SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

For the quarter ended March 31, 1998


       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)

                 136 Madison Avenue, New York, N.Y.  10016
---------------------------------------------------------------------
      (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  __

The number of common shares outstanding on April 30, 1998 was 14,116,982.


<PAGE>

                                MOVIE STAR, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
                                                   March 31,          June 30,
                                                    1998                 1997*
                                                 -----------          -------- 
                                                 (Unaudited)
                                     Assets
Current assets
  Cash                                            $ 5,425             $ 3,035
  Receivables, net of allowances                    6,978               4,147
  Inventory (note 3)                               14,079              16,638
  Deferred income taxes                             2,291               2,291
  Prepaid expenses and other
   current assets                                     403                 205
                                                   -------             -------

         Total current assets                      29,176              26,316
                         
Property, plant and equipment (net) (note 5)        3,554               4,262
Other assets (note 6)                                 935               1,661
Deferred income taxes                               1,718               1,718
                                                   -------             -------

         Total assets                             $35,383             $33,957
                                                  =======             =======

                      Liabilities and Stockholders' Equity

Current liabilities
  Current maturities of long-term debt            $    52             $    73
  Accounts payable and accrued expenses             8,644               7,607
                                                  -------             -------
         Total current liabilities                  8,696               7,680
                                                  -------             -------

Long-term debt                                     20,985              22,336
                                                  -------             -------
Commitments and Contingencies                         -                  -

Stockholders' equity
  Common stock                                        161                160
  Additional paid-in capital                        3,789              3,731
  Retained earnings                                 5,370              3,668
                                                  -------            -------
                                                    9,320              7,559

 Less: Treasury stock, at cost                      3,618              3,618
                                                  -------            -------

         Total stockholders' equity                 5,702              3,941
                                                  -------            -------

Total liabilities and stockholders' equity        $35,383            $33,957
                                                  =======            =======


* Derived from audited financial statements.

See notes to consolidated condensed financial statements.


<PAGE>


                                MOVIE STAR, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                     Three Months Ended      Nine Months Ended
                                                            March 31,            March 31,
                                                      1998         1997       1998      1997
                                                    -------      --------    -------  -------
<S>                                                 <C>          <C>        <C>        <C>    
Net sales                                           $12,918      $13,089    $50,857    $48,116

Cost of sales (note 3)                                9,134        9,554     36,300     35,551
                                                    -------      -------    -------     -------

Gross profit                                          3,784        3,535     14,557     12,565

Selling, general and administrative expenses          3,400        3,212     10,967     10,075
                                                    -------      -------    -------    -------

Income from operations                                  384          323      3,590      2,490

Gain on purchases of subordinated debentures
  and senior notes (note 4)                             (59)           -       (157)      (560)

Interest expense                                        566          652      2,045      2,161
                                                    -------      -------     -------    -------

Net income (loss)                                   $  (123)     $  (329)   $ 1,702    $   889
                                                    =======      ========   ========   =======

Basic net income (loss) per share (note 7)            $(.01)       $(.02)      $.12       $.06
                                                      ======        =====      ====       ====
Dilutive net income (loss) per share (note 7)         $(.01)       $(.02)      $.11       $.06
                                                      ======        =====      ====       ====

Basic weighted average number of shares
 outstanding (note 7)                                14,117       13,960     14,029     13,960
                                                     ======       ======     ======     ======
</TABLE>







See notes to consolidated condensed financial statements.


<PAGE>


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


<TABLE>
<CAPTION>
                                                                              Nine Months Ended March 31,
                                                                              --------------------------
                                                                                1998              1997
                                                                              ---------        ---------
<S>                                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                  $ 1,702           $   889
  Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation and amortization                                                467               546
     Gain on purchases of subordinated debentures and
      senior notes                                                               (157)             (560)
   (Increase) decrease in operating assets:
     Receivables                                                               (2,831)             (266)
     Inventory                                                                  2,559             1,094
     Prepaid expenses and other current assets                                   (198)              (36)
     Other assets                                                                 (63)               78
   Increase (decrease)in operating liabilities:
     Accounts payable and accrued expenses                                      1,037              (494)
                                                                               -------            -------

          Net cash provided by operating activities                             2,516              1,251
                                                                               -------            -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                                     (107)              (113)
  Proceeds from sale of property, plant and equipment                             500                  -
  Proceeds from sale of other assets (interest in building)                       619                  -
                                                                               -------            -------

