SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

     For the quarter ended September 30, 2006

[_]  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 1-5893

                                MOVIE STAR, INC.
             (Exact name of Registrant as specified in its charter)

                New York                                 13-5651322
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                Identification Number)

           1115 Broadway, New York, N.Y.                    10010
   (Address of principal executive offices)               (Zip Code)

                                 (212) 684-3400
              (Registrant's telephone number, including area code)

              _____________________________________________________
              (Former name, former address, and former fiscal year,
                         if changed since last report.)

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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):

Large accelerated filer [_]  Accelerated filer [_]  Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act):

     Yes [_]   No [X]

The number of common shares outstanding on October 31, 2006 was 15,792,787.



                                MOVIE STAR, INC.
                           FORM 10-Q QUARTERLY REPORT
                                TABLE OF CONTENTS



                                                                                  PAGE

PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements

      Consolidated Condensed Balance Sheets at September 30, 2006 (Unaudited),
         June 30, 2006 (Audited) and September 30, 2005 (Unaudited)                3

      Consolidated Statements of Operations (Unaudited) for the
         Three Months Ended September 30, 2006 and 2005                            4

      Consolidated Condensed Statements of Cash Flows (Unaudited) for the
         Three Months Ended September 30, 2006 and 2005                          5 - 6

      Notes to Consolidated Condensed Unaudited Financial Statements             7 - 10

   Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations                               11 - 17

   Item 3.  Quantitative and Qualitative Disclosures About Market Risk             17

   Item 4.  Controls and Procedures                                                17

PART II.  OTHER INFORMATION                                                        18

   Item 1A. Risk Factors                                                           18

   Item 6.  Exhibits                                                               18

Signatures                                                                         18



                                       2



PART I.  FINANCIAL INFORMATION

   ITEM 1.  FINANCIAL STATEMENTS

                                MOVIE STAR, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                    (In Thousands, Except Share Information)



                                                                       September 30,   June 30,   September 30,
                                                                           2006         2006*         2005
                                                                       -------------   --------   -------------
                                                                        (Unaudited)                (Unaudited)

                                     Assets

Current Assets
   Cash                                                                   $     81     $    203      $    164
   Receivables, net                                                         15,530        6,074         7,930
   Inventory                                                                 9,644        8,981        11,052
   Deferred income taxes                                                     1,912        1,914         2,470
   Prepaid expenses and other current assets                                   419          801           710
                                                                          --------     --------      --------
      Total current assets                                                  27,586       17,973        22,326

Property, plant and equipment, net                                           1,048          838           726
Deferred income taxes                                                        3,068        3,296         2,473
Goodwill                                                                       537          537           537
Assets held for sale                                                           174          174           174
Other assets                                                                   425          403           458
                                                                          --------     --------      --------
      Total assets                                                        $ 32,838     $ 23,221      $ 26,694
                                                                          ========     ========      ========

                      Liabilities and Shareholders' Equity

Current Liabilities
   Note payable                                                           $ 14,278     $  4,955      $  8,298
   Current maturity of capital lease obligation                                 54         --            --
   Accounts payable and other current liabilities                            3,872        4,086         3,553
                                                                          --------     --------      --------
      Total current liabilities                                             18,204        9,041        11,851
                                                                          --------     --------      --------

Long-term liabilities                                                          464          398           501
                                                                          --------     --------      --------

Commitments and Contingencies                                                   --           --            --

Shareholders' equity
   Common stock, $.01 par value - authorized 30,000,000 shares;
      issued 17,783,000 shares in September 2006, 17,755,000 in June
      2006 and 17,679,000 in September 2005                                    178          178           177
   Additional paid-in capital                                                4,860        4,834         4,768
   Retained earnings                                                        12,727       12,361        12,990
   Accumulated other comprehensive income                                       23           27            25
   Less treasury stock, at cost--2,017,000 shares                           (3,618)      (3,618)       (3,618)
                                                                          --------     --------      --------
      Total shareholders' equity                                            14,170       13,782        14,342
                                                                          --------     --------      --------

Total liabilities and shareholders' equity                                $ 32,838     $ 23,221      $ 26,694
                                                                          ========     ========      ========


* Derived from audited financial statements.

See notes to consolidated condensed unaudited financial statements.


