U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

              For the quarterly period ended  September  30, 2011

[  ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

              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)

N/A

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

Indicate  by check  mark  whether  the  registrant  (1) has filed  all  reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes [  ]      No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)

Accelerated filer [  ]

Smaller reporting company [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]

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

4,596,439shares of common stock, par value $.10 per share

 (as of November  1, 2011)

Cover Page 2 of 2

UNITED-GUARDIAN, INC.

INDEX TO FINANCIAL STATEMENTS

	Page No.
Part I.  FINANCIAL INFORMATION
Item 1 -  Condensed Financial Statements (unaudited unless otherwise indicated):
Statements of Income - Three and Nine Months ended September  30, 2011 and 2010	2
Balance Sheets – September 30, 2011 and December 31, 2010 (audited)	3-4
Statements of Cash Flows –  Nine months ended September 30, 2011 and 2010	5
Notes to Condensed Financial Statements	6-10
Item 2 -    Management's Discussion and Analysis of Financial Condition and Results of Operations	11-16
Item 3 -    Quantitative and Qualitative Disclosures About Market Risk	16
Item 4 -    Controls and Procedures	16
Part II.  OTHER INFORMATION
Item 1 -    Legal Proceedings	17
Item 1A -  Risk Factors	17
Item 2 -    Unregistered Sales of Equity 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	17
Signatures	18

Page 1 of 18

Part I.  FINANCIAL INFORMATION

ITEM 1.  Condensed Financial Statements

UNITED-GUARDIAN, INC.

STATEMENTS OF INCOME

(UNAUDITED)

	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED  SEPTEMBER 30,
	2011		2010		2011		2010
Net sales	$	3,345,035	$	3,848,393	$	11,047,383	$	11,159,860
Costs and expenses:
Cost of sales		1,229,561		1,450,053		4,318,444		4,261,999
Operating expenses		537,248		598,809		1,759,177		1,925,438
Pension plan termination		---		---		---		847,744
Total costs and expenses		1,766,809		2,048,862		6,077,621		7,035,181
Income from operations		1,578,226		1,799,531		4,969,762		4,124,679
Other income:
Investment income		61,308		65,954		205,211		291,100
Gain on sale of assets		12,267		---		18,251		---
Income from damage settlement		385,182		---		385,182		---
Total other income		458,757		65,954		608,644		291,100
Income before income taxes		2,036,983		1,865,485		5,578,406		4,415,779
Provision for income taxes		667,700		621,700		1,818,300		1,451,626
Net income	$	1,369,283	$	1,243,785	$	3,760,106	$	2,964,153
Earnings per common share (Basic and Diluted)	$	0.30	$	0.27	$	0.82	$	0.62
Weighted average shares – basic and diluted		4,596,439		4,596,439		4,596,439		4,786,183

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

BALANCE SHEETS

(UNAUDITED)

ASSETS	SEPTEMBER 30,		DECEMBER 31,
	2011		2010
Current assets:	(UNAUDITED)
Cash and cash equivalents	$	1,076,391	$	1,514,589
Marketable securities		10,658,298		8,314,403
Accounts receivable, net of allowance for doubtful      accounts of $18,500 at September 30, 2011 and      $23,000 at December 31, 2010		1,451,085		1,090,711
Inventories (net)		1,585,490		1,321,389
Prepaid expenses and other current assets		131,973		148,240
Prepaid income taxes		---		182,575
Deferred income taxes		218,328		218,328
Total current assets		15,121,565		12,790,235
Property, plant and equipment:
Land		69,000		69,000
Factory equipment and fixtures		3,681,447		3,650,283
Building and improvements		2,703,364		2,618,253
Waste disposal plant		133,532		133,532
Total property, plant and equipment		6,587,343		6,471,068
Less: Accumulated depreciation		5,313,771		5,261,908
Total property, plant and equipment, net		1,273,572		1,209,160
Other assets		47,090		75,344
TOTAL ASSETS	$	16,442,227	$	14,074,739

