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   June 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 Company  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 of August 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 - Six and Three
                Months Ended June 30, 2006 and 2005 (unaudited)..........    2

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

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

              Consolidated Notes to (unaudited) Financial Statements.....   6-12

   Item 2 - Management's Discussion and Analysis of Financial Condition
              and Results of Operations..................................  12-16

   Item 3 - Controls and Procedures......................................    16

Part II. OTHER INFORMATION

   Item 1 - Legal Proceedings.............................................   17

   Item 2 - Changes in Securities and Use of Proceeds.....................   17

   Item 3 - Defaults Upon Senior Securities...............................   17

   Item 4 - Submission of Matters to a Vote of Security Holders...........   17

   Item 5 - Other Information.............................................   17

   Item 6 - Exhibits and Reports On Form 8-K..............................   17

Signatures................................................................   17


















                                        1
<page>
                          Part I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

                              UNITED-GUARDIAN, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                   (UNAUDITED)
<table>
<caption>
                                                       SIX MONTHS ENDED               THREE MONTHS ENDED
                                                           June 30,                         JUNE 30,
                                                      2006         2005                2006         2005
                                                     ------        ------             ------        ------
<S>                                               <C>           <C>                <C>           <C>
Revenue:
  Net sales                                       $ 5,921,812   $ 6,647,572        $ 3,057,015   $ 2,767,455
                                                   ----------    ----------         ----------    ----------
Costs and expenses:
  Cost of sales                                     2,793,799     3,041,560          1,441,188     1,272,793
  Operating expenses                                1,374,458     1,325,339            733,334       656,646
                                                   ----------    ----------         ----------    ----------
                                                    4,168,257     4,366,899          2,174,522     1,929,439
                                                   ----------    ----------         ----------    ----------
      Income from operations                        1,753,555     2,280,673            882,493       838,016


Other income (expense):
  Investment income                                   195,102       161,291            114,679        94,952
  Loss on sale of marketable securities                  (349)     (114,231)              (349)         -
  Other                                                  (227)          (48)              (227)         -
                                                    ---------    ----------          ---------    ----------
      Income before income taxes                    1,948,081     2,327,685            996,596       932,968

Provision for income taxes                            675,700       860,900            346,200       321,900
                                                    ---------     ---------          ---------     ---------
      Net income                                  $ 1,272,381   $ 1,466,785        $   650,396   $   611,068
                                                     ========     =========           ========     =========
Earnings per common share
   (basic and diluted)                            $       .26   $       .30        $       .13   $       .12
                                                    =========     =========          =========     =========
Weighted average shares - basic                     4,941,167     4,932,761          4,942,139     4,932,981
                                                    =========     =========          =========     =========
Weighted average shares - diluted                   4,944,600     4,940,239          4,944,876     4,940,204
                                                    =========     =========          =========     =========
</table>











                 See notes to consolidated financial statements

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



                                               JUNE 30,         DECEMBER 31,
                                                2006               2005
                                            ------------       -------------
              ASSETS                         (UNAUDITED)         (AUDITED)
Current assets:
     Cash and cash equivalents           $   2,359,165      $    3,425,593
     Temporary investments                   1,002,582             699,363
     Marketable securities                   6,461,173           7,066,797
     Accounts receivable, net of
       allowance for doubtful accounts
       of $36,288 and $47,500 at
       June 30, 2006 and December 31,
       2005, respectively                    1,058,918           1,083,992
     Inventories (net)                       1,514,863           1,031,563
     Prepaid expenses and other
        current assets                         443,003             440,380
     Deferred income taxes                     255,189             217,389
                                           -----------         -----------
              Total current assets          13,094,893          13,965,077
                                           -----------         -----------

Property, plant and equipment:
     Land                                       69,000              69,000
     Factory equipment and fixtures          3,087,972           3,068,050
     Building and improvements               2,140,405           2,133,422
     Waste disposal plant                      133,532             133,532
                                           -----------         -----------
                                             5,430,909           5,404,004
       Less: Accumulated depreciation        4,550,036           4,455,524
                                           -----------         -----------
                                               880,873             948,480
                                           -----------         -----------

Other assets                                   148,430             108,680
                                           -----------         -----------
                                        $   14,124,196      $   15,022,237
                                           ===========         ===========















                 See notes to consolidated financial statements

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

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

Current liabilities:
   Dividends payable                       $     -             $1,086,391
   Accounts payable                           190,067             148,051
   Accrued expenses                           605,342             448,990
                                            ---------           ---------
         Total current liabilities            795,409           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      (145,269)            (84,365)
   Retained earnings                        9,480,957           9,444,111
   Treasury stock, at cost; 62,200 shares    (359,630)           (359,630)
                                            ---------           ---------
         Total stockholders' equity        13,268,970          13,278,988
                                            ---------           ---------
                                         $ 14,124,196        $ 15,022,237
                                           ==========          ==========





















