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 December 31, 1997


       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  January  30,  1997  was
      14,116,982.



<PAGE>





                                MOVIE STAR, INC.

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
<TABLE>
<CAPTION>


                                                                          December 31,                 June 30,
                                                                             1997                       1997*
                                                                          (Unaudited)

                                                           Assets     
<S>                                                                          <C>                         <C>  
Current assets
  Cash                                                                      $ 3,842                   $ 3,035
  Receivables, net of allowances                                              8,570                     4,147
  Inventory (note 3)                                                         12,148                    16,638
  Deferred income taxes                                                       2,291                     2,291
  Prepaid expenses and other
   current assets                                                               131                       205
                                                                             -------                   -------

         Total current assets                                                26,982                    26,316

Property, plant and equipment (net) (note 5)                                  3,596                     4,262
Other assets                                                                  1,490                     1,661
Deferred income taxes                                                         1,718                     1,718
                                                                             -------                   -------

         Total assets                                                       $33,786                   $33,957
                                                                             =======                   =======



                                            Liabilities and Stockholders' Equity

Current liabilities
  Notes payable                                                              $    -                   $     -
  Current maturities of long-term debt                                           62                        73
  Accounts payable and accrued expenses                                       6,450                     7,607
                                                                             -------                   -------
         Total current liabilities                                            6,512                     7,680
                                                                             -------                   -------


Long-term debt                                                               21,449                    22,336
                                                                             -------                   -------

Commitments and Contingencies

Stockholders' equity
  Common stock                                                                  161                       160
  Additional paid-in capital                                                  3,789                     3,731

  Retained earnings                                                           5,493                     3,668
                                                                             -------                   -------
                                                                              9,443                     7,559

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

         Total stockholders' equity                                           5,825                     3,941
                                                                             -------                   -------

Total liabilities and stockholders' equity                                  $33,786                   $33,957
                                                                             =======                   =======


</TABLE>


* Derived from audited financial statements.

See notes to consolidated condensed financial statements.



<PAGE>



                                MOVIE STAR, INC.

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)

                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>


                                                                           Three Months Ended    Six Months Ended
                                                                              December 31,         December 31,
                                                                             1997     1996       1997       1996
                                                                           -------   --------   -------    -------
<S>                                                                          <C>       <C>        <C>        <C> 
Net sales                                                                  $22,737   $22,133    $37,939    $35,027

Cost of sales (note 3)                                                      16,248    16,388     27,166     25,997
                                                                           -------   -------    -------    -------

Gross profit                                                                 6,489     5,745     10,773      9,030

Selling, general and administrative
 expenses                                                                    4,142     3,693      7,567      6,864
                                                                           -------   -------    -------    -------

Income from operations                                                       2,347     2,052      3,206      2,166

Gain on purchase of subordinated debentures
  and senior notes (note 4)                                                    (98)        -        (98)      (560)


Interest expense                                                               785       772      1,479      1,509
                                                                           -------   -------    -------    -------

Net Income                                                                 $ 1,660   $ 1,280    $ 1,825    $ 1,217
                                                                           =======   =======    =======    =======

Basic net income per share (note 6)                                           $.12      $.09       $.13       $.09
                                                                              ====      ====       ====       ====
Dilutive net income per share (note 6)                                        $.11      $.08       $.12       $.08
                                                                              ====      ====       ====       ====
Weighted average number of shares
 outstanding (note 6)                                                       14,004    13,960     13,982     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>


                                                                                            Six Months Ended December 31,
                                                                                             1997                1996
                                                                                           ---------          ----------
<S>                                                                                           <C>                 <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                               $ 1,825             $ 1,217 
 Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation and amortization                                                             308                 369
      Gain on purchase of subordinated debentures and
      senior notes                                                                             (98)               (560)
     Loss on sale of fixed assets                                                                -                  43
   (Increase) decrease in operating assets:
     Receivables                                                                            (4,423)                 10
     Inventory                                                                               4,490               2,664
     Prepaid expenses and other current assets                                                  74                 (89)
     Other assets                                                                               87                  35
   Decrease in operating liabilities:
     Accounts payable and accrued expenses                                                  (1,157)             (1,494)
                                                                                           -------             -------

          Net cash provided by operating activities                                          1,106               2,195
                                                                                           -------             -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                                                   (73)                (82)
  Proceeds from sale of property, plant and equipment                                          500                   -
                                                                                           -------             -------

          Net cash provided by (used in)
            investing activities                                                               427                 (82)
                                                                                           -------             -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of long-term debt and capital lease obligations                                   (726)               (576)
                                                                                                 -                   -
                                                                                           -------             -------

          Net cash used in financing activities                                               (726)               (576)
                                                                                           -------             -------

NET INCREASE IN CASH                                                                           807               1,537
CASH, beginning of period                                                                    3,035               2,283
                                                                                           -------             -------

CASH, end of period                                                                        $ 3,842             $ 3,820
                                                                                           =======             =======

</TABLE>


                                                                       (Cont'd)

<PAGE>



                                MOVIE STAR, INC.

