UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, DC 20549

                                 FORM 10-Q


              Quarterly Report Pursuant to Section 13 or 15(d)
                  of the Securities Exchange Act of 1934


             For the Quarterly Period Ended: September 30, 2006


                        Commission File No. 1-4436


                              THE STEPHAN CO.
          (Exact Name of Registrant as Specified in its Charter)


               Florida                               59-0676812
   (State or Other Jurisdiction of               (I.R.S. Employer
   Incorporation or Organization)               Identification No.)


   1850 West McNab Road, Fort Lauderdale, Florida      33309
      (Address of Principal Executive Offices)       (Zip Code)


Registrant's Telephone Number, including Area Code: (954) 971-0600


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X     NO

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer.  See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act).
Large accelerated filer[ ] Accelerated filer[ ] Non-accelerated filer[X]

Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)
YES       NO X

         Approximate number of shares of Common Stock outstanding
                          as of November 1, 2006:


                                 4,389,805





                       THE STEPHAN CO. AND SUBSIDIARIES
                    QUARTERLY REPORT PURSUANT TO SECTION 13
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                              SEPTEMBER 30, 2006

                                    INDEX

                                                               PAGE NO.
PART I.    FINANCIAL INFORMATION

           ITEM 1.  Financial Statements

           Unaudited Condensed Consolidated Balance Sheets
           as of September 30, 2006 and December 31, 2005        5-6

           Unaudited Condensed Consolidated Statements
           of Operations for the nine months ended
           September 30, 2006 and 2005                            7

           Unaudited Condensed Consolidated Statements
           of Operations for the three months ended
           September 30, 2006 and 2005                            8

           Unaudited Condensed Consolidated Statements
           of Cash Flows for the nine months ended
           September 30, 2006 and 2005                           9-10

           Notes to Unaudited Condensed Consolidated
           Financial Statements                                 11-16

           ITEM 2.    Management's Discussion and Analysis
                      of Financial Condition and
                      Results of Operations                     17-20

           ITEM 3.    Quantitative and Qualitative
                      Disclosure About Market Risk                20

           ITEM 4.    Controls and Procedures                   20-21


PART II.   OTHER INFORMATION

           ITEM 1.    Legal Proceedings                           22

           ITEM 6.    Exhibits                                    22


SIGNATURES                                                        23




                                     2



                        THE STEPHAN CO. AND SUBSIDIARIES
                    QUARTERLY REPORT PURSUANT TO SECTION 13
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                              SEPTEMBER 30, 2006


         CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
    PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995


          This quarterly report contains certain "forward-looking"
statements. The Stephan Co. ("Stephan" or the "Company") desires to take
advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the
express purpose of availing itself of the protections of such safe harbor
with respect to all such forward-looking statements.  Such forward-looking
statements involve risks, uncertainties and other factors which may cause
the actual results, condition (financial or otherwise), performance, trends
or achievements of the Company and its subsidiaries to be materially
different from any results, condition, performance, trends or achievements
projected, anticipated or implied by such forward-looking statements.

Words such as "projects," "believe," "anticipates," "estimate,"
"plans," "expect," "intends," and similar words and expressions are
intended to identify forward-looking statements and are based on our
current expectations, assumptions, and estimates about us and our industry.
In addition, any statements that refer to expectations, projections or
other characterizations of future events or circumstances are forward-
looking statements. Although we believe that such forward-looking
statements are reasonable, we cannot assure you that such expectations will
prove to be correct.

     Our actual results could differ materially from those anticipated in
such forward-looking statements as a result of several factors, risks and
uncertainties. These factors, risks and uncertainties include, without
limitation, our ability to satisfactorily address any material weaknesses
in our financial controls; general economic and business conditions;
competition; the relative success of our operating initiatives; our
development and operating costs; our advertising and promotional efforts;
brand awareness for our product offerings; the existence or absence of
adverse publicity; acceptance of any new product offerings; changing trends
in customer tastes; the success of any multi-branding efforts; changes in
our business strategy or development plans; the quality of our management
team; costs and expenses incurred by us in pursuing strategic alternatives;
the availability, terms and deployment of capital; the business abilities
and judgment of our personnel; the availability of qualified personnel; our
labor and employee benefit costs; the availability and cost of raw
materials and supplies; changes in or newly-adopted accounting principles;
changes in, or our failure to comply with, applicable laws and regulations;
changes in our product mix and associated gross profit margins; as well as
management's response to these factors, and other factors that may be more
fully described in the Company's literature, press releases and publicly-

                                     3



                        THE STEPHAN CO. AND SUBSIDIARIES
                    QUARTERLY REPORT PURSUANT TO SECTION 13
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                              SEPTEMBER 30, 2006


filed documents with the Securities and Exchange Commission. You are urged
to carefully review and consider these disclosures, which describe certain
factors that affect our business.