          Net cash provided by (used in)
           investing activities                                                 1,012               (113)
                                                                               -------            -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on and purchases of long-term debt
   and capital lease obligations                                               (1,138)              (588)
                                                                               -------            -------

         Net cash used in financing activities                                 (1,138)              (588)
                                                                               -------            -------

NET INCREASE IN CASH                                                            2,390                550
CASH, beginning of period                                                       3,035              2,283
                                                                              -------             -------

CASH, end of period                                                           $ 5,425            $ 2,833
                                                                              =======             =======
</TABLE>




(Cont'd)




<PAGE>


                                MOVIE STAR, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                                     Nine Months Ended March 31,
                                                                                      1998                1997
                                                                                     ------             --------
<S>                                                                                 <C>                 <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
   Cash paid during period for:
     Interest                                                                       $1,478               $1,072
                                                                                    ======               ======
     Income taxes (net of refunds received)                                         $   13               $   42
                                                                                    ======               ======



SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
   Conversion of long-term debt for common stock                                    $  (59)              $    -
   Issuance of common stock                                                             59                    -
                                                                                    -------               ------
                                                                                    $    -               $    -
                                                                                    =======              =======

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
   Increase in long-term debt for interest paid in kind                             $    -               $  217
   Decrease in accrued liabilities for interest paid in kind                             -                 (217)
                                                                                    ------                ------
                                                                                    $    -               $    -
                                                                                    =======              =======
                                                                                                       (Concluded)
</TABLE>



See notes to consolidated condensed financial statements.



<PAGE>


                                MOVIE STAR, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



1.   In the opinion of the  Company,  the  accompanying  consolidated  condensed
     financial  statements  contain all  adjustments  (consisting of only normal
     recurring  accruals)  necessary to present fairly the financial position as
     of March 31, 1998 and the  results of  operations  for the interim  periods
     presented and cash flows for the nine months ended March 31, 1998 and 1997,
     respectively.

     The condensed  consolidated 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  consolidated  financial  statements.  The year-end
     condensed consolidated balance sheet was derived from the Company's audited
     financial statements. This Form 10-Q should be read in conjunction with the
     Company's  consolidated financial statements and notes included in the 1997
     Annual Report on Form 10-K.

2.   The results of  operations  for the three and nine  months  ended March 31,
     1998 are not  necessarily  indicative of the results to be expected for the
     full year.

3.   Certain items included in these  statements are based upon  estimates.  The
     cost of sales is determined  utilizing  estimated  gross profit rates.  The
     calculation  of the  actual  cost of sales is  predicated  upon a  physical
     inventory taken at the end of each fiscal year.

     An approximate breakdown of the inventory is as follows (in thousands):

                                                       March 31,     June 30,
                                                         1998           1997
                                                       --------      --------

    Raw materials                                      $  4,450     $  5,503
    Work-in-process                                       1,479        2,806
    Finished goods                                        8,150        8,329
                                                       --------      -------
                                                        $14,079      $16,638
                                                       ========      =======


4.   In October 1997, the Company purchased  $500,000 in principal amount of its
     12.875%  subordinated  debentures.  As a  result  of the  transaction,  the
     Company  recorded a pre-tax gain of $94,000,  net of related costs,  in the
     second quarter of fiscal 1998.

     In November 1997, the Company purchased $300,000 in principal amount of its
     8% convertible  senior notes.  These notes entitled the previous holders to
     convert the principal  amount into 800,000  shares of the Company's  common
     stock. As a result of the transaction,  the Company recorded a pre-tax gain
     of $4,000, net of related costs, in the second quarter of fiscal 1998.

     In  February  1998 and March  1998,  the  Company  purchased  $156,000  and
     $300,000  in  principal  amount  of its  12.875%  subordinated  debentures,
     respectively.  As a result of these  transactions,  the Company  recorded a
     pre-tax  gain of $59,000,  net of related  costs,  in the third  quarter of
     fiscal 1998. These debentures,  along with previously acquired  debentures,
     will be applied to the mandatory  sinking fund requirement  through October
     1999 and will reduce the October 2000 requirement by $13,000.

     In  December  1997,  holders  of  $59,000  in  principal  amount  of the 8%
     convertible senior notes converted their notes into  approximately  157,000
     shares of common stock.