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

BALANCE SHEETS

(continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	SEPTEMBER 30,		DECEMBER 31,
	2011		2010
Current liabilities:	(UNAUDITED)
Accounts payable	$	267,458	$	208,244
Accrued expenses		766,881		815,996
Income taxes payable		230,425		---
Total current liabilities		1,264,764		1,024,240
Deferred income taxes		11,104		3,626
Stockholders’ equity:
Common stock $.10 par value; 10,000,000 shares      authorized; 4,596,439 shares issued and      outstanding at September 30, 2011 and      December 31, 2010, respectively		459,644		459,644
Accumulated other comprehensive income		20,933		6,835
Retained earnings		14,685,782		12,580,394
Total stockholders’ equity		15,166,359		13,046,873
TOTAL LIABILITIES AND STOCKHOLDERS’      EQUITY	$	16,442,227	$	14,074,739

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	NINE MONTHS ENDED
	September 30,
	2011			2010
Cash flows from operating activities:
Net income	$	3,760,106		$	2,964,153
Adjustments to reconcile net incometo net cash      provided by operating activities:
Depreciation and amortization		193,732			176,349
Realized loss (gain) on sales of marketable      securities		17,849			(47,080	)
Realized gain on sale of assets		(18,251	)		---
Realized loss on pension termination		---			338,655
Amortization of bond premium		559			---
Deferred income taxes		---			37,742
Provision for bad debts		(4,237	)		---
(Increase) decrease in cash resulting from      changes in operating assets and liabilities:
Accounts receivable		(356,137	)		(6,641	)
Inventories		(264,101	)		2,635
Prepaid expenses and other current      and non-current assets		198,842			81,372
Accounts payable		59,214			(230,109	)
Accrued expenses and taxes payable		181,310			(150,719	)
Pension liability		---			(108,892	)
Net cash provided by operating activities		3,768,886			3,057,465
Cash flows from investing activities:
Acquisitions of property, plant and equipment		(250,297	)		(413,998	)
Proceeds from sale of assets		38,658			---
Proceeds from sales  of marketable securities		1,540,000			5,404,428
Purchases of marketable securities		(3,880,727	)		(5,565,854	)
Net change in certificates of deposit		---			1,014,866
Net cash (used in) provided by investingactivities		(2,552,366	)		439,442
Cash flows from financing activities:
Acquisition of treasury stock		---			(3,762,500	)
Dividends paid		(1,654,718	)		(3,066,792	)
Net cash used in financing activities		(1,654,718	)		(6,829,292	)
Net decrease in cash and cashequivalents		(438,198	)		(3,332,385	)
Cash and cash equivalents at beginning of period		1,514,589			5,021,073
Cash and cash equivalents at end of period	$	1,076,391		$	1,688,688

See notes to condensed financial statements

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UNITED-GUARDIAN, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1.         Nature of Business

United-Guardian, Inc. (the “Company”) is a Delaware corporation that, through its Guardian Laboratories Division, conducts research, product development, manufacturing and marketing of cosmetic ingredients and other personal care products, pharmaceuticals, medical and health care products and proprietary specialty industrial products.

2.         Basis of Presentation

Interim financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation SX.  In the opinion of management, all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods have been included.  The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2011. The interim unaudited financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

3.         Stock-Based Compensation

The Company maintains a stock-based compensation plan for its employees and directors, which is more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.  The Company recognizes the fair value of all share-based payments to employees, including grants of employee stock options, as a compensation expense in the financial statement.

As of September 30, 2011, the Company had no share-based awards outstanding and exercisable and did not grant any options during the nine months ended September 30, 2011.

As of September 30, 2011, 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 stock-based compensation expense during the nine-month periods ended September 30, 2011 and 2010.

The Company did not receive any proceeds from the exercise of options during the nine-month periods ended September 30, 2011 and 2010.

4.         Recent Accounting Pronouncements

In June 2011, the FASB issued an amendment to the disclosure requirements for the presentation of comprehensive income.  The amendment requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  This guidance is effective retrospectively for the interim periods and annual periods beginning after December 15, 2011. The Company will adopt this amendment in the first quarter of 2012. The adoption of this amendment will not have a material impact on the Company's results of operations, cash flows or financial position.