                                       3



                                MOVIE STAR, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                    (In Thousands, Except Per Share Amounts)

                                                        Three Months Ended
                                                          September  30,
                                                        ------------------
                                                          2006      2005
                                                        -------   --------
Net sales                                               $18,690   $ 13,637
Cost of sales                                            12,867      9,924
                                                        -------   --------
   Gross profit                                           5,823      3,713
Selling, general and administrative expenses              5,026      4,215
                                                        -------   --------
   Income (loss) from operations                            797       (502)
Interest expense                                            187        117
                                                        -------   --------
   Income (loss) before income tax (benefit)                610       (619)
Income tax (benefit)                                        244       (248)
                                                        -------   --------
   Net income (loss)                                    $   366   $   (371)
                                                        =======   ========
   BASIC NET INCOME (LOSS) PER SHARE                    $   .02   $   (.02)
                                                        =======   ========
   DILUTED NET INCOME (LOSS) PER SHARE                  $   .02   $   (.02)
                                                        =======   ========
Basic weighted average number of shares outstanding      15,763     15,660
                                                        =======   ========
Diluted weighted average number of shares outstanding    15,950     15,660
                                                        =======   ========

See notes to consolidated condensed unaudited financial statements.


                                       4



                                MOVIE STAR, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In Thousands)

                                                           Three Months Ended
                                                             September 30,
                                                           ------------------
                                                            2006        2005
                                                           -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                          $   366    $  (371)
   Adjustments to reconcile net income (loss) to net
      cash used in operating activities:
   Depreciation and amortization                                88         94
   Provision for sales allowances and doubtful accounts        390        611
   Stock-based compensation expense                              5          3
   Deferred income taxes                                       230       (210)
   Deferred lease liability                                     (4)         2
   Issuance of common stock for directors' fees                 21         18
(Increase) decrease in operating assets:
   Receivables                                              (9,846)    (2,563)
   Inventory                                                  (663)       678
   Prepaid expenses and other current assets                   388       (337)
   Other assets                                                (18)       (23)
Increase (decrease) in operating liabilities:
   Accounts payable and other liabilities                     (246)    (1,380)
                                                           -------    -------
   Net cash used in operating activities                    (9,289)    (3,478)
                                                           -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment                                        (138)       (45)
                                                           -------    -------
   Cash used in investing activities                          (138)       (45)
                                                           -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease obligation                         (18)        --
Proceeds from revolving line of credit, net                  9,323      3,504
                                                           -------    -------
   Cash provided by financing activities                     9,305      3,504
                                                           -------    -------
Effect of exchange rate changes on cash                         --          5
                                                           -------    -------
NET DECREASE IN CASH                                          (122)       (14)
CASH, beginning of period                                      203        178
                                                           -------    -------
CASH, end of period                                        $    81    $   164
                                                           =======    =======

                                                                        (Cont'd)


                                       5



                                MOVIE STAR, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In Thousands)



                                                                Three Months Ended
                                                                  September 30,
                                                                ------------------
                                                                  2006      2005
                                                                -------   --------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Cash paid during period for:
      Interest                                                    $110     $73
                                                                  ====     ===
      Income taxes                                                $  3     $ 4
                                                                  ====     ===
SUPPLEMENTAL DISCLOSURES OF NONCASH
   INVESTING ACTIVITIES:
   Acquisition of equipment, software and maintenance
      contract through assumption of capital lease obligation     $170     $--
                                                                  ====     ===


                                                                     (Concluded)

See notes to consolidated condensed unaudited financial statements.


                                       6



                                MOVIE STAR, INC.
         NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS

1.   INTERIM FINANCIAL STATEMENTS

     In the opinion of the Company, the accompanying consolidated condensed
     unaudited financial statements contain all adjustments (consisting of
     normal recurring accruals) necessary to present fairly the financial
     position as of September 30, 2006 and the results of operations and cash
     flows for the three months ended September 30, 2006 and 2005.

     The consolidated condensed financial statements and notes are presented as
     required by Form 10-Q and do not contain certain information included in
     the Company's year-end financial statements. The June 30, 2006 consolidated
     condensed balance sheet was derived from the Company's audited financial
     statements. The results of operations for the three months ended September
     30, 2006 are not necessarily indicative of the results to be expected for
     the full year. This Form 10-Q should be read in conjunction with the
     Company's financial statements and notes included in the 2006 Annual Report
     on Form 10-K.