                 See notes to consolidated financial statements

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

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

  Net income                                       $ 1,272,381      $ 1,466,785
  Adjustments to reconcile net earnings
    to net cash flows from operations:
      Depreciation and amortization                     94,512          100,524
      Realized loss on sale of marketable securities       349          116,855
      Provision for doubtful accounts                  (11,212)         (11,029)
      Reduction of inventory obsolescence               19,000             -
      Increase (decrease) in cash resulting from
        changes in operating assets and liabilities:
         Accounts receivable                            36,286         (551,997)
         Inventories                                  (502,300)         336,239
         Prepaid expenses and other current
           and non-current assets                      (42,373)         186,925
         Accounts payable                               42,016           29,046
         Accrued expenses and taxes payable            156,352          155,282
                                                    ----------       ----------
      Net cash provided by operating activities      1,065,011        1,828,630
                                                    ----------       ----------
Cash flows from investing activities:

   Acquisition of property, plant and equipment        (26,905)         (85,509)
   Net change in temporary investments                (303,219)        (295,764)
   Purchase of marketable securities                   (93,803)      (4,342,520)
   Proceeds from sale of marketable securities         600,374        3,465,351
                                                    ----------       ----------
      Net cash provided by (used in) investing
         activities                                    176,447       (1,258,442)
                                                    ----------       ----------
Cash flows from financing activities:

   Proceeds from exercise of stock options              14,040            5,865
   Dividends paid                                   (2,321,926)      (2,120,812)
                                                    ----------       ----------
     Net cash used in financing activities          (2,307,886)      (2,114,947)
                                                    ----------       ----------

Net decrease in cash and cash equivalents           (1,066,428)      (1,544,759)

Cash and cash equivalents at beginning of period     3,425,593        3,735,945
                                                    ----------       ----------
Cash and cash equivalents at end of period         $ 2,359,165      $ 2,191,186
                                                    ==========       ==========





                 See notes to consolidated financial statements

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

     1. In the opinion of 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 June 30, 2006
and the results of  operations  for the six and three months ended June 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 six and three  months ended June 30,
2006 and 2005 are not  necessarily  indicative of the results to be expected for
the full year.

     3.  Stock-Based  Compensation:  At  June  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 fixed 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
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 six months ended June 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 June 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 $24,801,  and a weighted average remaining term of
5.28 years.  All of those options were fully vested as of December 31, 2005. The
Company did not grant any options  during the six months ended June 30, 2006 and
2005.


                                        6
<page>


     As of June 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 six-months
ended June 30, 2006 under the provisions of FAS 123R.

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

     The  following  table  illustrates  the effect on net income and income per
share for the six-months ended June 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:

                                                                Six Months Ended
                                                                  June 30, 2005
                                                                  --------------

 Net income as reported                                            $1,466,785

 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                                            $1,466,785
                                                                    =========

   Income per share:
         Basic--as reported                                        $    .30
         Basic--pro forma                                          $    .30
         Diluted--as reported                                      $    .30
         Diluted--pro forma                                        $    .30



     4. Marketable Securities
                                                                     Unrealized
     June 30, 2006                       Cost       Fair Value      Gain/(Loss)
     ------------------                ----------    ----------      -----------
     Available for Sale:
       U.S. Treasury and agencies      $1,747 433    $1,735,247     $   (12,186)
       Corporate debt securities          599,688       597,921          (1,767)
       Fixed income mutual funds        4,120,106     3,904,795        (215,311)
       Equity and other mutual funds      227,785       223,210          (4,575)
                                       ----------     -----------    -----------
                                       $6,695,012     6,461,173        (233,839)
                                       ==========     ===========    ===========



                                        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:         June 30,     December 31,
                                                    2006            2005
                                                ----------      ----------
     Raw materials and work in process          $  335,835      $  376,308
     Finished products and fine chemicals        1,179,028         655,255
                                                ----------      ----------
                                                $1,514,863      $1,031,563
                                                ==========      ==========

     At June 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 $551,122 and $585,674 for the six months ended
June 30, 2006 and 2005, respectively. There were no payments for interest during
these periods.

     Dividends paid were $1,235,535 and $1,233,135 for the six months ended June
30, 2006 and 2005, respectively.