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5.         Investments

The fair values of the Company’s marketable securities and certificates of deposit are determined in accordance with GAAP, with fair value being defined as the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions,  the Company utilizes the three-tier value hierarchy, as prescribed by GAAP, which prioritizes the inputs used in measuring fair value, as follows:

•   Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•   Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•   Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following available-for-sale securities, which comprise all of the Company’s marketable securities, are re-measured to fair value on a recurring basis and are valued using Level 1 inputs, which are quoted prices (unadjusted) for identical assets in active markets:

					Unrealized
September 30, 2011	Cost		Fair Value		Gain/(Loss)
Available for Sale:
U.S. Treasury and agencies:
Mature within 1 year	$	249,136	$	236,781	$	(12,355	)
Corporate bonds:
Mature within 1 year		267,251		249,450		(17,801	)
Maturities after 1 year through 5 years		203,920		197,961		(5,959	)
Total corporate bonds		471,171		447,411		(23,760	)
Fixed income mutual funds		9,653,754		9,753,065		99,311
Equity and other mutual funds		252,200		221,041		(31,159	)
	$	10,626,261	$	10,658,298	$	32,037

					Unrealized
December 31, 2010	Cost		Fair Value		Gain/(Loss)
Available for Sale:
U.S. Treasury and agencies:
Mature within 1 year	$	859,589	$	853,682	$	(5,907	)
Maturities after 1 year through 5 years		249,137		244,161		(4,976	)
Total U.S. Treasury and agencies		1,108,726		1,097,843		(10,883	)
Corporate bonds:
Maturities after 1 year through 5 years		267,251		259,154		(8,097	)
Fixed income mutual funds		6,678,972		6,715,870		36,898
Equity and other mutual funds		248,993		241,536		(7,457	)
	$	8,303,942	$	8,314,403	$	10,461

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Proceeds from the sale and redemption of marketable securities amounted to $1,540,000 for the nine months ended September 30, 2011, which included realized losses of $17,849. Proceeds from the sale and redemption of marketable securities, amounted to $5,404,428 for the nine months ended September 30, 2010, which included realized gains of $47,080.

Investment income consisted principally of interest income from certificates of deposit, bonds and money market funds and dividend income from bond funds and mutual funds.

Marketable securities include investments in equity and fixed-income mutual funds, government securities and corporate bonds which are classified as “available-for-sale” securities and are reported at their fair values.  Unrealized gains and losses on “available-for-sale” securities are reported as accumulated other comprehensive income (loss) in stockholders’ equity, net of the related tax effects.  Investment income is recognized when earned.  Realized gains and loses on sales of investments are determined on a specific identification basis.

6.         Inventories - Net

	September 30,		December 31,
	2011		2010
Inventories consist of the following:
Raw materials and work in process	$	571,345	$	447,295
Finished products		1,014,145		874,094
	$	1,585,490	$	1,321,389

Inventories are valued at the lower of cost or current market value. Cost is determined using the average cost method, which approximates cost determined by the first-in, first-out (“FIFO”) method. Finished product inventories at September 30, 2011 and December 31, 2010 are stated net of a reserve of $20,000 and $39,000, respectively, for slow moving or obsolete inventory.

7.         Supplemental Financial Statement Information

For purposes of the Statements 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 $1,405,000 and $1,525,300 for the nine months ended September 30, 2011 and September 30, 2010, respectively. No payments were made for interest during these periods.

The Company paid $1,654,718 ($0.36 per share) and $3,066,792 ($0.62 per share) in dividends for the nine months ended September 30, 2011 and September 30, 2010, respectively. The amount that the Company paid in dividends for the nine months ended September 30, 2011 was less than the amount paid for the nine months ended September 30, 2010, because the Company paid the 2010 year-end dividend in December 2010 rather than waiting until January 2011 due to uncertainties relating to the taxation of qualified dividends, whereas the dividend declared in December 2009 was paid in January 2010.

On May 29, 2010 the Company retired 350,000 shares of stock that it purchased from Kenneth H. Globus, the Company's President and largest stockholder. On June 9, 2010 the Company retired the 62,200 shares of its stock which it previously held as treasury stock.