2.   STOCK OPTIONS

     The Company accounts for its stock-based employee compensation arrangements
     under SFAS 123 (revised 2004), "Share Based Payment" ("SFAS 123R") which
     requires companies to recognize the cost of employee services received in
     exchange for awards of equity instruments, based on the grant date fair
     value of those awards, in the financial statements. There were no stock
     options granted during the three months ended September 30, 2006 or 2005.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

     In September 2006, the FASB issued SFAS 157 "Fair Value Measures" ("SFAS
     157"). SFAS 157 defines fair value, establishes a framework for measuring
     fair value, and expands disclosures about fair value measurements. This
     statement applies under other accounting pronouncements that require or
     permit fair value measurements, however it does not apply to SFAS 123R.
     This Statement shall be effective for financial statements issued for
     fiscal years beginning after November 15, 2007, and interim periods within
     those fiscal years. Earlier application is encouraged, provided that the
     reporting entity has not yet issued financial statements for that fiscal
     year, including any financial statements for an interim period within that
     fiscal year. The provisions of this statement should be applied
     prospectively as of the beginning of the fiscal year in which this
     Statement is initially applied, except in some circumstances where the
     statement shall be applied retrospectively. The Company is currently
     evaluating the effect, if any, of SFAS 157 on its financial statements.


                                        7



4.   INVENTORY

     Inventory consists of the following (in thousands):

                                 September 30,   June 30,   September 30,
                                     2006          2006         2005
                                 -------------   --------   -------------
Raw materials                       $1,443        $1,279       $ 1,309
Work-in process                        289           281           292
Finished goods                       7,912         7,421         9,451
                                    ------        ------       -------
                                    $9,644        $8,981       $11,052
                                    ======        ======       =======

5.   NOTE PAYABLE

     Effective June 30, 2006, the Company secured a new line of credit with a
     financial institution. This line of credit matures on June 30, 2008 and is
     subject to annual renewals thereafter. Under this line of credit, the
     Company may borrow in the aggregate, revolving loans and letters of credit,
     up to $30,000,000. As of September 30, 2006, the Company had outstanding
     borrowings of $14,278,000 under the facility and had approximately
     $2,557,000 of outstanding letters of credit. Availability under this line
     of credit is subject to the Company's compliance with certain financial
     formulas as outlined in the agreement. As of September 30, 2006, the
     Company was in compliance. Pursuant to the terms of this line of credit,
     the Company pledged substantially all of its assets. Interest on
     outstanding borrowings is payable at a variable rate per annum equal to
     JPMorgan Chase Bank's prime rate less 0.75 percent (7.50 percent as of
     September 30, 2006).

6.   NET INCOME (LOSS) PER SHARE

     Basic net income (loss) per share has been computed by dividing the
     applicable net income (loss) by the weighted average number of shares
     outstanding. Diluted net income (loss) per share has been computed by
     dividing the applicable net loss by the weighted average number of shares
     outstanding and common equivalents.

     The Company's calculation of basic and diluted net (loss) income per share
     are as follows (in thousands, except per share amounts):

                                                           Three Months Ended
                                                              September 30,
                                                           ------------------
                                                            2006       2005
                                                           -------   --------
BASIC:
Net income (loss)                                          $   366   $   (371)
                                                           =======   ========
Basic weighted average number of shares outstanding         15,763     15,660
                                                           =======   ========
Basic net income (loss) per share                          $   .02   $   (.02)
                                                           =======   ========
DILUTED:
Net income (loss)                                          $   366   $   (371)
                                                           =======   ========
Weighted average number of shares outstanding               15,763     15,660
   Shares issuable upon conversion of stock options            164         --
   Shares issuable upon conversion of warrants                  23         --
                                                           -------   --------
Total average number of equivalent shares outstanding       15,950     15,660
                                                           =======   ========
Diluted net income (loss) per share                        $   .02   $   (.02)
                                                           =======   ========

                                        8



     For the three months ended September 30, 2005, shares issuable upon
     conversion of stock options and warrants of 162,000, at prices ranging from
     $.4375 to $.6875 per share, were not included in the computation of diluted
     net income (loss) per share since they would be considered antidilutive.

7.   CLOSING OF DISTRIBUTION FACILITY

     During fiscal year ended June 30, 2005, the Company recorded facility
     closing costs of $108,000, which included severance and related salary and
     benefit costs of $58,000, relating to a plan to close the distribution
     facility in Petersburg, Pennsylvania. The action was taken by the Company
     to enhance the Company's competitiveness, to reduce expenses and to improve
     efficiencies. During fiscal 2005, the Company reclassified certain property
     and equipment at its Petersburg, Pennsylvania facility to assets held for
     sale.