     We do not undertake, subject to applicable law, any obligation to
publicly release the results of any revisions, which may be made to any
forward-looking statements to reflect events or circumstances occurring
after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.  Therefore, we caution each reader of
this report to carefully consider the specific factors and qualifications
discussed herein with respect to such forward-looking statements, as such
factors and qualifications could affect our ability to achieve our
objectives and may cause actual results to differ materially from those
projected, anticipated or implied herein.

































                                     4



                        PART I.  FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

                       THE STEPHAN CO. AND SUBSIDIARIES
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                   ASSETS

                                             September 30,   December 31,
                                                 2006            2005
                                             ____________    ____________

CURRENT ASSETS

 Cash and cash equivalents                    $ 6,231,566    $  5,602,762

 Restricted cash                                1,112,074       3,335,557

 Accounts receivable, net                       2,292,675       1,431,650

 Inventories                                    6,096,707       6,148,267

 Income taxes receivable                             -             22,893

 Prepaid expenses and
  other current assets                            389,958         311,905
                                             ____________    ____________

   TOTAL CURRENT ASSETS                        16,122,980      16,853,034

RESTRICTED CASH                                 1,387,500            -

PROPERTY, PLANT AND EQUIPMENT, net              1,612,243       1,682,951

GOODWILL, net                                   4,013,458       4,013,458

TRADEMARKS, net                                 8,364,809       8,364,809

DEFERRED ACQUISITION COSTS, net                    92,667         142,185

OTHER ASSETS, net                               1,371,027       1,721,169
                                             ____________    ____________

   TOTAL ASSETS                              $ 32,964,684    $ 32,777,606
                                             ============    ============


    See notes to unaudited condensed consolidated financial statements


                                     5



                      THE STEPHAN CO. AND SUBSIDIARIES
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



                   LIABILITIES AND STOCKHOLDERS' EQUITY


                                            September 30,    December 31,
                                                2006             2005
                                            ____________     ____________
CURRENT LIABILITIES

 Accounts payable and
  accrued expenses                         $  2,189,538      $  2,002,728

 Current portion of
  long-term debt                              1,110,000         3,237,500

 Income taxes payable                            43,600              -
                                           ____________      ____________

   TOTAL CURRENT LIABILITIES                  3,343,138         5,240,228

DEFERRED INCOME TAXES, net                    1,656,823         1,343,257

LONG-TERM DEBT, less current maturities       1,387,500              -
                                           ____________      ____________

   TOTAL LIABILITIES                          6,387,461         6,583,485
                                           ____________      ____________

COMMITMENTS AND CONTINGENCIES (NOTE 3)

STOCKHOLDERS' EQUITY

  Common stock, $.01 par value                   43,898            43,898
  Additional paid in capital                 17,623,735        17,556,731
  Retained earnings                           8,909,590         8,593,492
                                           ____________      ____________
  TOTAL STOCKHOLDERS' EQUITY                 26,577,223        26,194,121
                                           ____________      ____________
TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                     $ 32,964,684      $ 32,777,606
                                           ============      ============




    See notes to unaudited condensed consolidated financial statements


                                  6




                    THE STEPHAN CO. AND SUBSIDIARIES
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                   Nine Months Ended
                                                     September 30,
                                            ______________________________

                                                 2006             2005
                                             ____________     ____________

NET SALES                                    $ 17,054,155     $ 17,141,001

COST OF GOODS SOLD                              9,910,822       10,437,736
                                              ___________      ___________
GROSS PROFIT                                    7,143,333        6,703,265

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                       6,231,099        6,712,074
                                              ___________     ____________
OPERATING INCOME/(LOSS)                           912,234           (8,809)

OTHER INCOME(EXPENSE)
  Interest income                                 155,312           86,061
  Interest expense                               (110,580)         (74,122)
  Other income, net                                37,500           37,500
                                              ___________      ___________