     During September 1996, the Company purchased $1,320,000 in principal amount
     of its 12.875% subordinated debentures. As a result of the transaction, the
     Company  recorded a pre-tax gain of $560,000,  net of related costs, in the
     first quarter of fiscal 1997.  The Company  reduced its  mandatory  sinking
     fund requirement due in October 1996 with these debentures.


<PAGE>

5.   During  the  second   quarter  of  fiscal   1998,   the  Company  sold  two
     non-operating  manufacturing facilities located in Georgia for an aggregate
     of  $500,000.  The  Company  did not  recognize  a gain  or  loss on  these
     transactions.

6.   In March 1998,  the  Company  sold its  interest  in a building  located in
     Georgia for approximately $619,000. The Company did not recognize a gain or
     loss on this transaction.

7.   Net Income  (Loss) Per Share - Effective  December  31,  1997,  the Company
     adopted  Statement  of  Financial  Accounting  Standards  ("SFAS") No. 128,
     "Earnings  Per Share." As required by SFAS No. 128,  all net income  (loss)
     per share have been restated to present Basic and Diluted Net Income (Loss)
     Per Share. The Company's calculation of Basic and Diluted Net Income (Loss)
     Per Share are as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                            Three Months Ended      Nine Months Ended
                                                                March 31,              March 31,
                                                            1998         1997       1998        1997
                                                           -------      -------    -------    -------
<S>                                                      <C>           <C>        <C>         <C> 
 Basic Net  Income (Loss) Per Share:

 Net Income (Loss) to Common Stockholders                 $  (123)     $   (329)   $ 1,702     $   889
 Basic Weighted Average Shares Outstanding                 14,117        13,960     14,029      13,960
 Basic Net Income (Loss) Per Share                        $  (.01)        $(.02)      $.12        $.06
                                                           =======      ========   =======     =======

 Diluted Net Income (Loss) Per Share:

 Net Income (Loss) to Common Stockholders                $  (123)      $   (329)  $ 1,702      $  889
 Plus: Interest Expense on 8% Convertible Senior Notes        (a)            (a)       31          43
                                                         --------      ---------  -------     -------
 Adjusted Net Income (Loss)                              $  (123)      $   (329)  $ 1,733      $  932
                                                           =======      ========   =======     =======

 Basic Weighted Average Shares Outstanding                14,117         13,960    14,029      13,960
 Plus: Shares Issuable Upon Conversion of
        8% Convertible Senior Notes                           (a)            (a)    1,483       1,908
                                                          -------        -------   ------      ------
 Diluted Weighted Average Shares Outstanding              14,117         13,960    15,512      15,868
                                                          =======       ========   =======     =======
 Diluted Net Income (Loss) Per Share                       $(.01)         $(.02)     $.11        $.06
                                                          ========      ========   =======     =======
</TABLE>

     (a)  These dilutive  securities have been excluded because their effect, if
          included, would have been antidilutive.

     Shares of  potential  exercisable  stock  options  are not  included in the
     Diluted  Net  Income  Per Share  calculation  because  they are  considered
     antidilutive.

8.   In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
     "Disclosure About Segments of an Enterprise and Related Information," which
     is effective for the Company for the year ended June 30, 1999. SFAS No. 131
     requires  disclosure about operating segments in complete sets of financial
     statements and in condensed financial  statements of interim periods issued
     to  shareholders.  The new standard also  requires that the Company  report
     certain information about their products and services, the geographic areas
     in which  they  operate,  and  major  customers.  The  Company  has not yet
     determined the impact of the adoption of SFAS No. 131.


<PAGE>


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


The  following  discussion  contains  certain  forward-looking  statements  with
respect  to  anticipated  results,  which are  subject  to a number of risks and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially are:  business  conditions and growth in the  Registrant's  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; the timing of orders
placed by the Registrant's  customers;  and the risk factors listed from time to
time in the Company's SEC reports.

Results of Operations
----------------------

Net  sales for the three  months  ended  March  31,  1998  decreased  by 1.3% to
$12,918,000 from  $13,089,000 in the comparable  period in 1997. The decrease in
sales resulted from lower sales in the intimate  apparel division and the retail
division of approximately $47,000 and $15,000,  respectively,  and a decrease in
other  business.  Net sales in the  intimate  apparel  division  and the  retail
division decreased to $11,015,000 and $1,902,000, respectively.