     On August 14, 2006, the Company entered into a contract for the sale of the
     land, building and contents of the Petersburg distribution facility. On
     October 17, 2006, the Company completed the sale of the distribution
     facility for $670,000 in cash. As a result of the transaction, the Company
     will record a pre-tax gain of approximately $482,000, net of related costs,
     in the second quarter of fiscal 2007.

8.   SEGMENT REPORTING

     The Company operates in one segment with revenues generated in the United
     States and Canada as follows (in thousands):

                         Three Months Ended
                            September 30,
                         ------------------
                           2006      2005
                         -------   -------
Net Sales
   United States         $18,494   $13,135
   Canada                    196       502
                         -------   -------
                         $18,690   $13,637
                         =======   =======

9.   COMMITMENTS AND CONTINGENCIES

     Employment Agreement - On October 3, 2006, the Company entered into an
     amended and restated employment agreement with Melvyn Knigin, pursuant to
     which Mr. Knigin will continue to be employed as the Company's President
     and Chief Executive Officer until June 30, 2009 ("Initial Term") and will
     then serve as the Company's Senior Vice President of Global Wal-Mart
     Corporate Sales from July 1, 2009 until June 30, 2011 ("Additional Term").
     Mr. Knigin's employment agreement provides that he will receive a base
     salary of $575,000 per year during the Initial Term and a base salary of
     $280,000 per year during the Additional Term. Mr. Knigin is also entitled
     to receive an annual bonus during the Initial Term under the Company's 1998
     Senior Executive Incentive Plan equal to 3% of the Company's net income
     before taxes and before calculation of all bonuses for each fiscal year
     during the Initial Term ("Net Income") in excess of $1,200,000 and up to
     $3,200,000, and equal to 3.75% of Net Income in excess of $3,200,000.
     During the Additional Term, Mr. Knigin will be entitled to receive an
     annual bonus equal to the excess of 1.5% ("Bonus Percentage") of Wal-Mart
     Net Sales (as defined in the employment agreement) over Mr. Knigin's


                                        9



     annual base salary. The Bonus Percentage will be increased or decreased for
     each year during the Additional Term in which the Company's gross margin
     for Wal-Mart Net Sales during such period exceeds or is less than the
     blended average gross margin for Wal-Mart Net Sales for the three fiscal
     years ending June 30, 2007, 2008 and 2009.

     In addition to his base salary, the Company granted Mr. Knigin a ten-year
     option to purchase 500,000 shares of the Company's common stock under the
     Company's Amended and Restated 1988 Stock Option Plan at an exercise price
     of $1.00 per share, 125,000 shares of which will vest on each of (i) the
     date of grant, (ii) the six-month anniversary of the date of grant, (iii)
     the first anniversary of the date of grant and (iv) the second anniversary
     of the date of grant.

     Additionally, on each of July 1, 2007 and 2008, provided that Mr. Knigin is
     employed by the Company on each such date (except as otherwise set forth in
     the employment agreement), the Company will issue Mr. Knigin shares of
     restricted stock equal to the number of shares of the Company's common
     stock determined by dividing $25,000 by the last sale price of a share of
     the Company's common stock on each such date. All such shares will vest on
     June 30, 2009.


                                       10



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD LOOKING STATEMENTS

When used in this Form 10-Q and in our future filings with the Securities
Exchange Commission, the words or phrases "will likely result," "management
expects" or "we expect," "will continue," "is anticipated," "estimated" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. We have no obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect anticipated or unanticipated events or circumstances
occurring after the date of such statements.

Such statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. These risks are included in "Item 1: Business," "Item
1A: Risk Factors" and "Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's Form 10-K for the fiscal
year ended June 30, 2006. In assessing forward-looking statements contained
herein, readers are urged to carefully read those statements. Among the factors
that could cause actual results to differ materially are: business conditions
and growth in our industry; general economic conditions; the addition or loss of
significant customers; the loss of key personnel; product development;
competition; foreign government regulations; fluctuations in foreign currency
exchange rates; rising costs of raw materials and the unavailability of sources
of supply; and the timing of orders placed by our customers.

OVERVIEW

The intimate apparel business is a highly competitive industry. The industry is
characterized by a large number of small companies selling unbranded
merchandise, and by several large companies that have developed widespread
consumer recognition of the brand names associated with the merchandise sold by
these companies. In addition, retailers to whom we sell our products have sought
to expand the development and marketing of their own brands and to obtain
intimate apparel products directly from the same or similar sources from which
we obtain our products.

