`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 March 31, 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 April 28, 2006 was 15,738,574.






                                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 March 31, 2006 (Unaudited),
       June 30, 2005 (Audited) and March 31, 2005 (Unaudited)                      3

       Consolidated Statements of Operations (Unaudited) for the
       Three and Nine Months Ended March 31, 2006 and 2005                         4

       Consolidated Condensed Statements of Cash Flows (Unaudited) for the
       Nine Months Ended March 31, 2006 and 2005                                 5 - 6

       Notes to Consolidated Condensed Unaudited Financial Statements            7 - 11


   Item 2.   Management's Discussion and Analysis of Financial
             Condition and Results of Operations                                12 - 17

   Item 3.   Quantitative and Qualitative Disclosures About Market Risk         17 - 18

   Item 4.   Controls and Procedures                                              18


PART II.   OTHER INFORMATION

   Item 6.   Exhibits                                                             19

Signatures                                                                        19















                                       2




PART  I.   FINANCIAL INFORMATION

  ITEM 1.  FINANCIAL STATEMENTS


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




                                                                  March 31,      June 30,      March 31,
                                                                    2006           2005*         2005
                                                                 -----------    ----------    -----------
                                                                 (Unaudited)                  (Unaudited)

                                     Assets

Current Assets
 Cash                                                              $   134        $   178        $   435
 Receivables, net                                                    9,529          5,973          9,278
 Inventory                                                           6,431         11,730          7,132
 Deferred income taxes                                               1,782          2,260          1,781
 Prepaid expenses and other current assets                           2,249            372            812
                                                                   -------        -------        -------
        Total current assets                                        20,125         20,513         19,438

Property, plant and equipment, net                                     727            755          1,012
Deferred income taxes                                                2,606          2,473          1,542
Goodwill                                                               537            537            537
Assets held for sale                                                   174            174              -
Other assets                                                           425            455            445
                                                                   -------        -------        -------
        Total assets                                               $24,594        $24,907        $22,974
                                                                   =======        =======        =======

                      Liabilities and Shareholders' Equity

Current Liabilities
 Note payable                                                      $ 6,626        $ 4,794        $ 3,763
 Accounts payable and accrued expenses                               2,321          5,046          2,109
                                                                   -------        -------        -------
        Total current liabilities                                    8,947          9,840          5,872
                                                                   -------        -------        -------


Long-term liabilities                                                  384            390            388
                                                                   -------        -------        -------

Commitments and Contingencies                                            -              -              -

Shareholders' equity
 Common stock, $.01 par value - authorized 30,000,000 shares;
  issued 17,736,000 shares at March 31, 2006,
  17,657,000 shares at June 30, 2005 and
  17,637,000 shares at March 31, 2005                                  177            177            176
 Additional paid-in capital                                          4,808          4,747          4,729
 Retained earnings                                                  13,876         13,361         15,417
 Accumulated other comprehensive income                                 20             10             10
 Treasury stock, at cost--2,017,000 shares                          (3,618)        (3,618)        (3,618)
                                                                   -------        -------        -------
         Total shareholders' equity                                 15,263         14,677         16,714
                                                                   -------        -------        -------
Total liabilities and shareholders' equity                         $24,594        $24,907        $22,974
                                                                   =======        =======        =======


* 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        Nine Months Ended
                                                                          March 31,                March 31,
                                                                     ------------------       -------------------
                                                                      2006        2005         2005         2006
                                                                     ------      ------       ------       ------

Net sales                                                           $11,940     $14,659      $43,444      $50,479
Cost of sales                                                         8,689      11,186       31,199       38,146
                                                                    -------     -------      -------      -------
  Gross profit                                                        3,251       3,473       12,245       12,333

Selling, general and administrative expenses                          4,114       4,666       12,426       13,877
Insurance recovery                                                   (1,424)          -       (1,424)           -
                                                                    -------     -------      -------      -------

  Income (loss) from operations                                         561      (1,193)       1,243       (1,544)

Interest expense                                                         99          76          383          233
                                                                    -------     -------      -------      -------

  Income (loss) before provision for (benefit from) income taxes        462      (1,269)         860       (1,777)
Provision for (benefit from) income taxes                               186        (508)         345         (711)
                                                                    -------     -------      -------      -------