INCOME BEFORE INCOME TAXES                        994,466           40,630

INCOME TAX EXPENSE                                414,979           31,884
                                              ___________      ___________

NET INCOME                                    $   579,487      $     8,746
                                              ===========      ===========


BASIC AND DILUTED EARNINGS PER SHARE          $       .13      $       .00

                                              ===========      ===========

WEIGHTED AVERAGE NUMBER
  OF SHARES OUTSTANDING                         4,391,052        4,401,454
                                              ===========      ===========




    See notes to unaudited condensed consolidated financial statements



                                     7




                    THE STEPHAN CO. AND SUBSIDIARIES
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                 Three Months Ended
                                                    September 30,
                                            _____________________________

                                                 2006            2005
                                            ____________     ____________

NET SALES                                    $ 6,097,238      $ 6,567,510

COST OF GOODS SOLD                             3,525,412        4,242,746
                                             ___________      ___________

GROSS PROFIT                                   2,571,826        2,324,764

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                      1,945,022        2,214,012
                                             ___________     ____________

OPERATING INCOME                                 626,804          110,752

OTHER INCOME(EXPENSE)
  Interest income                                 48,919           34,567
  Interest expense                               (42,604)         (20,925)
  Other income, net                               12,500           12,500
                                             ___________      ___________

INCOME BEFORE INCOME TAXES                       645,619          136,894

INCOME TAX EXPENSE                               279,367           43,038
                                             ___________      ___________


NET INCOME                                   $   366,252      $    93,856
                                             ===========      ===========

BASIC AND DILUTED EARNINGS PER SHARE         $       .08      $       .02
                                             ===========      ===========
WEIGHTED AVERAGE NUMBER
  OF SHARES OUTSTANDING                        4,391,052        4,401,454
                                             ===========      ===========





    See notes to unaudited condensed consolidated financial statements



                                     8


                      THE STEPHAN CO. AND SUBSIDIARIES
          UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                  Nine Months Ended
                                                    September 30,
                                             ___________________________

                                                 2006            2005
                                             ___________     ____________

CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income                                   $  579,487      $     8,746
                                             ___________     ____________

 Adjustments to reconcile net income
  to cash flows provided by
  operating activities:

   Depreciation                                  108,931         108,302
   Stock option compensation                      67,004            -
   Amortization of intangible assets              49,518          55,711
   Write-down of inventories                        -             60,000
   Deferred income tax provision                 313,566           3,948
   Provision for doubtful accounts                55,774          24,414

   Changes in operating assets and
   liabilities:

     Accounts receivable                        (916,799)       (579,162)
     Inventories                                  51,560         370,470
     Income taxes receivable/payable              66,493         (25,020)
     Prepaid expenses
      and other current assets                   (78,053)         87,768
     Other assets                                350,142         146,712
     Accounts payable and accrued expenses       186,810         422,445
                                             ___________     ___________

     Total adjustments                           254,946         675,588
                                             ___________     ___________
Net cash flows provided
 by operating activities                         834,433         684,334
                                             ___________     ___________




See notes to unaudited condensed consolidated financial statements




                                     9



                       THE STEPHAN CO. AND SUBSIDIARIES
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                   Nine Months Ended
                                                     September 30,
                                             ____________________________

                                                 2006             2005
                                             ____________     ___________
CASH FLOWS FROM INVESTING ACTIVITIES:

 Change in restricted cash                       835,983          929,945

 Purchase of property, plant
  and equipment                                  (38,223)        (179,784)
                                             ___________      ___________
Net cash flows provided by
 investing activities                            797,760          750,161
                                             ___________      ___________
CASH FLOWS FROM FINANCING ACTIVITIES:

 Repayments of long-term debt                   (740,000)        (832,500)

 Dividends paid                                 (263,389)        (263,390)
                                              ___________      ___________
Net cash flows used in
 financing activities                         (1,003,389)      (1,095,890)
                                             ___________      ___________
 INCREASE IN CASH AND
  CASH EQUIVALENTS                               628,804          338,605

CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                           5,602,762        4,402,463
                                             ___________      ___________
CASH AND CASH EQUIVALENTS,
 END OF PERIOD                               $ 6,231,566      $ 4,741,068
                                             ===========      ===========
Supplemental Disclosures of
 Cash Flow Information:

          Interest paid                      $    32,641      $    45,387
                                             ===========      ===========
          Income taxes paid                  $    35,178      $    45,771
                                             ===========      ===========




    See notes to unaudited condensed consolidated financial statements



                                     10



                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES


         NATURE OF OPERATIONS:  The Stephan Company (the "Company") is
engaged in the manufacture, sale, and distribution of hair and personal
care grooming products principally throughout the United States.  The
Company has allocated substantially all of its business into three
segments, which include professional hair care products and distribution,
retail personal care products and manufacturing.