The intimate apparel business for department stores, specialty stores and
regional chains is broken down into four selling seasons per year. For each
selling season, we create a new line of products that represent our own brand
name Cinema Etoile(R). Our brand name does not have widespread consumer
recognition, although it is well known by our customers. We sell our brand name
products primarily during these selling seasons. We also develop specific
products for some of our larger accounts, mass merchandisers and national
chains, and make between five and eight presentations throughout the year to
these accounts. We do not have long-term contracts with any of our customers and
therefore our business is subject to unpredictable increases and decreases in
sales depending upon the size and number of orders that we receive each time we
present our products to our customers.

Hurricane Katrina impacted our business operations during the quarter ended
September 30, 2005 and, to a lesser extent, the quarter ended December 31, 2005.
Our distribution center in Poplarville, Mississippi was forced to close from
August 29th to September 6th as a result of the hurricane. Operations at the
Poplarville distribution facility resumed once power was restored to the
facility on September 6th.


                                       11



Because some of our employees were unable to return to work, the facility
operated at less than full capacity until the middle of October 2005. In an
effort to reduce the impact of this problem, we diverted some of our inventory
to a public warehouse operation in Los Angeles, California and to our
Petersburg, Pennsylvania distribution center, which we closed during the fourth
quarter of fiscal 2005. We reopened this facility until December 31, 2005 to
assist with shipping our goods to customers. However, notwithstanding our best
efforts, some orders were delayed and were shipped in the second quarter of
fiscal 2006 instead of the first quarter. We have resolved all of our insurance
claims relating to hurricane Katrina. The claim for our loss of inventory was
resolved in the third quarter of fiscal 2006 and did not result in any
significant financial adjustment. The claim for the physical damage to our
distribution facilities also was resolved in the third and fourth quarter of
fiscal 2006 and resulted in a gain of $1,450,000. The final claim of additional
expenses incurred was resolved in the fourth quarter of fiscal 2006 and did not
have a material impact on our results of operations.

We began fiscal 2007 with a significantly increased level of open orders and,
therefore, we expect sales for the first half of fiscal 2007 to be higher than
the first half of fiscal 2006. We have added a new knit sleepwear line that was
introduced at our recent August market which was well received by our customers.
This new product line, called Cinema Studio(TM), has broadened our product
offerings and has increased the amount of product that our customers may buy
from us. At September 30, 2006, our backlog of orders was approximately
$33,159,000 as compared to $24,155,000 at September 30, 2005.

We have been and we are continuing the exploration of our strategic alternatives
to maximize shareholder value, including discussions with a private apparel
company with respect to a possible combination of the companies. TTG Apparel,
LLC, which beneficially owns 22.4% of our outstanding common stock, is the
majority stockholder of the private company. Consequently, we established a
special committee of independent directors to review this possible transaction
and to consider our other strategic alternatives. We caution that no assurances
can be made that the exploration of strategic alternatives, including the
discussions with the private apparel company, will result in a transaction.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the appropriate
application of certain accounting policies, many of which require estimates and
assumptions about future events and their impact on amounts reported in the
financial statements and related notes. Since future events and their impact
cannot be determined with certainty, the actual results will inevitably differ
from our estimates. Such differences could be material to the financial
statements.

Management believes the application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly re-evaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, management has found the
application of accounting policies to be appropriate, and actual results
generally do not differ materially from those determined using necessary
estimates.

Our accounting policies are more fully described in Note 1 to the consolidated
financial statements in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2006. Management has identified certain critical accounting policies
that are described below.

Inventory - Inventory is carried at the lower of cost or market on a first-in,
first-out basis. Management writes down inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand, market
conditions and the age of the inventory. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required. Historically,


                                       12



management has found that its write-down of inventory has been appropriate, and
actual results generally do not differ materially from those determined using
necessary estimates. Inventory reserves were $1,015,000 at September 30, 2006
and June 30, 2006, and $900,000 at September 30, 2005.

Allowance for Doubtful Accounts/Sales Discounts - Accounts receivable is net of
allowance for doubtful accounts and sales discounts. An allowance for doubtful
accounts is determined through the analysis of the aging of accounts receivable
at the date of the financial statements. An assessment of the accounts
receivable is made based on historical trends and an evaluation of the impact of
economic conditions. This amount is not significant primarily due to our history
of minimal bad debts. An allowance for sales discounts is based on those
discounts relating to open invoices where trade discounts have been extended to
customers and costs associated with potential returns of products as well as
allowable customer markdowns and operational charge backs, net of expected
recoveries. These allowances are included as a reduction to net revenue and are
part of the provision for allowances included in accounts receivable. These
provisions result from seasonal negotiations as well as historic deduction
trends, net of expected recoveries and the evaluation of current market
conditions. As of September 30, 2006, June 30, 2006 and September 30, 2005,
accounts receivable was net of allowances of $1,340,000, $950,000 and
$1,736,000, respectively. Historically, management has found its allowance for
doubtful accounts and sales discounts to be appropriate, and actual results
generally do not differ materially from those determined using necessary
estimates. However, if the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required and if market conditions were to decline,
management may take actions to increase customer incentive offerings possibly
resulting in an incremental allowance at the time the incentive is offered.

