# UNITED STATES SECURITIES
AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549Form 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 September 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                                                       | 04-1886990                          
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number)
|                                                               |                                     

|                                         |           
|---------------------------------------- | ----------
|90 Park Avenue                           |           
|New York, NY                             | 10016     
|(Address of principal executive offices) | (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 October 31, 2006
|Common stock, $.10 par value | 6,074,699                             



---

# SWANK, INC. INDEX

|                                                                                                       |         
|------------------------------------------------------------------------------------------------------ | --------
|                                                                                                       | Page No.
|Part I.  Financial Information                                                                        
|                                                                                                      
|Item 1.          Condensed Financial Statements and Related Notes                                      | 3 - 9   
|                                                                                                      
|Item 2.          Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 - 15 
|                                                                                                      
|Item 3.          Quantitative and Qualitative Disclosures about Market Risk                            | 15      
|                                                                                                      
|Item 4.          Controls and Procedures                                                               | 15      
|                                                                                                      
|Part II.  Other Information                                                                           
|                                                                                                      
|                                                                                                      
|Item 1A.       Risk Factors                                                                            | 16      
|                                                                                                      
|Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds                           | 16      
|                                                                                                      
|Item 4.          Submission of Matters to a Vote of Security Holders                                   | 16      
|                                                                                                      
|Item 6.          Exhibits                                                                              | 17      
|                                                                                                      
|Signatures                                                                                             | 18      
|                                                                                                      
|Exhibit Index                                                                                          | 19      
|                                                                                                      

2



---

# Part I. Financial
Information

# Item 1. Financial
Statements

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

|                                                                  | September 30, 2006 |  |   |       
|----------------------------------------------------------------- | ------------------ |  | - | ------
|
|Current:                                                          |                    |  |   |       
|Cash and cash equivalents                                         |                    |  | $ | 337   
|Accounts receivable, less allowances                              |                    | 
|of $6,032 and $5,241, respectively                                |                    |  |   | 21,407
|Inventories, net:                                                 |                    | 
|Raw materials                                                     |                    |  |   | -     
|Work in process                                                   |                    |  |   | 2,092 
|Finished goods                                                    |                    |  |   | 18,790
|                                                                  |                    |  |   |       
|                                                                  |                    |  |   | 20,882
|Prepaid and other current assets                                  |                    |  |   | 1,022 
|                                                                  |                    |  |   |       
|Total current assets                                              |                    |  |   | 43,648
|Property, plant and equipment, net of                             |                    | 
|accumulated depreciation and amortization                         |                    |  |   | 418   
|Other assets                                                      |                    |  |   | 3,398 
|                                                                  |                    |  |   |       
|Total assets                                                      |                    |  | $ | 47,464
|                                                                  |                    |  |   |       
|LIABILITIES                                                       |                    | 
|Current:                                                          |                    | 
|Notes payable to banks                                            |                    |  | $ | 20,553
|Current portion of long-term debt                                 |                    |  |   | 491   
|Accounts payable                                                  |                    |  |   | 3,438 
|Accrued employee compensation                                     |                    |  |   | 1,341 
|Convertible note due to related party                             |                    |  |   | -     
|Other current liabilities                                         |                    |  |   | 3,172 
|                                                                  |                    |  |   |       
|Total current liabilities                                         |                    |  |   | 28,995
|                                                                  |                    | 
|Long-term obligations                                             |                    |  |   | 6,182 
|                                                                  |                    |  |   |       
|Total liabilities                                                 |                    |  |   | 35,177
|                                                                  |                    |  |   |       
|STOCKHOLDERS' EQUITY                                              |                    | 
|Preferred stock, par value $1.00:                                 |                    | 
|Authorized - 1,000,000 shares                                     |                    |  |   | -     
|Common stock, par value $.10:                                     |                    | 
|Authorized - 43,000,000 shares:                                   |                    | 
|Issued -- 6,305,379 and 5,908,712 shares, respectively            |                    |  |   | 631   
|Capital in excess of par value                                    |                    |  |   | 1,818 
|Retained earnings                                                 |                    |  |   | 10,545
|Accumulated other comprehensive (loss), net of tax                |                    |  |   | (102  
|Treasury stock, at cost, 305,680 and 176,791 shares, respectively |                    |  |   | (605  
|                                                                  |                    |  |   |       
|Total stockholders' equity                                        |                    |  |   | 12,287
|                                                                  |                    |  |   |       
|Total liabilities and stockholders' equity                        |                    |  | $ | 47,464
|                                                                  |                    |  |   |       

