                 2003          2002       (IN YEARS)
                                                              -----------   -----------   -----------
                                                                         ($ IN THOUSANDS)
<S>                                                           <C>           <C>           <C>
Furniture, fixtures and equipment...........................   $ 39,470      $ 31,404        3 to 7
Leasehold improvements......................................     48,283        45,267       2 to 14
                                                               --------      --------
Total.......................................................     87,753        76,671
Accumulated depreciation and amortization...................    (37,290)      (26,530)
                                                               --------      --------
Net fixed assets............................................   $ 50,463      $ 50,141
                                                               ========      ========
</Table>

4.  DEBT

     On January 28, 2004, as discussed below, the Company's $22,500,000
subordinated note, the equipment notes and a contractual rent payment (discussed
in Note 5(a)) become due. On April 1, 2003, the Company completed an offering of
units and utilized a substantial portion of the net proceeds to refinance these
obligations. Therefore, in accordance with Statement of Financial Accounting
Standards No. 6, "Classification of Short-Term Obligations Expected to be
Refinanced", these obligations have been recorded as long-term liabilities in
the consolidated balance sheet at February 1, 2003. Contemporaneously with the
consummation of the offering, the Company also repaid the term loan and a
portion of the revolver loans outstanding under its credit facility and entered
into a new revolving credit facility (the "Restated Credit Facility") on the
terms of the existing credit facility as amended on April 1, 2003. See Note 12
for a further discussion.

  (A) REVOLVING CREDIT FACILITY

     The Company entered into a $120,000,000 revolving credit facility in
January, 1999 with a $40,000,000 sublimit for the issuance of letters of credit
(the "Credit Agreement") with Citicorp USA, Inc., General Electric Capital
Corporation, BNY Financial Corporation, and National City Commercial Finance,
Inc. maturing on January 28, 2003. In December 2001, the Company entered into an
amendment to its Credit Agreement (the "December Amendment"), which among other
things, amended and/or eliminated certain of the financial covenants contained
therein through fiscal 2002 and decreased the commitment pursuant to

                                     F-11
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

that agreement to $105,000,000. In addition, the maturity of the Credit
Agreement was extended to February 15, 2003. On July 15, 2002, the Company
entered into a new $105,000,000 million credit facility led by General Electric
Capital Corporation, as Administrative Agent (the "GE Facility"), which replaced
the Company's prior credit facility. The GE Facility provides a $97,000,000
revolving loan commitment (the "Revolver") with a $40,000,000 sub-limit for the
issuance of letters of credit and an $8,000,000 term loan commitment (the "Term
Loan"). Proceeds from the GE Facility were used to repay in full all amounts
outstanding under the previous revolving credit facility with Citibank, N.A. and
are being used for working capital, capital expenditures and general corporate
purposes. Obligations under the GE Facility are secured by a first priority and
perfected lien on substantially all of the assets of the Company.

     Availability under the Revolver is calculated as a percentage of eligible
inventory (including undrawn documentary letters of credit) and Barneys private
label credit card receivables, less certain reserves. The Term Loan, which was
fully funded on the closing date of the GE Facility, will be reduced by $425,000
each fiscal quarter commencing on November 3, 2002 but only if availability
under the Revolver would exceed $15,000,000 after giving effect to such payment.
The Term Loan may be optionally prepaid in whole or in part but only if
availability under the Revolver exceeds $15,000,000 after giving effect to such
prepayment.

     Interest rates on borrowings under the Revolver are either the Base Rate
(as defined in the GE Facility) plus 1.00% or LIBOR plus 2.75%, subject to
quarterly adjustment after the first year. Interest rates on the Term Loan are
either the Base Rate plus 1.75% or LIBOR plus 3.50% and are subject to weekly
adjustments if availability declines below $15,000,000. The GE Facility also
provides for a fee of 2.25% per annum on the daily average letter of credit
amounts outstanding and a commitment fee of 0.50% on the unused portion of the
facility. Average borrowings under the respective credit facilities for the
fiscal year ended February 1, 2003 and the fiscal year ended February 2, 2002
were $30.7 million and $35.2 million, respectively, and the effective interest
rate on this portion of the Company's outstanding debt was 10.52% and 9.94%,
respectively, in the comparable periods.

     In connection with the origination of the GE Facility, the Company incurred
fees of approximately $1,500,000. Such fees are being amortized over the life of
the GE Facility as interest and financing costs. The unamortized portion of
these fees is included in Other Assets. The unamortized fees of approximately
$641,000, associated with the prior revolving credit facility, were written off
in Fiscal 2002 and are included in Interest expense.

     The GE Facility contains financial covenants relating to net worth,
earnings (specifically, earnings before interest, taxes, depreciation and
amortization ("EBITDA")) and capital expenditures as outlined below. With the
exception of the capital expenditures covenant, which is measured on an annual
basis, the covenants discussed herein are required to be measured on a quarterly
basis.

     Minimum consolidated net worth.  As of the last day of every fiscal
quarter, starting with the first fiscal quarter of 2002, consolidated net worth
shall not be less than certain minimum amounts. The minimum amount at the end of
Fiscal 2002 is $132,000,000; $136,000,000 at the close of Fiscal 2003; and
$147,000,000 at the close of Fiscal 2004.

     Minimum consolidated EBITDA.  As of the last day of every fiscal quarter
(for the defined trailing periods), starting with the first fiscal quarter of
2002, EBITDA shall not be less than certain minimum amounts, subject to
escalation during the fiscal year. The minimum amount at the end of Fiscal 2002
is $16,000,000; $25,000,000 at the close of Fiscal 2003; and $28,000,000 at the
close of Fiscal 2004.

     Capital expenditures.  The Company's total capital expenditures for Fiscal
2002 were established at $5,000,000, and are subject to upward adjustment if
certain conditions are met. For Fiscal 2003 and beyond, the cap on capital
expenditures is $10,000,000 subject to upward adjustment. In addition, pursuant
to the GE Facility, the Company was permitted to apply proceeds received in a
prior year in connection with the exercise of options and warrants, towards
increasing the permitted amount of capital expenditures pursuant to this
covenant.

                                     F-12
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In addition to the above, the Company is subject to a 30 day clean-down
provision within the 90 day period commencing December 1 of each year wherein
the Company's outstanding revolving loans and letter of credit obligations may
not exceed $65,000,000.

     The GE Facility matures on the earlier to occur of (i) July 15, 2005 or
(ii) the date that is 45 days prior to the date of the first scheduled payment
related to the $22,500,000 Subordinated Note and the Equipment Lessors Notes if
such Notes have not been satisfactorily refinanced or restructured. The first
scheduled payment related to such Notes is currently due on January 28, 2004.

     As of February 1, 2003, inclusive of current amounts due, the Company had
approximately $18.1 million of loans outstanding under its credit facility,
consisting of approximately $10.5 million of borrowings under the revolving
portion of the facility and $7.6 million in term loan borrowings. As of February
2, 2002, the Company had approximately $23.6 million of revolving loans
outstanding under its credit facility. In addition, at February 1, 2003 and
February 2, 2002, $17,982,000 and $12,677,000, respectively, was committed under
unexpired letters of credit. Additionally, as collateral for performance on
certain leases and as credit guarantees, Barney's, Inc. is contingently liable
under standby letters of credit under the GE Facility in the amount of
approximately $10,333,000.

     Management believes that it will be in compliance with the financial
covenants contained in the GE Facility for the fiscal year ending January 31,
2004. However, any material deviations from the Company's forecasts could
require the Company to seek waivers or amendments of covenants, alternative
sources of financing or to reduce expenditures. There can be no assurance that
such waivers, amendments or alternative financing could be obtained, or if
obtained, would be on terms acceptable to the Company.

  (B) $22,500,000 SUBORDINATED NOTE

     This note bears interest at the stated rate of 10% per annum payable
semi-annually, and matures on January 28, 2004.

     The fair value of this note was estimated to be approximately $20,648,000
at January 30, 1999. This amount was not necessarily representative of the
amount that could be realized or settled. The difference between the face amount
and the fair market value was recorded as a debt discount and is being amortized
using the effective interest method. The fair market value was based upon a
valuation from an investment banking firm utilizing discounted cash flows and
comparable company methodology. After amortization of the debt discount, this
note was recorded at $22,112,000 and $21,678,000 at February 1, 2003 and
February 2, 2002, respectively.

  (C) EQUIPMENT NOTES

     These promissory notes, totaling $35,789,000, bear interest at the stated
rate of 11 1/2% per annum payable semi-annually, mature on January 28, 2004, and
are secured by a first priority lien on the equipment that was the subject of
each of the respective equipment leases. The estimated fair value of the
Equipment Notes approximates face value as estimated by an investment banking
firm utilizing discounted cash flows and comparable company methodology.

     Whippoorwill Associates, Inc. ("Whippoorwill"), one of the Company's
principal shareholders, owns an approximate 25% beneficial interest in the
holder of one of the Equipment Notes that has an aggregate principal amount of
$34.2 million.

  (D) OTHER

     During Fiscal 2002, 2001 and 2000, the Company paid interest of
approximately $9,447,000, $9,835,000 and $12,100,000, respectively.

                                     F-13
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  COMMITMENTS AND CONTINGENCIES

  (A) LEASES

     The Company leases real property and equipment under agreements that expire
at various dates. Certain leases contain renewal provisions and generally
require the Company to pay utilities, insurance, taxes and other operating
expenses. In addition, certain real estate leases provide for escalation rentals
based upon increases in the lessor's costs or provide for additional rent
contingent upon the Company increasing its sales. In accordance with SFAS No. 13
"Accounting for Leases," the Company accounts for the rental payments due under
its operating leases on a straight-line basis, and records an annual rent
expense for each lease by dividing the total rent payments due during the term
of the lease by the number of years in the term of the respective lease.
Accordingly, the difference between the cash rent expense and the straight line
rent expense is included in other long-term liabilities on the balance sheet.

     At February 1, 2003, total minimum rent payments at contractual rates are
as follows for the respective fiscal years:

<Table>
<Caption>
                                                               ($ IN 000'S)
                                                               ------------
<S>                                                            <C>
2003........................................................     $ 37,460
2004........................................................       24,194
2005........................................................       23,609
2006........................................................       21,615
2007........................................................       21,116
Thereafter..................................................      273,896
                                                                 --------
Total minimum rent payments.................................     $401,890
                                                                 ========
</Table>

     Included in the 2003 minimum rent payments set forth in the table above is
an aggregate $15.0 million additional rent payment that the Company is required
to make on January 28, 2004 pursuant to the terms of the leases for its flagship
stores. Such payment was included in the determination of the Company's straight
line rent expense.

