U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

   [X]    Quarterly report under Section 13 or 15(d) of the Securities
            Exchange Act of 1934

              For the quarterly period ended   September 30, 2006
                                               ------------------

   [ ]    Transition report under Section 13 or 15(d) of the Exchange Act

              For the transition period from __________  to  ___________


                    Commission File Number:   1-10526
                                            -----------


                           UNITED-GUARDIAN, INC.
-------------------------------------------------------------------------
         (Exact name of registrant as specified in its charter)


          Delaware                                11-1719724
-------------------------------      ------------------------------------
(State or other jurisdiction of      (I.R.S. Employer Identification No.)
 incorporation or organization)


                230 Marcus Boulevard, Hauppauge, New York 11788
-------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (631) 273-0900

-------------------------------------------------------------------------
                         (Registrant's telephone number)

-------------------------------------------------------------------------
            (Former name, former address and former fiscal year,
                         if changed since last report)



     Indicate  by check  mark  whether  the  registrant  (1) filed  all  reports
required to be filed by Section 13 or 15(d) of the  Exchange Act during the past
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                                                Yes [X]  No [ ]




                             Cover Page 1 of 2 Pages

<page>

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

                                                                Yes [ ]  No [X]



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

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

                                                                Yes [ ]  No [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date:

                        4,942,139 shares of common stock,
                           par value $.10 per share,
                               as November 1, 2006

     Transitional Small Business Disclosure Format (Check one): Yes [ ]  No [X]































                             Cover Page 2 of 2 Pages

<page>
                              UNITED-GUARDIAN, INC.

                                      INDEX

                                                                        Page No.
                                                                       ---------
Part I.  FINANCIAL INFORMATION

   Item 1 - Financial Statements

              Consolidated Statements of Income - Nine and Three
                Months Ended September 30, 2006 and 2005 (unaudited)....     2

              Consolidated Balance Sheets -
                September 30, 2006 (unaudited) and December 31, 2005....   3-4

              Consolidated Statements of Cash Flows - Nine Months
                ended September 30, 2006 and 2005 (unaudited)...........     5

              Consolidated Notes to (unaudited) Financial Statements....  6-13

   Item 2 - Management's Discussion and Analysis of Financial
              Condition and Results of Operations....................... 13-17

   Item 3 - Controls and Procedures.....................................    18

Part II. OTHER INFORMATION

   Item 1 - Legal Proceedings...........................................    18

   Item 2 - Changes in Securities and Use of Proceeds...................    18

   Item 3 - Defaults Upon Senior Securities.............................    18

   Item 4 - Submission of Matters to a Vote of Security Holders.........    18

   Item 5 - Other Information...........................................    18

   Item 6 - Exhibits and Reports On Form 8-K............................    18

Signatures..............................................................    19


















                                        1
<page>
                          Part I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

                              UNITED-GUARDIAN, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                   (UNAUDITED)

<table>
<caption>
                                                      NINE MONTHS ENDED               THREE MONTHS ENDED
                                                        SEPTEMBER 30,                    SEPTEMBER 30,
                                                      2006         2005                2006         2005
                                                     ------        ------             ------        ------
<S>                                               <C>           <C>                <C>           <C>
Revenue:
  Net sales                                       $ 8,942,178    $9,697,066        $ 3,020,366   $ 3,049,494
                                                   ----------    ----------         ----------    ----------
Costs and expenses:
  Cost of sales                                     4,235,851     4,408,053          1,442,052     1,366,493
  Operating expenses                                1,966,602     1,885,612            592,144       560,273
                                                   ----------    ----------         ----------    ----------
                                                    6,202,453     6,293,665          2,034,196     1,926,766
                                                   ----------    ----------         ----------    ----------
      Income from operations                        2,739,725     3,403,401            986,170     1,122,728


Other income (expense):
  Investment income                                   303,718       235,466            108,616        74,175
  Loss on sale of marketable securities                (1,134)     (113,888)              (785)          343
  Other                                                (1,060)         (178)              (833)         (130)
                                                    ---------    ----------          ---------    ----------
      Income before income taxes                    3,041,249     3,524,801          1,093,168     1,197,116

Provision for income taxes                          1,058,000     1,282,300            382,300       421,400
                                                    ---------     ---------          ---------     ---------
      Net income                                  $ 1,983,249   $ 2,242,501        $   710,868   $   775,716
                                                     ========     =========           ========     =========
Earnings per common share
   (basic and diluted)                            $       .40   $       .45        $       .14   $       .16
                                                    =========     =========          =========     =========
Weighted average shares - basic                     4,941,494     4,934,528          4,942,139     4,937,356
                                                    =========     =========          =========     =========
Weighted average shares - diluted                   4,944,637     4,941,266          4,944,704     4,942,614
                                                    =========     =========          =========     =========
</table>










                 See notes to consolidated financial statements

                                        2
<page>
                              UNITED-GUARDIAN, INC.
                           CONSOLIDATED BALANCE SHEETS

                                            SEPTEMBER 30,       DECEMBER 31,
                                                2006               2005
                                            ------------       -------------
              ASSETS                         (UNAUDITED)         (AUDITED)
Current assets:
     Cash and cash equivalents           $   2,264,167      $    3,425,593
     Temporary investments                     764,550             699,363
     Marketable securities                   6,631,398           7,066,797
     Accounts receivable, net of
       allowance for doubtful accounts
       of $36,288 and $47,500 at
       September 30, 2006 and December 31,
       2005, respectively                    1,540,320           1,083,992
     Inventories (net)                       2,007,113           1,031,563
     Prepaid expenses and other
        current assets                         365,480             440,380
     Deferred income taxes                     218,901             217,389
                                           -----------         -----------
              Total current assets          13,791,929          13,965,077
                                           -----------         -----------