         BASIS OF PRESENTATION:  In the opinion of management, all
adjustments (consisting only of normal accruals) necessary for a fair
presentation of the Company's financial position and results of operations
are reflected in these unaudited interim financial statements.

     The results of operations for the three and nine month periods ended
September 30, 2006 is not necessarily indicative of the results to be
achieved for the year ending December 31, 2006.  The December 31, 2005
condensed consolidated balance sheet was derived from the audited
consolidated financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United States
of America ("generally accepted accounting principles").  These interim
financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 2005,
previously filed with the Securities and Exchange Commission.

         USE OF ESTIMATES:  The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

         CASH AND CASH EQUIVALENTS:    Cash and cash equivalents include
cash, money market investment accounts and short-term instruments having
maturities of 90 days or less when acquired.  The Company maintains cash
deposits at certain financial institutions in amounts in excess of the
federally insured limit.  Cash and cash equivalents held in interest-
bearing accounts as of September 30, 2006 and December 31, 2005 were
approximately $5,812,000 and $5,095,000, respectively.

         INVENTORIES:  Inventories are stated at the lower of cost (deter-
mined on a first-in, first-out basis) or market, and are as follows:


                                     11


                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES (continued)

                                      September 30,        December 31,
                                          2006                 2005
                                      ____________         ____________
Raw materials                         $  1,490,079         $  1,692,277
Packaging and components                 2,189,540            2,238,763
Work in progress                           530,170              454,217
Finished goods                           3,177,534            3,402,742
                                      ____________         ____________
                                         7,387,323            7,787,999
Less: Amount included in
      other assets                      (1,290,616)          (1,639,732)
                                      ____________         ____________
                                      $  6,096,707         $  6,148,267
                                      ============         ============

     Raw materials include surfactants, chemicals and fragrances used in
the production process.  Packaging materials include cartons, inner sleeves
and boxes used in the actual product, as well as outer boxes and cartons
used for shipping purposes.  Components are the actual bottles or
containers (plastic or glass), jars, caps, pumps and similar materials that
become part of the finished product.  Finished goods include hair dryers,
electric clippers, lather machines, scissors and salon furniture.

     Included in other assets is inventory not anticipated to be utilized
within one year and is comprised primarily of packaging, components and
finished goods.  The Company reduces the carrying value of inventory to
provide for these slow moving goods that includes the estimated costs of
disposal of inventory that may ultimately become unusable or obsolete.

         BASIC AND DILUTED EARNINGS PER SHARE:  Basic and diluted earnings
per share are computed by dividing net income by the weighted average
number of shares of common stock outstanding.  The weighted average number
of shares outstanding was 4,391,052 and 4,401,454, respectively, for both
the nine-month and three-month periods ended September 30, 2006 and 2005.
For the nine months ended September 30, 2006 and 2005, the Company had
396,178 and 351,240 outstanding stock options, respectively, a significant
portion of which were anti-dilutive. The inclusion of dilutive stock
options in the calculation of earnings per share did not have any impact on
the earnings per share for the three month period ended September 30, 2006.

         STOCK-BASED COMPENSATION:  Effective January 1, 2006, the Company
adopted Statement of Financial Accounting Standards No. 123 (revised),
"Share-Based Payment" ("FAS 123R"), and chose to utilize the modified
prospective transition method. Under this method, compensation costs


                                     12



                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES (continued)

recognized at September 30, 2006 relate to the estimated fair value at the
grant date of 75,310 stock options granted subsequent to January 1, 2006 in
accordance with FAS 123R.  Prior to the adoption of FAS 123R the Company
accounted for stock options in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and recognized no compensation
expense in net income for stock options granted and has elected the
disclosure only provisions of FAS 123.  In accordance with the provisions
of FAS 123R, options granted prior to January 1, 2006 have not been
restated to reflect the adoption of FAS 123R.  The required services for
awards prior to January 1, 2006 had been rendered prior to December 31,
2005.