     Total rent expense in Fiscal 2002, 2001, and 2000, was $32,621,000,
$31,701,000, and $29,464,000, respectively, which included percentage rent of
$60,000, $37,000, and $135,000, in each of the respective periods.

  (B) LITIGATION

     On or about July 31, 2002, an individual filed a class action complaint
against the Company in the Superior Court for the State of California, County of
San Diego. The complaint alleged two causes of action for purported violations
of California's Civil Code and Business and Professions Code relating to the
alleged requesting by the Company of certain information. The complaint sought
relief on a class basis under the statutes permitting a plaintiff to recover a
fine, in the discretion of the court, and such other damages which each member
of the class may have suffered as a result of our alleged conduct. The complaint
further sought an accounting of all moneys and profits received by us in
connection with the alleged violations as well as injunctive relief with respect
to the alleged practices. Certification of the class and attorneys fees were
sought by the complaint as well. On August 28, 2003, this matter was settled by
order of the court for an immaterial amount.

     In addition, the Company is involved in various legal proceedings which are
routine and incidental to the conduct of its business. Management believes that
none of these proceedings, if determined adversely to the Company, would have a
material effect on its financial condition or results of operations.

                                     F-14
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  INCOME TAXES

     The Company consummated a plan of reorganization under Chapter 11 of the
Bankruptcy Code on January 28, 1999. Pursuant to the plan, Holdings was formed
and all the equity interests in Barney's, Inc. were transferred to Holdings,
making Barney's, Inc. a wholly-owned subsidiary of Holdings. Holdings has no
independent operations and its primary asset consists of shares of Barney's,
Inc. In connection with its acquisition of Barney's, Inc., Holdings made an
election under Section 338(g) of the Internal Revenue Code, as a result of which
Barney's, Inc. and its subsidiaries are generally treated, for federal income
tax purposes, as having sold their assets at the time the plan of reorganization
was consummated and thereafter as a new corporation which purchased the same
assets as of the beginning of the following day. Consequently, Barney's, Inc.
recognized a gain at the time of the deemed sale in an amount equal to the
difference between the fair market value of its assets and its collective tax
basis of the assets at the time of the sale. The Company used existing net
operating loss carryforwards to eliminate the taxable gain recognized as a
result of the deemed sale. Nevertheless, the Company was subject to alternative
minimum tax. Furthermore, as a result of the Section 338(g) election, Barney's,
Inc. surrendered certain remaining tax attributes, including all unutilized net
operating loss carryforwards, and surrendered certain tax credits.

     Holdings is the parent of a U.S. federal consolidated group that includes
Barney's, Inc. and its wholly-owned subsidiaries, collectively referred to as
the Consolidated Subsidiaries. Holdings and the Consolidated Subsidiaries file a
consolidated U.S. federal income tax return. Under the U.S. federal consolidated
return rules, the Consolidated Subsidiaries generally do not directly pay U.S.
federal income taxes. Instead, Holdings remits any tax due with respect to the
consolidated group. To equitably allocate the consolidated income tax
liabilities of the consolidated group between Barney's, Inc., on behalf of
itself and its subsidiaries, and the remainder of the group, on January 28,
1999, Holdings entered into a tax sharing and indemnification agreement with the
Consolidated Subsidiaries. Under this agreement, Barney's, Inc. is obligated,
among other things, to pay to Holdings any taxes attributable to the
Consolidated Subsidiaries, and Holdings may be required to compensate Barney's,
Inc. for Holdings' use of tax benefits attributable to the Consolidated
Subsidiaries.

     For Fiscal 2002, 2001, and 2000, the Company recorded a current provision
for income taxes of approximately $600,000, $439,000, and $546,000,
respectively, which principally relates to state and local income and franchise
taxes. The AMT credit carryforward of $69,000 can be carried forward
indefinitely, while the net operating loss carryforwards of $28,063,000 begin to
expire in 2020. In the comparable periods, the Company paid capital, franchise
and income taxes, net of refunds, of approximately $538,000, $359,000, and
$542,000, respectively.

     A reconciliation of the U.S. statutory tax rate to the Company's effective
tax rate for financial reporting purposes follows:

<Table>
<Caption>
                                                      FISCAL 2002   FISCAL 2001   FISCAL 2000
                                                      -----------   -----------   -----------
<S>                                                   <C>           <C>           <C>
U.S. Statutory Rate.................................      35.0%         35.0%         35.0%
State Taxes.........................................      11.0           2.0          44.0
Tax Benefit Related to Basis Difference due to Fresh
  Start Accounting..................................        --            --         (41.0)
Other...............................................      (1.0)          3.0          (6.0)
Valuation Allowance.................................     (38.0)        (43.0)         15.0
                                                         -----         -----         -----
Effective Tax Rate..................................       7.0%         (3.0)%        47.0%
                                                         =====         =====         =====
</Table>

                                     F-15
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Deferred tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The
components of the Company's deferred tax assets and liabilities are as follows
($ in thousands):

<Table>
<Caption>
                                                              FEBRUARY 1,   FEBRUARY 2,
                                                                 2003          2002
                                                              -----------   -----------
<S>                                                           <C>           <C>
Deferred tax assets:
  Inventory.................................................    $   323       $   892
  Provision for doubtful accounts...........................        299           401
  Tax credit and loss carryforward..........................     11,293        10,330
  Other.....................................................      1,925         1,027
                                                                -------       -------
  Gross deferred tax assets.................................     13,840        12,650
  Less: Valuation allowance.................................     (5,684)       (9,168)
                                                                -------       -------
Deferred tax assets.........................................      8,156         3,482
Deferred tax liabilities:
  Depreciation & amortization...............................      8,087         3,413
                                                                -------       -------
  Net deferred tax asset....................................    $    69       $    69
                                                                =======       =======
</Table>

     Other current assets include a net deferred tax asset of approximately
$1,501,000 and $639,000 for the fiscal year ended February 1, 2003 and February
2, 2002, respectively. Other long-term liabilities include a net deferred tax
liability of $1,432,000 and $570,000 for the fiscal year ended February 1, 2003
and February 2, 2002.

7.  RELATED PARTY TRANSACTIONS

  (A) FLAGSHIP STORE LEASES

     Until June 26, 2001, subsidiaries of Holdings leased the Madison Avenue,
Beverly Hills and Chicago stores from Isetan Co. Ltd. ("Isetan"), a minority
stockholder of Holdings. Effective on such date, Isetan conveyed its right,
title and interest as lessor pursuant to each of the flagship store leases to a
third party. The lease for the New York store is for a term of twenty years,
with four options to renew of ten years each. The lease for the Chicago store is
for a term of ten years, with three options to renew of ten years each. The
lease for the Beverly Hills store is for a term of twenty years, with three
options to renew of ten years each. The leases for the flagship stores are all
triple-net leases. In the case of the Beverly Hills flagship store, Barneys is
also responsible for the rent payable pursuant to the existing ground lease.

     Pursuant to the terms of these leases, the Company is required to pay base
rent, as defined, and all operating expenses. Total rent expense (excluding
operating expenses) related to these leases was approximately $6,536,000 through
June 2001, and $15,635,000 in Fiscal 2000.

  (B) LICENSING ARRANGEMENTS

     BNY Licensing, a wholly-owned subsidiary of Barneys, is party to licensing
arrangements pursuant to which (i) two retail stores are operated in Japan and a
single in-store department is operated in Singapore under the name "BARNEYS NEW
YORK", each by an affiliate of Isetan, and (ii) Barneys Asia Co. LLC, which is
70% owned by BNY Licensing and 30% owned by an affiliate of Isetan, has the
exclusive right to sublicense the BARNEYS NEW YORK trademark throughout Asia
(excluding Japan).

     Pursuant to the trademark license agreement between BNY Licensing and
Barneys Japan Company ("Barneys Japan") (an affiliate of Isetan), a
royalty-bearing, exclusive right and license to operate retail store

                                     F-16
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

locations in Japan and a royalty-bearing, non-exclusive right and license to
operate a department within a retail store in Singapore, under the trademark and
trade names "BARNEYS NEW YORK" (the "Trademark License Agreement") has been
granted to Barneys Japan. In addition, Barneys Japan has been granted a license
to make, sell and distribute certain products bearing the trademark "BARNEYS NEW
YORK" and to use "BARNEYS NEW YORK" as part of its corporate name. The Trademark
License Agreement expires on December 31, 2015; however, Barneys Japan may renew
the agreement for up to three additional ten year terms provided certain
conditions are met. Under the terms of the agreement, Barneys Japan pays BNY
Licensing or its assignee a minimum royalty of 2.50% of a minimum net sales
figure set forth in the agreement (the "Minimum Royalty") and an additional
royalty of 2.50% of net sales in excess of the minimum net sales and sales
generated from the expansion of Barneys Japan store base (beyond three stores)
and business methods. In accordance with a prior arrangement, Isetan was given
an absolute assignment of 90% of the annual minimum royalties. As a result, the
Company only receives royalty payments equal to 10% of the annual minimum
royalties as set forth in the license agreement.

     Pursuant to the license agreement between BNY Licensing and Barneys Asia
Co., BNY Licensing has granted to Barneys Asia, a royalty-free, exclusive right
and license to sublicense the right to operate retail store locations and
departments with retail stores in Taiwan, Korea, Thailand, Malaysia, Hong Kong,
Indonesia, India, China and the Philippines, and a non-exclusive right and
license to sublicense the same activities in Singapore, under the trademark and
trade name "BARNEYS NEW YORK". In addition, Barneys Asia has been granted a
license to sublicense the right to make, sell and distribute certain products
bearing the trademark "BARNEYS NEW YORK". Further, Barneys Asia has been granted
a license to use "BARNEYS NEW YORK" as part of its corporate name. All
sublicenses granted by Barneys Asia under this agreement must be
royalty-bearing. The Barneys Asia License Agreement expires on December 31,
2015; however, Barneys Asia may renew the agreement for up to three additional
ten year terms.

     Pursuant to the terms of the trademark license agreement between BNY
Licensing and an affiliate of Isetan, the Company's 10% portion of the annual
minimum royalty over the remaining initial term of this agreement ranges from
45,868,000 to 61,195,106 Japanese Yen ($383,000 to $510,800 at the February 1,
2003 conversion rate of 119.8 Japanese yen to one United States dollar) a year.
The minimum royalty revenue is recognized monthly as the license fee accrues.
Any royalties above the minimum will be recognized as earned. Included in Other
income -- net is approximately $318,000, $326,000 and $330,000 in royalty income
for Fiscal 2002, 2001, and 2000, respectively.