Page 8 of 18

Research and development expenses amounted to $489,988 and $466,441 for the nine months ended September 30, 2011 and September 30, 2010, respectively, and are included in operating expenses.

8.         Income Taxes

The Company’s tax provision is based on its estimated annual effective rate. The Company continues to fully recognize its tax benefits, which are offset by a valuation allowance to the extent that it is more likely than not that the deferred tax assets will not be realized. As of September 30, 2011 and December 31, 2010 the Company did not have any unrecognized tax benefits.

The Company files consolidated Federal income tax returns in the U.S. with its inactive subsidiary, and separate income tax returns in New York State. The Company is subject to examination by the Internal Revenue Service and by New York State for years 2008 through 2010.

The Company's policy is to recognize interest and penalties in interest expense.

9.         Comprehensive Income

The components of comprehensive income are as follows:

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
Net income	$	1,369,283		$	1,243,785		$	3,760,106		$	2,964,153
Other comprehensive income
Unrealized (loss) gain on      marketable securities during      reporting period		(48,671	)		115,031			21,576			178,917
Adjustment for pension      termination		---			---			---			518,296
Income tax benefit (expense)      related to other      comprehensive income		16,869			(39,870	)		(7,478	)		(241,654	)
Other comprehensive income,      net of tax		(31,802	)		75,161			14,098			455,559
Comprehensive income	$	1,337,481		$	1,318,946		$	3,774,204		$	3,419,712

Accumulated other comprehensive income comprises unrealized gains and losses on marketable securities and liability for pension benefit net of the related tax effect.

10.       Defined Contribution Plan.

The Company sponsors a 401(k) defined contribution plan ("DC Plan") that provides for a dollar-for-dollar employer matching contribution of the first 4% of each employee's pay. In 2009, the Company also began making additional discretionary contributions to each employee's account based on a "pay-to-pay" safe-harbor formula that qualifies the 401(k) plan under current IRS regulations. For the three and nine months ended September 30, 2011 the Company had accrued contributions of $43,750 and $131,250, respectively, to the DC Plan. For the three and nine months ended September 30, 2010 the Company made no provisions for discretionary contributions to the DC Plan.

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11.       Related-Party Transactions

During each of the nine-month periods ended September 30, 2011 and September 30, 2010, the Company paid to Henry Globus, a former officer and current director of the Company, $16,722, for consulting services in accordance with his employment termination agreement of 1988.

During the nine-month periods ended September 30, 2011 and September 30, 2010, the Company paid to Bonamassa, Maietta and Cartelli, LLP $6,000 and $13,500, respectively, for accounting and tax services. Lawrence Maietta, a partner in Bonamassa, Maietta and Cartelli, LLP, is a director of the Company.

On May 28, 2010 the Company redeemed and retired 350,000 shares of its stock from its largest shareholder and President, Kenneth H. Globus, at $10.75 per share, for a total of $3,762,500.

During the first quarter of 2011 the Company sold one of its vehicles, with a book value of $20,407, to one of its Vice Presidents for $15,154 (the vehicle's fair market value) as part of his severance package.  As a result, the Company recognized a non-cash loss of $5,253.

During the third quarter of 2011 the President of the Company, Kenneth H. Globus, was reimbursed $11,406 for the value of the trade in of a personal vehicle that was used to purchase a Company vehicle.

12.       Other Information

Accrued Expenses
	September 30,		December 31,
	2011		2010
Accrued bonuses	$	100,000	$	180,000
Accrued 401(k) plan contributions		131,250		175,000
Accrued distribution fees		192,376		190,590
Other		343,255		270,406
	$	766,881	$	815,996

13.       Other Income

At the end of 2010 the Company experienced a temporary suspension of RENACIDIN IRRIGATION production due to regulatory issues at the supplier's facility.  Production did not resume until May 2011.  As a result, the Company determined that it lost approximately $390,000 in gross profit that would have been generated from sales of the product if production had not been curtailed. The Company and its supplier entered into a settlement agreement whereby the Company would be reimbursed for these losses. The miscellaneous income of $385,182 represents the amount that was repaid to the Company during the third quarter of 2011. Further information can be found in the Company's filing on Form 10-K for 2010.