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

3



---

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

_________________

|                                                                 | 2006 |  | 2005 |          
|---------------------------------------------------------------- | ---- |  | ---- | ---------
|Net sales                                                        |      |  | $    | 33,172   
|                                                                
|Cost of goods sold                                               |      |  |      | 21,560   
|                                                                 |      |  |      |          
|Gross profit                                                     |      |  |      | 11,612   
|                                                                
|Selling and administrative expenses                              |      |  |      | 8,003    
|                                                                 |      |  |      |          
|Income from operations                                           |      |  |      | 3,609    
|                                                                
|Interest expense                                                 |      |  |      | 455      
|                                                                 |      |  |      |          
|Income from operations before income taxes                       |      |  |      | 3,154    
|                                                                
|Income taxes                                                     |      |  |      | 59       
|                                                                 |      |  |      |          
|Net income                                                       |      |  | $    | 3,095    
|                                                                 |      |  |      |          
|Share and per share information:                                 |      | 
|Basic net income per weighted average common share outstanding   |      |  | $    | .52      
|Basic weighted average common shares outstanding                 |      |  |      | 5,943,907
|Diluted net income per weighted average common share outstanding |      |  | $    | .51      
|Diluted weighted average common shares outstanding               |      |  |      | 6,020,953

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

4



---

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

_________________

|                                                                 | 2006 |  | 2005 |          
|---------------------------------------------------------------- | ---- |  | ---- | ---------
|Net sales                                                        |      |  | $    | 81,786   
|                                                                
|Cost of goods sold                                               |      |  |      | 54,055   
|                                                                 |      |  |      |          
|Gross profit                                                     |      |  |      | 27,731   
|                                                                
|Selling and administrative expenses                              |      |  |      | 22,367   
|                                                                 |      |  |      |          
|(Gain) on termination of lease                                   |      |  |      | -        
|                                                                
|Income from operations                                           |      |  |      | 5,364    
|                                                                
|Interest expense                                                 |      |  |      | 1,185    
|                                                                 |      |  |      |          
|Income from operations before income taxes                       |      |  |      | 4,179    
|                                                                
|Income taxes                                                     |      |  |      | 84       
|                                                                 |      |  |      |          
|Net income                                                       |      |  | $    | 4,095    
|                                                                 |      |  |      |          
|Share and per share information:                                 |      | 
|Basic net income per weighted average common share outstanding   |      |  | $    | .70      
|Basic weighted average common shares outstanding                 |      |  |      | 5,819,392
|Diluted net income per weighted average common share outstanding |      |  | $    | .69      
|Diluted weighted average common shares outstanding               |      |  |      | 5,960,258