     By a first amendment to the above license agreement dated as of February 5,
2003, the affiliate of Isetan agreed to pay the Company the sum of $750,000 in
each of February 2003 and February 2004 in consideration of the Company's
consent to certain matters relating to the establishment by the affiliate of
Isetan of an additional Barneys New York store in Japan. The Company received
the first such payment in February 2003.

8.  STOCKHOLDERS' EQUITY

     Holdings' Certificate of Incorporation (the "Charter") provides that the
total number of all classes of stock which Holdings will have authority to issue
is 35,000,000 shares, of which 25,000,000 will be Holdings common stock, and
10,000,000 shares will be preferred stock (of which 20,000 shares have been
issued (see (d) below)), both having a par value of $0.01 per share. The rights
and preferences of the preferred stock are established by the Company's Board of
Directors upon issuance. Holdings is prohibited by its Charter from issuing any
class or series of non-voting securities.

  (A) HOLDINGS COMMON STOCK

     Each share of Holdings common stock entitles its holder to one vote. The
holders of record of Holdings common stock will be entitled to participate
equally in any dividend declared by the Board of Directors of Holdings. Each
share of Holdings common stock is entitled to share ratably in the net worth of
Holdings upon

                                     F-17
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dissolution. So long as any shares of preferred stock are outstanding, no
dividends on Holdings common stock may be paid until all accrued and unpaid
dividends on the preferred stock have been paid.

  (B) UNSECURED CREDITORS WARRANTS

     Pursuant to the Company's plan of reorganization, holders of certain
allowed general unsecured claims were issued warrants (the "Unsecured Creditors
Warrants") to purchase an aggregate of up to 1,013,514 shares of Holdings Common
Stock at an exercise price of $8.68 per share. The Unsecured Creditors Warrants
expired on May 30, 2000. Holders of 826,961 warrants exercised their rights to
acquire an equivalent amount of Holdings common stock. Aggregate proceeds to the
Company were approximately $7,200,000.

  (C) ISETAN WARRANTS

     Pursuant to the Company's plan of reorganization, Isetan was issued a
warrant (the "Isetan Warrants") to purchase 287,724 shares of Holdings Common
Stock at an exercise price of $14.68 per share. This warrant expired on January
29, 2002.

  (D) PREFERRED STOCK

     The 20,000 shares of Series A preferred stock have an aggregate liquidation
preference of $2,000,000 (the "Liquidation Preference"), plus any accrued and
unpaid dividends thereon (whether or not declared). Dividends on the preferred
stock are cumulative (compounding annually) from January 28, 1999 (the
"Effective Date") and are payable when and as declared by the Board of Directors
of Holdings, at the rate of 1% per annum on the Liquidation Preference. No
dividends shall be payable on any shares of Holdings common stock until all
accrued and unpaid dividends on the preferred stock have been paid.

     In accordance with SAB No. 64, Redeemable Preferred Stock, the Company
recorded the two separate issuances of redeemable preferred stock at their
respective fair values. The 5,000 shares originally issued to Bay Harbour
Management L.C. ("Bay Harbour"), one of the Company's principal shareholders,
were valued at $500,000. The remaining 15,000 shares were issued to the Barneys
Employees Stock Plan Trust (the "Trust"). See Note 9(a) Employees Stock Plan
below.

     The shares of preferred stock will not be redeemable prior to the sixth
anniversary of the Effective Date. On or after the sixth anniversary of the
Effective Date, the preferred stock will be redeemable at the option of Holdings
for cash, in whole or in part, at an aggregate redemption price equal to the
Liquidation Preference, plus any accrued and unpaid dividends thereon. In
addition, Holdings will be required to redeem the preferred stock in whole on
the tenth anniversary of the Effective Date at an aggregate redemption price
equal to the Liquidation Preference, plus any accrued and unpaid dividends
thereon.

     The shares of preferred stock will be convertible, in whole or in part, at
the option of the holders thereof, any time on or after the earlier of the fifth
anniversary of the Effective Date and the consummation of a rights offering by
Holdings (which offering meets certain conditions), into 162,500 shares of
Holdings common stock. Any accrued and unpaid dividends on the preferred stock
will be cancelled upon conversion. Conversion rights will be adjusted to provide
antidilution protection for stock splits, stock combinations, mergers or other
capital reorganization of Holdings. In addition, upon a sale of Holdings,
Holdings' right to redeem the preferred stock and the holders' right to convert
the preferred stock will be accelerated. The preferred stock has one vote per
share and votes together with the Holdings common stock on all matters other
than the election of directors.

  (E) RESTRICTED STOCK

     Pursuant to an amendment to his employment agreement dated January 10,
2003, Holdings agreed to make a restricted stock award on February 2, 2003 of
200,000 shares of Holdings common stock to Howard

                                     F-18
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Socol, the Company's Chairman, President and Chief Executive Officer. The fair
value of the restricted shares was $850,000 based on the $4.25 trading price of
Holdings common stock on the award date. Pursuant to the restricted stock award
agreement between Holdings and Mr. Socol, until the shares vest, the shares will
be held in escrow and Mr. Socol may not transfer the shares. In addition, until
the shares vest, the shares are subject to a right of repurchase by Holdings
upon Mr. Socol's resignation without good reason or termination by Holdings for
cause. 100,000 of the shares vest on January 31, 2004 and the other 100,000
shares vest on January 31, 2005, provided that Mr. Socol does not terminate his
employment before those dates. The agreement also contains an accelerated
vesting provision upon the occurrence of certain events.

9.  EMPLOYEE BENEFIT PLANS

  (A) EMPLOYEES STOCK PLAN

     Pursuant to the plan of reorganization, Holdings established the Barneys
Employees Stock Plan effective January 28, 1999 for all eligible employees and
15,000 shares of new Holdings Preferred Stock were contributed to the Barneys
Employees Stock Plan Trust. This Preferred Stock will be issued to existing
employees of Barneys as incentive compensation in connection with future
services to be rendered to the Company. Since the 15,000 shares issued to the
Trust have not yet been issued to existing employees, they are not considered as
issued or outstanding. When such shares are issued to the employees, the Company
will record compensation expense based on the fair value of the shares at such
time. Any difference between the fair value at that time and the ultimate
redemption value will be accreted as a dividend over the period up through the
date on which they must be redeemed. This plan is a profit sharing plan covering
all eligible employees other than those covered by a collective bargaining
agreement. Contributions under this plan are at the discretion of the Company.

 (B) STOCK OPTIONS

     The Company has a stock option plan that provides for the granting of stock
options to officers and key employees for purchase of Holdings' common shares.
This plan is administered by the compensation committee of the Board of
Directors, whose members are not eligible for grants under this plan. These
options expire ten years from the date of grant and vest 20% on the date of
grant, with the remainder vesting ratably over the next four years. The option
price is determined by the compensation committee, but cannot be less than 100%
of the fair market value of the stock (as defined) at the date the option is
granted. As of February 1, 2003, there were 392,766 shares available for future
grant under this option plan.

     In Fiscal 2000, pursuant to his employment agreement with the Company,
Howard Socol, Chairman, President and Chief Executive Officer, was granted
792,234 options from this plan to purchase an equivalent number of shares of
Holdings common stock which are to vest over the term of his employment.
Pursuant to an amendment to his employment agreement in Fiscal 2002, Holdings
has guaranteed that, as of the date of the first change of control of Holdings,
the aggregate amount of compensation derived from all stock options (previously
or thereafter) granted to Mr. Socol (and the value of any shares of Holdings
common stock acquired upon exercise of such stock options) will be at least $5.0
million. If Holdings achieves certain financial targets, the guarantee will
increase to as much as $10.0 million. Following the change of control, Holdings
will pay Mr. Socol in cash any shortfall between the aggregate value of all
stock options granted to him and the guaranteed amount.

     In addition to the above stock option plan, in Fiscal 1999, the Company
adopted a stock option plan that provides for the granting of non-qualified
stock options to non-employee members of the Company's Board of Directors. Each
Eligible Director (as defined in the option plan) is granted an option to
purchase 5,000 shares of Holdings common stock upon their initial appointment to
the Board of Directors, exercisable at the fair market value of Holdings common
stock at the date of grant. These options expire ten years from the date of
grant and vest 50% on the date of grant, with the remainder on the first
anniversary therefrom. At the

                                     F-19
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

discretion of the Board of Directors, additional options may be granted to
Eligible Directors on the date of the annual stockholders' meeting that takes
place after the initial grant. As of February 1, 2003, 30,000 shares were
available for future grants pursuant to this option plan.

     Following is a summary of the stock option plan activity for each of the
respective years:

<Table>
<Caption>
                                                                        WEIGHTED AVERAGE
                                                             SHARES      EXERCISE PRICE
                                                            ---------   ----------------
<S>                                                         <C>         <C>
Granted during and Outstanding at January 29, 2000........    876,270        $ 8.68
Granted...................................................  1,247,234          9.85
Cancelled.................................................   (831,270)         8.68
                                                            ---------        ------
Outstanding at February 3, 2001...........................  1,292,234          9.81
Granted...................................................    489,000          9.62
Canceled..................................................    (46,600)        10.04
                                                            ---------        ------
Outstanding at February 2, 2002...........................  1,734,634          9.75
Granted...................................................         --            --
Canceled..................................................   (107,400)         9.89
                                                            ---------        ------
Outstanding at February 1, 2003...........................  1,627,234          9.74
                                                            =========        ======
</Table>

     At February 1, 2003, the outstanding options have a weighted average
remaining contractual life of 7.9 years, with exercise prices ranging from
$8.68 -- $10.25.

     Options exercisable at:

<Table>
<Caption>
                                                                        WEIGHTED AVERAGE
                                                              SHARES     EXERCISE PRICE
                                                              -------   ----------------
<S>                                                           <C>       <C>
February 3, 2001............................................  136,000        $9.73
February 2, 2002............................................  599,359         9.74
February 1, 2003............................................  972,318         9.77
</Table>

     There were no options granted during Fiscal 2002. The weighted average fair
value of options granted during Fiscal 2000 and 2001 estimated on the date of
grant using the Black Scholes option-pricing model was $2.88 and $3.22,
respectively. The fair values were estimated on the date of grant using the
following weighted average assumptions: risk-free interest rate range of 4.38%
to 6.66% depending on grant date; dividend yield of 0%; a weighted average
expected life ranging from five to 10 years; and expected volatility ranging
from 37.3% to 41.5%.

     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25") and related
interpretations in accounting for its employee stock options. Under APB No. 25,
no compensation expense is recognized because the exercise price of the stock
options equals the assumed market price of the underlying stock on the date of
grant.