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

FORWARD-LOOKING STATEMENTS

Statements made in this Form 10-Q 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”, “anticipates”, or other similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements. In addition to those specific risks and uncertainties set forth in the Company's reports currently on file with the SEC, some other factors that may affect the future results of operations of the Company are: the development of competitive 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; changes in 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 principles, 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 conducts research, product development, manufacturing and marketing of cosmetic ingredients, personal and health care products, pharmaceuticals, and specialty industrial products. All of the products that the Company manufactures, with the exception of its RENACIDIN IRRIGATION®, are produced at its facility in Hauppauge, New York, and are marketed through marketing partners, distributors, wholesalers, direct advertising, mailings, and trade exhibitions. Its most important personal care product line is its LUBRAJEL® line of water-based moisturizing and lubricating gels. It also sells two pharmaceutical products for urological uses. Those products are sold primarily through the major drug wholesalers, which in turn sell the products to pharmacies, hospitals, nursing homes and other long-term care facilities, and to government agencies, primarily the Veteran's Administration.

The Company’s pharmaceutical products are distributed in the United States primarily by the major drug wholesalers. Its personal care products are marketed worldwide by five marketing partners. The largest of those marketing partners, and the one responsible for the most significant sales of the Company's personal care products, has been International Specialty Products Inc., which was acquired during the third quarter of 2011 by Ashland Inc., a global supplier of specialty chemical products for consumer and industrial markets, and is now doing business under the name Ashland Specialty Ingredients ("ASI").  This acquisition is not expected to negatively impact the business relationship between the Company and what is now ASI.

Page 11 of 18

Approximately one-half of the Company's personal care products are sold, either directly or through the Company’s marketing partners, to end-users located outside of the United States.

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

The Company recognizes revenue when products are shipped, title and risk of loss pass to the customers, persuasive evidence of a sales arrangement exists, and collections are reasonably assured.  An allowance for returns, based on historical experience, is taken as a reduction of sales within the same period the revenue is recognized.

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.    

CRITICAL ACCOUNTING POLICIES

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, the discussion and analysis of the Company’s financial condition and results of operations are based on its financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of those financial statements required the Company to make estimates and assumptions that affect the carrying value of assets, liabilities, revenues and expenses reported in those financial statements. Those estimates and assumptions can be subjective and complex, and consequently actual results could differ from those estimates and assumptions. The Company’s most critical accounting policies relate to revenue recognition, concentration of credit risk, inventory, patents and income taxes. Since December 31, 2010, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

The following discussion and analysis covers material changes in the financial condition of the Company since the year ended December 31, 2010, and a comparison of the results of operations for the three and nine months ended September 30, 2011 and September 30, 2010. This discussion and analysis should be read in conjunction with "Management's Discussion and Analysis or Plan of Operation" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

RESULTS OF OPERATIONS

Sales

Net sales for the third quarter of 2011 decreased $503,358 (13.1%) compared with the third quarter of 2010. Net sales for the first nine months of 2011 decreased $112,477 (1.0%) compared with the corresponding period in 2010. The changes in net sales for these periods in 2011 were attributable to the following changes in sales of the Company's various product lines:

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(a)   Personal care products:  Sales of the Company’s personal care products decreased $359,141 (14.2%) for the third quarter of 2011 compared with the third quarter of 2010, but sales of these products increased $97,462 (1.4%) for the nine-month period ended September 30, 2011 compared with the same period in 2010. The decrease in the third quarter of 2011 was the result of unusually strong sales in the third quarter of 2010 to ASI, the Company’s largest marketing partner. However, for the nine-month period ended September 30, 2011 sales to ASI increased by $473,356 (8.9%) when compared with the same period in 2010.  This increase was partially offset by decreases in sales to some of the Company’s other marketing partners. The decreases for the nine-month period were primarily attributable to the Company’s marketing partners in France, South Korea, and Italy. These marketing partners were adversely affected by the economic conditions in their respective countries for the first nine months of 2011 compared with the first nine months of 2010. However, sales to the Company’s marketing partners in France and South Korea increased in the third quarter of 2011 compared with the third quarter of 2010.