  Net income (loss)                                                 $   276     $  (761)     $   515      $(1,066)
                                                                    =======     =======      =======      =======

  BASIC NET INCOME (LOSS) PER SHARE                                    $.02       $(.05)        $.03        $(.07)
                                                                       ====       =====         ====        =====

  DILUTED NET INCOME (LOSS) PER SHARE                                  $.02       $(.05)        $.03        $(.07)
                                                                       ====       =====         ====        =====

Basic weighted average number of shares outstanding                  15,717      15,620       15,687       15,619
                                                                     ======      ======       ======       ======
Diluted weighted average number of shares outstanding                15,829      15,620       15,776       15,619
                                                                     ======      ======       ======       ======


See notes to consolidated condensed unaudited financial statements.


















                                       4




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



                                                                                    Nine Months Ended
                                                                                        March 31,
                                                                             ------------------------------
                                                                                2006                2005
                                                                             ----------          ----------

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                                                            $   515             $(1,066)
    Adjustments to reconcile net income (loss) to net cash used in
      operating activities:
    Depreciation and amortization                                                 253                 300
    Provision for sales allowances and doubtful accounts                          424                  82
    Stock compensation expense                                                      8                   -
    Deferred income taxes                                                         345                (602)
    Deferred lease liability                                                        5                  24
    Issuance of common stock for directors' fees                                   53                   -
 (Increase) decrease in operating assets, net of effect of acquisition of
    business:
    Receivables                                                                (3,975)             (1,782)
    Inventory                                                                   5,299               1,679
    Prepaid expenses and other current assets                                  (1,877)               (222)
    Other assets                                                                  (29)                (57)
  Decrease in operating liabilities:
    Accounts payable and accrued expenses                                      (2,738)               (557)
                                                                              -------             -------
    Net cash used in operating activities                                      (1,717)             (2,201)
                                                                              -------             -------
 CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of equipment                                                          (166)               (226)
 Acquisition of Sidney Bernstein & Son business                                     -              (3,456)
                                                                              -------             -------

      Net cash used in investing activities                                      (166)             (3,682)
                                                                              -------             -------
 CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from revolving line of credit, net                                    1,832               3,763
 Proceeds from exercise of employee stock options                                   -                  23
                                                                              -------             -------

      Net cash provided by financing activities                                 1,832               3,786
                                                                              -------             -------

 Effect of exchange rate changes on cash                                            7                   5
                                                                              -------             -------

 NET DECREASE IN CASH                                                             (44)             (2,092)
 CASH, beginning of period                                                        178               2,527
                                                                              -------             -------

 CASH, end of period                                                          $   134             $   435
                                                                              =======             =======

                                                                                                  (Cont'd)




                                       5




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



                                                          Nine Months Ended
                                                               March 31,
                                                      -------------------------
                                                       2006               2005
                                                      ------             ------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during period for:
     Interest                                          $349               $234
                                                       ====               ====

     Income taxes                                       $30                $47
                                                       ====               ====



                                                                    (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 Company's
       financial position as of March 31, 2006 and the results of operations and
       cash flows for the nine months ended March 31, 2006 and 2005,
       respectively.

       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, 2005
       consolidated condensed balance sheet was derived from the Company's
       audited financial statements. The results of operations for the three and
       nine months ended March 31, 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 2005 Annual Report on Form 10-K.

2.     STOCK OPTIONS

       Previously, pursuant to Accounting Principles Board Opinion No. 25,
       "Accounting for Stock Issued to Employees," the Company accounted for
       stock-based employee compensation arrangements using the intrinsic value
       method. Accordingly, no compensation expense was recorded in the
       financial statements with respect to option grants, since the options
       were granted at/or above market value.

       Effective July 1, 2005, the Company adopted SFAS No. 123 (revised 2004),
       "Share Based Payment" ("SFAS No. 123R"), which eliminates the use of APB
       25 and the intrinsic value method of accounting, and 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. The Company has adopted the modified
       prospective method whereby compensation cost is recognized in the
       financial statements beginning with the effective date based on the
       requirements of SFAS No. 123R for all share-based payments granted after
       that date and for all unvested awards granted prior to that date.