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

5



---

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

_________________

|                                                                        | 2006 |  | 2005 |        
|----------------------------------------------------------------------- | ---- |  | ---- | -------
|Cash flows from operating activities:                                   |      |  |      |        
|                                                                        |      | 
|Net income                                                              |      |  | $    | 4,095  
|Adjustments to reconcile net income to                                  |      | 
|net cash (used in) operations:                                          |      | 
|Depreciation and amortization                                           |      |  |      | 157    
|(Gain) on termination of real property lease                            |      |  |      | -      
|Bad debt expense                                                        |      |  |      | 227    
|                                                                        |      | 
|Changes in assets and liabilities                                       |      | 
|(Increase) in accounts receivable                                       |      |  |      | (10,372
|(Increase) in inventory                                                 |      |  |      | (6,007 
|(Increase) in prepaid and other assets                                  |      |  |      | (160   
|(Decrease) increase in accounts payable, accrued and other liabilities  |      |  |      | (390   
|Increase (decrease) in other long-term obligations and deferred credits |      |  |      | 365    
|                                                                        |      |  |      |        
|Net cash (used in) operating activities                                 |      |  |      | (12,085
|                                                                        |      |  |      |        
|Cash flows from investing activities:                                   |      | 
|Capital expenditures                                                    |      |  |      | (34    
|Premiums on life insurance                                              |      |  |      | (122   
|                                                                        |      |  |      |        
|Net cash (used in) investing activities                                 |      |  |      | (156   
|                                                                        |      |  |      |        
|Cash flows from financing activities:                                   |      | 
|Borrowing under revolving credit agreements                             |      |  |      | 42,326 
|Payments of revolving credit obligations                                |      |  |      | (30,037
|Proceeds from stock option exercises                                    |      |  |      | 48     
|Treasury stock received                                                 |      |  |      | (264   
|                                                                        |      |  |      |        
|Net cash provided by financing activities                               |      |  |      | 12,073 
|                                                                        |      |  |      |        
|Net (decrease) increase in cash and cash equivalents                    |      |  |      | (168   
|                                                                        |      | 
|Cash and cash equivalents at beginning of period                        |      |  |      | 505    
|                                                                        |      |  |      |        
|Cash and cash equivalents at end of period                              |      |  | $    | 337    
|                                                                        |      |  |      |        
|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



---

# 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
          September 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 per share for           the
periods ending September 30, 2006 and September 30, 2005 (in thousands,           except
for share and per share data):

|                                                                       | Quarter
Ending September 30, |  | Nine Months
Ending September 30, |          
|---------------------------------------------------------------------- | ---------------------------- |  | -------------------------------- | ---------
|
|Numerator:                                                             |                              |  |                                  |          
|Net income as reported                                                 |                              |  | $                                | 3,095    
|Add back interest expense on convertible note due to affiliate, net of |                              | 
|income taxes                                                           |                              |  |                                  | -        
|                                                                       |                              |  |                                  |          
|Net income used for diluted earnings per share calculation             |                              |  | $                                | 3,095    
|                                                                       |                              |  |                                  |          
|Denominators:                                                          |                              | 
|Shares used in computing basic net income per weighted average         |                              | 
|common share outstanding                                               |                              |  |                                  | 5,943,907
|Effect of dilutive securities                                          |                              |  |                                  | 77,046   
|                                                                       |                              |  |                                  |          
|Shares used in computing net income per weighted average common        |                              | 
|share outstanding assuming dilution                                    |                              |  |                                  | 6,020,953
|                                                                       |                              |  |                                  |          
|Basic net income per weighted average common share outstanding         |                              |  | $                                | .52      
|Diluted net income per weighted average common share outstanding       |                              |  | $                                | .51      

Certain
convertible securities in the amount of 218,750 shares were not included in the
computation of diluted earnings per share for the nine months ended September 30, 2005
since the inclusion would be antidilutive.

(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. On 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)              Stock-Based
Compensation. 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 are no longer permitted 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 are
now 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           (the 1998 Plan) or 1994 Non-Employee
Director Plan (the 1994           Director Plan) respectively, vested
immediately (see footnote H to the           consolidated financial statements included
in our Form 10-K for the fiscal year           ended December 31, 2005). We did not grant
any stock options during either of           the three or nine-month periods ended
September 30, 2006.

7



---

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

Prior
to the adoption of SFAS 123(R), we accounted for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
Stock-based employee compensation cost related to stock options granted during the third
quarter of 2005 was not reflected in net income, as all such options granted had an
exercise price equal to the market value of the underlying common stock on the date of the
grant. The options granted during the quarter ended September 30, 2005 were non-qualified
option grants issued under the 1994 Director Plan.