     7. Comprehensive Income (Loss)

            The components of comprehensive income (loss) are as follows:
<table>
<caption>
                                                      Six months ended June 30,          Three months ended June 30,
                                                         2006            2005                2006            2005
                                                        ------          ------              ------          ------
<S>                                                  <C>             <C>                 <C>             <C>
Net income                                           $1,272,381      $1,466,785          $  650,396      $  611,068
                                                     ----------      ----------          ----------      ----------
Other comprehensive income (loss):
   Unrealized (loss) gain on marketable
     securities during period ......................    (99,078)        (43,880)            (62,351)         55,313
   Less: reclassification adjustment for net
     losses included in net income .................        374         116,855                 374            -
                                                     ----------      ----------          ----------      ----------
   Other comprehensive (loss) income before tax ....    (98,704)         72,975             (61,977)         55,313

</table>



                                        8
<page>
<table>
<caption>
(table continued from previous page)                   Six months ended June 30,          Three months ended June 30,
                                                         2006            2005                2006            2005
                                                        ------          ------              ------          ------
<S>                                                  <C>             <C>                 <C>             <C>
Income tax expense (benefit) related to other
   comprehensive income ............................    (37,800)         27,200             (24,000)         20,600
                                                     ----------      ----------          ----------      ----------
Other comprehensive (loss) income, net of tax.......    (60,904)         45,775             (37,977)         34,713
                                                     ----------      ----------          ----------      ----------
Comprehensive income net of tax .................... $1,211,477      $1,512,560          $  612,419      $  645,781
                                                     ==========      ==========          ==========      ==========

     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 six and three months ended June 30, 2006 and 2005.

<caption>
                                                      Six months ended              Three months ended
                                                         June 30,                        June 30,
                                                    2006           2005             2006           2005
                                                   ------         ------           ------         ------
<S>                                             <C>            <C>              <C>            <C>
Numerator:
   Net income                                   $1,272,381     $1,466,785       $  650,396     $  611,068
                                                   =======      =========          =======      =========
Denominator:
   Denominator for basic earnings
   per share (weighted average
   shares)                                       4,941,167      4,932,761        4,942,139      4,932,981

Effect of dilutive securities:
   Employee stock options                            3,433          7,478            2,737          7,223
                                                 ---------      ---------        ---------      ---------

Denominator for diluted earnings
   per share (adjusted weighted-average
   shares) and assumed conversions               4,944,600      4,940,239        4,944,876      4,940,204
                                                 =========      =========        =========      =========
Basic and diluted earnings per share            $     0.26     $     0.30       $     0.13     $     0.12
                                                 =========      =========        =========      =========
</table>
      9.  The  Company  has  two  reportable  business  segments:  the  Guardian
Laboratories   Division   ("Guardian")   conducts   research,   development  and
manufacturing  of  cosmetic  ingredients,  personal  and health  care  products,
pharmaceuticals and specialty industrial products.  Eastern Chemical Corporation
("Eastern"),  a  wholly-owned  subsidiary of the Company,  distributes a line of
fine chemicals, solutions, dyes and reagents.






                                       9
<page>
     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 six and three months ended June 30, 2006 and 2005.
<table>
<caption>
                                                                    Six months ended June 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
<S>                                <C>            <C>            <C>               <C>            <C>            <C>
Revenues from external customers   $ 5,384,005    $   537,807    $ 5,921,812       $ 6,054,390    $   593,182    $ 6,647,572
Depreciation and amortization           42,247           -            42,247            44,750           -            44,750
Segment income before income
  taxes                              1,784,295         46,064      1,830,359         2,327,899         31,953      2,359,852

Segment assets                       3,022,098        540,685      3,562,783         2,648,972        354,204      3,003,176

Capital expenditure                     18,803           -            18,803            27,916            -           27,916

Reconciliation to Consolidated Amounts

Income before income taxes
----------------------------
Total earnings for reportable segments                           $ 1,830,359                                     $ 2,359,852
Other income, net                                                    194,526                                          47,012
Corporate headquarters expense                                       (76,804)                                        (79,179)
                                                                  ----------                                      ----------
Consolidated earnings before income taxes                        $ 1,948,081                                     $ 2,327,685
                                                                  ==========                                      ==========
Assets
------
Total assets for reportable segments                             $ 3,562,783                                     $ 3,003,176
Corporate headquarters                                            10,561,413                                      11,000,140
                                                                  ----------                                      ----------
      Total consolidated assets                                  $14,124,196                                     $14,003,316
                                                                  ==========                                      ==========