(b)   Pharmaceuticals:  Sales of the Company’s pharmaceutical products decreased $288,364 (41.4%) in the third quarter of 2011 when compared with the third quarter of 2010. Similarly, sales for the nine-month period ended September 30, 2011 decreased by $388,107 (18.5%) when compared with the comparable period in 2010. The decrease in sales for both periods was the result of a decrease in sales of the Company’s RENACIDIN IRRIGATION product, which has not yet returned to its historically consistent sales level due to (1) a temporary curtailment of sales between November 2010 and May 2011 due to production problems experienced by the Company's supplier, and (2) a price increase implemented on June 1, 2011, which resulted in customers purchasing additional inventory in May 2011 in order to minimize the impact of the price increase. This historically results in lower sales for several months following the price increase.

(c)   Medical (non-pharmaceutical) products: Sales of the Company’s medical products increased $143,469 (22.0%) for the third quarter of 2011 compared with the third quarter of 2010. This increase was due to sales to two customers, and is attributable to both the ordering patterns of these customers and to an increase in demand from these customers. Sales for the first nine months of 2011 increased $316,267 (16.2%) compared with the same period in 2010, and this increase was also due to increased sales to these same two customers.

(d)   Industrial and other products:  Sales of the Company's industrial products, as well as other miscellaneous products, decreased by $13,594 (27.5%) for the third quarter of 2011, and decreased $47,150 (33.2%) for the first nine months of 2011, when compared with the same period in 2010.

In addition to the above changes in sales, net sales allowances increased $14,275 and  decreased $90,948 for the three and nine months, respectively, ended September 30, 2011 when compared with the corresponding periods in 2010. The changes were due to increases and decreases in allowances for distribution fees related to sales of the Company's pharmaceutical products.

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Cost of Sales

Cost of sales as a percentage of sales decreased to 36.8% for the three months ended September 30, 2011 from 37.7% for the comparable period in 2010. For the nine months ended September 30, 2011, cost of sales as a percentage of sales increased to 39.1% from 38.2% for the comparable period in 2010. For the three months ended September 30, 2011 the decrease in cost of sales as a percentage of sales was primarily due to increased sales of higher-margin products, and a decrease in sales of one lower-margin product. The increase in the first nine months of 2011 compared with the same period in 2010 was primarily due to a cost increase for the Company’s primary raw material. This was partially offset by the decrease in sales of one of the Company’s lower margin products.

Operating Expenses

Operating expenses consist of selling, general and administrative expenses. Operating expenses decreased $61,561 (10.3%) for the third quarter of 2011 compared with the comparable quarter in 2010, and decreased $166,261 (8.6%) for the nine-month period ended September 30, 2011 compared with the comparable periods in 2010. The decreases for the third quarter and the first nine months of 2011 were primarily due to decreases in professional, consulting, annual reporting costs and a real estate tax refund.

Defined Benefit Pension Plan Termination

On July 13, 2010, the Company terminated its defined benefit pension plan ("DB Plan").  The termination resulted in the Company recognizing a one-time non-cash expense of $518,296, offset by a $179,641 tax benefit associated with recognizing unamortized actuarial losses.  In addition, the Company provided for a cash contribution of $337,378, offset by a $116,900 tax benefit, in order to fully fund the DB Plan. The recognition of the non-cash and cash contributions resulted in a before-tax charge of $847,744, and an after-tax charge of $559,133 ($0.12 and $0.11 per share for the three and six-month period ended June 30, 2010).  Since the non-cash expense had previously been provided for as a charge to other comprehensive income, the net effect of the termination was a $220,478 decrease in stockholders' equity.