The
following table illustrates the effect on net income and earnings per share for the
quarter and nine months ended September 30, 2005, as if we had applied the fair value
recognition provisions of SFAS 123, Accounting for Stock-Based Compensation,
for the grant of stock options:

|                                                                                  |  | 
|--------------------------------------------------------------------------------- |  | 
|                                                                                  |  | 
|(Dollars in thousands except per share amounts)                                   |  | 
|                                                                                  |  | 
|Net income as reported                                                            |  | 
|Add: Stock-based employee compensation included in reported net income, net of    |  | 
|related tax effects                                                               |  | 
|Deduct: Total stock-based employee compensation determined under fair value based |  | 
|method for all awards, net of related tax effects                                 |  | 
|                                                                                  |  | 
|Pro forma net income                                                              |  | 
|                                                                                  |  | 
|Basic net income per common share as reported                                     |  | 
|Basic net income per common share pro forma                                       |  | 
|Diluted net income per common share as reported                                   |  | 
|Diluted net income per common share pro forma                                     |  | 

The
following table provides the significant weighted average assumptions used in determining
the estimated fair value at the date of grant under the Black-Scholes option-pricing
model of the award granted during the third quarter of 2005:

|                            |                   
|--------------------------- | ------------------
|                            | September 30, 2005
|                            | Proforma          
|                            |                   
|Expected volatility         | 99.0%             
|Weighted average volatility | 99.0%             
|Risk free rate              | 6.5%              
|Expected life (in years)    | 5.0               
|Expected dividend yield     | -                 

The
expected volatility was based on historical volatility for a period approximating the
awards expected life. The risk-free rate was based on the U.S. Treasury Bill rate in
effect at the time of grant. The expected life (estimated period of time outstanding) of
awards granted was estimated using the historical exercise behavior of employees. Under
the terms of our loan agreement with Wells Fargo Foothill, Inc., we are prohibited from
paying dividends.

# Stock Options

In
1994, we established the 1994 Director Plan pursuant to which options may be granted to
non-employee directors to purchase 50,000 shares of common stock at market value on the
date of grant. Options granted under this plan were for a period of five years and are
immediately exercisable. In April 1998, our stockholders approved the 1998 Plan which
replaced our prior incentive stock plans, all of which had expired by their terms. The
1998 Plan permits our Board of Directors to grant a maximum of 1,000,000 shares to key
employees through stock options, stock appreciation rights, restricted stock units,
performance awards and other stock-based awards. We granted options for 625,000 shares
under the 1998 Plan in 2001. These shares vested immediately. Under the 1998 Plan, 375,000
shares remain available for future grants.

A
summary of option activity under the stock-based compensation plans as of September 30,
2006 and changes during the nine-months ended September 30, 2006, is detailed below:

8

---

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

|                                                 |           |                |              |          
|------------------------------------------------ | --------- | -------------- | ------------ | ---------
|                                                 |           |                | Weighted     |          
|                                                 |           |                | Average      | Aggregate
|                                                 |           | Weighted       | Remaining    | Intrinsic
|                                                 | Number of | Average        | Contractual  | Value (in
|                                                 | Shares    | Exercise Price | Term (years) | thousands
|Outstanding at December 31, 2005                 | 363,334   | $ .19          | .93          | $ 440    
|Granted                                          | -         | -              | -            | -        
|Exercised                                        | (280,001) | $.17           | -            | $ 751    
|Forfeited/ Expired                               | -         | -              | -            | -        
|                                                 |           |                |              |          
|Outstanding at September 30, 2006                | 83,333    | $ .23          | .36          | $ 314    
|                                                 |           |                |              |          
|Vested or expected to vest at September 30, 2006 | 83,333    | $ .23          | .36          | $ 314    
|Exercisable at September 30, 2006                | 83,333    | $ .23          | .36          | $ 314    

All
options granted under the both the 1998 Plan and the 1994 Director Plan are vested as of
September 30, 2006.