Deferred Tax Valuation Allowance - In assessing the need for a deferred tax
valuation allowance, we consider future taxable income and ongoing prudent and
feasible tax planning strategies. Since we were able to determine that we should
be able to realize our deferred tax assets in the future, a deferred tax asset
valuation allowance was not deemed necessary. Likewise, should we determine that
we would not be able to realize all or part of our net deferred tax asset in the
future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made.

The following table shows each specified item as a dollar amount and as a
percentage of net sales in each fiscal period, and should be read in conjunction
with the consolidated financial statements included elsewhere in this Form 10-Q
(in thousands, except for percentages):



                                                       Three Months ended
                                                           September 30,
                                               ---------------------------------
                                                     2006              2005
                                               ---------------   ---------------

Net sales                                      $18,690   100.0%  $13,637   100.0%
Cost of sales                                   12,867    68.8%    9,924    72.8%
                                               -------   -----   -------   -----
   Gross profit                                  5,823    31.2%    3,713    27.2%
Selling, general and administrative expenses     5,026    26.9%    4,215    30.9%
                                               -------   -----   -------   -----
  Income (loss) from operations                    797     4.3%     (502)   (3.7)%
Interest expense                                   187     1.0%      117     0.9%
                                               -------   -----   -------   -----
  Income (loss) before income tax (benefit)        610     3.3%     (619)   (4.5)%
Income tax (benefit)                               244     1.3%     (248)   (1.8)%
                                               -------   -----   -------   -----
Net income (loss)                              $   366     2.0%  $  (371)   (2.7)%
                                               =======   =====   =======   =====
Percent amounts may not add due to rounding



                                       13



RESULTS OF OPERATIONS

Net sales for the three months ended September 30, 2006 increased $5,053,000, or
37.1%, to $18,690,000 from $13,637,000 in the comparable period in 2005. This
increase was primarily due to an increase in shipments to our largest account,
partially offset by a net overall decrease in shipments to other accounts. Also
in the prior year, due to hurricane Katrina, certain orders that would have been
shipped in the first quarter were shipped in the second quarter.

The gross profit percentage increased to 31.2% for the three months ended
September 30, 2006 from 27.2% in the same period in the prior year. The higher
overall margin resulted from a better product mix in the current year, creating
a higher initial gross margin and lower markdowns and charge backs in the
current year. Also, in the prior year, we had additional costs related to
hurricane Katrina.

As a result of differences between the accounting policies of companies in the
industry relating to whether certain items of expense are included in cost of
sales rather than recorded as selling expenses, the reported gross profits of
different companies, including our own, may not be directly compared. For
example, we record the costs of preparing merchandise for sale, including
warehousing costs and shipping and handling costs, as a selling expense, rather
than a cost of sale. Therefore, our gross profit is higher than it would be if
such costs were included in cost of sales.

Selling, general and administrative expenses were $5,026,000, or 26.9% of net
sales, for the three months ended September 30, 2006, as compared to $4,215,000,
or 30.9% of net sales, for the same period in the prior year. This increase of
$811,000 resulted primarily from an increase in professional fees of $540,000,
salary and salary related expenses of $158,000, shipping expense and shipping
related costs of $67,000, bad debts of $50,000 and a net overall increase in
other selling, general and administrative expenses, partially offset by a
hurricane Katrina related expense in the prior year of $61,000. The increase in
professional fees was due to our continuing exploration of our strategic
alternatives to maximize shareholder value, including discussions with a private
apparel company with respect to a possible combination of the companies. TTG
Apparel, LLC, which beneficially owns 22.4% of our outstanding common stock, is
the majority stockholder of the private company. Consequently, we established a
special committee of independent directors to consider our strategic
alternatives and this particular transaction. The special committee has retained
a financial advisor, Chanin Capital Partners, and legal counsel. We caution that
no assurances can be made that the exploration of strategic alternatives,
including the discussions with the private apparel company, will result in a
transaction. The increase in salary expense and salary related expenses was the
result of changes in the composition of personnel. The increase in shipping
expense and shipping related costs was the result of higher sales. The increase
in bad debts resulted from two customers filing for bankruptcy protection. The
hurricane related expenses in the prior year were related to hurricane Katrina
discussed earlier.

