# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q

_________________

# (Mark One)

| | Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | ---------------------------------------------------------------------------------------

# For the quarterly
period ending June 30, 2006

# OR

| | Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | ----------------------------------------------------------------------------------------

# For the transition
period from__________ to__________

# Commission File Number
1-5354

# Swank, Inc.

(Exact name of
registrant as specified in its charter)

|Delaware(State or other jurisdiction of incorporation
or organization)90 Park Avenue
New York, NY(Address of principal executive offices) | 04-1886990(IRS Employer Identification Number)10016(Zip code)
|----------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------

(212) 867-2600(Registrants telephone number, including area code)

NOT APPLICABLE(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, and (2) has been subject to such filing requirements for the past 90 days.

|Yes | 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
|----------------------- | ----------------- | ---------------------

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

|Yes | No
|--- | --

APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate
by check mark whether the registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.

|Yes | No
|--- | --

APPLICABLE ONLY TO
CORPORATE ISSUERS:Indicate the number of shares outstanding of
each of the issuers classes

of
common stock as of the latest practicable date:

|Title of Class               | Shares Outstanding on July 31, 2006
|---------------------------- | -----------------------------------
|Common stock, $.10 par value | 5,853,511                          



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# SWANK, INC.INDEX

|                                                                                                 |     
|------------------------------------------------------------------------------------------------ | ----
|                                                                                                 | Page
|Part I. Financial Information                                                                    |     
|Item 1.    Condensed Financial Statements and Related Notes                                      | 3-8 
|Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations | 8-13
|Item 3.    Quantitative and Qualitative Disclosures about Market Risk                            | 13  
|Item 4.    Controls and Procedures                                                               | 13  
|Part II. Other Information                                                                       |     
|Item 1A.    Risk Factors                                                                         | 14  
|Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                           | 14  
|Item 6.    Exhibits                                                                              | 14  
|Signatures                                                                                       | 15  
|Exhibit Index                                                                                    | 16  

2



---

# Part I. Financial
Information

# Item 1. Financial
Statements

# SWANK, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands except share data)

|                                                   |  |  |  |        |  |   |       
|-------------------------------------------------- |  |  |  | ------ |  | - | ------
|
|Current:                                           |  |  |  |        |  |   |       
|Cash and cash equivalents                          |  |  |  |        |  | $ | 130   
|Accounts receivable, less allowances               |  | 
|of $4,558 and $5,241, respectively                 |  |  |  |        |  |   | 12,917
|Inventories, net:                                  |  | 
|Raw materials                                      |  |  |  | -      |  |   |       
|Work in process                                    |  |  |  | 1,600  |  |   |       
|Finished goods                                     |  |  |  | 14,932 |  |   |       
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |        |  |   | 16,532
|                                                   |  |  |  |       
|Prepaid and other current assets                   |  |  |  |        |  |   | 1,067 
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total current assets                               |  |  |  |        |  |   | 30,646
|                                                   |  |  |  |       
|Property, plant and equipment, net of              |  | 
|accumulated depreciation and amortization          |  |  |  |        |  |   | 448   
|Other assets                                       |  |  |  |        |  |   | 3,375 
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total assets                                       |  |  |  |        |  | $ | 34,469
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|LIABILITIES                                        |  | 
|Current:                                           |  | 
|Notes payable to banks                             |  |  |  |        |  | $ | 12,828
|Current portion of long-term debt                  |  |  |  |        |  |   | 489   
|Accounts payable                                   |  |  |  |        |  |   | 2,375 
|Accrued employee compensation                      |  |  |  |        |  |   | 662   
|Convertible note due to related party              |  |  |  |        |  |   | -     
|Other current liabilities                          |  |  |  |        |  |   | 2,739 
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total current liabilities                          |  |  |  |        |  |   | 19,093
|                                                   |  |  |  |       
|Long-term obligations                              |  |  |  |        |  |   | 6,101 
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total liabilities                                  |  |  |  |        |  |   | 25,194
|                                                   |  |  |  |        |  |   |       
|STOCKHOLDERS' EQUITY                               |  | 
|Preferred stock, par value $1.00:                  |  | 
|Authorized - 1,000,000 shares                      |  |  |  |        |  |   | -     
|Common stock, par value $.10:                      |  | 
|Authorized - 43,000,000 shares:                    |  | 
|Issued -- 6,105,379 and 5,908,712 shares,          |  |  |  |        |  |   | 611   
|respectively                                       |  | 
|Capital in excess of par value                     |  |  |  |        |  |   | 1,804 
|Retained earnings                                  |  |  |  |        |  |   | 7,451 
|Accumulated other comprehensive (loss), net of tax |  |  |  |        |  |   | (102  
|Treasury stock, at cost, 251,868 and 176,791       |  | 
|shares, respectively                               |  |  |  |        |  |   | (489  
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total stockholders' equity                         |  |  |  |        |  |   | 9,275 
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       
|Total liabilities and stockholders' equity         |  |  |  |        |  | $ | 34,469
|                                                   |  |  |  |        |  |   |       
|                                                   |  |  |  |       

The accompanying notes
are an integral part of the condensed financial statements.