Other Income

For the three- and nine-month periods ended September 30, 2011, investment income decreased $4,646 (7.0%) and $85,889 (29.5%), respectively, when compared with the comparable periods in 2010. The decreases were mainly attributable to a decline in interest rates and lower returns on investments. In the third quarter of 2011 the Company experienced a gain of $12,267 from the sale of equipment. For the first nine months of 2011 there was a net gain of $18,251, which consisted of a $12,267 gain in the third quarter and a $11,237 gain in the second quarter, which was partially offset by a loss of $5,523 on the sale of a company vehicle in the first quarter of 2011. There were no such gains or losses for the comparable periods in 2010. In the third quarter of 2011 the Company received income of $385,182 from the partial settlement of a claim for damages between the Company and one of its suppliers. Detailed information on this claim can be found in the Company's annual filing on Form 10-K for the year ended December 31, 2010.

Provision for Income Taxes

For the three- and nine-month periods ended September 30, 2011, the provision for income taxes increased by $46,000 (7.4%) and $366,674 (25.3%), respectively, when compared with the comparable periods in 2010. These changes were primarily due to changes in income before taxes.

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The Company's effective income tax rate was approximately 33.0% for all periods presented.

LIQUIDITY AND CAPITAL RESOURCES

Working capital increased by $2,090,806 to $13,856,801 at September 30, 2011 from $11,765,995 at December 31, 2010. The increase in working capital was primarily due to the fact that in the second quarter of 2010 the Company acquired 350,000 shares of Company stock from the Company's largest shareholder. There was no comparable use of current assets in 2011.

The current ratio decreased to 12.0 to 1 at September 30, 2011 from 12.5 to 1 at December 31, 2010. The decrease in the current ratio was primarily due to the effect of an increase in income taxes payable.

During the nine-month period ended September 30, 2011, the average period of time that an account receivable was outstanding was approximately 31 days. The average period of time that an account receivable was outstanding during the nine-month period ended September 30, 2010 was 33 days.

The Company 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 does not expect to incur any significant capital expenditures for the remainder of 2011.

The Company generated cash from operations of $3,768,886 and $3,057,465 for the nine months ended September 30, 2011 and September 30, 2010, respectively. The increase was primarily due to an increase in net income.

Cash used in investing activities for the nine-month period ended September 30, 2011 was $2,552,366, while cash provided by investing activities was $439,442 for the nine-month period ended September 30, 2010. The decrease was primarily due to the sale of marketable securities in the nine months ended September 30, 2010.

Cash used in financing activities was $1,654,718 and $6,829,292 for the nine months ended September 30, 2011 and September 30, 2010, respectively.  This decrease was mainly due to no further acquisition of treasury stock for the first half of 2011 and no dividend payment in the first quarter of 2011.  The Company chose to pay the year-end dividend in December 2010 rather than waiting until January 2011 due to uncertainties regarding the extension of certain tax cuts on qualified dividends originally enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001.

The Company expects to continue to use its cash to make dividend payments, to purchase marketable securities, and to take advantage of other opportunities that are in the best interest of the Company, should they arise.

RECENT ACCOUNTING PRONOUNCEMENTS

Please see Note 4 to the Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and the anticipated impact on the financial statements.

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OFF-BALANCE-SHEET ARRANGEMENTS

The Company has no off-balance-sheet transactions that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The information to be reported under this item is not required of smaller reporting companies.

Item 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information to be reported under this item is not required of smaller reporting companies.

Item 4.     CONTROLS AND PROCEDURES

(a)   DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, including its Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”).  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon the evaluation performed by the Company’s management, including its Principal Executive Officer and Principal Financial Officer, it was determined that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding disclosures.

(b)   CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company's Principal Executive Officer and Principal Financial Officer have determined that, during the period covered by this quarterly report, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  They have also concluded that there were no significant changes in the Company’s internal controls after the date of the evaluation.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

The information to be reported under this item is not required of smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY 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

31.1	Certification of Kenneth H. Globus, President and principal executive officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Robert S. Rubinger, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Kenneth H. Globus, President and principal executive officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Robert S. Rubinger, Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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/  KENNETH H. GLOBUS
	Kenneth H. Globus
	President
By:	/S/  ROBERT S. RUBINGER
	Robert S. Rubinger
	Chief Financial Officer

Date:  November 8, 2011

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