UNITED
STATES SECURITIES
AND EXCHANGE COMMISSION Washington,
D.C. 20549 FORM
10-Q x
    QUARTERLY REPORT PURSUANT TO
  SECTION 13 OR 15(d) OFTHE
  SECURITIES EXCHANGE ACT OF 1934For the quarterly
period ended December 3, 2005ORo
    TRANSITION REPORT PURSUANT TO
  SECTION 13 OR 15(d) OFTHE
  SECURITIES EXCHANGE ACT OF 1934For the transition
  period from _________ to _________Commission file number 1-11479  E-Z-EM,
  Inc.(Exact name of registrant as specified in its charter)Delaware
  
  11-1999504(State or other
  jurisdiction of
  
  (I.R.S. Employerincorporation or
  organization)
  
  Identification No.)1111
  Marcus Avenue, Lake Success, New York
  
  11042(Address of principal executive offices)
  
  (Zip Code)(516)
  333-8230Registrants telephone
  number, including area code 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
o Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes
x          
No
o Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
o          
No
x As of January 6, 2006, there were 10,853,440 shares of
the issuers common stock outstanding.    E-Z-EM,
Inc. and Subsidiaries

INDEX

PagePart I:      Financial
  InformationItem l.
  Financial StatementsConsolidated
  Balance Sheets  December 3, 2005 and May 28, 2005
  
  3  4Consolidated
  Statements of Earnings  Thirteen and twenty-seven weeks ended December 3,
  2005 and thirteen and twenty-six weeks ended November 27, 2004
  
  5Consolidated
  Statement of Stockholders Equity and Comprehensive Income  Twenty-seven
  weeks ended December 3, 2005
  
  6Consolidated
  Statements of Cash Flows  Twenty-seven weeks ended December 3, 2005 and
  twenty-six weeks ended November 27, 2004
  
  7  8Notes
  to Consolidated Financial Statements
  
  9  19Item 2.
  Managements
  Discussion and Analysis of Financial Condition and Results of Operations
  
  20 - 34Item 3.
  Quantitative
  and Qualitative Disclosures About Market Risk
  
  34 - 35Item 4.
  Controls
  and Procedures
  
  35Part II:
    Other InformationItem 1.
  Legal
  Proceedings
  
  36Item 1A.
  Risk
  Factors
  
  36Item 2.
  Unregistered
  Sales of Equity Securities and Use of Proceeds
  
  36Item 3.
  Defaults
  Upon Senior Securities
  
  36Item 4.
  Submission
  of Matters to a Vote of Security Holders
  
  36Item 5.
  Other
  Information
  
  37Item 6.
  Exhibits
  
  37-2-

E-Z-EM, Inc. and
Subsidiaries

CONSOLIDATED BALANCE SHEETS  
(in thousands)

ASSETS
  
  
  December 3,
  2005
  

  
  May 28,
  2005(unaudited)
  

  
  (audited)CURRENT ASSETSCash and
cash
  equivalents
  
  
  $
  8,441
  
  
  $
  10,183Debt and
equity
  securities, at fair value
  
  
  
  18,655
  
  
  
  18,419Accounts
  receivable, principally trade, net
  
  
  
  22,098
  
  
  
  17,677Inventories, net
  
  
  
  27,460
  
  
  
  22,822Refundable
  income taxes
  
  
  
  1,154
  
  
  
  1,444Other
current
  assets
  
  
  
  3,691
  
  
  
  4,705Total
current
  assets
  
  
  
  81,499
  
  
  
  75,250PROPERTY, PLANT
  AND EQUIPMENT - AT COST, less accumulated depreciation and amortization
  
  
  
  13,377
  
  
  
  13,256INTANGIBLE ASSETS,
  less accumulated amortization
  
  
  
  4,495
  
  
  
  4,867DEBT AND EQUITY
  SECURITIES, at fair value
  
  
  
  1,156
  
  
  
  746OTHER ASSETS
  
  
  
  9,208
  
  
  
  7,936NONCURRENT
  ASSETS HELD FOR DISPOSAL
  
  
  
  3,554
  
  
  
  3,593$
  113,289
  
  
  $
  105,648The accompanying
notes are an integral part of these statements.