3



---

# SWANK, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)FOR THE QUARTERS ENDING JUNE 30, 2006 AND 2005
(Dollars in thousands except share and per share data)

---

|                                                                 | 2006 |           | 2005 |          
|---------------------------------------------------------------- | ---- | --------- | ---- | ---------
|Net sales                                                        |      | $26,447   |      | $22,025  
|Cost of goods sold                                               |      | 17,652    |      | 14,547   
|                                                                 |      |           |      |          
|Gross profit                                                     |      | 8,795     |      | 7,478    
|Selling and administrative expenses                              |      | 7,393     |      | 7,098    
|                                                                 |      |           |      |          
|Income from operations                                           |      | 1,402     |      | 380      
|Interest expense                                                 |      | 401       |      | 291      
|                                                                 |      |           |      |          
|Income from operations before income taxes                       |      | 1,001     |      | 89       
|Income taxes                                                     |      | 25        |      | -        
|                                                                 |      |           |      |          
|Net income                                                       |      | $976      |      | $89      
|                                                                 |      |           |      |          
|Share and per share information:                                 |     
|Basic net income per weighted average common share outstanding   |      | $.17      |      | $.02     
|Basic weighted average common shares outstanding                 |      | 5,774,067 |      | 5,539,157
|Diluted net income per weighted average common share outstanding |      | $.16      |      | $.01     
|Diluted weighted average common shares outstanding               |      | 6,115,863 |      | 6,092,309

The accompanying
notes are an integral part of the condensed financial statements.

4



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# SWANK, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)FOR THE SIX MONTHS ENDING JUNE 30, 2006 AND 2005
(Dollars in thousands except share and per share data)

_________________

|                                                                        | 2006 |           | 2005 |          
|----------------------------------------------------------------------- | ---- | --------- | ---- | ---------
|Net sales                                                               |      | $48,614   |      | $41,268  
|                                                                        |      |          
|Cost of goods sold                                                      |      | 32,495    |      | 27,649   
|                                                                        |      |           |      |          
|                                                                        |      |          
|Gross profit                                                            |      | 16,119    |      | 13,619   
|                                                                        |      |          
|Selling and administrative expenses                                     |      | 14,364    |      | 13,946   
|                                                                        |      |          
|(Gain) on termination of lease                                          |      | -         |      | (75      
|                                                                        |      |           |      |          
|Income (loss) from operations                                           |      | 1,755     |      | (252     
|                                                                        |      |          
|Interest expense                                                        |      | 730       |      | 530      
|                                                                        |      |          
|Income (loss) from operations before income taxes                       |      | 1,025     |      | (782     
|                                                                        |      |          
|Income taxes                                                            |      | 25        |      | -        
|                                                                        |      |           |      |          
|Net income (loss)                                                       |      | $1,000    |      | $(782    
|                                                                        |      |           |      |          
|Share and per share information:                                        |     
|Basic net income (loss) per weighted average common share outstanding   |      | $.17      |      | $(.14    
|Basic weighted average common shares outstanding                        |      | 5,757,135 |      | 5,530,823
|Diluted net income (loss) per weighted average common share outstanding |      | $.17      |      | $(.14    
|Diluted weighted average common shares outstanding                      |      | 6,115,889 |      | 5,530,823
|                                                                        |      |          
|                                                                        |     

The accompanying
notes are an integral part of the condensed financial statements.

5



---

# SWANK, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)FOR THE SIX MONTHS ENDING JUNE 30, 2006 AND 2005
(Dollars in thousands)