                                                                  Three months ended June 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
<S>                                <C>            <C>            <C>               <C>            <C>            <C>
Revenues from external customers   $ 2,802,971    $   254,044    $ 3,057,015       $ 2,486,642    $   280,813    $ 2,767,455
Depreciation and amortization           20,079           -            20,079            23,415           -            23,415
Segment income before income
  taxes                                897,102         23,730        920,832           857,842         19,679        877,521

</table>




                                       10
<page>
(table continued from previous page)
<table>
<caption>
Reconciliation to Consolidated Amounts

                                                                  Three months ended June 30,
                                                     2006                                            2005
                                     ------------------------------------            ------------------------------------
                                     GUARDIAN       EASTERN         TOTAL            GUARDIAN       EASTERN         TOTAL
                                   ------------   ------------   -----------       ------------   ------------   -----------
<S>                                <C>            <C>            <C>               <C>            <C>            <C>


Income before income taxes
----------------------------
Total earnings for reportable segments                           $   920,832                                     $   877,521
Other income, net                                                    114,103                                          94,952
Corporate headquarters expense                                       (38,339)                                        (39,505)
                                                                  ----------                                      ----------
Consolidated earnings before income taxes                        $   996,596                                     $   932,968
                                                                  ==========                                      ==========
Other Significant items
-----------------------

<caption>
                                                                     Six months ended June 30,
                                                     2006                                           2005
                                   ------------------------------------------       -------------------------------------------
                                     Segment                     Consolidated          Segment                     Consolidated
                                      Totals       Corporate        Totals              Totals        Corporate       Totals
                                   ------------   ------------   -------------      -------------   ------------   -------------
<S>                                  <C>            <C>             <C>               <C>            <C>             <C>
Capital expenditures                 $ 18,803       $  8,102        $ 26,905          $ 27,916       $ 57,593        $ 85,509
Depreciation and amortization          42,247         52,265          94,512            44,750         55,774         100,524

Geographic Information
----------------------

<caption>
                                                       2006                                2005
                                           ---------------------------         ---------------------------
                                             Revenues      Long-Lived            Revenues      Long-Lived
                                                             Assets                              Assets
                                           -----------    -------------        -----------    -------------
<S>                                        <C>           <C>                   <C>           <C>
United States                              $ 2,413,974   $      880,873        $ 3,391,534   $      982,656
France                                         732,393                             781,473
Other countries                              2,775,445                           2,474,565
                                           -----------    -------------        -----------    -------------
                                           $ 5,921,812   $      880,873        $ 6,647,572   $      982,656
                                           ===========    =============        ===========    =============
</table>






                                       11
<page>
(table continued from previous page)
<table>
<caption>
                                                       2006                                2005
                                           ---------------------------         ---------------------------
                                             Revenues      Long-Lived            Revenues      Long-Lived
                                                             Assets                              Assets
                                           -----------    -------------        -----------    -------------
<S>                                        <C>           <C>                   <C>           <C>

Major Customers
---------------
Customer A (Guardian)**                    $ 2,085,254                         $ 2,313,604
Customer B (Guardian)**                        607 277                             665,793
All other customers                          3,229,281                           3,668,175
                                           -----------                         -----------
                                           $ 5,921,812                         $ 6,647,572
                                           ===========                         ===========
</table>
     ** At June 30, 2006  Customers A and B had balances  approximating  36% and
25% of net accounts receivable, respectively. At June 30, 2005 Customers A and B
had balances approximating 49% 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.

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.








                                       12
<page>
     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.

        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





                                       13
<page>
     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.  It's  personal care  products are marketed  worldwide  primarily by its
marketing  partners,  the largest of which is International  Specialty  Products
("ISP"). Approximately half of Guardian's personal care products will be sold to
foreign customers, either directly of through its marketing partners.

     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 six and three months ended June
30, 2006 and June 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

     Gross revenue from operations
     -----------------------------

     For the six-month  period ended June 30, 2006 net sales decreased  $725,760
(10.9%) versus the comparable  period in 2005.  Guardian had a sales decrease of
$670,385 (11.1%) and Eastern had a sales decrease of $55,375 (9.3%).

     For the  three-month  period  ended  June 30,  2006,  net  sales  increased
$289,560  (10.5%)  versus the  comparable  period in 2005.  Guardian had a sales
increase of $316,329 (12.7%) and Eastern had a sales decrease of $26,769 (9.5%).