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

<TABLE>
<CAPTION>


                                                                                            Six  Months Ended December 31,
                                                                                             1997                 1996
                                                                                           --------             --------
<S>                                                                                          <C>                   <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
   Cash paid during period for:
     Interest                                                                              $ 1,406               $ 1,064
                                                                                           =======               =======
     Income taxes (net of refunds received)                                                $    12               $   (13)
                                                                                           =======               =======



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

</TABLE>

                                                                    (Concluded)







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 December 31, 1997 and the results of operations for the interim  periods
     presented  and cash flows for the six months  ended  December  31, 1997 and
     1996, 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 six months ended  December 31,
     1997 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 in thousands is as follows: 

                                            December 31,      June 30,
                                               1997             1997
                                            -----------     ------------

            Raw materials                    $  4,412         $  3,816
            Work-in-process                       940            1,950
            Finished goods                      6,796            8,481
                                             ---------        ---------
                                              $12,148          $14,247
                                             =========        =========


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.  The  Company  will  further  reduce  its
     mandatory   sinking  fund  requirement  due  in  October  1999  with  these
     debentures.

     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. 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.

     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.

<PAGE>


     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.

     In February 1998, the Company purchased $156,000 in principal amount of its
     12.875%  subordinated  debentures.  As a result  of this  transaction,  the
     Company will record a pre-tax gain of $21,000,  net of related costs in the
     third quarter of fiscal 1998. The Company will further reduce its mandatory
     sinking fund  requirement  due in October 1999 by the  principal  amount of
     these debentures.

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.   Net Income 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 per share have been
     restated to present  Basic and Diluted Net Income Per Share.  The Company's
     calculation  of Basic and  Diluted  Net Income Per Share are as follows (in
     thousands, except per share amounts): <TABLE>
<CAPTION>

                                                                           Three Months Ended    Six Months Ended
                                                                              December 31,         December 31,
                                                                             1997     1996       1997       1996
                                                                           -------   --------   -------    -------
Basic Net Income Per Share:
<S>                                                                          <C>       <C>        <C>        <C> 
Net Income to Common Stockholders                                          $1,660    $1,280     $1,825     $1,217
Weighted Average Shares Outstanding                                        14,004    13,960     13,982     13,960
Basic Net Income Per Share                                                   $.12      $.09       $.13       $.09
                                                                             ====      ====       ====       ====
Diluted Net Income Per Share:

Net Income to Common Stockholders                                          $1,660    $1,280     $1,825     $1,217
Plus: Interest Expense on 8% Convertible Senior Notes                          10        14         24         29
                                                                           ------    -------    -------    -------
Adjusted Net Income                                                        $1,670    $1,294     $1,849     $1,246
                                                                           ======    =======    =======    =======
Weighted Average Shares Outstanding                                        14,004    13,960     13,982     13,960
Plus: Shares Issuable Upon Conversion of
      8% Convertible Senior Notes                                           1,589     1,908      1,749      1,908
                                                                           ------    -------    -------    -------
Diluted Weighted Average Shares Outstanding                                15,593    15,868     15,731     15,868
                                                                           ======    =======    =======    =======
Diluted Net Income Per Share                                                 $.11      $.08       $.12       $.08
                                                                             ====      ====       ====       ====
Shares of potential exercisable stock options are
not included in the Diluted Net Income Per Share
calculation because they are considered antidilutive.
</TABLE>

7.   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  December  31, 1997  increased by 2.7% to
$22,737,000 from  $22,133,000 in the comparable  period in 1996. The increase in
sales resulted from higher sales in the intimate apparel division and the retail
division of approximately $622,000 and $232,000  respectively,  offset partially
by a decrease in other  business.  Net sales in the  intimate  apparel  division
increased to $18,427,000 due to the Company's  refocused efforts in creating new
designs and competitive  products for its customers.  Net sales in the Company's
retail  division  increased to $4,316,000  primarily due to an expanded  product
line, which includes higher priced brand named products.

Net sales for the six  months  ended  December  31,  1997  increased  by 8.3% to
$37,939,000 from  $35,027,000 in the comparable  period in 1996. The increase in
sales resulted from higher sales in the intimate apparel division and the retail
division of approximately $2,695,000 and $598,000 respectively, offset partially
by a decrease in other business.  Net sales in the intimate apparel division and
the retail division increased to $31,531,000 and $6,400,000 respectively.  These
increases  were  attributable  to the  same  factors  as for  the  three  months
discussed above.