Property, plant and equipment:
     Land                                       69,000              69,000
     Factory equipment and fixtures          3,108,142           3,068,050
     Building and improvements               2,161,175           2,133,422
     Waste disposal plant                      133,532             133,532
                                           -----------         -----------
                                             5,471,849           5,404,004
       Less: Accumulated depreciation        4,599,873           4,455,524
                                           -----------         -----------
                                               871,976             948,480
                                           -----------         -----------

Other assets                                   148,430             108,680
                                           -----------         -----------
                                        $   14,812,335      $   15,022,237
                                           ===========         ===========

















                 See notes to consolidated financial statements

                                        3
<page>
                              UNITED-GUARDIAN, INC.
                           CONSOLIDATED BALANCE SHEETS

                                           September 30,       DECEMBER 31,
                                               2006                2005
                                          ---------------      ------------
                                            (UNAUDITED)         (AUDITED)
LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
   Dividends payable                       $     -             $1,086,391
   Accounts payable                           242,992             148,051
   Accrued expenses                           394,055             448,990
   Taxes Payable                               62,303                -
                                            ---------           ---------
         Total current liabilities            699,350           1,683,432
                                            ---------           ---------
 Deferred income taxes                         59,817              59,817
                                            ---------           ---------

Stockholders' equity:
   Common stock $.10 par value,
      authorized, 10,000,000 shares;
      5,004,339 and 5,000,339 shares
      issued, respectively, and
      4,942,139 and 4,938,139
      shares outstanding, respectively        500,434             500,034
   Capital in excess of par value           3,792,478           3,778,838
   Accumulated other comprehensive loss       (71,939)            (84,365)
   Retained earnings                       10,191,825           9,444,111
   Treasury stock, at cost; 62,200 shares    (359,630)           (359,630)
                                            ---------           ---------
         Total stockholders' equity        14,053,168          13,278,988
                                            ---------           ---------
                                         $ 14,812,335        $ 15,022,237
                                           ==========          ==========




















                 See notes to consolidated financial statements

                                        4
<page>
                                  UNITED-GUARDIAN, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       (UNAUDITED)
                                                           NINE MONTHS ENDED
                                                              SEPTEMBER 30,
                                                              ------------
                                                         2006             2005
                                                       -------          -------
Cash flows provided by operating activities:

  Net income                                       $ 1,983,249      $ 2,242,501
  Adjustments to reconcile net earnings
    to net cash flows from operations:
      Depreciation and amortization                    144,349          149,269
      Net realized loss on sale of
         marketable securities                           1,134          116,512
      Provision for doubtful accounts                  (11,212)         (11,029)
      Reduction of inventory obsolescence reserve       19,000             -
      Increase (decrease) in cash resulting from
        changes in operating assets and liabilities:
         Accounts receivable                          (445,116)        (617,022)
         Inventories                                  (994,550)         425,882
         Prepaid expenses and other current
           and non-current assets                       26,438           74,933
         Accounts payable                               94,941           35,094
         Accrued expenses and taxes payable              7,368          (32,241)
                                                    ----------       ----------
      Net cash provided by operating activities        825,601        2,383,899
                                                    ----------       ----------
Cash flows from investing activities:

   Acquisition of property, plant and equipment        (67,845)        (108,878)
   Net change in temporary investments                 (65,187)        (296,694)
   Purchase of marketable securities                (1,646,827)      (4,683,147)
   Proceeds from sale of marketable securities       2,100,718        4,116,413
                                                    ----------       ----------
      Net cash provided by (used in) investing
         activities                                    320,859         (972,306)
                                                    ----------       ----------
Cash flows from financing activities:

   Proceeds from exercise of stock options              14,040           19,905
   Dividends paid                                   (2,321,926)      (2,120,812)
                                                    ----------       ----------
     Net cash used in financing activities          (2,307,886)      (2,100,907)
                                                    ----------       ----------

Net decrease in cash and cash equivalents           (1,161,426)        (689,314)

Cash and cash equivalents at beginning of period     3,425,593        3,735,945
                                                    ----------       ----------
Cash and cash equivalents at end of period         $ 2,264,167      $ 3,046,631
                                                    ==========       ==========




                 See notes to consolidated financial statements

                                        5
<page>
                              UNITED-GUARDIAN, INC.
                   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

     1. In the opinion of the  registrant  (also  referred to hereinafter as the
"Company"),  the  accompanying   unaudited  financial   statements  contain  all
adjustments  (consisting of only normal recurring accruals) necessary to present
fairly the  financial  position  as of  September  30,  2006 and the  results of
operations for the nine and three months ended  September 30, 2006 and 2005. The
accounting  policies  followed  by the  Company  are set forth in the  Company's
financial  statements included in its Annual Report to Shareholders for the year
ended December 31, 2005.

     2. The results of operations for the nine and three months ended  September
30, 2006 and 2005 are not  necessarily  indicative of the results to be expected
for the full year.