_________________

|                                                                        | 2006 |  | 2005 |        
|----------------------------------------------------------------------- | ---- |  | ---- | -------
|Cash flows from operating activities:                                   |      |  |      |        
|                                                                        |      | 
|Net income (loss)                                                       |      |  | $    | 1,000  
|Adjustments to reconcile net income (loss) to                           |      | 
|net cash (used in) operations:                                          |      | 
|Depreciation and amortization                                           |      |  |      | 107    
|(Gain) on termination of real property lease                            |      |  |      | -      
|Bad debt expense                                                        |      |  |      | 162    
|                                                                        |      | 
|Changes in assets and liabilities                                       |      | 
|(Increase) decrease in accounts receivable                              |      |  |      | (1,817 
|(Increase) decrease in inventory                                        |      |  |      | (1,657 
|(Increase) in prepaid and other assets                                  |      |  |      | (246   
|(Decrease) in accounts payable, accrued and other                       |      |  |      | (2,567 
|                                                                        |      | 
|Increase (decrease) in other long-term obligations and deferred credits |      |  |      | 284    
|                                                                        |      |  |      |        
|Net cash (used in) operations                                           |      |  |      | (4,734 
|                                                                        |      |  |      |        
|                                                                        |      | 
|Cash flows from investing activities:                                   |      | 
|Capital expenditures                                                    |      |  |      | (35    
|Premiums on life insurance                                              |      |  |      | (37    
|                                                                        |      |  |      |        
|Net cash (used in) investing activities                                 |      |  |      | (72    
|                                                                        |      |  |      |        
|                                                                        |      | 
|Cash flows from financing activities:                                   |      | 
|Borrowing under revolving credit agreements                             |      |  |      | 25,175 
|Payments of revolving credit obligations                                |      |  |      | (20,611
|Proceeds from stock option exercises                                    |      |  |      | 15     
|Treasury stock received                                                 |      |  |      | (148   
|                                                                        |      |  |      |        
|Net cash provided by financing activities                               |      |  |      | 4,431  
|                                                                        |      |  |      |        
|                                                                        |      | 
|Net (decrease) in cash and cash equivalents                             |      |  |      | (375   
|                                                                        |      | 
|Cash and cash equivalents at beginning of period                        |      |  |      | 505    
|                                                                        |      | 
|Cash and cash equivalents at end of period                              |      |  | $    | 130    
|                                                                        |      |  |      |        
|                                                                        |      | 
|                                                                        |      | 
|Supplemental non-cash disclosure:                                       |      | 
|                                                                        |      | 
|Conversion of convertible note to common stock                          |      |  | $    | 350    

The accompanying
notes are an integral part of the condensed financial statements.

6



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# SWANK, INC.
Notes to Condensed Financial Statements (Unaudited)

(1)    
          The unaudited information furnished herein reflects all adjustments (consisting
          only of normal recurring adjustments) which are, in the opinion of management,
          necessary to present a fair statement of the results for the periods ending June
          30, 2006 and 2005. The financial information contained herein represents
          condensed financial data and, therefore, does not include all footnote
          disclosures required to be included in financial statements prepared in
          conformity with generally accepted accounting principles. Footnote information
          was included in the financial statements included in the Companys 2005
          Annual Report on Form 10-K. The condensed financial data included herein should
          be read in conjunction with the information in the Annual Report.

(2)    
          The following table sets forth the computation of the net income (loss) per
          share for the periods ending June 30, 2006 and June 30, 2005 (in thousands,
          except for share and per share data):

|                                                                  | Quarter |            | Six Months |          
|----------------------------------------------------------------- | ------- | ---------- | ---------- | ---------
|
|
|Numerator:                                                        |         |            |            |          
|Net income (loss) as reported                                     |         | $976       |            | $89      
|Add back interest expense on convertible note due to              |        
|affiliate, net of income taxes                                    |         | 6          |            | 6        
|                                                                  |         |            |            |          
|Net income (loss) used for diluted earnings per share calculation |         | $982       |            | $95      
|                                                                  |         |            |            |          
|Denominators:                                                     |        
|Shares used in computing basic net income (loss) per              |        
|weighted average common share outstanding                         |         | 5,774,067  |            | 5,539,157
|Effect of dilutive securities                                     |         | 341,796    |            | 553,152  
|                                                                  |         |            |            |          
|Shares used in computing net income (loss) per                    |        
|weighted average common share outstanding assuming dilution       |         | 6,115,8636 |            | 6,092,309
|                                                                  |         |            |            |          
|Basic net income (loss) per weighted average common               |        
|share outstanding                                                 |         | $.17       |            | $.02     
|Diluted net income (loss) per weighted average                    |        
|common share outstanding                                          |         | $.16       |            | $.01     

For the six-month period ended June
30, 2005, the effect of including all potential common shares is anti-dilutive and
therefore they are excluded from the number of shares used in the calculation.

(3)    
          Segment Information. We presently have one reportable segment, mens
          accessories, consisting of mens costume jewelry, belts and suspenders and
          personal leather goods.

(4)    
          Conversion of Convertible Note. During the three-month period ended June 30,
          2006, the Estate of Marshall Tulin (the Estate) converted the
          Amended and Restated Convertible Promissory Note of the Company dated April 1,
          2004, as amended and restated as of June 30, 2004, and payable to the order of
          the Estate (the Note) in the amount of $350,000, into 116,666 shares
          of the Companys common stock, $.10 par value per share (Common
          Stock) pursuant to a formula set forth in the Note.