       Had the Company elected to recognize compensation expense for stock-based
       compensation using the fair value method, net income (loss), basic and
       diluted net income (loss) per share would have been as follows:



                                                                   Three Months Ended       Nine Months Ended
                                                                        March 31,                March 31,
                                                                  --------------------      ------------------
                                                                   2006          2005        2006        2005
                                                                  ------        ------      ------      ------

       Net income (loss), as reported                              $276         $(761)       $515      $(1,066)
       Add stock-based employee compensation expense,
         included in reported net income (loss)                       3             -           8            -
       Deduct stock-based employee compensation expense
         determined under fair value based method                    (3)           (6)         (8)         (33)
                                                                   ----         -----        ----      -------
       Pro forma net income (loss)                                 $276         $(767)       $515      $(1,099)
                                                                   ====         =====        ====      =======




                                       7


                                                                   Three Months Ended       Nine Months Ended
                                                                        March 31,                March 31,
                                                                  --------------------      ------------------
                                                                   2006          2005        2006        2005
                                                                  ------        ------      ------      ------

       Basic net income (loss) per share, as reported              $.02         $(.05)       $.03        $(.07)
                                                                   ====         =====        ====        =====
       Pro forma basic net income (loss) per share                 $.02         $(.05)       $.03        $(.07)
                                                                   ====         =====        ====        =====


       Diluted net income (loss) per share, as reported            $.02         $(.05)       $.03        $(.07)
                                                                   ====         =====                    =====
       Pro forma diluted net income (loss) per share               $.02         $(.05)       $.03        $(.07)
                                                                   ====         =====        ====        =====


       During the quarter ended March 31, 2006, the Company granted options to
       purchase 40,000 shares of common stock under the 2000 Performance Equity
       Plan at an exercise price of $.63 per share. The fair value of the
       options-pricing model was calculated with the following weighted-average
       assumptions used for the grant: risk-free interest rate 4.56%; expected
       life 7 years; expected volatility 54%. The fair value generated by the
       Black-Scholes model may not be indicative of the future benefit, if any,
       that may be received by the option holder. There were no options granted
       in the three months ended March 31, 2005.


3.     INVENTORY

       Inventory consists of the following (in thousands):



                                      March 31,      June 30,      March  31,
                                        2006           2005          2005
                                     ----------     ---------     -----------

          Raw materials               $   521        $ 1,574        $   997
          Work-in process                 191            382            218
          Finished goods                5,719          9,774          5,917
                                      -------        -------        -------
                                      $ 6,431        $11,730        $ 7,132
                                      =======        =======        =======


4.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

       During the three months ended March 31, 2006, the Company resolved its
       insurance claim for the physical damage caused by Hurricane Katrina to
       its distribution center in Poplarville, Mississippi, which resulted in a
       gain of $1,424,000, net of expenses. As of March 31, 2006, the insurance
       claim is included in "Prepaid Expenses and Other Current Assets." It has
       subsequently been collected.


5.     NOTE PAYABLE

       The Company has a secured line of credit with an international bank which
       matures on June 30, 2006 and is subject to annual renewals thereafter.
       Under the terms of this line of credit, the Company may borrow up to
       $20,000,000, in the aggregate, including revolving loans and letters of
       credit. As of March 31, 2006, the Company had outstanding borrowings of
       $6,626,000 under the facility and had approximately $4,978,000 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 March 31, 2006, the Company was in
       compliance. Pursuant to the terms of


                                       8




       the agreement, the Company pledged substantially all of its assets.
       Interest on outstanding borrowings is payable at a variable rate per
       annum, equal to the prime rate less 0.75 percent (7.00 percent as of
       March 31, 2006). The Company has been informed that the bank does not
       wish to extend the line of credit for another year. Accordingly, the
       Company is discussing the establishment of a new credit facility with
       several banks and other institutional lenders. Based upon preliminary
       indications, the Company is confident that it will be able to establish a
       new line of credit, although there is no assurance that this will be the
       case.