The gross  profit  percentage  increased  to 28.5% for the  three  months  ended
December 31, 1997 from 26.0% in the similar  period in 1996. The gross margin in
the Company's  intimate apparel division increased to 26.8% for the three months
ended  December  31, 1997 from 23.0% in the similar  period in 1996.  The higher
margins in the intimate apparel division  resulted  primarily from the continued
implementation of the Company's  decision to shift a significant  portion of its
production to Mexico-based  contractors and, to a lesser extent, the elimination
of certain problems with the quality of specific items of its imported  finished
goods  (discussed  below) which the Company had in the prior year.  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  decreased to 35.8% for the
three months ended  December 31, 1997 as compared to 37.6% in the similar period
in 1996. The lower margins in the retail division resulted primarily from higher
markdowns taken in the current three-month period as compared to the same period
in the prior year.

<PAGE>

The gross profit percentage increased to 28.4% for the six months ended December
31,  1997 from  25.8% in the  similar  period in 1996.  The gross  margin in the
Company's intimate apparel division increased to 27.4% from 24.2% in the similar
period in 1996. The higher  margins in the intimate  apparel  division  resulted
from the  above-mentioned  shift in production to Mexico and the  elimination of
certain  problems  the Company had in the prior year.  The gross  margin for the
retail division was 33.3% for the six months ended December 31, 1997 and 1996.

At the end of fiscal 1996 and extending  into the second quarter of fiscal 1997,
the  Company  continued  to  encounter  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 $449,000 to $4,142,000
for the three months ended  December 31, 1997 as compared to the similar  period
in 1996.  This increase  resulted from  increases in salary  expenses and salary
related costs of $261,000 and sales related expenses,  including  commissions of
$71,000, along with a net increase in other general overhead expenses.

Selling, general and administrative expenses increased by $703,000 to $7,567,000
for the six months ended  December 31, 1997 as compared to the similar period in
1996.  This  increase  resulted  from  increases  in salary  expenses and salary
related costs of $387,000 and sales related expenses,  including  commissions of
$164,000 and advertising  costs of $129,000,  along with a net increase in other
general overhead expenses.

Income from operations  increased to $2,347,000 and $3,206,000 for the three and
six months ended  December 31, 1997,  from  $2,052,000  and  $2,166,000  for the
similar  periods in 1996.  These  increases were due to higher sales and margins
partially offset by an increase in selling, general and administrative expenses.
The  Company's  retail  division  had income from  operations  of  $752,000  and
$659,000  for the three and six months  ended  December  31, 1997 as compared to
income from operations of $867,000 and $663,000 for the similar periods in 1996.
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.  The Company  will further  reduce its  mandatory  sinking fund
requirements due in October 1999 by the principal amount of these debentures.

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.

<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 for the three  months  ended  December  31, 1997  increased by
$13,000 from the comparable  period in 1996.  Interest expense for the six-month
period ended December 31, 1997  decreased by $30,000 from the comparable  period
in 1996.

The Company did not provide for an income tax provision or benefit for the three
and six months ended December 31, 1997 and 1996.

As a result of the above, net income was $1,660,000 and $1,825,000 for the three
and six months ended  December 31, 1997 as compared to net income of  $1,280,000
and $1,217,000 for the same period in 1996.  This  improvement was primarily due
to higher sales and margins 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 six months ended  December  31,  1997,  the  Company's  working  capital
increased by $1,834,000 to $20,470,000,  principally from profitable  operations
and the sale of non-operating  facilities offset by the purchase of fixed assets
and payments on and purchases of long-term debt.

During the six months ended December 31, 1997,  cash increased by $807,000.  Net
cash provided by operations was $1,106,000. The Company used cash of $73,000 for
the purchase of fixed  assets and $726,000 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 plant facilities of $500,000.

Receivables  at December 31, 1997  increased by $4,423,000  to  $8,570,000  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 December 31, 1997  decreased by  $4,490,000  to  $12,148,000  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.

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

<PAGE>

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  $11,276,500.   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 $21,350,000.

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,  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.

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.

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

In February  1998,  the Company  purchased  $156,000 in principal  amount of its
12.875% subordinated  debentures.  As a result of this transaction,  the Company
will record a pre-tax gain of approximately $21,000, net of related costs in the
third  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.  The remaining principal amount due on the October 1999 sinking fund
requirement is $287,000.  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.

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.

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.

Continued Stock Exchange Listing

The Company has been advised by the American Stock Exchange that, in view of the
Company's  recent  financial  performance,  it has  determined  to defer further
consideration of the Company's continued listing eligibility, subject to routine
periodic  reviews of the  Company's  filings  with the  Securities  and Exchange
Commission.

<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

10.5.10            Agreement dated                       Filed herewith.
                   December 24, 1997
                   Amending Financing
                   Agreement dated
                   as of April 24, 1996
                   between Rosenthal
                   & Rosenthal, Inc.
                   and the Registrant.

27                 Financial Data Schedule               Filed herewith.

            (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


February 12, 1998



<PAGE>