Net  sales  for the nine  months  ended  March  31,  1998  increased  by 5.7% to
$50,857,000 from  $48,116,000 in the comparable  period in 1997. The increase in
sales resulted from higher sales in the intimate apparel division and the retail
division  of  approximately  $2,648,000  and  $583,000,   respectively,   offset
partially by a decrease in other  business.  Net sales in the  intimate  apparel
division  increased to  $42,546,000  due to greater demand for the Company's new
designs and  competitive  products.  Net sales in the Company's  retail division
increased  to  $8,302,000  primarily  due to an  expanded  product  line,  which
includes higher priced brand name products.

The gross profit percentage  increased to 29.3% for the three months ended March
31,  1998 from  27.0% in the  similar  period in 1997.  The gross  margin in the
Company's  intimate  apparel  division  increased  to 28.9% for the three months
ended  March 31,  1998 from  26.6% in the  similar  period in 1997.  The  higher
margins in the intimate  apparel  division  resulted  primarily from an improved
product  mix,  better  control of  product  costs and the  continued  shift of a
significant  portion of production  to  Mexico-based  contractors.  The shift in
production to Mexico-based  contractors enables the Company to take advantage of
lower duty rates that result from the North  American  Free Trade  Agreement and
shorter  lead times  associated  with the raw  materials  that are  available in
Mexico. The proximity of the Mexico-based contractors also affords the Company's
senior management the opportunity to more easily monitor the production of these
products.  The gross margin for the retail  division  increased to 31.4% for the
three months ended March 31, 1998 as compared to 29.0% in the similar  period in
1997. The higher margins in the retail  division  resulted  primarily from lower
markdowns taken in the current three-month period as compared to the same period
in the prior year.

The gross profit  percentage  increased to 28.6% for the nine months ended March
31,  1998 from  26.1% in the  similar  period in 1997.  The gross  margin in the
Company's intimate apparel division increased to 27.8% for the nine months ended
March 31, 1998 from 24.8% in the similar  period in 1997.  The higher margins in
the  intimate  apparel  division  resulted  from  the  above-mentioned  shift in
production to Mexico,  an improved  product mix, better control of product costs
and, to a lesser extent, the elimination of certain problems with the quality of
specific items of the Company's imported finished goods (discussed below) in the
prior year. The gross margin for the retail division  increased to 32.9% for the
nine months ended March 31, 1998 from 32.2% for the similar  period in 1997. The
higher margins in the retail  division  resulted  primarily from lower markdowns
taken in the  current  nine-month  period as  compared to the same period in the
prior year.

<PAGE>

At the end of fiscal 1996 and extending  into the second quarter of fiscal 1997,
the Company  encountered  problems with certain of its imported  finished goods.
After  taking  delivery of these  goods,  the  Company  was  required to correct
manufacturing  defects before  shipping the  merchandise to one of the Company's
customers. Although there was no loss of sales attributable to this merchandise,
the Company incurred additional costs of approximately  $400,000 associated with
correcting the quality  problems,  which had a negative  impact on the financial
results  for fiscal  1997.  In fiscal  1997,  the  Company  replaced  the senior
personnel  responsible for its import department and hired new employees located
in the Far East to supervise the  production of its products.  In addition,  the
Company is now purchasing its products from different Far East manufacturers.

Selling, general and administrative expenses increased by $188,000 to $3,400,000
for the three months  ended March 31, 1998 as compared to the similar  period in
1997. This increase resulted from a more favorable  recovery of bad debts in the
prior year, which reduced the prior year's expense.

Selling,   general  and   administrative   expenses  increased  by  $892,000  to
$10,967,000  for the nine months ended March 31, 1998 as compared to the similar
period in 1997.  This increase  resulted from  increases in salary  expenses and
salary related costs of $436,000,  commissions of $192,000, advertising costs of
$143,000  and a more  favorable  recovery of bad debts in the prior year,  which
reduced the prior year's expense by approximately $201,000,  partially offset by
a net decrease in other general overhead expenses.