The
table above reflects 275,000 option shares exercised under the 1998 Plan at $.17 per share
and 5,001 option shares exercised under the 1994 Director Plan at prices ranging from $.18
to $.37 per share during the nine months ended September 30, 2006. At September 30, 2006,
there were 75,000 option shares issued, outstanding and exercisable at $.17 per share
under the 1998 Plan and 8,333 option shares issued, outstanding, and exercisable at prices
ranging from $.18 to $1.60 per share under the 1994 Director Plan.

(6)              Recent
Accounting Pronouncements. 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
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
157). SFAS 157 establishes a common definition for fair value to be applied to US
GAAP guidance requiring use of fair value, establishes a framework for measuring fair
value, and expands disclosure about such fair value measurements. SFAS 157 is effective
for fiscal years beginning after November 15, 2007. We are currently assessing the impact
of the adoption of SFAS 157 but do not presently anticipate it will have a material effect
on our consolidated financial position and results of operations.

In
September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans (SFAS 158). SFAS 158 requires
an employer to recognize the over-funded or under-funded status of defined benefit and
other postretirement plans (other than a multiemployer plan) as an asset or liability on
its consolidated balance sheet. Actuarial gains and losses and prior service costs and
credits that have not yet been recognized as a component of net periodic benefit cost as
of the statement adoption date are recorded as a component of accumulated other
comprehensive income. SFAS 158 also modifies the required disclosures in the notes to the
financial statements. SFAS 158 is effective as of the end of fiscal years ending after
December 15, 2006. We are currently assessing the impact of SFAS 158 on our consolidated
financial statements.

In
September 2006, the SEC staff issued Staff Accounting Bulletin 108, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108). SAB 108 requires that public companies utilize
a dual-approach to assessing the quantitative effects of financial
misstatements. This dual approach includes both an income statement focused assessment and
a balance sheet focused assessment. The guidance in SAB 108 must be applied to annual
financial statements for fiscal years ending after November 15, 2006. We are assessing the
impact of adopting SAB 108 but do not presently anticipate that it will have a material
effect on our consolidated financial position or results of operations.

9



---

# 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 income for the quarter and nine-month periods ended September 30, 2006 was $3,095,000
and $4,095,000 respectively, compared to $915,000 and $133,000, respectively, for the
corresponding periods last year. The increase in net income in both periods was primarily
due to higher net sales. Net sales during the quarter increased 28% to $33,172,000
compared to $25,934,000 for the corresponding period in 2005 and, for the nine-month
period, increased 22% to $81,786,000 compared to $67,202,000. The increase in both
periods was due to higher shipments of our jewelry, belt, and personal leather goods
merchandise and a decrease in the provision for customer returns, offset in part by an
increase in in-store markdown expense (see discussion under Net Sales below). Gross
profit for the quarter and nine-month periods increased 40% and 27% respectively,
compared to the same periods last year. Gross profit expressed as a percentage of net
sales increased during the quarter to 35.0% from 31.9% and to 33.9% from 32.6%, during
the nine-month period, both as compared to the prior year. The increase in gross profit
was due to higher net sales as well as reductions in product sourcing-related costs,
primarily inbound freight. Selling and administrative expenses increased $968,000 or
13.8% during the quarter and $1,386,000 or 7% for the nine-month period primarily due to
variable sales-related expenses, increases in product development costs, and increases in
certain fringe benefit-related expenses.

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 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.

10



---

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

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 September 30, 2006 increased 28% to $33,172,000, and for the
nine-month period, increased 22% to $81,786,000, both as compared to the corresponding
periods last year. The increase during the both the quarter and nine-month periods was
principally due to higher shipments of our jewelry, personal leather goods, and belt
merchandise and a reduction in accrued returns, offset partially by higher in-store
markdown expenses. The increase for the nine-month period ending September 30, 2006 was
also due to a more favorable adjustment associated with customer returns actually
received during our spring season compared to the allowance established at the end of the
preceding fiscal year.