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 income (loss) by the weighted average number
       of shares outstanding and common equivalents. The Company's calculation
       of basic and diluted net income per share is as follows (in thousands,
       except per share amounts):



                                                                   Three Months Ended       Nine Months Ended
                                                                        March 31,                March 31,
                                                                  --------------------      ------------------
                                                                   2006          2005        2006        2005
                                                                  ------        ------      ------      ------

          BASIC:
       Net income (loss)                                            $276         $(761)       $515     $(1,066)
                                                                    ====         =====        ====     =======
       Basic weighted average number of shares outstanding        15,717        15,620      15,687      15,619
                                                                  ======        ======      ======     =======
       Basic net income (loss) per share                            $.02         $(.05)       $.03       $(.07)
                                                                    ====         =====        ====       =====

          DILUTED:
       Net income (loss)                                            $276         $(761)       $515     $(1,066)
                                                                    ====         =====        ====     =======

       Weighted average number of shares outstanding              15,717        15,620      15,687      15,619
               Shares issuable upon conversion of stock options       93             -          78           -
               Shares issuable upon conversion of warrants            19             -          11           -
                                                                  ------        ------      ------     -------
       Total average number of equivalent shares outstanding      15,829        15,620      15,776      15,619
                                                                  ======        ======      ======     =======

       Diluted net income (loss) per share                          $.02         $(.05)       $.03       $(.07)
                                                                    ====         =====        ====       =====


       Options and warrants to purchase 417,000 and 463,000 shares of common
       stock at prices ranging from $.4375 to $1.0625 per share were not
       included in the computation of diluted net income (loss) per share for
       the three and nine-month periods ended March 31, 2005, respectively,
       since they would be antidilutive.


7.     ACQUISITION

       On August 3, 2004, the Company completed its acquisition of certain
       assets of Sidney Bernstein & Son Lingerie, Inc. ("SB&S"), a New York
       based company engaged in the design, marketing and sale of women's
       lingerie and related apparel accessories, pursuant to an Asset Purchase
       Agreement, dated as of July 28, 2004. The transaction allows the Company
       to expand its offerings, as well as diversify its sales distribution.

       The assets were purchased for an aggregate price of $3,379,000. The
       Company also assumed $3,012,000 of SB&S' open purchase orders and
       received $7,408,000 of open customer orders. Pursuant to the Asset
       Purchase Agreement, the Company had also agreed to pay up to an
       additional $1,000,000 in the aggregate


                                       9



       based upon certain gross profit levels generated by the Company's
       newly-established Sidney Bernstein & Son Division during the next three
       fiscal years (see below).

       The acquisition was accounted for by the purchase method of accounting
       and the acquisition consideration was allocated among the tangible and
       intangible assets in accordance with their estimated fair value on the
       date of acquisition. In accordance with SFAS No. 142, goodwill will be
       subject to impairment testing at least annually. The results of
       operations of SB&S since August 3, 2004, are included in the Company's
       consolidated statement of operations. The total amount of goodwill is
       expected to be deductible for income tax purposes. The acquisition
       consideration and allocation of that consideration are as follows:

       ACQUISITION CONSIDERATION:
          Cash consideration paid                                 $ 3,379,000
          Transaction related fees                                     77,000
                                                                  -----------
             Total acquisition consideration                      $ 3,456,000
                                                                  ===========

       ALLOCATION OF ACQUISITION CONSIDERATION:
          Inventory                                                $2,873,000
          Goodwill related to acquisition                             537,000
          Covenant not to compete                                      40,000
          Property and equipment                                        4,000
          Other current assets                                          2,000
                                                                  -----------
             Total                                                $ 3,456,000
                                                                  ===========

       On August 3, 2004, the Company entered into an employment agreement with
       Daniel Bernstein, a former employee of SB&S, which was to expire on June
       30, 2007. Pursuant to the agreement, Mr. Bernstein was to receive a base
       compensation of $350,000 annually plus commission based on formulas, as
       defined, in the agreement. In addition, the Company was to issue Mr.
       Bernstein options to purchase 75,000 shares of common stock under the
       Company's 2000 Performance Equity Plan in both fiscal 2005 and 2006.

       Effective June 10, 2005, Mr. Bernstein terminated his employment
       agreement with the Company. In addition, due to Mr. Bernstein's
       termination, he is no longer entitled to be issued options and the
       Company is no longer required to pay up to an additional $1,000,000 under
       the Asset Purchase Agreement.