Income from  operations  increased to $384,000 and  $3,590,000 for the three and
nine months ended March 31, 1998,  from $323,000 and  $2,490,000 for the similar
periods in 1997.  The  increase  for the three  months  was due to higher  gross
margins partially offset by an increase in selling,  general and  administrative
expenses.  The  increase  for the nine months was due to higher  sales and gross
margins partially offset by an increase in selling,  general and  administrative
expenses.  The Company's  retail  division had a loss from operations of $38,000
and income from operations of $621,000 for the three and nine months ended March
31,  1998 as  compared  to a loss from  operations  of $61,000  and income  from
operations  of  $603,000  for  the  similar  periods  in  the  prior  year.  The
operational  results  for the  retail  division  are based on  direct  operating
expenses and do not include any indirect corporate overhead.

In October  1997,  the Company  purchased  $500,000 in  principal  amount of its
12.875%  subordinated  debentures.  As a result of the transaction,  the Company
recorded a pre-tax gain of $94,000,  net of related costs, in the second quarter
of fiscal 1998.

In November 1997, the Company  purchased  $300,000 in principal amount of its 8%
Convertible  Senior  Notes due  September  1, 2001.  These  Notes  entitled  the
previous  holders to convert the  principal  amount into  800,000  shares of the
Company's  common  stock,  par value $.01. As a result of the  transaction,  the
Company  recorded a pre-tax gain of $4,000,  net of related costs, in the second
quarter of fiscal 1998.

In February 1998 and March 1998, the Company purchased  $156,000 and $300,000 in
principal  amount of its 12.875%  subordinated  debentures,  respectively.  As a
result of these  transactions,  the Company  recorded a pre-tax gain of $59,000,
net of related costs in the third quarter of fiscal 1998.

<PAGE>

In September 1996, the Company  purchased  $1,320,000 in principal amount of its
12.875%  subordinated  debentures  to meet a sinking fund payment due in October
1996.  As a result of the  transaction,  the Company  recorded a pre-tax gain of
$560,000, net of related costs, in the first quarter of fiscal 1997.

Interest expense  decreased by $86,000 and $116,000 for the three and nine-month
period ended March 31, 1998,  respectively,  from the comparable  periods in the
prior year primarily due to the purchases of a portion of the Company's  12.875%
subordinated debentures and lower short-term borrowing charges.

The Company did not provide for an income tax provision or benefit for the three
and nine months ended March 31, 1998 and 1997.

The  Company  recorded a net loss for the three  months  ended March 31, 1998 of
$123,000 as compared to a net loss of $329,000 for the same period in 1997.  Net
income was  $1,702,000  for the nine months  ended March 31, 1998 as compared to
net income of $889,000 for the same period in 1997. The three-month  improvement
was due to higher gross margins, lower interest costs and a gain on the purchase
of subordinated  debentures offset partially by an increase in selling,  general
and administrative  expenses. The increase for the nine months was due to higher
sales and gross margins and lower interest costs offset partially by an increase
in selling general and administrative expenses and a larger gain on the purchase
of subordinated debentures in the prior year.

Liquidity and Capital Resources
--------------------------------

For the nine  months  ended  March  31,  1998,  the  Company's  working  capital
increased by $1,844,000 to $20,480,000,  principally from profitable  operations
and the sale of non-operating assets offset by the purchases of property,  plant
and equipment and payments on and purchases of long-term debt.

During the nine months ended March 31, 1998,  cash increased by $2,390,000.  Net
cash provided by operations  was  $2,516,000.  The Company used cash of $107,000
for the  purchases of  property,  plant and  equipment  and  $1,138,000  for the
payments on and purchases of long-term  debt.  These  activities  were funded by
profitable operations and from the proceeds of the sale of certain non-operating
assets in the amount of $1,119,000.

Receivables  at March 31,  1998  increased  by  $2,831,000  to  $6,978,000  from
$4,147,000 at June 30, 1997.  This increase is due to normal  seasonal  shipping
fluctuations within the period for the Company's intimate apparel division.

Inventory  at March  31,  1998  decreased  by  $2,559,000  to  $14,079,000  from
$16,638,000 at June 30, 1997. This decrease  reflects normal  reductions in both
the intimate apparel and the retail  inventory,  which results from historically
higher sales during the July through  December period as compared to the January
through June period.

During the second  quarter of fiscal 1998,  the Company  sold two  non-operating
manufacturing  facilities  located in Georgia for an aggregate of $500,000.  The
Company did not recognize a gain or loss on these transactions.