(5)    
          Recent Accounting Pronouncements. In December 2004, the Financial Accounting
          Standards Board (FASB) issued SFAS No. 123 (revised 2004, SFAS
          123R), Share-Based Payment. SFAS 123R addresses the accounting
          for share-based payments to employees, including grants of employee stock
          options. Under the new standard, companies will no longer be able to account for
          share-based compensation transactions using the intrinsic method in accordance
          with APB Opinion No. 25, Accounting For Stock Issued To Employees. Instead,
          companies will be required to account for such transactions using a fair-value
          method and recognize the expense in the consolidated statement of operations. We
          adopted SFAS 123R under the modified prospective method effective
          January 1, 2006. Under that method, compensation cost is recognized for
          share-based payments granted prior to January 1, 2006 but not yet vested, based
          on the grant date fair value estimated in accordance with the provisions of SFAS
          123R. The results for prior periods are not restated. Stock options issued by us
          to certain executives and non-employee directors under either our 1998 Equity
          Incentive Compensation Plan or 1994 Non-Employee Director Plan respectively,
          vest immediately (see footnote H to the consolidated financial statements
          included in our Form 10-K for the fiscal year ended December 31, 2005). We
          granted no stock options during any of the

7



---

# SWANK, INC.Notes to Condensed Financial Statements (Unaudited) (continued)

three- or six-month periods ended
June 30, 2006 or June 30, 2005 and accordingly, the adoption of SFAS 123R on
January 1, 2006 had no impact on our net income during any of those periods.
Additionally, since we did not grant any stock options during either of the three- or
six-month periods ended June 30, 2005, there is no pro forma stock-based employee
compensation expense for those periods.

In
July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement No. 109" (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a companys financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes the recognition and
measurement of a tax position taken or expected to be taken in a tax return. It also
provides guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We are currently evaluating the effect that the
adoption of FIN 48 will have on our consolidated financial statements but do not
expect that it will have a material impact.

In
February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial Instruments (SFAS 155) which amends SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS
133) and SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities (SFAS 140).
SFAS 155 simplifies the accounting for certain derivatives embedded in other
financial instruments by allowing them to be accounted for as a whole if the holder elects
to account for the whole instrument on a fair value basis. SFAS 155 also clarifies
and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is
effective for all financial instruments acquired, issued or subject to a remeasurement
event occurring in fiscal years beginning after September 15, 2006 and is therefore
required to be adopted in the first fiscal quarter of our fiscal year ending
December 31, 2007. We are currently evaluating the effect that the adoption of
SFAS 155 will have on our consolidated financial statements but do not expect that it
will have a material impact.

# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations

Overview

We
are currently engaged in the importation, sale and distribution of mens belts,
leather accessories, suspenders, and mens jewelry. Our products are sold both
domestically and internationally under a broad assortment of brands including both
licensed tradenames and private labels. We distribute our merchandise principally through
department stores and through a wide variety of specialty stores and mass merchandisers.
We also operate a number of factory outlet stores primarily to distribute excess and out
of line merchandise.

Our
net sales during the quarter ended June 30, 2006 increased 20% to $26,447,000 compared to
$22,025,000 for the corresponding period in 2005 and, for the six-month period, increased
18% to $48,614,000 compared to $41,268,000. The increases were due to higher shipments of
our jewelry, belt, and for the quarter, personal leather goods merchandise, as well as a
more favorable returns adjustment recorded during the quarter (see Managements
Discussion and Analysis of Financial Condition and Results of Operations below). Gross
profit for both the quarter and six-month periods increased 18% compared to the same
periods last year. Gross profit expressed as a percentage of net sales decreased during
the quarter to 33.3% from 34.0% but increased during the six-month period, to 33.2% from
33.0%, both as compared to the prior year. The increase in gross profit dollars was due
to a more favorable sales mix resulting from the growth in our relatively high-margin
jewelry business, increases in net sales of belts, and reductions in certain
inventory-related expenses. Selling and administrative expenses increased $295,000 or
4.2% during the quarter primarily due to variable sales-related expenses associated with
our domestic sales organization and product development, and increases in certain fringe
benefit-related costs, offset in part by a reduction in an accrual associated with
certain environmental matters as more fully described below in Liquidity and
Capital Resources.

Critical Accounting
Policies and Estimates

We
believe that the accounting policies discussed below are important to an understanding of
our financial statements because they require management to exercise judgment and estimate
the effects of uncertain matters in the preparation and

8



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# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)

reporting of financial results.
Accordingly, management cautions that these policies and the judgments and estimates they
involve are subject to revision and adjustment in the future.