     3.  Stock-Based  Compensation:  At September 30, 2006,  the Company had two
stock-based  employee  compensation plans, which are more fully described in the
Company's  Annual  Report on Form 10-KSB for the year ended 2005.  As  permitted
under Statement of Financial  Accounting  Standards ("SFAS") No. 123, Accounting
for Stock-based Compensation ("FAS 123"), through December 31, 2005, the Company
elected to follow the  guidance  of APB  Opinion  No. 25,  Accounting  for Stock
Issued to  Employees  ("APB  25"),  and  Financial  Accounting  Standards  Board
Interpretation  No. 44,  Accounting  for Certain  Transactions  Involving  Stock
Compensation - an Interpretation of APB Opinion No. 25 ("FIN 44"), in accounting
for the Company's stock-based employee compensation  arrangements.  Accordingly,
no  compensation  cost was  recognized  for any of the  Company's  stock options
granted to employees  when the exercise price of each option equaled or exceeded
the fair  value of the  underlying  common  stock as of the grant  date for each
stock  option.   The  Company  accounted  for  equity   instruments   issued  to
non-employees in accordance with the provisions of FAS 123.

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 123 (revised 2004),  Share-Based  Payment ("FAS 123R"),  which replaced
FAS 123 and  supersedes APB 25 and FIN 44. FAS 123R requires that the fair value
of all  share-based  payments to employees,  including  grants of employee stock
options,  be recognized as expense in the  financial  statements.  The pro forma
disclosures  previously  permitted under FAS 123 are no longer an alternative to
financial statement recognition.  The Company adopted the provisions of FAS 123R
on January 1, 2006 using the modified prospective application method of adoption
which requires the Company to record compensation cost related to unvested stock
awards as of December 31, 2005 by recognizing  the  unamortized  grant date fair
value of these awards over the remaining service periods of those awards with no
change in historical  reported earnings.  Awards granted after December 31, 2005
are  valued  at fair  value  in  accordance  with  provisions  of FAS  123R  and
recognized on a straight line basis over the service periods of each award.  The
estimated forfeiture rates utilized for the nine months ended September 30, 2006
were based on the Company's historical experience. Upon adoption of FAS 123R the
Company elected to continue using the Black-Scholes option pricing model.

     At September  30, 2006 the Company had 4,300  share-based  awards that were
outstanding and exercisable, with a weighted average exercise price of $3.29, an
aggregate  intrinsic value of $25,833,  and a weighted average remaining term of
5.08 years.  All of those options were fully vested as of December 31, 2005. The
Company did not grant any options  during the nine months  ended  September  30,
2006 and 2005.




                                        6
<page>
     As of September 30, 2006 there was no remaining  unrecognized  compensation
cost related to the non-vested  share-based  compensation  arrangements  granted
under the Company's plans.

     The Company did not record any compensation  expense during the nine months
ended September 30, 2006 under the provisions of FAS 123R.

     Cash  received  from  option   exercise  under  all   share-based   payment
arrangements for the nine months ended September 30, 2006, was $14,040.

     The  following  table  illustrates  the effect on net income and income per
share for the nine months  ended  September  30, 2005 if the Company had applied
the fair value  recognition  provisions of FAS 123 since the original  effective
date of FAS 123 to stock-based  employee  compensation for options granted under
the  Company's  arrangements  as well  as to the  arrangement  of the  Company's
subsidiaries:

                                                               Nine Months Ended
                                                              September 30, 2005
                                                               -----------------

 Net income as reported                                            $2,242,501

 Add back (deduct): Total stock-based employee
     compensation expense determined under APB 25 for
     all awards, net of related tax effects                           --

  Deduct: Total stock-based employee compensation
     expense determined under fair value-based method
     for all awards, net of related tax effects                       --

   Pro forma net income                                            $2,242,501
                                                                    =========

   Income per share:
         Basic--as reported                                        $    .45
         Basic--pro forma                                          $    .45
         Diluted--as reported                                      $    .45
         Diluted--pro forma                                        $    .45



     4. Marketable Securities

                                                                     Unrealized
    September 30, 2006                    Cost        Fair Value     Gain/(Loss)
    ------------------                 ----------     ----------     -----------
     Available for Sale:
       U.S. Treasury and agencies      $2,347,646    $2,349,453     $     1,807
       Fixed income mutual funds        4,170,048     4,046,177        (123,871)
       Equity and other mutual funds      228,643       235,768           7,125
                                       ----------     -----------    -----------
                                       $6,746,337     6,631,398        (114,939)
                                       ==========     ===========    ===========





                                        7
<page>
                                                                     Unrealized
    December 31, 2005                     Cost        Fair Value     Gain/(Loss)
    -----------------                  ----------     ----------     -----------
     Available for Sale:
       U.S. Treasury and agencies      $2,046,900     $2,028,984     $  (17,916)
       Corporate debt securities          900,595        892,110         (8,485)
       Fixed income mutual funds        4,028,072      3,928,513        (99,559)
       Equity and other mutual funds      225,793        217,190         (8,603)
                                       ----------     -----------    -----------
                                       $7,201,360     $7,066,797     $ (134,563)
                                       ==========     ===========    ===========
     5. Inventories - Net

     Inventories consist of the following:     September 30,    December 31,
                                                    2006            2005
                                                ----------      ----------
     Raw materials and work in process          $  338,140      $  376,308
     Finished products and fine chemicals        1,668,973         655,255
                                                ----------      ----------
                                                $2,007,113      $1,031,563
                                                ==========      ==========

     One of the Company's  pharmaceutical  products,  Renacidin  Irrigation,  is
currently  manufactured for the Company by Hospira, Inc., formerly a division of
Abbott  Laboratories,  in Rocky Mount,  North Carolina.  Hospira is changing the
manufacturing  facility for Renacidin Irrigation to Clayton, North Carolina, and
as a result the Company is in the process of obtaining F.D.A. approval to change
to the new facility.  Since  approval is not expected until the end of 2007, the
Company  brought  in  sufficient  inventory  to last until the new  facility  is
approved.  This has resulted in an increase of  approximately  $1 million in the
Company's  finished goods  inventory as compared with December 2005. The Company
expects all of that inventory to be sold prior to its expiration date.