  (C) UNION PLAN

     Pursuant to agreements with unions, the Company is required to make
periodic pension contributions to union-sponsored multiemployer plans which
provide for defined benefits for all union members employed by the Company.
Union pension expense aggregated $753,000, $771,000 and $768,000 in Fiscal 2002,
2001 and 2000, respectively. The Company, at present, has no intentions of
withdrawing from this plan.

                                     F-20
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (D) 401(K) AND MONEY PURCHASE PLAN

     Through December 2001, the Company maintained both a 401(k) Savings Plan
and a Money Purchase Plan. All employees of the Company, except for certain
employees covered by specific collective bargaining agreements, were eligible to
participate in both plans. Pursuant to the terms of the 401(k) Plan, eligible
participating employees can elect to contribute between 1% and 13% of their
annual compensation up to the annual dollar limits set by the Internal Revenue
Service. The Company will match 50% of the first 6% of the participant's
elective contributions resulting in a maximum of 3% of total compensation.
Effective January 2002, the Company amended the 401(k) Plan and the Money
Purchase Plan. Prior to the effective date of the amendments, contributions to
the Money Purchase Plan were made 100% by the Company in an amount equal to 3%
of a participant's eligible compensation for the year in question, subject to a
specified cap. In addition, the 401(k) included a profit sharing feature whereby
the Company could make a discretionary contribution of up to 3% of a
participant's eligible compensation. The determination of whether or not a
contribution is made and, if so, the amount of same, is determined by the
Compensation Committee. Pursuant to the amendments, the following occurred: 1)
further contributions to the Money Purchase Plan were eliminated commencing with
contributions for the 2002 plan year, 2) the plans were consolidated with the
new plan now called the Barney's, Inc. Retirement Savings Plan, 3) the adding of
a non-discretionary contribution of 1.5% of a participant's eligible
compensation for the year in question subject to a specified cap and 4) an
increase in the maximum discretionary contribution from 3% to 4% of a
participant's eligible compensation.

     The aggregate expense of these plans was $1,560,000, $1,695,000, and
$1,982,000 in Fiscal 2002, 2001 and 2000, respectively.

10.  ACCRUED EXPENSES

     Accrued expenses consist of the following:

<Table>
<Caption>
                                                              FEBRUARY 1,   FEBRUARY 2,
                                                                 2003          2002
                                                              -----------   -----------
                                                                  ($ IN THOUSANDS)
<S>                                                           <C>           <C>
Payroll and other employee benefit liabilities..............    $ 9,608       $ 6,741
Customer liabilities........................................     11,203        10,590
Interest....................................................      3,220         3,102
Other.......................................................      8,998        11,813
                                                                -------       -------
Accrued expenses............................................    $33,029       $32,246
                                                                =======       =======
</Table>

11.  OTHER

     Other income -- net includes the following at:

<Table>
<Caption>
                                                      FEBRUARY 1,   FEBRUARY 2,   FEBRUARY 3,
(000'S)                                                  2003          2002          2001
-------                                               -----------   -----------   -----------
<S>                                                   <C>           <C>           <C>
Finance charge income...............................    $4,608        $4,661        $4,462
Royalty income......................................       318           326           330
Insurance recoveries................................       523           926            --
Reversal of Predecessor Company liabilities.........        --           913            --
Sale of a trademark unrelated to business...........       400            --            --
Other...............................................       478           131            41
                                                        ------        ------        ------
Total...............................................    $6,327        $6,957        $4,833
                                                        ======        ======        ======
</Table>

                                     F-21

<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Mr. Questrom, a member of the Board of Directors and former Chairman,
President and Chief Executive Officer of the Company is also a member of the
board of Polo Ralph Lauren Corporation. During Fiscal 2002, 2001, and 2000, the
Company purchased at retail approximately $1,245,000, $1,558,000, and
$2,758,000, respectively, of products from Polo Ralph Lauren Corporation.

     Bay Harbour and Whippoorwill, who collectively beneficially own
approximately 77% of the outstanding shares of Holdings common stock, are
parties to a Stockholders Agreement, dated as of November 13, 1998 (the
"Stockholders Agreement"), which sets forth their agreement with respect to
certain matters relating to the shares of Holdings common stock held by them.
Pursuant to the Stockholders Agreement, each of Bay Harbour and Whippoorwill
have agreed to (i) grant rights of first offer as well as tag along rights in
the event of a transfer of shares, (ii) grant the right to participate in an
acquisition of additional shares of Holdings common stock by one of them, and
(iii) give the other a right of first refusal to purchase shares of Holdings
common stock which one of them has requested Holdings to register pursuant to
the Registration Rights Agreement entered into on the Effective Date. In
addition, Bay Harbour and Whippoorwill have agreed to take all actions necessary
to elect three designees of each, one designee of Isetan, the chief executive
officer of Holdings, and three independent directors, to the Board of Directors
of Holdings. The Stockholders Agreement also generally prohibits each of Bay
Harbour and Whippoorwill from voting the shares of Holdings common stock held by
it in favor of amending Holdings' Certificate of Incorporation or Bylaws or a
sale of the Company without the consent of the other.

     On the Effective Date, pursuant to the plan of reorganization, Messrs.
Greenhaus and Strumwasser, who are principals and officers of Whippoorwill
(which is a stockholder of Holdings), and Messrs. Teitelbaum and Van Dyke, who
are principals of Bay Harbour (which is a stockholder of Holdings), and Mr.
Halpern, became members of the board of directors of Holdings.

     Holdings guaranteed the obligations of Barney's, Inc. and its subsidiaries
under the Company's $22,500,000 subordinated note and the Equipment Notes
(described in Notes 4(b) and (c)), all of which were issued in connection with
the Company's bankruptcy reorganization. In addition, Holdings also guaranteed
the obligations of Barney's, Inc. and its subsidiaries under the leases for the
Company's flagship stores and the licensing arrangements (described in Note
7(b)).

     Approximately 39% of the Company's employees are covered under collective
bargaining agreements.

     In April 2002, the FASB, issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections," known as SFAS No. 145. This statement, among other things,
rescinded SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt,"
which required all gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of tax. In
accordance with the provisions of SFAS No. 145, we have elected to adopt this
statement early. Accordingly, in connection with the early extinguishment of a
prior revolving credit facility, the unamortized fees of approximately $0.6
million related to such facility were written off and are included in interest
expense.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which changes the accounting for
costs, such as lease termination costs and certain employee severance costs,
that are associated with a restructuring, discontinued operation, plant closing,
or other exit or disposal activity initiated after December 31, 2002. The
standard requires companies to recognize the fair value of costs associated with
exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. We do not expect the adoption of this
standard to have a material effect on our results of operations.

     In 2002, the FASB Emerging Issues Task Force ("EITF") issued EITF No.
02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor." EITF 02-16 addresses the accounting by a
reseller for consideration received from a vendor. A consensus was reached that
cash

                                       F-22
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

consideration is presumed to be a reduction in the price of a vendor's product
that should be recognized as a reduction of cost of sales. However, this
presumption can be overcome when the consideration received is for the
reimbursement of specific, identifiable and incremental costs of the reseller.
In that event, the consideration, subject to a threshold, is recognized as a
reduction in selling, general and administrative expenses. The provisions of
EITF 02-16 are effective for all new arrangements, or modifications to existing
arrangements, entered into after December 31, 2002. We are currently evaluating
the potential impact of adopting the provisions of EITF 02-16 on our
consolidated financial position and results of operations.

12.  SUBSEQUENT EVENT

     On April 1, 2003, the Company completed an offering of 106,000 units at a
price of $850 per unit, for gross proceeds of $90.1 million. Each unit consisted
of $1,000 principal amount at maturity of 9.000% senior secured notes due April
1, 2008 of Barney's, Inc. and one warrant to purchase 3.412 shares of common
stock of Holdings at an exercise price of $0.01 per share. $106.0 million
aggregate principal amount at maturity of notes were issued, together with an
aggregate of 106,000 warrants to acquire an aggregate of 361,672 shares of the
common stock of Holdings. The warrants expire on April 1, 2008. Approximately
$1.9 million of the proceeds from the offering was allocated to the warrants and
the remainder of the proceeds was allocated to the notes. The total debt
discount of $17.8 million is being amortized over the life of the notes.

     On or after April 1, 2006 and April 1, 2007, Barney's, Inc., at its option,
may redeem some or all of the notes at a redemption price of 109.894% of
accreted value, and 100% of principal amount at maturity, respectively, in all
cases plus accrued and unpaid interest. Prior to April 1, 2005, Barney's, Inc.
can utilize the proceeds of certain equity offerings to redeem up to 35% of the
aggregate principal amount at maturity of the notes, at a redemption price equal
to 113.192% of accreted value plus accrued and unpaid interest. If Barney's,
Inc. experiences a change of control, each holder of the notes will have the
right to sell to Barney's, Inc. all or a portion of their notes at 101% of their
accreted value, plus accrued and unpaid interest, to the date of repurchase.

     The Company has entered into a registration rights agreement relating to
the notes, pursuant to which the Company is required to file one or more
registration statements within specified time periods to provide for the
exchange of the notes for freely tradable notes with substantially identical
terms. If the Company does not comply with the terms of the registration rights
agreement, including the requirement to file an exchange offer registration
statement with the SEC within 90 days after the offering and have that
registration statement declared effective by the SEC within 180 days after the
offering, it will be required to pay liquidated damages to holders of the notes
in the form of additional cash payments until all defaults under the
registration rights agreement have been cured.

     In connection with the offering, Holdings agreed that upon receipt of a
written request from the holders of at least 5% of the shares issuable upon
exercise of the warrants, Holdings will, as promptly as practicable, file a
shelf registration statement covering the resale of the shares issuable upon
exercise of the warrants. Holdings may, at its option, file a registration
statement covering the resale of the shares issuable upon exercise of the
warrants.

     Net proceeds to the Company were approximately $81.7 million after
deducting commissions, financial advisory fees and estimated expenses
(collectively referred to as the "Offering Fees") of the offering. The Offering
Fees of approximately $8.4 million will be deferred and will be included in
other assets. Such amount will be amortized to interest expense over the term of
the notes. The net proceeds were used to repay the $22.5 million Subordinated
Note; the Equipment Notes; the Term Loan and a portion of the Revolver loans
outstanding under the GE Facility; and a substantial portion of the Company's
deferred rent obligations pursuant to its flagship leases. The prepayment of the
$22.5 million subordinated note and the Equipment Notes aggregated approximately
$58.1 million and resulted in a gain on early extinguishments of debt of
approximately $200,000.