Net
sales are generally recorded upon shipment, provided there exists persuasive evidence of
an arrangement, the fee is fixed or determinable and collectability of the related
receivable is reasonably assured. We record revenues net of sales allowances, including
cash discounts, in-store customer allowances, cooperative advertising, and customer
returns, which are all accounted for in accordance with Statement of Financial Accounting
Standards No. 48, Revenue Recognition When Right of Return Exists, and
Emerging Issues Task Force Issue No. 01-09, Accounting for Consideration Given by a
Vendor to a Customer or Reseller of the Vendors Products. Sales allowances
are estimated using a number of factors including historical experience, current trends
in the retail industry and individual customer and product experience. We reduce net
sales and cost of sales by the estimated effect of future returns of current period
shipments. Each spring upon the completion of processing returns from the preceding fall
season, we record adjustments to net sales in the second quarter to reflect the
difference between customer returns of prior year shipments actually received in the
current year and the estimate used to establish the allowance for customer returns at the
end of the preceding fiscal year.

We
determine our allowance for doubtful accounts using a number of factors including
historical collection experience, general economic conditions and the amount of time an
account receivable is past its payment due date. In certain circumstances where it is
believed a customer is unable to meet its financial obligations, a specific allowance for
doubtful accounts is recorded to reduce the account receivable to the amount believed to
be collectable.

In
accordance with AICPA Statement of Position 96-1, Environmental Remediation
Liabilities, environmental expenditures that relate to current operations are
expensed or capitalized, as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. Generally,
adjustments to these accruals coincide with the completion of a feasibility study or a
commitment made by us to a formal plan of action or other appropriate benchmark.

Inventories
are stated at the lower of cost (principally average cost which approximates FIFO) or
market. Our inventory is somewhat fashion oriented and, as a result, is subject to risk
of rapid obsolescence. We believe that our inventory has been adequately adjusted, where
appropriate, and that we have adequate channels to dispose of excess and obsolete
inventory.

We
determine the valuation allowance for deferred tax assets based upon projections of
taxable income or loss for future tax years in which the temporary differences that
created the deferred tax asset are anticipated to reverse, and the likelihood that our
deferred tax assets will be recovered.

Results of Operations

As
is customary in the fashion accessories industry, we make modifications to our
merchandise lines coinciding with our Spring (January  June) and Fall (July  December)
selling seasons. We believe that the results of operations are more meaningful on a
seasonal basis than on a quarterly basis. The timing of shipments can be affected by the
availability of materials, retail sales, and fashion trends. These factors may shift
volume between quarters within a season differently in one year than in another. Due to
seasonality and other factors, the results for the quarter are not necessarily indicative
of the results to be expected for the full year.

Net Sales

Net
sales for the quarter ending June 30, 2006 were $26,447,000, an increase of $4,422,000 or
20% compared to the quarter ending June 30, 2005. For the six-month period ending June
30, 2006, net sales totaled $48,614,000, an increase of $7,346,000 or 18% compared to the
corresponding period last year. The increase during both the quarter and six-month
periods was principally due to increased shipments of our jewelry and belt merchandise
and a more favorable adjustment for customer returns, offset in part by increases in
in-store markdown expenses. Net sales of our mens jewelry merchandise increased 13%
and 31% during the quarter and six-month periods ending June 30, 2006, respectively,
compared to the corresponding prior year periods. The increases reflect the continued
strong demand for both our private label and branded jewelry collections that has been
driven largely by mens fashion trends that accentuate dressier looks. Belt net
sales

9



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# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)

increased 29% and 24% for the quarter
and six-month periods, respectively due mainly to increases in certain private label
shipments in connection with both new business opportunities and expansion of market share
associated with existing programs. During the quarter, we commenced significant shipments
of our new Nautica collection of mens accessories and further enhanced our position
at several major retailers, increasing both private label and branded merchandise
shipments to these customers.

Net
sales to international customers (including certain military accounts) increased $510,000
or 27% during the quarter and $200,000 or 5% for the six-moth period ended June 30, 2006
compared to the same periods last year. The increases were due primarily to shipments of
branded goods made to a customer in Mexico during the quarter.

Included
in net sales for the quarter and six months ending June 30, 2006 and 2005, are annual
second quarter adjustments to record the variance between customer returns of prior year
shipments actually received in the current year and the allowance for customer returns
which was established at the end of the preceding fiscal year. This adjustment increased
net sales by $1,248,000 for the three-month and six-month periods ended June 30, 2006,
compared to $814,000 for the comparable periods in 2005. The Companys actual return
experience during both the spring 2006 and spring 2005 seasons was better than
anticipated compared to the reserves established at December 31, 2005 and December 31,
2004 principally due to lower than expected returns for mens belts and personal
leather goods. The reserve at December 31, 2005 was established in consideration of
shipments made during the fall 2005 season associated with a variety of new merchandise
programs. However, during the past few seasons, the Company has been taking steps to
minimize customer returns by assisting retailers in promoting excess and discontinued
merchandise following the holiday season to accelerate retail sales of these goods. The
Company established its reserve for returns as of December 31, 2005 based on its estimate
of merchandise to be received during the spring 2006 season which was generally shipped
to retailers for the 2005 fall and holiday selling seasons.