     The decline in  Guardian's  sales for the  six-month  period ended June 30,
2006  versus the  comparable  period in 2005 was due to lower sales in the first
quarter that were partially  offset by higher sales in the second  quarter.  The
lower  first  quarter  sales  were due  primarily  to a price  increase  for the
company's  pharmaceutical  products that went into effect on March 1, 2005,  the
anticipation  of which  resulted  in an  unusually  high  volume of sales of the
company's  pharmaceutical  products in the first quarter of 2005. That situation
was not repeated in the first  quarter of 2006,  resulting in more typical sales
levels for the pharmaceutical  products. In addition,  the first quarter of 2005
experienced  an  unusual  number of  shipments  of  orders  that  customers  had
requested  not be shipped out at the very end of 2004.  That  situation  did not
recur this year. The increase in Guardian's  sales in the second quarter of 2006
was due mainly to an increase in sales of the company's  pharmaceutical products
compared with the same period in 2005.

     The  decrease  in  Eastern's   sales  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 47.2%  for the six
months ended June 30, 2006 from 45.8% for the  comparable  period ended June 30,
2005.  For the three months ended June 30, 2006  compared  with the three months
ended June 30, 2005, cost of sales as a percentage of sales increased from 46.0%
to 47.1%.  These increases were due to increases in standard  overhead rates for



                                       14
<page>
Guardian that  resulted  primarily  from  increases in insurance and payroll and
payroll-related costs.

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

     Operating  expenses  increased $49,119 (3.7%) for the six months ended June
30, 2006 compared with the comparable  period in 2005.  This increase was mainly
attributable  to the net  effect of  increases  in payroll  and  payroll-related
expenses and the reduction of the  Company's  bad debt  reserve.  For the three-
month period ended June 30, 2006,  operating  expenses increased $76,688 (11.7%)
when compared with the comparable  period ended June 30, 2005. This increase was
due mainly to increases in payroll and payroll related expenses.

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

     Other Income  increased  to $194,526  from $47,012 for the six month period
ended June 30,  2006 and June 30,  2005,  respectively,  an increase of $147,514
(313.8%). This increase was mainly attributable to the net effect of an increase
in investment  income of $33,811 in 2006 and  substantially  lower losses on the
sale of  marketable  securities  in 2005.  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 June 30, 2006 Other  Income  increased  $19,151
(20.2%)  which was mainly  attributable  to higher  investment  income due to an
increase in interest rates.

     Provision for income taxes
     --------------------------

     The  provision  for income  taxes  decreased  $185,200  (21.5%) for the six
months ended June 30, 2006 when  compared  with the  comparable  period in 2005.
This  decrease  was due to (a)  decreased  earnings  before taxes of $379,604 in
2006, and (b) the adding back of the approximately $116,000 in capital loss from
the sale of the bond  portfolio in 2005,  which loss will be available to offset
any  realized  capital  gains in 2005 and any excess may be carried  forward for
five years following the year of the loss.

     The  provision  for income  taxes  increased  $24,300  (7.5%) for the three
months ended June 30, 2006 which is mainly due to an increase in earnings before
taxes of $63,628.

     The company had  effective  income tax rates of 34.7% and 37.0% for the six
months ended June 30, 2006 and June 30,2005,  respectively,  and 34.7% and 34.5%
for the  three  months  ended  June 30,  2006 and  June 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.



                                       15
<page>
LIQUIDITY AND CAPITAL RESOURCES

     Working  capital  increased  from  $12,281,645  at  December  31,  2005  to
$12,299,484  at June 30,  2006.  The current  ratio  increased  from 8.3 to 1 at
December 31, 2005 to 16.5 to 1 at June 30, 2006.  The increase in current  ratio
was primarily due to the net effect of a decrease in dividends payable offset by
increases in inventories, and decreases in cash and investments.

     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 $1,065,011 and $1,828,630 for
the six months ended June 30, 2006 and June 30, 2005, respectively. The decrease
was primarily due to the decreases in net income from operations, losses on sale
of  investments,  and the net  effect of  increases  in  inventory  and  prepaid
expenses.

     During the six-month  period ended June 30, 2006,  $176,447 was provided by
investment  activities,  as compared  with the  six-month  period ended June 30,
2005, when $1,258,442 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 six months ending June 30, 2005.

     Cash used in financing activities was $2,307,886 and $2,114,947 for the six
months ended June 30, 2006 and June 30, 2005, respectively. The increase was due
primarily to an increase in dividends  paid during the six months ended June 30,
2006.

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.






                                       16
<page>
                           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 were two reports on Form 8-K filed  during the fiscal  quarter  ended
June 30,  2006.  One was filed on May 10, 2006 and related to the issuance of an
earnings  release by the Company on May 8, 2006. The second was filed on May 19,
2006,  and related to the  declaration  of a special  dividend by the  Company's
Board of Directors on May 18, 2006.


                                   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:  August 10, 2006


                                       17