                                     F-23
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Upon consummation of the offering, the Company also entered into the
Restated Credit Facility. The Restated Credit Facility, which matures on July
15, 2006, is a $70.0 million revolving credit facility under
which the Company may borrow up to $66 million, which may be increased to $70.0
million with the consent of the required lenders, subject to a borrowing base
test.

     Interest rates on borrowings under the Restated Credit Facility are either
the "base rate," as defined in the Restated Credit Facility, plus 1.00% or LIBOR
plus 2.50%, subject to quarterly adjustment after August 2, 2004. The Restated
Credit Facility also provides for a fee of 2.0% per annum on the maximum amount
available to be drawn under each outstanding letter of credit and a tiered
unused commitment fee with a weighted average of approximately 0.45% on the
unused portion of the credit facility.

     The Restated Credit Facility eliminated, among other things, the 30 day
clean-down provision and amended the financial covenants in the GE Facility (as
discussed in Note 4(a)), and also added a minimum excess borrowing base
availability covenant, all as outlined below.

     - Minimum consolidated net worth -- The minimum amount was set at $147.0
       million at the end of the fiscal year ending January 28, 2006.

     - Minimum consolidated EBITDA -- The minimum amount at the end of Fiscal
       2004 was increased to $29.0 million from $28.0 million; and the minimum
       amount at the end of Fiscal 2005 was set at $30.0 million.

     - Capital expenditures -- The limitation on capital expenditures is $10.0
       million per fiscal year, subject to increase if certain conditions are
       met.

     - Minimum excess borrowing base availability -- The Company is required to
       maintain minimum excess borrowing base availability of $8.0 million at
       all times.

     The Restated Credit Facility and the related guarantees thereof are secured
by a first-priority lien on substantially all of the Company's assets, other
than real property leaseholds. The 9.000% senior secured notes are guaranteed on
a senior secured basis by Holdings and each of the existing and future domestic
restricted subsidiaries of Barney's, Inc. The 9.000% senior secured notes and
the related guarantees are secured by a second-priority lien on the same assets
as secure the Restated Credit Facility.

                                     F-24
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

13.  CONDENSED CONSOLIDATING FINANCIAL INFORMATION

     On April 1, 2003, Barney's, Inc., a subsidiary of the Company, issued
$106.0 million principal amount of its 9.000% senior secured notes due April 1,
2008, as more fully discussed in Note 12 above. Barney's Inc. and the guarantor
subsidiaries are 100% owned by Holdings. These notes have been fully and
unconditionally, jointly and severally guaranteed by Holdings and each of the
existing and future domestic restricted subsidiaries of Barney's, Inc. Subject
to certain exceptions, Barney's, Inc. is restricted in its ability to make funds
available to Holdings. The following condensed consolidating financial
information of the Company is being provided pursuant to Article 3-10(d) of
Regulation S-X.

<Table>
<Caption>
                                                       FISCAL YEAR ENDED FEBRUARY 1, 2003
                                --------------------------------------------------------------------------------
                                           BARNEY'S    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                                HOLDINGS     INC.     SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                                --------   --------   ------------   -------------   ------------   ------------
                                                                 (IN THOUSANDS)
<S>                             <C>        <C>        <C>            <C>             <C>            <C>
Net sales.....................  $    --    $336,298     $47,065          $  --         $    --        $383,363
Cost of sales.................       --     177,218      26,797             --              --         204,015
                                -------    --------     -------          -----         -------        --------
     Gross profit.............       --     159,080      20,268             --              --         179,348
Expenses:
  Selling, general and
     administrative expenses
     (including occupancy
     expense of $32,421)......       --     139,850      14,963             --              --         154,813
  Depreciation and
     amortization.............       --       9,233       1,527             --              --          10,760
  Other income -- net.........       --      (6,278)        (49)            --              --          (6,327)
                                -------    --------     -------          -----         -------        --------
     Operating income.........       --      16,275       3,827             --              --          20,102
Equity in net income of
  subsidiary..................   (9,027)         --          --             --           9,027              --
Interest and financing costs,
  net of interest income......      (39)     11,075          --             --              --          11,036
                                -------    --------     -------          -----         -------        --------
     Income before income
       taxes..................    9,066       5,200       3,827             --          (9,027)          9,066
Income taxes..................      600          --          --             --              --             600
                                -------    --------     -------          -----         -------        --------
     Net income...............  $ 8,466    $  5,200     $ 3,827          $  --         $(9,027)       $  8,466
                                =======    ========     =======          =====         =======        ========
</Table>

                                     F-25
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                      FISCAL YEAR ENDED FEBRUARY 2, 2002
                               ---------------------------------------------------------------------------------
                                          BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                               HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                               --------   ---------   ------------   -------------   ------------   ------------
                                                                (IN THOUSANDS)
<S>                            <C>        <C>         <C>            <C>             <C>            <C>
Net sales....................  $     --   $323,722      $47,447          $  --         $     --       $371,169
Cost of sales................        --    181,908       26,937             --               --        208,845
                               --------   --------      -------          -----         --------       --------
     Gross profit............        --    141,814       20,510             --               --        162,324
Expenses:
  Selling, general and
     administrative expenses
     (including occupancy
     expense of $31,367).....        --    138,488       16,330             --               --        154,818
  Depreciation and
     amortization............        --     17,070        1,732             --               --         18,802
  Other income -- net........        --     (6,345)        (612)            --               --         (6,957)
                               --------   --------      -------          -----         --------       --------
  Operating (loss) income....        --     (7,399)       3,060             --               --         (4,339)
Equity in net loss of
  subsidiary.................    15,098         --           --             --          (15,098)            --
Interest and financing costs,
  net of interest income.....      (366)     7,107        3,652             --               --         10,393
                               --------   --------      -------          -----         --------       --------
     Loss before income
       taxes.................   (14,732)   (14,506)        (592)            --           15,098        (14,732)
Income taxes.................       439         --           --             --               --            439
                               --------   --------      -------          -----         --------       --------
     Net loss................  $(15,171)  $(14,506)     $  (592)         $  --         $ 15,098       $(15,171)
                               ========   ========      =======          =====         ========       ========
</Table>

                                     F-26
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                        FISCAL YEAR ENDED FEBRUARY 3, 2001
                                 ---------------------------------------------------------------------------------
                                            BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                                 HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                                 --------   ---------   ------------   -------------   ------------   ------------
                                                                  (IN THOUSANDS)
<S>                              <C>        <C>         <C>            <C>             <C>            <C>
Net sales......................   $   --    $352,646      $51,675          $  --          $  --         $404,321
Cost of sales..................       --     188,699       28,026             --             --          216,725
                                  ------    --------      -------          -----          -----         --------
     Gross profit..............       --     163,947       23,649             --             --          187,596
Expenses:
  Selling, general and
     administrative expenses
     (including occupancy
     expense of $29,120).......       --     143,793       17,730             --             --          161,523
  Depreciation and
     amortization..............       --      16,587        1,440             --             --           18,027
  Other income -- net..........       --      (4,261)        (572)            --             --           (4,833)
                                  ------    --------      -------          -----          -----         --------
     Operating income..........       --       7,828        5,051             --             --           12,879
Equity in net income of
  subsidiary...................     (554)         --           --             --            554               --
Interest and financing costs,
  net of interest income.......     (602)      8,455        3,870             --             --           11,723
                                  ------    --------      -------          -----          -----         --------
     Income (loss) before
       income taxes............    1,156        (627)       1,181             --           (554)           1,156
Income taxes...................      546          --           --             --             --              546
                                  ------    --------      -------          -----          -----         --------
     Net income (loss).........   $  610    $   (627)     $ 1,181          $  --          $(554)        $    610
                                  ======    ========      =======          =====          =====         ========
</Table>

                                     F-27
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEET

<Table>
<Caption>
                                                               FEBRUARY 1, 2003
                               ---------------------------------------------------------------------------------
                                          BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                               HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                               --------   ---------   ------------   -------------   ------------   ------------
                                                       (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                            <C>        <C>         <C>            <C>             <C>            <C>
                                                     ASSETS
Current assets:
  Cash and cash
    equivalents..............  $     --   $  6,666      $    445         $  --        $      --       $  7,111
  Receivables, less
    allowances of $4,225.....        --     24,575           382            --               --         24,957
  Inventories................        --     52,879         9,373            --               --         62,252
  Other current assets.......     1,507      6,097           304            --               --          7,908
                               --------   --------      --------         -----        ---------       --------
    Total current assets.....     1,507     90,217        10,504            --               --        102,228
Fixed assets at cost, less
  accumulated depreciation
  and amortization of
  $37,290....................        --     47,550         2,913            --               --         50,463
Excess reorganization value,
  less accumulated
  amortization of $26,372....        --    147,764            --            --               --        147,764
Investment in and advances to
  subsidiary.................   156,113     29,659            --            --         (185,772)            --
Other assets.................        --      1,327            11            --               --          1,338
                               --------   --------      --------         -----        ---------       --------
    Total assets.............  $157,620   $316,517      $ 13,428         $  --        $(185,772)      $301,793
                               ========   ========      ========         =====        =========       ========

                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-
    term debt................  $     --   $    425      $     --         $  --        $      --       $    425
  Revolving credit
    facility.................        --     10,480            --            --               --         10,480
  Net affiliate payable......        --    115,208        42,547            --         (157,755)            --
  Accounts payable...........        --     20,521           226            --               --         20,747
  Accrued expenses...........       598     28,382         4,049            --               --         33,029
                               --------   --------      --------         -----        ---------       --------
    Total current
      liabilities............       598    175,016        46,822            --         (157,755)        64,681
Long-term debt...............        --     65,051            --            --               --         65,051
Other long-term
  liabilities................     1,434     15,313          (770)           --               --         15,977
Series A Redeemable Preferred
  Stock -- Aggregate
  liquidation preference
  $2,000.....................       500         --            --            --               --            500
Commitments and contingencies
  Stockholders' equity:
  Preferred stock............        --         --           214            --             (214)            --
  Common stock -- $.01 par
    value; authorized
    25,000,000
    shares -- issued
    13,903,227 shares........       139         --           341            --             (341)           139
Additional paid-in capital...   166,390         --        45,176            --          (45,176)       166,390
Accumulated other
    comprehensive income.....        --        496            --            --               --            496
  Retained deficit...........   (11,441)    60,641       (78,355)           --           17,714        (11,441)
                               --------   --------      --------         -----        ---------       --------
    Total stockholders'
      equity.................   155,088     61,137       (32,624)           --          (28,017)       155,584
                               --------   --------      --------         -----        ---------       --------
Total liabilities and
  stockholders' equity.......  $157,620   $316,517      $ 13,428         $  --        $(185,772)      $301,793
                               ========   ========      ========         =====        =========       ========
</Table>