In March 1998,  the Company sold its  interest in a building  located in Georgia
for approximately $619,000. The Company did not recognize a gain or loss on this
transaction.

<PAGE>

In  October  1996,  the  Company   consummated  an  agreement  with  holders  of
$10,187,000 in principal amount of the Company's  outstanding  12.875% unsecured
subordinated debentures  ("Restructured Bonds"). The holders of the Restructured
Bonds exchanged such bonds for the issuance of an equivalent principal amount of
a new  series  of notes  bearing  interest  at a rate of 8% per  annum,  payable
semi-annually (April 1 and October 1) which are senior to the 12.875% debentures
("New  Senior  Notes").  Additionally,  the  holders of the  Restructured  Bonds
deferred the receipt of interest due April 1, 1996 (approximately  $656,000) and
October 1, 1996 (approximately  $434,000).  The Company paid the interest due on
the remaining 12.875% debentures. The holders of the Restructured Bonds accepted
New Senior Notes in exchange for the April 1, 1996 and October 1, 1996  deferred
interest   related  to  the   Restructured   Bonds.   Upon   completion  of  the
restructuring,   the  aggregate   principal  amount  of  the  New  Senior  Notes
approximated  $11,265,500.   The  New  Senior  Notes  do  not  provide  for  any
amortization  of principal  and mature on September 1, 2001.  As a result of the
exchange,  the  Company  applied  the  entire  principal  amount of  $10,187,000
acquired by the Company to its mandatory  annual  sinking fund payments  through
October 1999. The Company's  obligation to make mandatory  sinking fund payments
on the 12.875%  debentures will resume in October 1999. The aggregate  principal
indebtedness  of the New Senior  Notes and the 12.875%  subordinated  debentures
remaining  after  the  exchange  and  subsequent  purchases  by the  Company  is
approximately $20,894,000.

The New Senior Notes carried the right to convert up to  approximately  $716,000
of the Notes into 1,908,000  shares of the Company's  common stock at a price of
$0.375 per share (see below).  In addition,  the holders of the New Senior Notes
have the right to  designate  a  representative  to attend all  meetings  of the
Company's Board of Directors and Compensation Committee.

In November 1997, the Company  purchased  $300,000 in principal amount of its 8%
Convertible  Senior  Notes due  September  1, 2001.  These  Notes  entitled  the
previous  holders to convert the  principal  amount into  800,000  shares of the
Company's  common  stock,  par value $.01. As a result of the  transaction,  the
Company  recorded a pre-tax gain of $4,000,  net of related costs, in the second
quarter of fiscal  1998.  Also in the second  quarter  of fiscal  1998,  certain
individuals  affiliated with the Company purchased  $278,500 in principal amount
of the 8% Convertible Senior Notes due September 1, 2001. The Notes purchased by
the  affiliates  entitle  the  holders  to convert  the  principal  amount  into
approximately  742,667 shares of the Company's common stock, par value $.01. The
purchasing  affiliates  have agreed to convert the Notes no later than March 31,
1999 and to certain  restrictions on the circumstances  under which they will be
permitted to sell the shares  underlying  the Notes.  The  purchasers  have also
granted the Company the right to purchase the underlying shares at a price equal
to 90% of the market  price at the time any  purchaser  is  permitted  under the
agreement to sell the underlying shares in the open market and wishes to do so.

In December 1997,  non-affiliated  holders of $59,000 in principal amount of the
8% Convertible  Senior Notes  converted their Notes into  approximately  157,000
shares of common stock.

In October  1997,  the Company  purchased  $500,000 in  principal  amount of its
12.875%  subordinated  debentures.  As a result of the transaction,  the Company
recorded a pre-tax gain of $94,000,  net of related costs, in the second quarter
of fiscal  1998.  The Company  will further  reduce its  mandatory  sinking fund
requirements due in October 1999 by the principal amount of these debentures.

In February 1998 and March 1998, the Company purchased  $156,000 and $300,000 in
principal  amount of its 12.875%  subordinated  debentures,  respectively.  As a
result  of  these   transactions,   the  Company  recorded  a  pre-tax  gain  of
approximately  $59,000,  net of related  costs,  in the third  quarter of fiscal
1998.  These debentures  along with the previously  acquired  debentures will be
applied to the mandatory sinking fund requirements  through October 1999 and the
balance of $13,000  will be applied  to reduce  the  October  2000  requirement.
Depending  on price  and  availability,  the  Company  may seek to  purchase  an
additional  portion of its outstanding  12.875% debentures to further reduce its
sinking fund obligation and reduce interest expense.