8.     CLOSING OF DISTRIBUTION FACILITY

       During the fiscal year ended June 30, 2005, the Company recorded facility
       closing costs of $108,000, which includes 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, as the Company expects to
       sell this facility. In connection with the Company's plan of disposal,
       management estimates that they will not incur a loss in liquidating these
       assets. As of March 31, 2006, the remaining accrued closing costs are
       $54,000, which includes severance and related salary and benefit costs of
       $17,000.

       The Company's distribution center in Poplarville, Mississippi was forced
       to close from August 29, 2005 to September 6, 2005 as a result of
       hurricane Katrina. Because some of the Company's 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, the Company diverted some of its incoming inventory to



                                       10



       a public warehouse operation in Los Angeles, California and to its
       Petersburg, Pennsylvania distribution facility. As a result, the
       Petersburg distribution facility was reopened on a temporary basis to
       assist with shipping the Company's finished goods to its customers until
       December 31, 2005.












































                                       11




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 future filings by the Company with the
Commission, the words or phrases "will likely result," "management expects" or
"the Company expects," "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. The Company has 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" included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2005. 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 the Company'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; and the timing of
orders placed by the Company's 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 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 sources from which we obtain
our products.

The intimate apparel business for the department stores, specialty stores and
regional chains is divided into five selling seasons per year. We create a new
line of products that represent our own brand name "Cinema Etoile" for each
selling season. 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.

On August 3, 2004, we completed the acquisition of certain assets of Sidney
Bernstein & Son Lingerie, Inc. ("SB&S"), a company engaged in the design,
marketing and sale of women's lingerie and related apparel accessories. This
transaction has allowed us to expand our product offerings, as well as diversify
and broaden our sales distribution.



                                       12



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 center resumed once power was restored to the facility
on September 6th. Because some of our employees were unable to return to work,
the facility operated at less than full capacity until the middle of October. In
our effort to reduce the impact of this problem, we diverted some of our
incoming 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 two of the
three portions of our insurance claim. The claim for our loss of inventory was
resolved in the third quarter and did not result in any significant financial
adjustment. The claim for the physical damage to our distribution facilities was
also resolved in the third quarter, although the proceeds were received on May
4, 2006, and resulted in a gain of $1,424,000. The final claim for additional
expenses incurred is still pending and is currently being negotiated with the
insurance company. We do not expect the results of these negotiations to have a
material impact on our results of operation.


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, 2005. 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 and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.

Allowance for Doubtful Accounts/Sales Discounts - Management maintains
allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. 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. Management also
estimates allowances for customer discounts, orders and incentive offerings. 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.



                                       13



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 Quarterly
Report on Form 10-Q (in thousands, except for percentages):



                                                  Three Months Ended                            Nine Months Ended
                                                       March 31,                                     March 31,
                                      ----------------------------------------      ------------------------------------------
                                             2006                   2005                    2006                   2005
                                      ------------------     -----------------      --------------------     -----------------
                                                     %                     %                         %                     %

Net sales                             $11,940      100.0     $14,659     100.0      $43,444        100.0     $50,479     100.0
Cost of sales                           8,689       72.8      11,186      76.3       31,199         71.8      38,146      75.6
                                      -------      -----     -------     -----      -------        -----     -------     -----
   Gross profit                         3,251       27.2       3,473      23.7       12,245         28.2      12,333      24.4

Selling, general and
  Administrative expenses               4,114       34.5       4,666      31.8       12,426         28.6      13,877      27.5
Insurance recovery                     (1,424)     (11.9)          -         -       (1,424)        (3.3)          -         -
                                      -------      -----     -------     -----      -------        -----     -------     -----
Operating income (loss)                   561        4.7      (1,193)     (8.1)       1,243          2.9      (1,544)     (3.1)
Interest expense                           99        0.8          76       0.5          383          0.9         233       0.5
                                      -------      -----     -------     -----      -------        -----     -------     -----
Income (loss) before income
  taxes                                   462        3.9      (1,269)     (8.7)         860          2.0      (1,777)     (3.5)
Income taxes                              186        1.6        (508)     (3.5)         345          0.8        (711)     (1.4)
                                      -------      -----     -------     -----      -------        -----     -------     -----
Net income (loss)                     $   276        2.3     $  (761)     (5.2)     $   515          1.2     $(1,066)     (2.1)
                                      =======      =====     =======     =====      =======        =====     =======     =====


Percent amounts may not add due to rounding.