Net
sales of the our jewelry merchandise increased 34% and 32% during the quarter and
nine-month periods ending September 30, 2006, respectively, compared to the corresponding
prior year periods. The increases reflect initial shipments of certain new branded
merchandise including our Donald Trump, and Chaps jewelry
collections during the quarter, as well the continuing strength of the jewelry business
generally. Mens fashion trends have accentuated dressier looks featuring, among
other things, French-cuff shirts that have increased the demand for both our branded and
private-label jewelry lines. Net sales of our personal leather goods merchandise increased
42% during the quarter and 17% for the nine-month period. The increase in both periods was
driven principally by the ongoing roll-out of our new Nautica personal leather
goods and gift collections and higher shipments of certain private-label merchandise for a
major department store customer. Belt net sales increased 23% for both the quarter and
nine-month periods due mainly to increases in shipments of private label merchandise
associated with several new business opportunities; shipments of our new
Nautica collection of belts; and higher shipments to certain existing
customers reflecting an expansion of our market share at those accounts.

Net
sales to international customers (including certain military accounts) increased $452,000
or 21% during the quarter and $652,000 or 11% for the nine-moth period ended September 30,
2006 compared to the same periods last year. The increase during the quarter was due
primarily to shipments of branded merchandise to certain customers in Canada and Mexico.
Shipments to international customers accounted for 8% of net sales during both the quarter
and nine-months ended September 30, 2006, approximately the same as last year.

Included
in net sales for the nine months ending September 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 nine-month period ended September 30, 2006, compared to
$814,000 for the comparable period in 2005. Our 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, we have 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. We established our reserve for returns as of December 31,
2005 based on our 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.

11



---

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

# Gross profit

Gross
profit for the quarter ending September 30, 2006 increased $3,327,000 or 40% and for the
nine-month period, increased $5,827,000 or 27%, in each case as compared to the
corresponding period last year. Gross profit expressed as a percentage of net sales for
the quarter was 35.0% compared to 31.9% last year and, for the nine-month period,
increased to 33.9% from 32.6% compared to the same period in 2005.

The
increase in gross profit during both the quarter and nine-months ending September 30,
2006 was primarily due to increases in net sales and reductions in certain product
sourcing-related costs, primarily in-bound freight, offset in part by increases in
inventory-control costs. Average initial margins for our belt merchandise decreased
during both the quarter and nine-month period compared to last year mainly due to certain
new private label programs that were shipped during those periods that generally carry a
lesser markup compared to our branded merchandise. Private label programs are frequently
less promotional than branded goods and are not subject to royalty or other
license-related obligations. The improvement in gross profit as a percentage of net sales
is mainly due to the increase in net sales since certain product-related costs included
in gross profit may contain a fixed component and accordingly, do not increase
proportionally with sales.

Included
in gross profit for the nine months ending September 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 nine-month periods ending September 30,
2006 and September 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 September 30, 2006 increased $968,000
or 13.8% and, for the nine-month period, increased $1,386,000 or 7%, both as compared to
the same periods last year. Selling and administrative expenses expressed as a percentage
of net sales were 24.1% and 27.1% for the quarters ending September 30, 2006 and 2005
respectively, and 27.3% and 31.2% for the nine months ending September 30, 2006 and 2005,
respectively.

Selling
expenses for the quarter increased $965,000 or 19% compared to last year but, expressed
as a percentage of net sales, decreased to 18.2% from 19.5%. For the nine-month period
ending September 30, 2006, selling expenses increased $1,809,000 or 12% and as a
percentage of net sales declined to 20.5% compared to 22.3% for the same period last
year. The increase for the quarter and year is due to increases in certain
variable-selling related costs including expenditures made in connection with our various
license agreements, district sales, merchandising and product development compensation,
travel expenses, and certain fringe benefit costs.