During September 1996, the Company  purchased  $1,320,000 in principal amount of
its 12.875% subordinated debentures. As a result of the transaction, the Company
recorded a pre-tax gain of approximately  $560,000, net of related costs, in the
first quarter of fiscal 1997.  The Company  reduced its  mandatory  sinking fund
requirements with these debentures.

<PAGE>

In September 1996, the Company delivered  $3,750,000 of its 12.875% subordinated
debentures that it had previously  acquired to the Indenture Trustee, in lieu of
making the mandatory sinking fund payment due October 1, 1996 in cash.

The Company has a secured revolving line of credit of up to $13,500,000, through
June 1999, to cover the  Company's  projected  needs for  operating  capital and
letters of credit to fund the  purchase of  imported  goods.  Direct  borrowings
under this line bear interest at the annual rate of 2.5% above the prime rate of
Chase  Manhattan  Bank  through June 1998 and 2.0% above the prime rate of Chase
Manhattan  Bank  through  June  1999.  Availability  under the line of credit is
subject to certain agreed upon formulas.  Under the terms of this financing, the
Company  has  agreed to  pledge  substantially  all of its  assets,  except  the
Company's  domestic  inventory  and real  property.  In April 1996,  this credit
facility replaced the financing agreements the Company had with two other banks.

Management   believes  the  Company's  available  borrowing  under  its  secured
revolving line of credit,  along with  anticipated  internally  generated funds,
will be sufficient to cover its working capital requirements.

The Company does not anticipate making any additional purchases of its stock and
anticipates  that  capital  expenditures  for  fiscal  1998  will be  less  than
$500,000.

Year 2000
---------

The Company is assessing and updating its computer hardware and software and the
programs  and  procedures  that will  require  modification  to become year 2000
compliant. The Company currently anticipates that it will substantially complete
the necessary modifications by October 1, 1998. The cost of updating the current
computer  system to be year 2000 compliant is not expected to be material to the
ongoing operations of the Company. The Company has received or is in the process
of receiving  representations  from its software  vendors that the software they
support for the Company will also be year 2000 compliant.



<PAGE>


                SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
                  THE SECURITIES LITIGATION REFORM ACT OF 1995


Except for historical  information  contained  herein,  this Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation  Reform Act of 1995,  which involve certain risks and  uncertainties.
The  Company's  actual  results or  outcomes  may differ  materially  from those
anticipated. Important factors that the Company believes might cause differences
are  discussed  in the  cautionary  statement  under the  caption  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
this Form  10-Q.  In  assessing  forward-looking  statements  contained  herein,
readers are urged to carefully read those statements.




<PAGE>


PART II       Other Information

Item 1   -    Legal proceedings - Not Applicable

Item 2   -    Changes in Securities - Not Applicable

Item 3   -    Defaults Upon Senior Securities - Not Applicable

Item 4   -    Submission of Matters to a Vote of Security Holders - None

Item 5   -    Other Information - None

Item 6   -    (a) Exhibits

Exhibit
Number               Exhibit                                Method of Filing
--------           ------------------------                 ----------------

10.11              Agreement dated                          Filed herewith.
                   as of December 9,
                   1997 (executed and
                   delivered on March
                   24, 1998) among
                   Melvyn Knigin, Saul
                   Pomerantz, Thomas Rende,
                   Gary W. Krat, Joel M.
                   Simon, Jill Salberg (the
                   "Affiliates") and the
                   Company governing the
                   rights of the Affiliates
                   with respect to the
                   Company's 8% Convertible
                   Senior Notes owned by
                   the Affiliates.

              (b) Form 8-K Report - None


                                   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/ MARK M. DAVID
                                                  ---------------------
                                                   MARK M. DAVID
                                                   Chairman of the Board;
                                                   Chief Executive Officer


                                               By: /s/ SAUL POMERANTZ
                                                  ------------------------
                                                  SAUL POMERANTZ
                                                  Executive Vice President;
                                                  Chief Financial Officer


May 14, 1998