     As a result of adopting FAS 123R on January 1, 2006, the Company's net
income for the nine and three month periods ended September 30, 2006 was
reduced due to the Company's recognition of approximately $67,000 and
$25,000, respectively, of compensation expense (included in Selling,
General and Administrative Expenses) in the periods that stock options were
granted.  The impact on basic and diluted earnings per share for the nine
months and quarter ended September 30, 2006 was not material and the per
share earnings remained at $.13 and $.08, respectively.  For the nine
months and quarter ended September 30, 2005, no compensation expense was
recorded for options granted in the period, as indicated above.  The
Company has used the Black-Scholes option pricing model to estimate the
fair value of stock options using the following assumptions as at
September 30, 2006:

              Life expectancy - Key Employee         10 years
              Life expectancy - Outside Director      5 years
              Risk-free interest rate                    5.2%
              Expected volatility                       61.1%
              Dividends per share                        2.1%
              Weighted average fair
               value at grant date                      $1.88

     The above assumptions are based on a number of factors as follows:
(i) expected volatility was determined using the historical volatility of
the Company's stock price, (ii) the expected term of the options is based
on the period of time that the options granted are expected to be
outstanding, and (iii) the risk free rate is the U.S. Treasury rate
effective at the time of grant for the duration of the options granted.
Compensation cost is recognized on a straight-line basis over the vesting
period.



                                     13



                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES (continued)

     NEW FINANCIAL ACCOUNTING STANDARDS:  In May 2005, the FASB issued SFAS
No. 154, "Accounting Changes and Error Corrections, a replacement of APB
Opinion No. 20 and FASB Statement No. 3", effective for accounting changes
and corrections of errors made in fiscal year 2006 and beyond.  In February
2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments, an amendment of FASB Statements No. 133 and 140",
effective for events occurring after the first fiscal year that begins
after September 15, 2006.  In March 2006, the FASB issued SFAS No. 156,
"Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140", also effective for the first fiscal year that begins
after September 15, 2006.  In September 2006, the FASB issued SFAS No. 157,
"Fair Value Measurements", effective for financial statements issued for
fiscal years beginning after November 15, 2007.  SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and expands
required disclosures in connection therewith.  The effect of these
statements on the Company's consolidated financial statements will be
determined based upon the nature and significance of future events, if any,
that would be subject to these statements.

     In July 2006 the FASB issued FASB Interpretation No. 48, ("FIN 48")
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109".  FIN 48 requires that we recognize in our financial
statements the impact of a tax position taken or expected to be taken in a
tax return, provided that that position is more likely than not of being
sustained on audit.  FIN 48 is effective for fiscal years beginning after
December 15, 2006.  We do not anticipate that FIN 48 will have any adverse
effect on our financial statements.

NOTE 2: SEGMENT INFORMATION

     The Company has identified three reportable operating segments based
upon the manner in which its management evaluates its business.  These
segments are Professional Hair Care Products and Distribution
("Professional"), Retail Personal Care Products ("Retail") and
"Manufacturing".  The Professional segment has a customer base consisting
generally of distributors that purchase the Company's hair products and
beauty and barber supplies for sale to salons and barbershops.  The
customer base for the Retail segment consists of mass merchandisers, chain
drug stores and supermarkets that sell products to end-users. The
Manufacturing segment manufactures products for different subsidiaries of
the Company and manufactures private label brands for customers.

     The Company conducts operations principally in the United States and
sales to international customers are not material to its consolidated net

                                     14



                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 2: SEGMENT INFORMATION (continued)

sales. Income/(Loss) Before Income Taxes as shown below reflects an
allocation of corporate overhead expenses (based upon sales) incurred by
the Manufacturing segment.  The following tables, in thousands, summarize
Net Sales and Income/(Loss) Before Income Taxes by reportable segment:


                                 NET SALES           NET SALES
                              _______________     _______________
                                Nine Months         Three Months
                               Ended Sept. 30,     Ended Sept. 30,
                                2006    2005        2006    2005
                              _______________     _______________
Professional                  $12,906 $13,377     $ 4,698 $ 5,065
Retail                          3,279   3,221       1,111   1,269
Manufacturing                   3,505   4,058       1,181   1,642
                              _______ _______     _______ _______
   Total                       19,690  20,656       6,990   7,976