                                     F-28
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEET

<Table>
<Caption>
                                                               FEBRUARY 2, 2002
                               ---------------------------------------------------------------------------------
                                          BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                               HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                               --------   ---------   ------------   -------------   ------------   ------------
                                                       (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                            <C>        <C>         <C>            <C>             <C>            <C>
                                                     ASSETS
Current assets:
  Cash and cash
     equivalents.............  $  6,797   $  3,347      $    678          $13         $      --       $ 10,835
  Restricted cash............        --        200            --           --                --            200
  Receivables, less
     allowances of $4,488....        --     26,411           278           --                --         26,689
  Inventories................        --     43,002         9,447           --                --         52,449
  Other current assets.......       646      4,874           253           --                --          5,773
                               --------   --------      --------          ---         ---------       --------
     Total current assets....     7,443     77,834        10,656           13                --         95,946
Fixed assets at cost, less
  accumulated depreciation
  and amortization of
  $26,530....................        --     46,031         4,110           --                --         50,141
Excess reorganization value,
  less accumulated
  amortization of $26,372....        --    149,439            --           --                --        149,439
Investment in and advances to
  subsidiary.................   141,294     29,659            --           --          (170,953)            --
Other assets.................        --      1,443            11           --                --          1,454
                               --------   --------      --------          ---         ---------       --------
     Total assets............  $148,737   $304,406      $ 14,777          $13         $(170,953)      $296,980
                               ========   ========      ========          ===         =========       ========
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Revolving credit
     facility................  $     --   $ 23,581      $     --          $--         $      --       $ 23,581
  Net affiliate payable......        --    108,850        48,948           --          (157,798)            --
  Accounts payable...........        --     23,321           313           --                --         23,634
  Accrued expenses...........     1,044     24,473         6,729           --                --         32,246
                               --------   --------      --------          ---         ---------       --------
     Total current
       liabilities...........     1,044    180,225        55,990           --          (157,798)        79,461
Long-term debt...............        --     57,467            --           --                --         57,467
Other long-term
  liabilities................       571     13,541        (1,182)          --                --         12,930
Series A Redeemable Preferred
  Stock -- Aggregate
  liquidation preference
  $2,000.....................       500         --            --           --                --            500
Commitments and contingencies
  Stockholders' equity:
  Preferred stock............        --         --           214           --              (214)            --
  Common stock --  $.01 par
     value; authorized
     25,000,000
     shares -- issued
     13,903,227 shares.......       139         --           341           --              (341)           139
  Additional paid-in
     capital.................   166,390         --        45,176           --           (45,176)       166,390
  Retained deficit...........   (19,907)    53,173       (85,762)          13            32,576        (19,907)
                               --------   --------      --------          ---         ---------       --------
     Total stockholders'
       equity................   146,622     53,173       (40,031)          13           (13,155)       146,622
                               --------   --------      --------          ---         ---------       --------
Total liabilities and
  stockholders' equity.......  $148,737   $304,406      $ 14,777          $13         $(170,953)      $296,980
                               ========   ========      ========          ===         =========       ========
</Table>

                                     F-29
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                            FISCAL YEAR ENDED FEBRUARY 1, 2003
                                     ---------------------------------------------------------------------------------
                                                BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                                     HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                                     --------   ---------   ------------   -------------   ------------   ------------
                                                                      (IN THOUSANDS)
<S>                                  <C>        <C>         <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
Net income.........................  $ 8,466    $   5,200     $ 3,827          $ --          $(9,027)      $   8,466
Adjustments to reconcile net income
  to net cash (used in) provided by
  operating activities:
Depreciation and amortization......       --       10,493       1,527            --               --          12,020
Write-off of unamortized bank
  fees.............................       --          641          --            --               --             641
Deferred rent......................       --        1,772         412            --               --           2,184
Equity in net income of
  subsidiary.......................   (9,027)          --          --            --            9,027              --
Decrease (increase) in:
  Receivables......................       --        1,836        (104)           --               --           1,732
  Inventories......................       --       (9,877)         74            --               --          (9,803)
  Other current assets.............       --         (727)        (51)           --               --            (778)
Increase (decrease) in:
  Accounts payable and accrued
    expenses.......................     (444)       2,890      (2,767)           --               --            (321)
                                     -------    ---------     -------          ----          -------       ---------
  Net cash (used in) provided by
    operating activities...........   (1,005)      12,228       2,918            --               --          14,141
                                     -------    ---------     -------          ----          -------       ---------
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Fixed asset additions..............       --      (10,752)       (330)           --               --         (11,082)
Restricted cash....................       --          200          --            --               --             200
Investment in and advances to
  subsidiary.......................   (5,792)       8,626      (2,821)          (13)              --              --
                                     -------    ---------     -------          ----          -------       ---------
    Net cash used in investing
      activities...................   (5,792)      (1,926)     (3,151)          (13)              --         (10,882)
                                     -------    ---------     -------          ----          -------       ---------
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from debt.................       --      439,691          --            --               --         439,691
Repayments of debt.................       --     (445,216)         --            --               --        (445,216)
Payment of bank fees...............       --       (1,458)         --            --               --          (1,458)
                                     -------    ---------     -------          ----          -------       ---------
    Net cash used in financing
      activities...................       --       (6,983)         --            --               --          (6,983)
                                     -------    ---------     -------          ----          -------       ---------
Net (decrease) increase in cash and
  cash equivalents.................   (6,797)       3,319        (233)          (13)              --          (3,724)
Cash and cash
  equivalents -- beginning of
  period...........................    6,797        3,347         678            13               --          10,835
                                     -------    ---------     -------          ----          -------       ---------
Cash and cash equivalents -- end of
  period...........................  $    --    $   6,666     $   445          $ --          $    --       $   7,111
                                     =======    =========     =======          ====          =======       =========
</Table>

                                     F-30
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                           FISCAL YEAR ENDED FEBRUARY 2, 2002
                                    ---------------------------------------------------------------------------------
                                               BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                                    HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                                    --------   ---------   ------------   -------------   ------------   ------------
                                                                     (IN THOUSANDS)
<S>                                 <C>        <C>         <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
Net loss..........................  $(15,171)  $ (14,506)    $  (592)          $--          $ 15,098       $(15,171)
Adjustments to reconcile net loss
  to net cash provided by
  operating activities:
Depreciation and amortization.....        --      18,262       1,732            --                --         19,994
Deferred rent.....................       217       2,024         426            --                --          2,667
Equity in net loss of
  subsidiary......................    15,098          --          --            --           (15,098)            --
Decrease (increase) in:
  Receivables.....................        --         888         154            --                --          1,042
  Inventories.....................        --       7,105       1,678            --                --          8,783
  Other current assets............      (217)        928          84            --                --            795
  Long-term assets................        --          (4)         --            --                --             (4)
Increase (decrease) in:
  Accounts payable and accrued
    expenses......................        80      (2,990)     (1,185)           --                --         (4,095)
                                    --------   ---------     -------           ---          --------       --------
    Net cash provided by operating
      activities..................         7      11,707       2,297            --                --         14,011
                                    --------   ---------     -------           ---          --------       --------
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Fixed asset additions.............        --     (11,182)       (800)           --                --        (11,982)
Contributions from landlords......        --         613          --            --                --            613
Investment in and advances to
  subsidiary......................    (5,216)      7,267      (2,051)           --                --             --
                                    --------   ---------     -------           ---          --------       --------
    Net cash used in investing
      activities..................    (5,216)     (3,302)     (2,851)           --                --        (11,369)
                                    --------   ---------     -------           ---          --------       --------
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from debt................        --     397,613          --            --                --        397,613
Repayments of debt................        --    (406,264)         --            --                --       (406,264)
Payment of bank fees..............        --        (525)         --            --                --           (525)
                                    --------   ---------     -------           ---          --------       --------
    Net cash used in financing
      activities..................        --      (9,176)         --            --                --         (9,176)
                                    --------   ---------     -------           ---          --------       --------
Net decrease in cash and cash
  equivalents.....................    (5,209)       (771)       (554)           --                --         (6,534)
Cash and cash
  equivalents -- beginning of
  period..........................    12,006       4,118       1,232            13                --         17,369
                                    --------   ---------     -------           ---          --------       --------
Cash and cash equivalents -- end
  of period.......................  $  6,797   $   3,347     $   678           $13          $     --       $ 10,835
                                    ========   =========     =======           ===          ========       ========
</Table>

                                     F-31
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                            FISCAL YEAR ENDED FEBRUARY 3, 2001
                                     ---------------------------------------------------------------------------------
                                                BARNEY'S,    GUARANTOR     NON-GUARANTOR                  CONSOLIDATED
                                     HOLDINGS     INC.      SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS      TOTAL
                                     --------   ---------   ------------   -------------   ------------   ------------
                                                                      (IN THOUSANDS)
<S>                                  <C>        <C>         <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
Net income (loss)..................  $   610    $    (627)     $1,181          $  --          $(554)       $     610
Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:
Depreciation and amortization......       --       17,667       1,440             --             --           19,107
Deferred rent......................       --        2,553         446             --             --            2,999
Equity in net income of
  subsidiary.......................     (554)          --          --             --            554               --
Decrease (increase) in:
  Receivables......................       --          489         (86)            --             --              403
  Inventories......................       --       (2,025)       (518)            --             --           (2,543)
  Other current assets.............      490         (431)        (90)            --             --              (31)
  Long-term assets.................       --           14           5             --             --               19
Increase (decrease) in:
  Accounts payable and accrued
    expenses.......................      (33)       2,441          70             --             --            2,478
                                     -------    ---------      ------          -----          -----        ---------
    Net cash provided by operating
      activities...................      513       20,081       2,448             --             --           23,042
                                     -------    ---------      ------          -----          -----        ---------
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Fixed asset additions..............       --       (6,965)     (1,534)            --             --           (8,499)
Reduction in restricted cash.......       --        2,243          --             --             --            2,243
Investment in and advances to
  subsidiary.......................     (719)         626          93             --             --               --
                                     -------    ---------      ------          -----          -----        ---------
    Net cash used in investing
      activities...................     (719)      (4,096)     (1,441)            --             --           (6,256)
                                     -------    ---------      ------          -----          -----        ---------
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from debt.................       --      423,745          --             --             --          423,745
Repayments of debt.................       --     (440,682)         --             --             --         (440,682)
Proceeds from exercise of stock
  options and warrants.............    7,187           --          --             --             --            7,187
                                     -------    ---------      ------          -----          -----        ---------
    Net cash provided by (used in)
      financing activities.........    7,187      (16,937)         --             --             --           (9,750)
                                     -------    ---------      ------          -----          -----        ---------
Net increase (decrease) in cash and
  cash equivalents.................    6,981         (952)      1,007             --             --            7,036
Cash and cash equivalents --
  beginning of period..............    5,025        5,070         225             13             --           10,333
                                     -------    ---------      ------          -----          -----        ---------
Cash and cash equivalents -- end of
  period...........................  $12,006    $   4,118      $1,232          $  13          $  --        $  17,369
                                     =======    =========      ======          =====          =====        =========
</Table>