     At  September  30, 2006 and  December  31,  2005,  the Company has reserved
$89,000 and $108,000, respectively, for slow moving and obsolete inventory.

     6. For purposes of the Statement of Cash Flows,  the Company  considers all
highly liquid  investments  purchased with a maturity of three months or less to
be cash equivalents.

     Cash  payments  for taxes were  $837,442  and  $983,553 for the nine months
ended  September 30, 2006 and 2005,  respectively.  During the nine months ended
September 30, 2006 the Company paid $798 in interest.  No payments were made for
interest in 2005.

     The Company paid dividends of $2,321,926 and $2,120,812 for the nine months
ended September 30, 2006 and 2005, respectively.













                                        8
<page>
     7. Comprehensive Income (Loss)

            The components of comprehensive income (loss) are as follows:
<table>
<caption>
                                                    Nine months ended September 30,   Three months ended September 30,
                                                         2006            2005                2006            2005
                                                        ------          ------              ------          ------
<S>                                                  <C>             <C>                 <C>             <C>
Net income                                           $1,983,249      $2,242,501          $  710,868      $  775,716
                                                     ----------      ----------          ----------      ----------
Other comprehensive income (loss):
   Unrealized gain (loss) on marketable
     securities during period ......................     18,468         (82,306)            117,546         (38,426)
   Less: reclassification adjustment for net
     losses (gain) included in net income ..........      1,158         116,512                 784            (343)
                                                     ----------      ----------          ----------      ----------
   Other comprehensive income (loss) before tax ....     19,626          34,206             118,330         (38,769)

Income tax expense (benefit) related to other
   comprehensive income ............................      7,200          12,800              45,000         (14,400)
                                                     ----------      ----------          ----------      ----------
Other comprehensive income (loss), net of tax.......     12,426          21,406              73,330         (24,369)
                                                     ----------      ----------          ----------      ----------
Comprehensive income net of tax .................... $1,995,675      $2,263,907          $  784,198      $  751,347
                                                     ==========      ==========          ==========      ==========
</table>
     Accumulated  other  comprehensive  income (loss) is comprised of unrealized
gains and losses on marketable securities, net of the related tax effect.

         8. Earnings Per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share for the nine and three months  ended  September  30, 2006 and
2005.
<table>
<caption>
                                                     Nine months ended              Three months ended
                                                       September 30,                   September 30,
                                                    2006           2005             2006           2005
                                                   ------         ------           ------         ------
<S>                                             <C>            <C>              <C>            <C>
Numerator:
   Net income                                   $1,983,249     $2,242,501       $  710,868     $  775,716
                                                   =======      =========          =======      =========
Denominator:
   Denominator for basic earnings
   per share (weighted average
   shares)                                       4,941,494      4,934,528        4,942,139      4,937,356

Effect of dilutive securities:
   Employee stock options                            3,143          6,738            2,565          5,258
                                                 ---------      ---------        ---------      ---------
Denominator for diluted earnings
   per share (adjusted weighted-average
   shares) and assumed conversions               4,944,637      4,941,266        4,944,704      4,942,614
                                                 =========      =========        =========      =========
Basic and diluted earnings per share            $     0.40     $     0.45       $     0.14     $     0.16
                                                 =========      =========        =========      =========
</table>
                                        9

     9.  The  Company  has  two  reportable  business  segments:   the  Guardian
Laboratories  Division  ("Guardian"),  which develops and manufactures  cosmetic
ingredients,  personal and health care products,  pharmaceuticals  and specialty
industrial   products;   and  Eastern  Chemical   Corporation   ("Eastern"),   a
wholly-owned  subsidiary  of the  Company,  which  distributes  a line  of  fine
chemicals, test solutions, dyes and reagents.

     The accounting policies used to develop segment  information  correspond to
those described in the summary of significant  accounting  policies as set forth
in the Annual Report for the year ended December 31, 2005.  Segment  earnings or
losses are based on earnings or losses from operations  before income taxes. The
reportable   segments  are  distinct   business  units  operating  in  different
industries.   They  are  separately   managed,   with  separate   marketing  and
distribution  systems.  The following  information about the two segments is for
the nine and three months ended September 30, 2006 and 2005.
<table>
<caption>
                                                                Nine months ended September 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
<S>                                <C>            <C>            <C>               <C>            <C>            <C>
Revenues from external customers   $ 8,139,067    $   803,111    $ 8,942,178       $ 8,847,905    $   849,161    $ 9,697,066
Depreciation and amortization           64,906           -            64,906            65,187           -            65,187
Segment income before income
  taxes                              2,794,693         68,593      2,863,286         3,459,359         70,445      3,529,804

Segment assets                       3,477,887        377,716      3,855,603         2,893,000        378,643      3,271,643

Capital expenditure                     38,973           -            38,973            32,825            -           32,825