Gross profit

Gross
profit for the quarter ending June 30, 2006 increased $1,317,000 or 18% and for the
six-month period, increased $2,500,000 or 18%, in each case as compared to the
corresponding period last year. Gross profit expressed as a percentage of net sales for
the quarter was 33.3% compared to 34.0% last year and, for the six-month period,
increased to 33.2% from 33.0% compared to the same period in 2005.

The
increase in gross profit during both the quarter and six-months ending June 30, 2006 was
primarily due to increases in net sales, reductions in certain inventory-related
expenses, and a more favorable returns adjustment (see below), offset in part by lower
average initial margins, principally for mens belts. The reduction in belt average
initial margin is mainly associated with a number of certain new private label programs
shipped during the quarter and six-month period which generally carried somewhat lower
initial markups compared to branded merchandise. However, the net margins on these
merchandise collections are typically comparable to that of other programs since such
merchandise is frequently less promotional than branded products and is not subject to
royalty or other license-related obligations. The decrease in inventory-control costs is
due mainly to a reduction in markdowns associated with sales of out of line belts as well
as lower import-related costs associated with our efforts to reduce shipping and other
inventory procurement expenses.

Included
in gross profit for the quarter and six months ending June 30, 2006 and 2005, are annual
second quarter adjustments to record the variance between customer returns of prior year
shipments actually received in the current year and the allowance for customer returns
which was established at the end of the preceding fiscal year. The adjustment to net
sales recorded in the second quarter described above resulted in a favorable adjustment
to gross profit of $943,000 and $569,000 for the quarter and six-month periods ending
June 30, 2006 and June 30, 2005, respectively. As described above, the increase in the
gross profit adjustment in 2006 was due to generally lower returns than anticipated
during the spring 2006 season and a reduction in required markdowns associated with goods
returned from vendors.

Selling and
Administrative Expenses

Selling
and administrative expenses for the quarter ending June 30, 2006 increased $295,000 or 4%
and, for the six-month period, increased $418,000 or 3%, both as compared to the same
periods last year. Selling and administrative expenses expressed as a percentage of net
sales were 28.0% and 32.2% for the quarters ending June 30, 2006 and 2005 respectively,
and 29.6% and 33.8% for the six months ending June 30, 2006 and 2005, respectively.

10



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# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)

Selling
expenses for the quarter increased $898,000 or 18% compared to last years second
quarter and expressed as a percentage of net sales, decreased to 22.4% from 22.8%. For
the six-month period ending June 30, 2006, selling expenses increased $844,000 or 9% and
as a percentage of net sales were 22.2% compared to 24.1% for the same period last year.
The increase for the quarter and year is due to increases in certain variable-selling
related costs including district sales, merchandising and product development
compensation, travel, in-store servicing and trade show expenses as well as substantial
increases in certain fringe benefit costs, particularly group health insurance due to
heavier than anticipated employee medical claims during the quarter.

We
routinely make expenditures for advertising and promotion as necessary to maintain and
enhance our business. Certain of our license agreements also require specified levels of
spending. These expenditures, which consist primarily of media and print advertising,
image fund contributions and other promotional costs, are included in selling and
administrative expenses as incurred. In addition, we frequently make expenditures in
connection with cooperative advertising programs to support various marketing initiatives
sponsored by our customers. Accruals associated with cooperative advertising expenditures
are recorded as a reduction to net sales. Expenditures for advertising and promotion,
including cooperative advertising, totaled $838,000 or 3.2% percent of net sales compared
to $679,000 or 3.1% of net sales for the quarters ending June 30, 2006 and 2005,
respectively. Advertising and promotion expenses, including cooperative advertising, for
the six months ending June 30, 2006 were $1,560,000 or 3.3% of net sales compared to
$1,335,000 or 3.2% of net sales for the  corresponding period last year. The
increase during both periods is due to additional expenditures based on a percentage of
net sales made in support of certain of our licensed tradenames.

For
the quarter and six-months ending June 30, 2006, administrative expenses decreased
$603,000 or 29% and $426,000 or 11%, respectively, compared to the same periods last
year. Administrative expenses expressed as a percentage of net sales were 5.6% and 9.4%
for the quarters ending June 30, 2006 and 2005, respectively, and 7.4% and 9.7% for the
six months ending June 30, 2006 and 2005, respectively. The decrease in administrative
expenses for both the quarter and six-month periods was mainly due to reductions in
administrative compensation, professional fees, and data processing maintenance and
rental charges as well as the reduction of an accrual related to certain environmental
matters (see Liquidity and Capital Resources), all offset in part by
increases in certain fringe benefit expenses, especially group health insurance.