                                     F-32
<PAGE>
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
                                                          2002 -- QUARTER ENDED
                                               -------------------------------------------
                                                5/4/02     8/3/02     11/2/02     2/1/03
                                               --------   --------   ---------   ---------
                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>        <C>        <C>         <C>
Net sales....................................  $92,475    $81,603    $103,299    $105,986
Gross profit.................................   42,469     40,157      46,249      50,473
Net income (loss)............................      478       (439)      2,877       5,550
Basic and diluted EPS........................     0.03      (0.03)       0.21        0.40
</Table>

<Table>
<Caption>
                                                          2001 -- QUARTER ENDED
                                                ------------------------------------------
                                                 5/5/01     8/4/01    11/3/01     2/2/02
                                                --------   --------   --------   ---------
                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>        <C>        <C>        <C>
Net sales.....................................  $94,069    $85,146    $89,408    $102,546
Gross profit..................................   43,220     38,808     36,623      43,673
Net (loss) income.............................   (3,301)    (3,860)    (8,448)        438
Basic and diluted EPS.........................    (0.24)     (0.28)     (0.61)       0.03
</Table>

                                     F-33
<PAGE>

                                   SCHEDULE I

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                       CONDENSED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                      FISCAL YEAR   FISCAL YEAR   FISCAL YEAR
                                                         ENDED         ENDED         ENDED
                                                      FEBRUARY 1,   FEBRUARY 2,   FEBRUARY 3,
                                                         2003          2002          2001
                                                      -----------   -----------   -----------
                                                                  (IN THOUSANDS)
<S>                                                   <C>           <C>           <C>
Expenses:
Selling, general and administrative expenses........    $    --      $     --       $   --
Loss before interest and financing costs, equity in
  net (income) loss of subsidiary and income
  taxes.............................................         --            --           --
Equity in net (income) loss of subsidiary...........     (9,027)       15,098         (554)
Interest and financing costs, net of interest
  income............................................        (39)         (366)        (602)
                                                        -------      --------       ------
     Income (loss) before income taxes..............      9,066       (14,732)       1,156
Income taxes........................................        600           439          546
                                                        -------      --------       ------
     Net income (loss)..............................    $ 8,466      $(15,171)      $  610
                                                        =======      ========       ======
</Table>

                                     F-34
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                            CONDENSED BALANCE SHEETS

<Table>
<Caption>
                                                              FISCAL YEAR   FISCAL YEAR
                                                                 ENDED         ENDED
                                                              FEBRUARY 1,   FEBRUARY 2,
                                                                 2003          2002
                                                              -----------   -----------
                                                                (IN THOUSANDS, EXCEPT
                                                                     SHARE DATA)
<S>                                                           <C>           <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................   $     --      $  6,797
  Other current assets......................................      1,507           646
                                                               --------      --------
     Total current assets...................................      1,507         7,443
Investment in and advances to subsidiary....................    156,113       141,294
                                                               --------      --------
     Total assets...........................................   $157,620      $148,737
                                                               ========      ========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accrued expenses..........................................   $    598      $  1,044
                                                               --------      --------
     Total current liabilities..............................        598         1,044
Other long-term liabilities.................................      1,434           571
Series A Redeemable Preferred Stock -- Aggregate liquidation
  preference $2,000.........................................        500           500
Commitments and contingencies Stockholders' equity:
  Common stock -- $.01 par value; authorized 25,000,000
     shares -- issued 13,903,227 shares.....................        139           139
  Additional paid-in capital................................    166,390       166,390
  Retained deficit..........................................    (11,441)      (19,907)
                                                               --------      --------
     Total stockholders' equity.............................    155,088       146,622
                                                               --------      --------
Total liabilities and stockholders' equity..................   $157,620      $148,737
                                                               ========      ========
</Table>

                                       F-35
<PAGE>

                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES

                       CONDENSED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                            FISCAL YEAR    FISCAL YEAR     FISCAL YEAR
                                                               ENDED          ENDED           ENDED
                                                            FEBRUARY 1,    FEBRUARY 2,     FEBRUARY 3,
                                                               2003            2002           2001
                                                            -----------   --------------   -----------
                                                                          (IN THOUSANDS)
<S>                                                         <C>           <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).........................................    $ 8,466        $(15,171)       $   610
Adjustments to reconcile net income (loss) to net cash
  (used in) provided by operating activities:
Equity in net (income) loss of subsidiary.................     (9,027)         15,098           (554)
Deferred rent.............................................         --             217             --
Decrease (increase) in:
  Other current assets....................................         --            (217)           490
Increase (decrease) in:
  Accounts payable and accrued expenses...................       (444)             80            (33)
                                                              -------        --------        -------
     Net cash (used in) provided by operating
       activities.........................................     (1,005)              7            513
                                                              -------        --------        -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in and advances to subsidiary..................     (5,792)         (5,216)          (719)
                                                              -------        --------        -------
     Net cash used in investing activities................     (5,792)         (5,216)          (719)
                                                              -------        --------        -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options and warrants............         --              --          7,187
                                                              -------        --------        -------
     Net cash provided by financing activities............         --              --          7,187
                                                              -------        --------        -------
Net (decrease) increase in cash and cash equivalents......     (6,797)         (5,209)         6,981
Cash and cash equivalents -- beginning of period..........      6,797          12,006          5,025
                                                              -------        --------        -------
Cash and cash equivalents -- end of period................    $    --        $  6,797        $12,006
                                                              =======        ========        =======
</Table>

NOTE TO CONDENSED FINANCIAL STATEMENTS

  A.  BASIS OF PRESENTATION

     The condensed financial statements of the Company are provided in
compliance with the requirements of Rule 5-04 and 12-04 of Regulation S-X.

     In the Company's condensed financial statements, the Company's investment
in subsidiaries is stated at cost plus equity in the undistributed earnings of
the subsidiaries. The Company's share of net income (loss) of its subsidiaries
is included in net income (loss) using the equity method of accounting. The
condensed financial statements should be read in conjunction with the Company's
consolidated financial statements.

                                     F-36
<PAGE>

                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                    BARNEYS NEW YORK, INC. AND SUBSIDIARIES
                                FEBRUARY 1, 2003

<Table>
<Caption>
COLUMN A                               COLUMN B             COLUMN C             COLUMN D       COLUMN E
--------                             ------------   ------------------------   -------------   ----------
                                                           ADDITIONS
                                                    ------------------------
                                      BALANCE AT    CHARGED TO    CHARGED TO                   BALANCE AT
                                     BEGINNING OF    COSTS AND      OTHER                        END OF
DESCRIPTION                             PERIOD      EXPENSES(A)    ACCOUNTS    DEDUCTIONS(B)     PERIOD
-----------                          ------------   -----------   ----------   -------------   ----------
                                                                (IN THOUSANDS)
<S>                                  <C>            <C>           <C>          <C>             <C>
YEAR ENDED FEBRUARY 3, 2001
Deducted from asset accounts:
  Allowance for returns and
     doubtful accounts.............     $3,599        $2,982        $  --         $2,253         $4,328
                                        ======        ======        =====         ======         ======
YEAR ENDED FEBRUARY 2, 2002
Deducted from asset accounts:
  Allowance for returns and
     doubtful accounts.............     $4,328        $1,840        $  --         $1,680         $4,488
                                        ======        ======        =====         ======         ======
YEAR ENDED FEBRUARY 1, 2003
Deducted from asset accounts:
  Allowance for returns and
     doubtful accounts.............     $4,488        $1,323        $  --         $1,586         $4,225
                                        ======        ======        =====         ======         ======
</Table>

---------------

(a)  Primarily provisions for doubtful accounts.

(b)  Primarily uncollectible accounts charged against the allowance provided
     therefor.

                                     F-37
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                               NAME OF EXHIBIT
-------                               ---------------
<S>         <C>
2.1         Second Amended Joint Plan of Reorganization for Barney's, Inc. and
            certain of its affiliates proposed by Whippoorwill Associates, Inc.
            ("Whippoorwill"), Bay Harbour Management L.C. ("Bay Harbour") and
            the Official Committee of Unsecured Creditors dated November 13,
            1998 (the "Plan of Reorganization") (1)

2.2         Supplement to the Plan of Reorganization dated December 8, 1998 (1)

2.3         Second Supplement to the Plan of Reorganization dated December 16,
            1998 (1)

3.1         Certificate of Incorporation of Barneys New York, Inc. ("Holdings"),
            filed with the Secretary of State of the State of Delaware on
            November 16, 1998 (1)

3.2         Certificate of Designation for Series A Preferred Stock of Holdings
            filed with the Secretary of State of the State of Delaware on
            December 24, 1998 (1)

3.3         By-laws of Holdings (1)

4.1         Specimen of Holdings' Common Stock Certificate (1)

4.2         Indenture, dated as of April 1, 2003, among Barney's, Inc.,
            Holdings, Barneys America, Inc., Barneys (CA) Lease Corp., Barneys
            (NY) Lease Corp., Basco All-American Sportswear Corp., BNY Licensing
            Corp., Barneys America (Chicago) Lease Corp. and Wilmington Trust
            Company (2)

4.3(a)      Form of Note (included in Exhibit 4.2 hereto)

4.3(b)      Form of Note Guarantee (included in Exhibit 4.2 hereto)

4.4         Registration Rights Agreement, dated April 1, 2003, by and among
            Holdings, Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease
            Corp., Barneys (NY) Lease Corp., Basco All-American Sportswear
            Corp., BNY Licensing Corp., Barneys America (Chicago) Lease Corp.
            and Jefferies & Company, Inc. (2)

4.5         Warrant Agreement, dated April 1, 2003, between Holdings and
            Wilmington Trust Company (2)

4.6         Form of Warrant Certificate (included in Exhibit 4.5 hereto)

4.7         Equity Registration Rights Agreement, dated April 1, 2003, by and
            between Holdings and Jefferies & Company, Inc. (2)

4.8         Security Agreement, dated April 1, 2003, by and among Barney's,
            Inc., Barneys America, Inc., Barneys (CA) Lease Corp., Barneys (NY)
            Lease Corp., Basco All-American Sportswear Corp., BNY Licensing
            Corp., Barneys America (Chicago) Lease Corp. and Wilmington Trust
            Company (2)