Intercompany
  Manufacturing                (2,636) (3,515)       (893) (1,408)
                              _______ _______     _______ _______
   Consolidated               $17,054 $17,141     $ 6,097 $ 6,568
                              ======= =======     ======= =======

                               INCOME/(LOSS)        INCOME/(LOSS)
                               BEFORE INCOME        BEFORE INCOME
                                   TAXES                TAXES
                              _______________      _______________
                                Nine Months          Three Months
                              Ended Sept. 30,       Ended Sept. 30,
                                2006    2005         2006    2005
                              _______________      _______________

Professional                  $   693 $  702       $  384  $  246
Retail                            398    (25)         301     (12)
Manufacturing                    ( 97)  (636)        ( 39)    (97)
                              _______ _______      ______  ______

 Consolidated                 $   994 $   41       $  646  $  137
                              ======= =======      ======  ======






                                     15



                       THE STEPHAN CO. AND SUBSIDIARIES
       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 3: LONG-TERM DEBT

     On September 26, 2006, the Company finalized a recasting of the
Wachovia Bank balloon payment due in August 2006.  Under the terms of the
loan modification agreement, the $2,497,500 that was due will continue to
be paid in installment payments of $92,500, plus interest, monthly until
the obligation is satisfied in January 2009.  The interest rate remained
the same, at 50 basis points above the rate of interest paid on the cash
collateral.  In connection with this modification, $1,387,500 of restricted
cash has been reclassified to long-term as of September 30, 2006.

NOTE 4: COMMITMENTS AND CONTINGENCIES

     The Company is involved in litigation matters arising in the ordinary
course of business.  It is the opinion of management that none of these
matters, at September 30, 2006, would likely, if adversely determined, have
a material adverse effect on the Company's financial position, results of
operations or cash flows. Additionally, there has been no material change
in the status of any other pending litigation since the Company's filing of
its Annual Report on Form 10-K with the Securities and Exchange Commission
for the year ended December 31, 2005.



























                                     16



                   THE STEPHAN CO. AND SUBSIDIARIES
               QUARTERLY REPORT PURSUANT TO SECTION 13
                OF THE SECURITIES EXCHANGE ACT OF 1934
                      SEPTEMBER 30, 2006 AND 2005


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     Nine months ended September 30, 2006:

     For the nine months ended September 30, 2006, net sales were
$17,054,000, compared to $17,141,000 achieved in the corresponding nine-
month period of 2005. The decrease in net sales was primarily a result of
lower Professional sales in the third quarter of 2006.  Gross profit for
the nine months ended September 30, 2006 was $7,143,000, compared to gross
profit of $6,703,000 achieved for the corresponding nine-month period in
2005.  The increase in gross profit was the result of an overall change in
the sales mix, especially in the third quarter of 2006.  An increase in
private label manufacturing and sales of certain retail brands, coupled
with a decline in Professional hard goods sales had the effect of
increasing our gross profit  for both the three and nine month periods
ended September 30, 2006.  The overall gross profit for the nine months
ended September 30, 2006 was 41.9% as compared to 39.1% for the nine months
ended September 30, 2005.

     Selling, general and administrative ("SGA") expenses for the nine
months ended September 30, 2006 decreased by $481,000, to $6,231,000, when
compared to the corresponding 2005 nine-month period total of $6,712,000.
This decrease can be attributed to a decline in rent expense as warehouse
facilities were consolidated and/or reduced, as well as a decline in
professional fees.

     Interest expense for the nine months ended September 30, 2006 was
$111,000, an increase of approximately $37,000 from the $74,000 incurred in
the corresponding period of 2005.  For the nine months ended September 30,
2006, we accrued $78,000 in interest expense related to a previously
disclosed arbitration award, more than offsetting any decline in interest
expense on our bank debt.  While our management believes we may ultimately
prevail and/or settle for an amount substantially below the amount already
accrued, our management continues to accrue interest on the entire
obligation because it cannot predict the outcome of the litigation.
Interest income of $155,000 for the nine months ended September 30, 2006
was higher than the $86,000 earned in the corresponding nine months of 2005
due to an increase in invested cash and the overall increase in interest
rates.  Other income includes royalty fees received from the licensing of
our Frances Denney products.