RESULTS OF OPERATIONS

Net sales for the three months ended March 31, 2006 decreased $2,719,000 to
$11,940,000 from $14,659,000 in the comparable period in 2005. Net sales for the
nine months ended March 31, 2006 decreased $7,035,000 to $43,444,000 from
$50,479,000 in the comparable period in 2005. The SB&S division accounted for
$4,256,000 and $12,327,000 of the sales for the three and nine months ended
March 31, 2006, respectively, as compared to $3,648,000 and $10,867,000 for the
same periods in the prior year. Absent sales from the SB&S division, we had
sales of $7,684,000 and $31,117,000 for the three and nine months ended March
31, 2006, respectively, as compared to sales of $11,011,000 and $39,612,000 in
the same periods in the prior year. This reduction for the three months was
primarily due to a decrease in certain customers' orders. The reduction in sales
for the nine months was primarily due to the shipment of a $7,150,000 and
$650,000 low margin order in the prior year's second and third quarters,
respectively. We declined to bid on the low margin program in the current year.
This reduction was partially offset by nine months of shipping for the SB&S
division in the current year as compared to eight months in the prior year.
While business remains challenging for the remainder of fiscal 2006 the initial
indications are very positive for our business outlook for the first half of
fiscal 2007.

The gross profit percentage increased to 27.2% and 28.2% for the three and nine
months ended March 31, 2006, respectively from 23.7% and 24.4% in the same
periods in the prior year. The higher overall



                                       14



margin resulted primarily from not having the large low margin order that we
shipped in the second and third quarters of fiscal 2005.

The large low margin order that we shipped in the second and third quarters of
fiscal 2005 was approximately $7,800,000. This order was for one major retailer
and the expected gross margin was considerably lower than Movie Star's regular
business. The costs to prepare this order for shipment were significantly higher
than we originally estimated. In addition, a significant portion of the
merchandise arrived late at our distribution centers from India and, in some
cases, to meet the delivery dates of our customer, goods were shipped via air at
a much higher cost.

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 shipment, 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 $4,114,000, or 34.5% of net
sales for the three months ended March 31, 2006, as compared to $4,666,000, or
31.8% of net sales for the similar period in 2005. This decrease of $552,000
resulted from a decrease in salary expense and salary related costs of $193,000,
samples and design related costs of $171,000, shipping expense and shipping
related costs of $134,000 and consulting fees of $56,000 as well as a net
overall reduction in other selling, general and administrative expenses,
partially offset by an increase in outbound freight expense of $70,000. The
decrease in salary expense and salary related costs were the result of a
reduction in personnel. The decrease in samples and design related cost was the
result of lower purchases of sample fabrics and trims and increased usage of in
house resources related to design and artwork. The decrease in shipping expense
is primarily the result of lower sales. The decrease in consulting fees is
related to the termination of our prior Chairman's services in connection with
our consulting agreement with him. The increase in outbound freight expense is
the result of an expedited shipment to one of our major customers and large
shipments to one of our prepaid freight customers.

Selling, general and administrative expenses were $12,426,000, or 28.6% of net
sales for the nine months ended March 31, 2006, as compared to $13,877,000, or
27.5% of net sales for the similar period in 2005. This decrease of $1,451,000
resulted from a decrease in salary expense and salary related costs of $546,000,
samples and design related costs of $369,000, shipping expense and shipping
related costs of $364,000, consulting fees of $149,000 and a net overall
decrease in other selling general and administrative expenses, partially offset
by an increase in royalty expenses of $81,000. The decreases in salary expense
and salary related costs, samples and design related costs, shipping expense and
shipping related costs and consulting fees were for the same reasons described
above. The increase in royalty expense was primarily due to the Maidenform
license agreement.

During the third quarter, we resolved our insurance claim on the Poplarville,
Mississippi distribution facilities which resulted in a gain of $1,424,000, net
of expenses. A portion of the proceeds will be utilized to replace certain
portions of the facility that were damaged during the hurricane.

We recorded income from operations of $561,000 and $1,243,000 for the three and
nine months ended March 31, 2006 as compared to a loss from operations of
$1,193,000 and $1,544,000 for the same three and nine-month periods in the prior
year. This improvement was primarily due to the insurance gain.