Interest Expense

Net
interest expense for the quarter and six-month periods ending June 30, 2006 increased by
$110,000 and $200,000 respectively, compared to the same periods in 2005. The increases
were mainly due to both higher average borrowings and interest rates during the periods
ended June 30, 2006. Average outstanding borrowings increased by approximately 12% during
both the quarter and six-month periods due to increases in average inventory and accounts
receivable investment associated with higher net sales during the periods. Our average
borrowing cost increased approximately 200 basis points for both the quarter and
six-months ended June 30, 2006 compared to the same periods last year due to increases
generally in short-term interest rates.

Provision for Income Taxes

We
recorded a $25,000 current income tax provision on our net income during the quarter and
six-month periods ended June 30, 2006. We recorded no current income tax provision or
benefit on our net income or loss during either of the periods ended June 30, 2005. We
have been recording a valuation reserve against all of the deferred tax assets we
generate due to the uncertainty as to whether we will generate sufficient taxable income
to allow us to benefit from these assets. The amount of the deferred tax asset considered
realizable could be adjusted in the future if estimates of taxable income or loss for
future years are revised based on actual results.

Liquidity and Capital
Resources

As
is customary in the fashion accessories industry, substantial percentages of our sales
and earnings occur in the months of September, October and November, when we make
significant shipments of our products to retailers for sale during the holiday season. As
a result, accounts receivable peak in the fourth quarter. We build inventory during the
year to meet the demand for the holiday season. The required cash is provided by a
revolving credit facility.

11



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# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)

The
Companys working capital increased by $1,616,000 during the six-month period ending
June 30, 2006 compared to a decrease of $621,000 for the six months ending June 30, 2005.
The increase during the current year is mainly due to increases in net inventory and
accounts receivable investment in connection with higher net sales during the six months
ended June 30, 2006, as well as a decrease in accounts payable balances. These working
capital increases were partially offset by higher bank borrowings under our revolving
credit agreement during the period. As discussed above, our bank borrowings generally
increase in advance of and during periods of rising sales as we finance the working
capital requirements associated with those sales. The decrease in working capital for the
period ending June 30, 2005 was principally due to a decrease in net accounts receivable
and inventories, and increases in short-term borrowings and accounts payable, offset in
part by decreases in accrued employee compensation and other current liabilities and
current portion of long term debt.

Cash
used in operations during the six months ending June 30, 2006 totaled $4,734,000 compared
to cash used in operations of $1,504,000 for the corresponding period last year. Cash was
used in operations this year mainly to fund additional inventory and accounts receivable
investments in connection with the increase in sales as well as decreases in accounts
payable and other accrued liabilities, all offset partially by net income and
depreciation and amortization.

Cash
used in operations during the first six months of 2005 reflects the net loss for the
period, decreases in accounts payable and other current liabilities, and increases in
prepaid and other current assets offset in part by reductions in net accounts
receivable and inventory.

Cash
used in investing activities was $72,000 for the six-month period ending June 30, 2006
compared to cash used of $100,000 for the six-month period ending June 30, 2005. In both
periods, cash was used for capital expenditures and premiums on certain life insurance
contracts owned by the Company.

Cash
provided by financing activities for the six months ending June 30, 2006 and June 30,
2005 was $4,431,000 and $1,474,000, respectively, reflecting in both years net borrowings
under our revolving credit agreement. The proceeds were used to fund the Companys
net working capital requirements.

In
the ordinary course of business, we are contingently liable for performance under letters
of credit. At June 30, 2006, outstanding letters of credit totaled $146,000. We presently
are required to pay a fee quarterly equal to 2.00% per annum on outstanding letters of
credit.

The
following chart summarizes our contractual obligations as of December 31, 2005 (in
thousands):

|                                                  | Payments due by period
|------------------------------------------------- | ----------------------
|
|Operating leases                                  |                       
|                                                 
|Minimum royalty and advertising payments required |                       
|under License Agreements                          |                       
|                                                 
|Postretirement benefits                           |                       
|                                                 
|Deferred compensation                             |                       
|                                                 
|Total                                             |                       
|                                                 

We
are also a party to employment agreements with certain of our executive officers that
provide for the payment of compensation and other benefits during the term of each
executives employment and, under certain circumstances, for a period of time
following their termination.

During
the quarter and six-months ended June 30, 2006, there were no material changes outside
the ordinary course of business in the contractual obligations set forth in the above
chart.

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# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)

During
the quarter ended June 30, 2006, we completed the sale of our former jewelry
manufacturing facility located in Attleboro, Massachusetts to the Attleboro Redevelopment
Authority (the ARA), which purchased the property for nominal consideration.
We ceased jewelry manufacturing operations in March 2000 but maintained certain office
and storage space at the Attleboro location through the fourth quarter of 2004. The
completion of the sale had no impact on the results of our operations or on our financial
condition for either the quarter or six-months ended June 30, 2006. However, during the
quarter we reduced certain accruals associated with environmental-related matters by
$233,000 following our assessment of the risks associated with the Attleboro transaction
in light of the ARAs contractual obligations in connection with the remediation of
the Attleboro facility. While the sale should result in a reduction in certain facility
maintenance and building operations costs going forward, we anticipate that these savings
will not have a material affect on the results of our operations or on our financial
condition.