     Net income for the nine-month period ended September 30, 2006 was
$579,000, compared to net income of $9,000 for the nine months ended
September 30, 2005.  An increase in gross profit and a reduction in SGA

                                     17


                  THE STEPHAN CO. AND SUBSIDIARIES
               QUARTERLY REPORT PURSUANT TO SECTION 13
                OF THE SECURITIES EXCHANGE ACT OF 1934
                      SEPTEMBER 30, 2006 AND 2005


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)

expenses all contributed to income from operations of $912,000 for the nine
months ended September 30, 2006, compared to a loss from operations of
$9,000 for the comparable period in 2005.  Income taxes for the nine months
ended September 30, 2006 were $415,000, comprised of a net current state
income tax provision of $102,000 and a deferred Federal income tax
provision of $313,000.

     Basic and diluted earnings per share was $0.13 for the nine months
ended September 30, 2006, compared to $0.00 for the nine months ended
September 30, 2005, based on a weighted average number of shares
outstanding of 4,391,052 and 4,401,454, respectively.

     Three months ended September 30, 2006:

     For the three months ended September 30, 2006, net sales were
$6,097,000, compared to $6,568,000 for the three months ended September 30,
2005, a decrease of $471,000.  Gross profit for the three months ended
September 30, 2006 was $2,572,000, compared to gross profit of $2,325,000
achieved for the corresponding three-month period in 2005.  As indicated
above, similarly to the nine-month period ended September 30, 2006, the
increase in gross profit was the result of an overall change in the sales
mix.  The gross profit margin for the three months ended September 30, 2006
was 42.2% as compared to 35.4% for the three months ended September 30,
2005.

     SGA expenses for the three months ended September 30, 2006 decreased
by $269,000, from $2,214,000 to $1,945,000, when compared to the
corresponding three-month period of 2005.

     Interest income for the three-month period ended September 30, 2006
was $49,000, an increase of approximately $14,000 when compared to $35,000
earned in the corresponding three-month period of 2005, primarily as a
result of rising interest rates.

     The income tax expense for the three months ended September 30, 2006
was $279,000 compared to $43,000 for the three-month period ended September
30, 2005.  For the three months ended September 30, 2006, net income was
$366,000 compared to $94,000 for the corresponding period in 2005.  Basic
and diluted earnings per share was $0.08 for the three months ended
September 30, 2006 compared to $0.02 for the three months ended September
30, 2005, based on a weighted average number of shares of 4,391,052 and
4,401,454, respectively.


                                     18



                  THE STEPHAN CO. AND SUBSIDIARIES
               QUARTERLY REPORT PURSUANT TO SECTION 13
                OF THE SECURITIES EXCHANGE ACT OF 1934
                      SEPTEMBER 30, 2006 AND 2005


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)


LIQUIDITY & CAPITAL RESOURCES

     Cash and cash equivalents increased $629,000 from December 31, 2005,
to $6,232,000 at September 30, 2006.  Total cash of $8,731,000 at September
30, 2006 includes $2,500,000 of cash invested in a restricted money market
account  pledged as collateral for a bank loan.  Accounts receivable were
$2,293,000 at September 30, 2006, an increase of $861,000 from the
$1,432,000 at December 31, 2005 due to the increased level of sales in the
third quarter when compared to the fourth quarter of 2005; inventories
decreased approximately $52,000 from $6,148,000 at December 31, 2005 to
$6,097,000 at September 30, 2006.

     Total current assets at September 30, 2006 were $16,123,000 compared
to $16,853,000 at December 31, 2005. Working capital increased $1,167,000
when compared to December 31, 2005 as a result of our formal recasting of
the Wachovia Bank balloon payment due in August 2006.  Under the terms of
the loan modification signed in the third quarter of 2006 (filed as Exhibit
10.1 hereto), we will continue to make the same installment payment of
$92,500, plus interest, monthly until the obligation is satisfied in
January 2009.  The interest rate remained the same, at 50 basis points
above the rate of interest paid on the cash collateral.

     In August 2006, under the terms of a two-year lease, we leased ware-
house space in Tampa, Florida, replacing an existing leased facility of
similar size.  Monthly rental and other terms remained similar to the
previous lease.