Reconciliation to Consolidated Amounts

Income before income taxes
----------------------------
Total earnings for reportable segments                           $ 2,863,286                                     $ 3,529,804
Other income, net                                                    301,524                                         121,400
Corporate headquarters expense                                      (123,561)                                       (126,403)
                                                                  ----------                                      ----------
Consolidated earnings before income taxes                        $ 3,041,249                                     $ 3,524,801
                                                                  ==========                                      ==========
Assets
------
Total assets for reportable segments                             $ 3,855,603                                     $ 3,271,643
Corporate headquarters                                            10,956,732                                      11,315,585
                                                                  ----------                                      ----------
      Total consolidated assets                                  $14,812,335                                     $14,587,228
                                                                  ==========                                      ==========
</table>










                                       10
<page>
<table>
                                                                  Three months ended September 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
<S>                                <C>            <C>            <C>               <C>            <C>            <C>
Revenues from external customers   $ 2,755,062    $   265,304    $ 3,020,366       $ 2,793,515    $   255,979    $ 3,049,494
Depreciation and amortization           22,659           -            22,659            20,437           -            23,437
Segment income before income
  taxes                              1,010,398         22,529      1,032,927         1,131,460         38,492      1,169,952
Capital Expenditure                     20,170              0         20,170             4,909              0          4,909


Reconciliation to Consolidated Amounts

                                                                  Three months ended September 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
Income before income taxes
----------------------------
Total earnings for reportable segments                           $ 1,032,927                                     $ 1,169,952
Other income, net                                                    106,998                                          74,388
Corporate headquarters expense                                       (46,757)                                        (47,224)
                                                                  ----------                                      ----------
Consolidated earnings before income taxes                        $ 1,093,168                                     $ 1,197,116
                                                                  ==========                                      ==========
Other Significant items
-----------------------
<caption>
                                                                    Nine months ended September 30,
                                                     2006                                           2005
                                   ------------------------------------------       -------------------------------------------
                                     Segment                     Consolidated          Segment                     Consolidated
                                      Totals       Corporate        Totals              Totals        Corporate       Totals
                                   ------------   ------------   -------------      -------------   ------------   -------------
<S>                                  <C>            <C>             <C>               <C>            <C>             <C>
Capital expenditures                 $ 38,973       $ 28,872        $ 67,845          $ 32,825       $ 76,053        $108,878
Depreciation and amortization          64,906         79,443         144,349            65,187         84,082         149,269

Geographic Information
----------------------
<caption>
                                                       2006                                2005
                                           ---------------------------         ---------------------------
                                             Revenues      Long-Lived            Revenues      Long-Lived
                                                             Assets                              Assets
                                           -----------    -------------        -----------    -------------
<S>                                        <C>           <C>                   <C>           <C>
United States                              $ 4,225,334   $      871,976        $ 4,608,137   $      957,280
France                                       1,052,692                           1,182,796
Other countries                              3,664,152                           3,906,133
                                           -----------    -------------        -----------    -------------
                                           $ 8,942,178   $      871,976        $ 9,697,066   $      957,280
                                           ===========    =============        ===========    =============
</table>


                                       11
<page>
<table>
<caption>
                                                       2006                                2005
                                           ---------------------------         ---------------------------
                                             Revenues      Long-Lived            Revenues      Long-Lived
                                                             Assets                              Assets
                                           -----------    -------------        -----------    -------------
<S>                                        <C>           <C>                   <C>           <C>

Major Customers
---------------
Customer A (Guardian)**                    $ 3,071,648                         $ 3,721,307
Customer B (Guardian)**                        868,393                           1,022,408
All other customers                          5,002,137                           4,953,351
                                           -----------                         -----------
                                           $ 8,942,178                         $ 9,697,066
                                           ===========                         ===========
</table>
     ** At September 30, 2006 Customers A and B had balances  approximating  33%
and  11% of  net  accounts  receivable,  respectively.  At  September  30,  2005
Customers  A and B had  balances  approximating  37%  and  15% of  net  accounts
receivable, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued
interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes  - An
Interpretation of FASB Statement No. 109" ("FIN 48"),  regarding accounting for,
and disclosure of, uncertain tax positions.  FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's  financial  statements
in accordance with FASB Statement No. 109, "Accounting for Income Taxes." FIN 48
prescribes a recognition  threshold and measurement  attribute for the financial
statement  recognition and measurement of a tax position taken or expected to be
taken  in a  tax  return.  FIN  48  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.  The Company is currently  evaluating  the impact FIN 48 will
have on its results of operations and financial position.

     In September  2006,  the Securities  and Exchange  Commission  (SEC) issued
Staff  Accounting   Bulletin  108,   "Considering  the  Effects  on  Prior  Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements," ("SAB 108"). SAB 108 requires  registrants to quantify errors using
both the income  statement  method (i.e.  iron curtain  method) and the rollover
method and requires adjustment if either method indicates a material error. If a
correction  in the current year relating to prior year errors is material to the
current year, then the prior year financial information needs to be corrected. A
correction to the prior year results that are not material to those years, would
not require a "restatement process" where prior financials would be amended. SAB
108 is effective  for fiscal years  ending  after  November 15, 2006.  We do not
anticipate that SAB 108 will have a material  effect on our financial  position,
results of operations or cash flows.








                                       12
<page>
     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
to define  fair  value,  establish  a  framework  for  measuring  fair  value in
accordance with generally accepted accounting principles, and expand disclosures
about fair value  measurements.  SFAS No. 157 will be effective for fiscal years
beginning  after  November  15,  2007,  which for the  Company  will be the 2008
calendar (and fiscal) year.  The Company is assessing the impact the adoption of
SFAS No. 157 will have on the  Company's  consolidated  financial  position  and
results of operations.