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 $912,000 compared to $766,000 last year or
approximately 3% of net sales for each the quarters ending September 30, 2006 and 2005,
respectively. Advertising and promotion expenses, including cooperative advertising, for
the nine months ending September 30, 2006 were $2,474,000 compared to $2,102,000 for the
corresponding period last or 3% of net sales for each of the nine-month periods. The
increase during both periods was due to additional expenditures based on a percentage of
net sales made in support of certain of our licensed tradenames.

12



---

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

Administrative
expenses for the quarter ending September 30, 2006 were approximately even with the prior
year and for the nine-month period, decreased $423,000 or 7%. Administrative expenses
expressed as a percentage of net sales were 6.0% and 7.6% for the quarters ending
September 30, 2006 and 2005, respectively, and 6.8% and 8.9% for the nine months ending
September 30, 2006 and 2005, respectively. During the quarter, increases in certain
fringe benefit costs were offset by reductions in administrative compensation, general
insurance and professional fees expenses. The decrease in administrative expenses for the
nine-month period was mainly due to reductions in administrative compensation,
professional fees, general insurance expense, and an accrual related to certain
environmental matters (see Liquidity and Capital Resources), all offset in
part by increases in certain fringe benefit expenses.

# Interest Expense

Net
interest expense for the quarter and nine-month periods ending September 30, 2006
increased by $120,000 or 36% and $320,000 or 37%, respectively, compared to the same
periods in 2005. The increases were due to both higher average borrowings and interest
rates during 2006. Average outstanding bank borrowings increased by approximately 15%
during the quarter and 13% during the nine-month period due to increases in average
inventory and accounts receivable investment associated with higher net sales during those
periods. Average interest rates on our bank borrowings increased approximately 180 basis
points for the quarter and approximately 190 basis points for the nine-months ended
September 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 current income tax provision of $59,000 and $84,000 on our net income during
the quarter and nine-month periods ended September 30, 2006, respectively. We recorded no
current income tax provision on our net income during either of the corresponding periods
in 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.

The
Companys working capital increased by $4,716,000 during the nine-month period
ending September 30, 2006 compared to an increase of $293,000 for the nine months ending
September 30, 2005. The increase in 2006 is mainly due to increases in net accounts
receivable and net inventory investment in connection with seasonal increases in net
sales during the nine-month period ended September 30, 2006 and decreases in accounts
payable and other current liabilities, all offset in part by an increase in bank
borrowings under our revolving credit agreement. 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 increase for the period ended September 30,
2005 was principally due to increases in net accounts receivable and net inventories and
a decrease in other current liabilities offset largely by increases in bank borrowings
and accounts payable. Accounts receivable and inventory investment both increased
substantially in 2006 relative to the prior year due to sales increases during the
period. The increase in our net inventories was also affected this year by the launch of
several new merchandise programs that required sufficient investment for both start-up
and replenishment orders.

Cash
used in operations during the nine months ending September 30, 2006 totaled $12,085,000
compared to cash used in operations of $6,633,000 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.

13



---

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

Cash
used in operations during the nine months ended September 30, 2005 reflects increases in
our accounts receivable and inventory investment, offset in part by cash provided from net
income for the period, depreciation and amortization, decreases in other non-current
assets, and increases in accounts payable and other accrued liabilities.

Cash
used in investing activities was $156,000 for the nine-month period ending September 30,
2006 compared to cash used of $189,000 for the nine-month period ending September 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 nine months ending September 30, 2006 and
September 30, 2005 was $12,073,000 and $6,932,000, respectively, reflecting in both years
principally net borrowings under our revolving credit agreement. The proceeds of bank
borrowings were used to fund our net working capital requirements.