                                       15



Interest expense for the three and nine months ended March 31, 2006 increased to
$99,000 and $383,000 as compared to $76,000 and $233,000 in the comparable
periods in 2005, respectively. These increases were due primarily to higher
interest rates and higher borrowing levels.

We recorded a provision for income taxes of $186,000 and $345,000 for the three
and nine months ended March 31, 2006 as compared to an income tax benefit of
$508,000 and $711,000 for the same periods in the prior year, respectively. We
utilized an estimated income tax rate of 40% in all periods.


NET INCOME (LOSS)

We had net income of $276,000 and $515,000 for the three and nine months ended
March 31, 2006 as compared to a net loss of $761,000 and $1,066,000 for the same
periods in the prior year, respectively. This improvement was primarily due to
the insurance gain.


CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

To facilitate an understanding of our contractual obligations and commercial
commitments, the following data is provided as of March 31, 2006 (in thousands):



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

  Contractual Obligations
  Credit Facility                   $ 6,626        $6,626        $    -        $    -      $     -
  Licensing Agreement                   303           160           143             -            -
  Operating Leases                    5,686         1,173         2,370         2,143            -
  Consulting Agreements                 165           165             -             -            -
  Employment Contracts                1,026           882           144             -            -
                                    -------        ------        ------        ------      -------
  Total Contractual Obligations     $13,806        $9,006        $2,657        $2,143      $     -
                                    =======        ======        ======        ======      =======

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

  Other Commercial Commitments
  Letters of Credit                  $4,978        $4,978          $  -          $  -        $  -
                                     ------        ------          ----          ----        ----
  Total Commercial Commitments       $4,978        $4,978          $  -          $  -        $  -
                                     ======        ======          ====          ====        ====


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.




                                       16



LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended March 31, 2006, our working capital increased by
$505,000 to $11,178,000, primarily due to the insurance recovery.

During the nine months ended March 31, 2006, cash decreased by $44,000. We used
cash of $1,717,000 in our operations and $166,000 for the purchase of fixed
assets. The net proceeds from short-term borrowings of $1,832,000 and the
decrease in cash primarily funded these activities.

Receivables, net of allowances, at March 31, 2006 increased by $3,556,000 to
$9,529,000 from $5,973,000 at June 30, 2005. This increase was due to higher
sales for the three months ended March 31, 2006 as compared to the three months
ended June 30, 2005.

Inventory at March 31, 2006 decreased to $6,431,000 from $11,730,000 at June 30,
2005. This decrease in finished goods and raw material is due to normal
inventory fluctuations as result of the expected sales for the respective
subsequent quarters.

We have a revolving line of credit of up to $20,000,000. The line of credit
expires June 30, 2006 and is sufficient for our projected needs for operating
capital and letters of credit to fund the purchase of imported goods through
that time. Direct borrowings under this credit line bear interest at the prime
rate less three quarters of one percent per annum. Availability under the line
of credit is subject to the Company's compliance with certain agreed upon
financial formulas. We were in compliance at March 31, 2006. This line of credit
is secured by substantially all of our assets. Our current lender has informed
us that it does not wish to renew our line of credit for another year and,
accordingly, we have been discussing the establishment of a new line of credit
with several banks and other financial institutions. Based upon preliminary
indications, we are confident that we will be able to establish a new credit
facility, although there is no assurance that this will be the case.

We anticipate that capital expenditures for fiscal 2006 will be less than
$400,000.

EFFECT OF NEW ACCOUNTING STANDARDS

There were no recently issued accounting standards that we believe will have a
material effect on our financial position, results of operations or cash flows.

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
March 31, 2006, borrowings peaked during the period at $7,144,000 and the
average amount of borrowings was $6,082,000. For the nine months ended March 31,
2006, borrowings peaked during the period at $12,613,000 and the average amount
of borrowings was $8,318,000.



                                       17



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 the Company's disclosure controls and
procedures as of March 31, 2006 was made under the supervision and with the
participation of the Company's management, including the chief executive officer
and chief financial officer. Based on that evaluation, they concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits 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 the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.












                                       18




PART II   OTHER INFORMATION



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

May 15, 2006

















                                       19`