     In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 158,  "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans." SFAS No.
158  requires  the  recognition  of the funded  status of a benefit  plan in the
balance sheet; the recognition in other comprehensive  income of gains or losses
and prior service costs or credits  arising  during the period but which are not
included as components  of periodic  benefit cost;  the  measurement  of defined
benefit plan assets and obligations as of the balance sheet date; and disclosure
of  additional  information  about the effects on periodic  benefit cost for the
following fiscal year arising from delayed recognition in the current period. In
addition, SFAS No. 158 amends SFAS No. 87, "Employers' Accounting for Pensions,"
and SFAS No. 106, "Employers' Accounting for Postretirement  Benefits Other Than
Pensions," to include guidance regarding selection of assumed discount rates for
use in measuring the benefit obligation.  SFAS No. 158 is effective for our year
ending  December 31,  2006.  The Company is not  currently  able to quantify the
effects of the  adoption  of SFAS No. 158 since  actual  amounts  will depend on
year-end calculations.

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

FORWARD LOOKING STATEMENTS

        Statements made in this Form 10-QSB which are not purely  historical are
forward-looking  statements  with  respect  to  the  goals,  plans,  objectives,
intentions,  expectations,  financial condition,  results of operations,  future
performance  and  business of the  Company.  Forward-looking  statements  may be
identified  by the use of such words as  "believes,"  "may,"  "will,"  "should,"
"intends," "plans," "estimates," or "anticipates" or other similar expressions.

     Forward-looking  statements involve inherent risks and  uncertainties,  and
important  factors  (many of which are beyond our  control)  could cause  actual
results  to  differ  materially  from  those  set  forth in the  forward-looking
statements.  In addition to those specific risks and  uncertainties set forth in
the  Company's  reports  currently on file with the SEC, some other factors that
may affect the future results of operations of the Company are: the  development
of products that may be superior to those of the Company; changes in the quality
or  composition  of the  Company's  products;  lack of market  acceptance of the
Company's  products;  the  Company's  ability to develop new  products;  general
economic  or  industry  conditions;  intellectual  property  rights;  changes in
interest rates;  new legislation or regulatory  requirements;  conditions of the
securities  markets;  the  Company's  ability  to  raise  capital;   changes  in
accounting   principals,   policies  or   guidelines;   financial  or  political
instability;  acts  of  war  or  terrorism;  and  other  economic,  competitive,
governmental,  regulatory  and  technical  factors that may affect the Company's
operations, products, services and prices.




                                       13
<page>
     Accordingly,  results  actually  achieved may differ  materially from those
anticipated as a result of such forward-looking statements, and those statements
speak only as of the date they are made.  The Company  does not  undertake,  and
specifically disclaims, any obligation to update any forward-looking  statements
to reflect events or circumstances occurring after the date of such statements.

OVERVIEW

     The  Company  is a  Delaware  corporation  that  operates  in two  business
segments.  Guardian conducts research,  product  development,  manufacturing and
marketing  of  cosmetic   ingredients,   personal  and  health  care   products,
pharmaceuticals, and specialty industrial products. The products manufactured by
Guardian  are  marketed  through  marketing   partners,   distributors,   direct
advertising,  mailings, and trade exhibitions.  Its most important personal care
product line is its LUBRAJEL(R) line of water-based moisturizing and lubricating
gels. It also sells two pharmaceutical products, which are distributed primarily
through drug  wholesalers  and surgical  supply houses.  There are also indirect
sales to the Veteran's Administration and other government agencies, and to some
hospitals and physicians.

     While the Company does have  competition in the marketplace for some of its
products,  many of its products or processes are either unique in their field or
have some unique  characteristics,  and therefore are not in direct  competition
with the products or processes of other pharmaceutical, chemical, or health care
companies. Guardian's research and development department is actively working on
the development of new products to expand the Company's personal care line.

     The  Company  has been issued  many  patents  and  trademarks,  and intends
whenever  possible  to make  efforts to obtain  patents in  connection  with its
product development program.

     Eastern  distributes a line of fine organic chemicals,  research chemicals,
test solutions,  indicators, dyes and reagents.  Eastern's products are marketed
through  advertising  in trade  publications  and  direct  mailings.  Since  the
Company's business  activities and marketing efforts over the past several years
have  focused  increasingly  on the Guardian  division,  the Company has reduced
Eastern's  inventory levels in order to make it more marketable in the event the
Company  decides  to sell it at some  future  date.  This has  resulted  in some
reduction in sales as compared with previous years.  Sales of this division have
also  declined  as a result  of  increased  competition  from  new and  existing
competitors.

     Guardian's  pharmaceutical products are distributed primarily in the United
States.  Its personal  care  products are  marketed  worldwide  primarily by its
marketing  partners,  the largest of which is International  Specialty  Products
Inc. ("ISP").  Approximately  one-half of Guardian's personal care products will
be sold to foreign customers, either directly or through its marketing partners.

Critical Accounting Policies

     As  disclosed  in our Annual  Report on Form 10-K for the fiscal year ended
December 31, 2005, the  discussion  and analysis of our financial  condition and
results of operations are based on our consolidated financial statements,  which
have been  prepared  in  conformity  with  U.S.  generally  accepted  accounting
principles.  The preparation of those financial  statements  required us to make
estimates  and  assumptions  that  affect  the  amount of  assets,  liabilities,
revenues and expenses  reported in those financial  statements.  Those estimates



                                       14
<page>
and assumptions can be subjective and complex,  and consequently  actual results
could differ from those estimates and assumptions.  Our most critical accounting
policies relate to revenue recognition, concentration of credit risk, inventory,
pension costs,  patents and other  intangible  assets,  and income taxes.  Since
December 31, 2005, there have been no significant changes to the assumptions and
estimates related to those critical accounting policies.