     As has been the case in the past, the bulk of our insurance policies
come up for renewal in July; as a result, our prepaid expenses increased.
Other than the above, we do not anticipate any significant capital
expenditures in the near term and our management believes that there is
sufficient cash on hand and working capital to satisfy upcoming
requirements.

     The Company does not have any off-balance sheet financing or similar
arrangements.

NEW FINANCIAL ACCOUNTING STANDARDS

     See Note 1 to the Financial Statements included in Part I, Item 1 for
a discussion of new financial accounting standards.



                                     19


                  THE STEPHAN CO. AND SUBSIDIARIES
               QUARTERLY REPORT PURSUANT TO SECTION 13
                OF THE SECURITIES EXCHANGE ACT OF 1934
                      SEPTEMBER 30, 2006 AND 2005


DISCUSSION OF CRITICAL ACCOUNTING POLICIES

     The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America ("generally accepted accounting principles") requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results would
differ significantly from those estimates if different assumptions were
used or unexpected events transpire.  Please see Item 7 in the Company's
Annual Report on Form 10-K for the year ended December 31, 2005 filed with
the Securities and Exchange Commission.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company does not participate in derivative or other financial
instruments for which fair value disclosure would be required under SFAS
No. 107.  In addition, the Company does not invest in securities that would
require disclosure of market risk, nor does it have floating rate loans or
foreign currency exchange rate risks.

ITEM 4.  CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:  As of the end
of the period covered by this quarterly report, an evaluation of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures was performed under the supervision and with the
participation of our management, including our principal executive officer
and principal financial officer.  Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that a material
weakness existed in our internal controls over financial reporting and
consequently our disclosure controls and procedures were not effective, as
of the end of the period covered by this quarterly report, in timely
alerting them as to material information relating to our Company (including
our consolidated subsidiaries) required to be included in this quarterly
report.

     The material weakness in our internal controls over financial
reporting as of September 30, 2006 related to the fact that as a small
public company, we have an insufficient number of personnel with clearly
delineated and fully documented responsibilities and with the appropriate
level of accounting expertise and we have insufficient documented
procedures to identify and prepare a conclusion on matters involving
material accounting issues and to independently review conclusions as to
the application of generally accepted accounting principles. The lack of a


                                     20



                  THE STEPHAN CO. AND SUBSIDIARIES
               QUARTERLY REPORT PURSUANT TO SECTION 13
                OF THE SECURITIES EXCHANGE ACT OF 1934
                      SEPTEMBER 30, 2006 AND 2005


ITEM 4.  CONTROLS AND PROCEDURES (continued)

sufficient number of accounting personnel is not considered appropriate for
an internal control structure designed for external reporting purposes.
The principal factors management considered in determining whether a
material weakness existed in this regard was based upon management's
evaluation discussed above and advice from our previous independent
registered public accounting firm.  As a result, management has determined
that a material weakness in the effectiveness of the Company's internal
controls over financial reporting existed as of September 30, 2006.

     (b) CHANGES IN INTERNAL CONTROLS:  No change in the Company's internal
control over financial reporting occurred during this reporting period that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.  However, management
of the Company, as well as the Audit Committee, recognizes that current
staffing levels will have to be enhanced and/or institute arrangements with
other accounting firms to act in a consulting capacity in an effort to
satisfy our reporting obligations and over-all standards of disclosure
controls and procedures.


























                                      21




                     THE STEPHAN CO. AND SUBSIDIARIES
                   QUARTERLY REPORT PURSUANT TO SECTION 13
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                         SEPTEMBER 30, 2006 AND 2005


                      PART II.  OTHER INFORMATION


 ITEM 1.  LEGAL PROCEEDINGS

     See Note 3 to the Financial Statements included in Part I, Item 1 for
a discussion of legal proceedings.

     Other than the above, there has been no material change in the status
of any other pending litigation since our last periodic report.


ITEM 6.  EXHIBITS

          10.1     Loan Modification Agreement with Wachovia Bank

          31.1    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.

          31.2    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.

          32.1  Certification by the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

          32.2  Certification by the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

















                                     22







                                 SIGNATURES



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



THE STEPHAN CO.




   /s/ Frank F. Ferola
_____________________________________
Frank F. Ferola
President and Chief Executive Officer
November 13, 2006




  /s/ David A. Spiegel
____________________________________
David A. Spiegel
Principal Financial and
Accounting Officer
November 13, 2006



















                                     23