4.9         Security Agreement, dated April 1, 2003, by and between Holdings and
            Wilmington Trust Company (2)

4.10        Pledge Agreement, dated as of April 1, 2003, by and among Barney's,
            Inc., Barneys America, Inc., Barneys (CA) Lease Corp., Barneys (NY)
            Lease Corp., Basco All-American Sportswear Corp., BNY Licensing
            Corp., Barneys America (Chicago) Lease Corp. and Wilmington Trust
            Company (2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                               NAME OF EXHIBIT
-------                               ---------------
<S>         <C>
4.11        Pledge Agreement, dated as of April 1, 2003, by and among Holdings
            and Wilmington Trust Company (2)

4.12        Intellectual Property Security Agreement, dated as of April 1, 2003,
            by Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease Corp.,
            Barneys (NY) Lease Corp., Basco All-American Sportswear Corp., BNY
            Licensing Corp., Barneys America (Chicago) Lease Corp. and
            Wilmington Trust Company (2)

10.1        Credit Agreement, among Barney's, Inc., Barneys (CA) Lease Corp.,
            Barneys (NY) Lease Corp., Basco All-American Sportswear Corp., BNY
            Licensing Corp. and Barneys America (Chicago) Lease Corp., as
            Borrowers, the lenders party thereto, Citicorp USA, Inc. ("CUSA"),
            as Administrative Agent for such lenders, and General Electric
            Capital Corporation, as Documentation Agent (the "1999 Credit
            Agreement"), dated as of January 28, 1999 (1)

10.2        First Amendment to the 1999 Credit Agreement dated as of March 23,
            1999 (1)

10.3        Second Amendment to the 1999 Credit Agreement dated as of June 2,
            1999 (3)

10.4        Third Amendment to the 1999 Credit Agreement dated as of November
            30, 1999 (4)

10.5        Fourth Amendment to the 1999 Credit Agreement dated as of March 17,
            2000 (6)

10.6        Fifth Amendment to the 1999 Credit Agreement dated as of March 30,
            2001 (9)

10.7        Sixth Amendment to the 1999 Credit Agreement dated as of December
            12, 2001 (8)

10.8        Guarantee by Holdings in favor of CUSA as the Administrative Agent
            dated as of January 28, 1999 (1)

10.9        Security Agreement by Holdings in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)

10.10       Pledge Agreement by Holdings in favor of CUSA as the Administrative
            Agent dated as of January 28, 1999 (1)

10.11       Pledge Agreement by Barney's, Inc. in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)

10.12       Security Agreement by Barney's, Inc. in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)

10.13       Trademark Security Agreement by Barney's, Inc. and BNY Licensing
            Corp. in favor of CUSA as the Administrative Agent dated as of
            January 28, 1999 (1)

10.14       Cash Collateral Pledge Agreement by Barney's, Inc. in favor of CUSA
            as the Administrative Agent dated as of January 28, 1999 (1)

10.15       Pledge Agreement by Barneys America, Inc. in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)

10.16       Security Agreement by Barneys America, Inc. in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                               NAME OF EXHIBIT
-------                               ---------------
<S>         <C>
10.17       Security Agreement by PFP Fashions Inc. in favor of CUSA as the
            Administrative Agent dated as of January 28, 1999 (1)

10.18       Security Agreement by Barneys (CA) Lease Corp. in favor of CUSA as
            the Administrative Agent dated as of January 28, 1999 (1)

10.19       Security Agreement by Barneys (NY) Lease Corp. in favor of CUSA as
            the Administrative Agent dated as of January 28, 1999 (1)

10.20       Security Agreement by Basco All-American Sportswear Corp. in favor
            of CUSA as the Administrative Agent dated as of January 28, 1999 (1)

10.21       Security Agreement by Barneys America (Chicago) Lease Corp. in favor
            of CUSA as the Administrative Agent dated as of January 28, 1999 (1)

10.22       Security Agreement by BNY Licensing Corp. in favor of CUSA as
            Administrative Agent dated as of January 28, 1999 (1)

10.23       Subordinated Note issued by Barney's, Inc. and payable to Isetan of
            America, Inc. ("Isetan") dated January 28, 1999 (the "Isetan Note")
            (1)

10.24       Guarantee by Holdings of the Isetan Note dated January 28, 1999 (1)

10.25       Subordinated Note issued by Barney's, Inc. and payable to
            Bi-Equipment Lessors LLC, dated January 28, 1999 (the "Bi-Equipment
            Lessors Note") (1)

10.26       Guarantee by Holdings of the Bi-Equipment Lessors Note dated as of
            January 28, 1999 (1)

10.27       Security Agreement by Barney's, Inc. in favor of Bi-Equipment
            Lessors LLC dated as of January 28, 1999 (1)

10.28       License Agreement among Barney's, Inc., BNY Licensing Corp. and
            Barneys Japan Co. Ltd. dated as of January 28, 1999 (1)

10.29       Stock Option Plan for Non-Employee Directors effective as of March
            11, 1999 (1)*

10.30       Employee Stock Option Plan (7)*

10.31       Registration Rights Agreement by and among Holdings and the Holders
            party thereto dated as of January 28, 1999 (the "Registration Rights
            Agreement") (1)

10.32       Amendment No.1 dated as of February 1, 2000, to the Registration
            Rights Agreement (4)

10.33       Letter Agreement, dated January 28, 1999, among Bay Harbour,
            Whippoorwill, Isetan and Holdings (5)

10.34       Employment Agreement between Holdings and Howard Socol effective as
            of January 8, 2001 (9)*

10.35       First Amendment to Employment Agreement, effective as of January 10,
            2003, between Holdings and Howard Socol (2)*

10.36       Registration Rights Agreement between Holdings and Howard Socol
            dated as of January 8, 2001 (9)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                               NAME OF EXHIBIT
-------                               ---------------
<S>         <C>
10.37       Restricted Stock Award Agreement, dated February 2, 2003, between
            Holdings and Howard Socol (2)*

10.38       Option Award Agreement, dated January 8, 2001, between Holdings and
            Howard Socol (2)*

10.39       Credit Agreement, among Barney's Inc., Barneys America, Inc.,
            Barneys (CA) Lease Corp., Barneys (NY) Lease Corp., Basco
            All-American Sportswear Corp., BNY Licensing Corp. and Barneys
            America (Chicago) Lease Corp., as Borrowers, the Lenders party
            thereto, and General Electric Capital Corporation, as the
            Administrative Agent for such lenders ("GE Capital"), dated as of
            July 15, 2002 (the "2002 Credit Agreement") (10)

10.40       Guaranty by Holdings in favor of GE Capital, dated as of July 15,
            2002 (10)

10.41       Security Agreement by the Borrowers under the 2002 Credit Agreement,
            in favor of GE Capital, dated as of July 15, 2002 (10)

10.42       Pledge Agreement by the Borrowers under the 2002 Credit Agreement,
            in favor of GE Capital, dated as of July 15, 2002 (10)

10.43       Security Agreement by Holdings in favor of GE Capital, dated as of
            July 15, 2002 (10)

10.44       Pledge Agreement by Holdings in favor of GE Capital, dated as of
            July 15, 2002 (10)

10.45       Intellectual Property Security Agreement by the Borrowers under the
            2002 Credit Agreement, in favor of GE Capital, dated as of July 15,
            2002 (10)

10.46       First Amendment, dated as of April 1, 2003, to Security Agreement by
            the Borrowers under the 2002 Credit Agreement, in favor of GE
            Capital (2)

10.47       Purchase Agreement, dated March 26, 2003, by and among Holdings,
            Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease Corp.,
            Barneys (NY) Lease Corp., Basco All-American Sportswear Corp., BNY
            Licensing Corp., Barneys America (Chicago) Lease Corp. and Jefferies
            & Company, Inc. (2)

10.48       Restated Credit Agreement, dated as of April 1, 2003, among
            Barney's, Inc., Barneys America, Inc., Barneys (CA) Lease Corp.,
            Barneys (NY) Lease Corp., Basco All-American Sportswear Corp., BNY
            Licensing Corp., and Barneys America (Chicago) Lease Corp., as
            borrowers, the institutions party thereto from time to time as
            lenders, and General Electric Capital Corporation, for itself, as
            Lender, and as the Administrative Agent for such lenders (2)

10.49       Omnibus Amendment and Confirmation of Collateral Documents, dated as
            of April 1, 2003, by and among Holdings, Barney's, Inc., Barneys
            America, Inc., Barneys (CA) Lease Corp., Barneys (NY) Lease Corp.,
            Basco All-American Sportswear Corp., BNY Licensing Corp., and
            Barneys America (Chicago) Lease Corp., and General Electric Capital
            Corporation, as administrative agent for the lenders (2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                               NAME OF EXHIBIT
-------                               ---------------
<S>               <C>
10.50             First Amendment to License Agreement, dated as of February 5,
                  2003, by and between Barney's, Inc., BNY Licensing Corp. and
                  Barneys Japan Co., Ltd. (2)

21                Subsidiaries of the Registrant (2)

23                Consent of Independent Auditors (2)

31.1              Certification of Chief Executive Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002 (11)

31.2              Certification of Chief Financial Officer pursuant  to Section
                  302 of the Sarbanes-Oxley Act of 2002 (11)

32.1              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (11)

32.2              Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (11)

</TABLE>

(1)   Incorporated by reference to Holdings' Registration Statement on Form 10
      (the "Form 10") filed with the Securities and Exchange Commission (the
      "Commission") on June 1, 1999.

(2)   Filed with initially filed Form 10-K.

(3)   Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended May 1, 1999.

(4)   Incorporated by reference to Amendment No. 2 to the Form 10 filed with the
      Commission on February 15, 2000.

(5)   Incorporated by reference to Amendment No. 1 to the Form 10 filed with the
      Commission on October 13, 1999.

(6)   Incorporated by reference to Amendment No. 3 to the Form 10 filed with the
      Commission on April 21, 2000.

(7)   Incorporated by reference to Exhibit A to the Proxy Statement of Holdings
      for its annual meeting of Stockholders held on June 27, 2000.

(8)   Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended November 3, 2001.

(9)   Incorporated by reference to Holdings' Annual Report on Form 10-K for the
      year ended February 3, 2001.

(10)  Incorporated by reference to Holdings' Quarterly Report on Form 10-Q for
      the quarter ended August 3, 2002.

(11)  Filed with this Form 10-K/A

*     Management contracts or compensatory plans or arrangements.


(b)   Reports on Form 8-K - Holdings did not file any reports on Form 8-K during
      the quarter ended February 1, 2003.