We had income from operations of $797,000 for the three months ended September
30, 2006 compared to a loss from operations of $502,000 for the same period in
the prior year. This improvement was due to higher sales and a higher gross
margin partially offset by higher selling, general and administrative expenses.

Interest expense for the three months ended September 30, 2006 increased by
$70,000 to $187,000 from $117,000 for the same period in the prior year. This
increase was due primarily to higher interest rates and to a lesser extent
higher borrowing levels.

We recorded a provision for income taxes of $244,000 for the three months ended
September 30, 2006 compared to an income tax benefit of $248,000 for the same
period in 2005. We utilized an estimated income tax rate of approximately 40% in
both periods.


                                       14



NET INCOME/LOSS

We had net income of $366,000 for the three months ended September 30, 2006
compared to a net loss of $371,000 for the same period in the prior year. This
improvement was due to higher sales and higher gross margins, partially offset
by higher selling, general and administrative expenses, an increase in interest
expense and an income tax expense in the current year as compared to an income
tax benefit in the prior year.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES

During the three months ended September 30, 2006, cash decreased by $122,000 to
$81,000 from $203,000 at June 30, 2006. We used $9,289,000 of cash in our
operations, $138,000 for the purchase of fixed assets and $18,000 for the
repayment of capital lease obligations. Net proceeds of $9,323,000 from
short-term borrowings primarily funded these activities.

Receivables, net of allowances, at September 30, 2006 increased by $9,456,000 to
$15,530,000 from $6,074,000 at June 30, 2006. This increase was due to a
$10,495,000 increase in sales in the quarter ended September 30, 2006 as
compared to sales for the quarter ended June 30, 2006.

Inventory at September 30, 2006 increased by $663,000 to $9,644,000 from
$8,981,000 at June 30, 2006. This increase was due to normal inventory
fluctuations.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

To facilitate an understanding of our contractual obligations and commercial
commitments, the following data is provided (in thousands):



                                                    Payments Due by Period
                                          -----------------------------------------
                                          Within                            After 5
                                 Total    1 Year    2-3 Years   4-5 Years   Years
                                -------   -------   ---------   ---------   -------

Contractual Obligations
Note Payable (1)                $14,278   $14,278     $   --      $   --      $--
Note Payable Interest (2)         1,071     1,071         --          --       --
Capital Lease Obligation            152        54         98
Licensing Agreement                 228       180         48          --       --
Operating Leases                  5,669     1,298      2,619       1,752       --
Consulting Agreements               113       113         --          --       --
Employment Contracts (3)          3,380     1,137      1,753         490       --
Long-term Liability                  70        12         26          31        1
                                -------   -------     ------      ------      ---
Total Contractual Obligations   $24,961   $18,143     $4,544      $2,273      $ 1
                                =======   =======     ======      ======      ===



                                       15





                                                         Amount of Commitment
                                                        Expiration Per Period
                                              ---------------------------------------
                                   Total
                                   Amounts    Within                          After 5
                                  Committed    1Year   2-3 Years   4-5Years    Years
                                  ---------   ------   ---------   --------   -------

Other Commercial Commitments
Letters of Credit                   $2,557    $2,557       $--        $--       $--
                                    ------    ------       ---        ---       ---
Total Commercial Commitments        $2,557    $2,557       $--        $--       $--
                                    ======    ======       ===        ===       ===


(1)  Note Payable is a less than one-year obligation because the financial
     institution may demand payment at any time. Interest on outstanding
     borrowings is payable at a variable rate per annum, equal to the prime rate
     less 0.75%.

(2)  Note Payable Interest assumes that the principal amount outstanding on our
     line of credit is paid in full on September 30, 2007, that the principal
     amount to be repaid on that date will be $14,278,000 and that the interest
     rate will be 7.50% (our current borrowing rate at September 30, 2006).

(3)  Includes contracts that were executed subsequent to September 30, 2006.

The Company has no obligations that have a provision for increased or
accelerated payments.