In
the ordinary course of business, we are contingently liable for performance under letters
of credit. At September 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):

|                                         |         |          |          |        |        
|---------------------------------------- | ------- | -------- | -------- | ------ | -------
|
|                                         |         |          |          |        |        
|
|Operating leases                         | $10,177 | $  2,249 | $  4,234 | $3,538 | $   156
|                                         |         |          |          |        |        
|Minimum royalty and advertising payments
|required under License Agreements        | 23,680  | 7,877    | 15,053   | 750    | -      
|                                         |         |          |          |        |        
|Postretirement benefits                  | 4,689   | 449      | 939      | 965    | 2,336  
|                                         |         |          |          |        |        
|Deferred compensation                    | 614     | 265      | 244      | 105    | -      
|                                         |         |          |          |        |        
|Total                                    | $39,160 | $10,840  | $20,470  | $5,358 | $2,492 
|                                         |         |          |          |        |        

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 nine-months ended September 30, 2006, there were no material changes
outside the ordinary course of business in the contractual obligations set forth in the
above chart.

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 nine-months ended September 30, 2006. However, during the quarter
ended June 30, 2006 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

14



---

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

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 nine-months ended September 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 September 30, 2006 that has
materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

15



---

# 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)                 Not
applicable.

(b)                 Not
applicable.

(c)                 Issuer
Purchases of Equity Securities.

| | The
following table provides certain information as to repurchases of shares of our Common
Stock during the three months ended September 30, 2006:
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|                  |        |        |    |   
|----------------- | ------ | ------ | -- | --
|
|                  |        |        |    |   
|July 1, 2006 -    | --     | --     | -- | --
|July 31, 2006    
|                  |        |        |    |   
|August 1, 2006 -  | --     | --     | -- | --
|August 31, 2006  
|                  |        |        |    |   
|September 1, 2006 | 53,812 | $ 2.16 | -- | --
|September 30, 200 |       
|                  |        |        |    |   
|Total             | 53,812 | $ 2.16 | -- | --
|                  |        |        |    |   

| | _________________(1)                 These
shares of Common Stock were repurchased by us in a private transaction.
| | ------------------------------------------------------------------------------------------------------------------

# Item
4.   Submission of Matters to a Vote of Security Holders

The
Companys 2006 Annual Meeting of Stockholders (the Annual Meeting) was
held on August 24, 2006. At the Annual Meeting, stockholders:

| | (a) |  | Elected
the following directors to serve as Class II directors of the Company
               until the Companys 2008 Annual Meeting of Stockholders and until
election                and qualification of their respective successors by the following
vote:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |           |         
|------------- | --------- | --------
|Director      | For       | Withheld
|John Tulin    | 5,131,521 | 65,097  
|John J. Macht | 5,182,571 | 14,047  

| | (b) |  | Approved
the appointment of BDO Seidman LLP as the independent accountants of                the
Company for the fiscal year ended December 31, 2006 by the following vote:
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|          |         |        
|--------- | ------- | -------
|For       | Against | Abstain
|5,169,102 | 20,083  | 7,433  

16

---

# Item
6.    Exhibits

| | ExhibitNumber |  | Description
| | ------------- |  | -----------

| | 31.01 |  | Rule
13a-14(a) Certification of John Tulin, President and Chief Executive Officer of the
               Company.
| | ----- |  | ----------------------------------------------------------------------------------------------------------------

| | 31.02 |  | Rule
13a-14(a) Certification of Jerold R. Kassner, Senior Vice President and Chief Financial
               Officer of the Company.
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------

| | 32.01 |  | Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------

17



---

# 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:   November
14, 2006

18



---

# EXHIBIT INDEX

|Exhibit No. | Description
|----------- | -----------

|31.01 | Rule 13a-14(a) Certification of John Tulin, President and Chief Executive
Officer of the                       Company.
|----- | -----------------------------------------------------------------------------------------------------------------------

|31.02 | Rule 13a-14(a) Certification of Jerold R. Kassner, Senior Vice President
and Chief Financial                       Officer of the Company.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------

|32.01 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the                       Sarbanes-Oxley Act of 2002.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------

19