Forward Looking
Statements

Certain
of the preceding paragraphs contain forward looking statements which are
based upon current expectations and involve certain risks and uncertainties. Under the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995, readers
should note that these statements may be impacted by, and the Companys actual
performance may vary as a result of, a number of known and unknown risks and
uncertainties that could cause actual results, performance or achievements to differ
materially from those described or implied in the forward-looking statements, including,
but not limited to, general economic and business conditions, competition in the
accessories markets; potential changes in customer spending; acceptance of our product
offerings and designs; the level of inventories maintained by our customers; the
variability of consumer spending resulting from changes in domestic economic activity; a
highly promotional retail environment; any significant variations between actual amounts
and the amounts estimated for those matters identified as our critical accounting
estimates as well as other significant accounting estimates made in the preparation of
our financial statements; and the impact of the hostilities in the Middle East and the
possibility of hostilities in other geographic areas as well as other geopolitical
concerns. Accordingly, actual results may differ materially from such forward-looking
statements.

You
are urged to consider all such factors. In light of the uncertainty inherent in such
forward-looking statements, you should not consider their inclusion to be a
representation that such forward-looking matters will be achieved. We assume no
obligation for updating any such forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such forward-looking
statements.

# Item
3.   Quantitative and Qualitative Disclosures about Market Risk

During
the quarter and six-months ended June 30, 2006, there were no material changes in the
information called for by this item from the information contained in Item 7A of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

# Item
4.   Controls and Procedures

At
the end of the period covered by this report, we carried out an evaluation, with the
participation of our management including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures. Based on our
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective. There was no change in our internal
control over financial reporting during the quarter ended June 30, 2006 that has
materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

13



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# PART II  OTHER
INFORMATION

# Item 1A. Risk Factors

There
were no material changes from the risk factors previously disclosed in Item 1A to Part I
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

# Item
2.    Unregistered Sales of Equity Securities and Use of Proceeds

(a)                        During
the three-month period ended June 30, 2006, the Estate of Marshall Tulin           (the
Estate) converted the Amended and Restated Convertible           Promissory
Note of the Company dated April 1, 2004, as amended and restated as           of June 30,
2004, and payable to the order of the Estate (the Note)           in the
amount of $350,000, into 116,666 shares of the Companys common           stock,
$.10 par value per share (Common Stock) pursuant to a formula           set
forth in the Note.

The
Company is relying on an exemption from registration contained in Section 4(2) of the
Securities Act of 1933, as amended (the Securities Act), in connection with
the issuance of the shares of Common Stock. The Estate has represented, warranted and
agreed, among other things, that the shares of Common Stock issued upon the conversion of
the Note have been acquired for its own account, for investment only and not with a view
to the resale or distribution thereof; and understand that the shares of Common Stock
must be held indefinitely unless the sale or other transfer thereof is subsequently
registered under the Securities Act or an exemption from such registration is available
at that time. The Estate has also represented that it has knowledge and experience in
financial and business matters; that it is capable of evaluating the merits and risks of
its investment in the shares of Common Stock; has adequate means of providing for its
current needs and possible future contingencies; is able to bear the economic risks of
its investment in the shares of Common Stock; is able to hold the shares of Common Stock
for an indefinite period of time and has a sufficient net worth to sustain a loss of its
investment in the shares of Common Stock in the event any loss should occur, and has had
access to and received such documents and information concerning the Company as it has
requested. A Securities Act restrictive legend is placed on each certificate representing
the shares of Common Stock and stop transfer instructions are placed on such certificates
as may be necessary or appropriate to, among other things, prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act and any
applicable state securities laws.

(b)       Not applicable.

(c)       Not applicable.

# Item
6.    Exhibits

|ExhibitNumber
31.01
31.02
32.01 | Description
Rule 13a-14(a) Certification of John Tulin, President and Chief Executive Officer of the Company.
Rule 13a-14(a) Certification of Jerold R. Kassner, Senior Vice President and Chief Financial Officer of the Company.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14



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# SIGNATURES

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

| | SWANK, INC.
Registrant/s/ Jerold R. Kassner
Jerold R. Kassner,
Senior Vice President,
Chief Financial Officer and
Treasurer
| | ---------------------------------------------------------------------------------------------------------------------------

Date:   August 14,
2006

15



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# EXHIBIT INDEX

|ExhibitNumber
31.01
31.02
32.01 | Description
Rule 13a-14(a) Certification of John Tulin, President and Chief Executive Officer of the Company.
Rule 13a-14(a) Certification of Jerold R. Kassner, Senior Vice President and Chief Financial Officer of the Company.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16