     The  following  discussion  and  analysis  covers  material  changes in the
financial condition of the Company since the year ended December 31, 2005, and a
comparison  of the results of  operations  for the nine and three  months  ended
September 30, 2006 and September 30, 2005.  This  discussion and analysis should
be read in  conjunction  with  "Management's  Discussion and Analysis or Plan of
Operation" included in the Company's Form 10-KSB for the year ended December 31,
2005.

RESULTS OF OPERATIONS

     Revenue
     -------

     For the nine-month  period  ended  September  30, 2006 net sales  decreased
$754,888  (7.8%)  versus the  comparable  period in 2005.  Guardian  had a sales
decrease of $708,838 ( 8.0%) and Eastern had a sales decrease of $46,050 (5.4%).

     For the  three-month  period ended  September 30, 2006, net sales decreased
$29,128  (1.0%)  versus  the  comparable  period in 2005.  Guardian  had a sales
decrease of $38,453 (1.4%) and Eastern had a sales increase of $9,325 (3.6%).

     The decline in Guardian's  sales for the nine-month  period ended September
30,  2006  compared  to the same  period in 2005 was due to a number of factors:

        (a) On March 1, 2005 the Company increased prices on its  pharmaceutical
products,  which resulted in an unusually high volume of sales of those products
in the first quarter of 2005  compared to the first quarter of 2006.  This extra
buying in the first quarter of 2005  continued to impact sales through the first
nine months, with sales of the Company's  pharmaceutical  products for the first
nine  months  of 2006  down  5% from  the  first  nine  months  of  2005.  It is
anticipated  that  sales of these  products  for the full  year in 2006  will be
substantially the same as 2005.

        (b) In the first  quarter  of 2005 the  Company  experienced  an unusual
number of shipments of orders that some  customers  had requested not be shipped
out at the very end of 2004. That situation did not recur in 2006.

        (c) Sales of the  Company's  personal  care  products  to the  Company's
largest customer  ("Customer A") and second largest customer ("Customer B") were
down in the first 9 months of 2006  compared  to the same  period in 2005 by 17%
and 15% respectively. However, sales to Customer A in October were almost double
sales to that customer in October 2005, so the Company believes that much of the
decrease  in sales for the  nine-month  period  was due to the timing of orders.
This is  supported  by  information  provided  to the Company by Customer A that
showed that  Customer A's sales of the  Company's  products to its own customers
were actually up for the nine-month period. For this reason the Company does not
believe that the reduced purchases from that customer are an indication or trend
of any loss of customers or sales.




                                       15
<page>
     The overall  decrease of 1% in Guardian sales for the third quarter of 2006
was primarily due to a decrease in sales to the Company's two largest customers,
which was almost  entirely  offset by higher  sales to a number of its  existing
customers.  The  Company  believes  that  this  temporary  decline  in  sales is
primarily the result of the timing of inventory purchases versus sales, and does
not indicate any real  reduction in the sales level of Guardian  products by its
customers.

     The changes in Eastern  sales for the three- and  nine-month  period  ended
September  30,  2006,  is  believed  to be due  to  normal  fluctuations  in the
purchasing patterns of its customers.

     Cost of Sales
     -------------

     Cost of Sales as a  percentage  of sales  increased  to 47.4%  for the nine
months ended September 30, 2006,  from 45.5% for the comparable  period in 2005.
For the three months ended  September  30, 2006 Cost of Sales as a percentage of
sales  increased  to 47.7% as  compared  with 44.8% for the three  months  ended
September 30, 2005.  These increases were due to increases in standard  overhead
rates for Guardian  that  resulted  primarily  from  increases in insurance  and
payroll and payroll-related costs.

     Operating Expenses
     ------------------

     Operating  Expenses  increased  $80,990  (4.3%) for the nine  months  ended
September 30, 2006 compared with the  comparable  period in 2005.  This increase
was mainly  attributable  to increases in payroll and  payroll-related  expenses
partially offset by the reduction of the Company's bad debt reserve. For the
three-month  period ended  September  30,  2006,  Operating  Expenses  increased
$31,871  (5.7%) when compared  with the  comparable  period ended  September 30,
2005.  This increase was due mainly to increases in payroll and payroll  related
expenses.

     Other Income
     ------------

     Other Income  increased to $301,524 from $121,400 for the nine month period
ended  September 30, 2006 and September 30, 2005,  respectively,  an increase of
$180,124 (148.4%). This increase was mainly attributable to the net effect of an
increase in investment income of $68,252 in 2006 and a decrease in losses on the
sale of  marketable  securities  of  $112,754  in  2006.  In 2005  the sale of a
portfolio of securities, primarily bonds, the bulk of which had been managed for
the  Company  by a  financial  institution,  resulted  in  a  realized  loss  of
approximately  $116,000,  of which  approximately  $107,000 had previously  been
recorded in the equity  section of the balance  sheet as an  "accumulated  other
comprehensive  loss".  Approximately  $108,000  of the above loss was due to the
sale of the bond portfolio managed by a financial  institution,  which, over the
18 months the Company held it, had realized  interest  income net of broker fees
of  approximately  $154,000.  The sale of bonds in the  second  quarter  of 2006
resulted in a loss of $349. Investment income is recorded net of brokerage fees.

     For the three  months ended  September  30,  2006,  Other Income  increased
$32,610 (43.8%) which was mainly attributable to higher investment income due to
an increase in interest rates.