NOTE PAYABLE

Effective June 30, 2006, we obtained a new revolving line of credit of up to
$30,000,000. The revolving line of credit expires on June 30, 2008 and is
sufficient for our projected needs for operating capital and letters of credit
to fund the purchase of imported goods through June 30, 2008. Direct borrowings
under this line bear interest at the prime rate less three quarters of one
percent per annum. Availability under the line of credit is subject to our
compliance with certain agreed upon financial formulas. We were in compliance
with our lender at September 30, 2006. This line of credit is secured by
substantially all of our assets.

FUTURE FINANCING REQUIREMENTS

For the three months ended September 30, 2006, our working capital increased by
$450,000 to $9,382,000, primarily due to income from operations.

We believe the available borrowing under our secured revolving line of credit,
along with anticipated operating cash flows, will be sufficient to cover our
working capital requirements through June 30, 2008.

On August 14, 2006, we entered into a contract for the sale of the land,
building and contents of the Petersburg distribution facility. On October 17,
2006, we completed the sale of the distribution facility for $670,000 in cash.

We anticipate that capital expenditures for fiscal 2007 will be less than
$700,000.

OFF-BALANCE SHEET ARRANGEMENTS

We have not created, and are not party to, any special-purpose or off-balance
sheet entities for the purpose of raising capital, incurring debt or operating
our business. We do not have any arrangements or relationships with entities
that are not consolidated into our financial statements that are reasonably
likely to materially affect our liquidity or the availability of capital
resources.

EFFECT OF NEW ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS 157 "Fair Value Measures" ("SFAS 157").
SFAS 157 defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair


                                       16



value measurements. This statement applies under other accounting pronouncements
that require or permit fair value measurements, however it does not apply to
SFAS 123R. This Statement shall be effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. Earlier application is encouraged, provided that the reporting
entity has not yet issued financial statements for that fiscal year, including
any financial statements for an interim period within that fiscal year. The
provisions of this statement should be applied prospectively as of the beginning
of the fiscal year in which this Statement is initially applied, except in some
circumstances where the statement shall be applied retrospectively. We are
currently evaluating the effect, if any, of SFAS 157 on its financial
statements.

INFLATION

We do not believe that our operating results have been materially affected by
inflation during the preceding three years. There can be no assurance, however,
that our operating results will not be affected by inflation in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to changes in the prime rate based on the Federal Reserve actions
and general market interest fluctuations. We believe that moderate interest rate
increases will not have a material adverse impact on our results of operations,
or financial position, in the foreseeable future. For the three months ended
September 30, 2006, borrowings peaked during the period at $14,278,000 and the
average amount of borrowings was $8,935,000.

IMPORTS

Transactions with our foreign manufacturers and suppliers are subject to the
risks of doing business abroad. Our import and offshore operations are subject
to constraints imposed by agreements between the United States and a number of
foreign countries in which we do business. These agreements impose quotas on the
amount and type of goods that can be imported into the United States from these
countries. Such agreements also allow the United States to impose, at any time,
restraints on the importation of categories of merchandise that, under the terms
of the agreements, are not subject to specified limits. Our imported products
are also subject to United States customs duties and, in the ordinary course of
business, we are from time to time subject to claims by the United States
Customs Service for duties and other charges. The United States and other
countries in which our products are manufactured may, from time to time, impose
new quotas, duties, tariffs or other restrictions, or adversely adjust presently
prevailing quotas, duty or tariff levels, which could adversely affect our
operations and our ability to continue to import products at current or
increased levels. We cannot predict the likelihood or frequency of any such
events occurring.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of the effectiveness of our disclosure controls and procedures as
of September 30, 2006 was made under the supervision and with the participation
of our management, including the chief executive officer and chief financial
officer. Based on that evaluation, they concluded that our disclosure controls
and procedures are effective to ensure that information we are required to
disclose by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms. During
the most recently completed fiscal quarter, there has been no change in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


                                       17



PART II OTHER INFORMATION

Item 1A - Risk Factors.

     There are no material changes from the risk factors set forth in Item 1A
     "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended
     June 30, 2006. Please refer to that section for disclosures regarding the
     risk and uncertainties in our business.

Item 6 - (a) Exhibits

             31.1   Certification by Chief Executive Officer.

             31.2   Certification by Principal Financial and Accounting Officer.

              32    Section 1350 Certification.

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                        MOVIE STAR, INC.


                                        By: /s/ Melvyn Knigin
                                           -------------------------------------
                                           MELVYN KNIGIN
                                           President and Chief Executive Officer


                                        By: /s/ Thomas Rende
                                           -------------------------------------
                                           THOMAS RENDE
                                           Chief Financial Officer and
                                           Principal Accounting Officer

November 13, 2006


                                       18