                                       16
<page>
     Provision for Income Taxes
     --------------------------

     The  Provision  for Income Taxes  decreased  $224,300  (17.5%) for the nine
months ended  September  30, 2006 when compared  with the  comparable  period in
2005.  This decrease was due to (a) decreased  earnings before taxes of $483,552
in 2006,  and (b) the  reduction  in  taxable  capital  gains in 2006 by capital
losses carried  forward from when the Company  recorded  $116,000 in losses upon
the  sale of its bond  portfolio  in  2005.

     The  Provision  for Income  Taxes  decreased  $39,100  (9.3%) for the three
months  ended  September  30, 2006 which is mainly due to a decrease in earnings
before taxes of $103,948.

     The Company had effective  income tax rates of 34.8% and 36.4% for the nine
months ended  September 30, 2006 and September 30, 2005,  respectively,  and 35%
and 35.2% for the three months ended  September  30, 2006 and September 30, 2005
respectively.  Differences  in the effective  income tax rate from the statutory
federal income tax rate arise primarily from capital loss  carryforwards,  state
taxes net of federal benefits, and other differences.

LIQUIDITY AND CAPITAL RESOURCES

     Working  capital  increased  from  $12,281,645  at  December  31,  2005  to
$13,092,579 at September 30, 2006. The current ratio  increased from 8.3 to 1 at
December  31, 2005 to 19.7 to 1 at September  30, 2006.  The increase in current
ratio was primarily due to the net effect of a decrease in dividends payable and
increases in inventories, partially offset by decreases in cash and investments.
The  increase  in  inventory  was  due  primarily  to the  Company  bringing  in
additional  inventory  of  Renacidin  Irrigation  while  it is  awaiting  F.D.A.
approval to change the manufacturing site for the product,  which is expected to
take about a year.  The Company  believes that all of the  additional  inventory
will be sold prior to its expiration date.

     The  Company  has  no  commitments  for  any  further  significant  capital
expenditures during the remainder of 2006, and believes that its working capital
is and will continue to be sufficient to support its operating  requirements for
at least the next twelve months.

     The Company  generated cash from  operations of $825,601 and $2,383,899 for
the nine months ended  September 30, 2006 and September 30, 2005,  respectively.
The decrease was  primarily due to decreases in net income from  operations  and
increases in inventory.

     During the nine  month  period  ended  September  30,  2006,  $320,859  was
provided by investment activities,  as compared with the nine month period ended
September 30, 2005, when $972,306 was used in investing  activities.  The change
is mainly due to the net  effect of the sale  (primarily  bonds)  and  purchases
(primarily  bond funds) of marketable  securities  during the nine months ending
September 30, 2005 and an increase in investments due to reinvested  income from
mutual funds and temporary  investments in the nine months ending  September 30,
2006.

     Cash used in financing  activities  was  $2,307,886  and $2,100,907 for the
nine months ended September 30, 2006 and September 30, 2005,  respectively.  The
increase  was due  primarily  to an increase in  dividends  paid during the nine
months ended September 30, 2006.


                                       17
<page>
Item 3.  Controls and Procedures

  (a) Evaluation of Disclosure Controls and Procedures

     Within 90 days prior to the filing of this Quarterly  Report on Form 10-QSB
the  Company's  principal  executive  officer and  principal  financial  officer
evaluated the effectiveness of the design and operation of Company's  disclosure
controls and procedures (as defined in Rules  13a-14(c) and 15d-14(c)  under the
Securities  Exchange Act of 1934 (the  "Exchange  Act")) and concluded  that the
Company's  disclosure  controls  and  procedures  are  effective  to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is accumulated and  communicated to the Company's
management,  including its officers,  as appropriate  to allow timely  decisions
regarding required disclosure, and are effective to ensure that such information
is  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified in the Securities and Exchange Commission's rules and forms.

   (b) Changes in Internal Controls

     The Company's  principal  executive officer and principal financial officer
have also concluded there were no significant  changes in the Company's internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to the date of their  evaluation,  including any  corrective  actions
with regard to significant deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS: NONE
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS: NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES: NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE
ITEM 5 - OTHER INFORMATION: NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     a. Exhibits

        31.1  Certification of Alfred  R.  Globus,  Chairman  and Chief
              Executive  Officer of the  Company, pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

        31.2  Certification of Kenneth H.  Globus, President  and Chief
              Financial Officer of the  Company, pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

        32.1  Certification  of Alfred R. Globus,  Chairman and Chief  Executive
              Officer  of  the   Company,   pursuant   to  Section  906  of  the
              Sarbanes-Oxley Act of 2002.

        32.2  Certification of Kenneth H. Globus,  President and Chief Financial
              Officer  of  the   Company,   pursuant   to  Section  906  of  the
              Sarbanes-Oxley Act of 2002.

     b. Reports on Form 8-K

     There was one  report on Form 8-K filed  during the  fiscal  quarter  ended
September  30, 2006. It was filed on August 10, 2006 and related to the issuance
of an earnings release by the Company on August 9, 2006.


                                       18
<page>
                                   SIGNATURES

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


                                      UNITED-GUARDIAN, INC.
                                       (Registrant)

                                      By:  /S/ ALFRED R. GLOBUS
                                           --------------------
                                           Alfred R. Globus
                                           Chief Executive Officer


                                       By: /S/ KENNETH H. GLOBUS
                                           ---------------------
                                           Kenneth H. Globus
                                           Chief Financial Officer

Date:  November 5, 2006





































                                       19