-3-

E-Z-EM, Inc. and
Subsidiaries

CONSOLIDATED
BALANCE SHEETS(in thousands, except share and per share data)

LIABILITIES AND
  STOCKHOLDERS EQUITY


December
  3,
  2005





May 28,
  2005(unaudited)

(audited)CURRENT LIABILITIESNotes
payable


$
207



$
347Current
  maturities of long-term debt



88




99Accounts
payable



5,301




5,069Accrued
  liabilities



9,013




9,916Accrued income
  taxes



559




207Total current
  liabilities



15,168




15,638LONG-TERM DEBT, less current maturities



35




85OTHER NONCURRENT LIABILITIES



5,010




4,205Total
  liabilities



20,213




19,928COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred
stock,
  par value $.10 per share - authorized, 1,000,000 shares; issued, noneCommon stock,
  par value $.10 per share - authorized, 16,000,000 shares; issued and
  outstanding 10,852,740 shares at December 3, 2005 and 10,827,772 shares at
  May 28, 2005 (excluding 89,205 shares held in treasury at December 3, 2005
  and May 28, 2005)



1,085




1,083Additional
  paid-in capital



29,243




28,478Retained
  earnings



58,575




54,497Accumulated
  other comprehensive income



4,173




1,662Total
  stockholders equity



93,076




85,720$
113,289



$
105,648The accompanying notes are an integral part of these
statements.

-4-

E-Z-EM, Inc. and
Subsidiaries

CONSOLIDATED
STATEMENTS OF EARNINGS(unaudited)(in thousands, except per share data)

Thirteen weeks ended





Twenty-seven
  weeks ended
  December 3,
  2005






Twenty-six
  weeks ended
  November 27,
  2004December 3,
  2005








November 27,
  2004Net sales


$
34,204



$
26,222



$
68,988



$
50,234Cost of goods sold



18,876




14,360




37,787




28,356Gross
profit



15,328




11,862




31,201




21,878Operating expensesSelling and
administrative



11,415




8,788




21,815




17,269Plant closing
and operational restructuring costs (credits)



(23
)



824




135




1,425Research and
development



1,414




1,469




2,755




2,498Total
operating expenses



12,806




11,081




24,705




21,192Operating
profit



2,522




781




6,496




686Other income
(expense)Interest
income



153




80




313




147Interest
expense



(121
)



(81
)



(241
)



(165
)Other,
net



(230
)



324




(326
)



1,026Earnings from
continuing operations before income taxes



2,324




1,104




6,242




1,694Income tax provision



799




281




2,164




240Earnings from
continuing operations



1,525




823




4,078




1,454Earnings from
discontinued operation, net of income tax provision








608









1,228NET
EARNINGS


$
1,525



$
1,431



$
4,078



$
2,682Basic earnings
per common shareFrom
continuing operations


$
0.14



$
0.08



$
0.38



$
0.14From
discontinued operation, net of income tax provision








0.05









0.11Net
earnings


$
0.14



$
0.13



$
0.38



$
0.25Diluted
earnings per common shareFrom
continuing operations


$
0.14



$
0.08



$
0.37



$
0.14From
discontinued operation, net of income tax provision








0.05









0.11Net
earnings


$
0.14



$
0.13



$
0.37



$
0.25Weighted
average common sharesBasic



10,847




10,749




10,842




10,741Diluted



11,110




10,936




11,055




10,934The accompanying notes are an integral part of these
statements.

-5-

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED
STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME

Twenty-seven weeks ended December 3, 2005
(unaudited)
(in thousands, except share data)

Accumulated
  other
  comprehensive
  incomeCommon
  stock

Additional
  paid-in
  capital

Retained
  earnings


Total

Comprehensive
  incomeShares

AmountBalance at May 28,
2005


10,827,772

$
1,083

$
28,478

$
54,497

$

1,662


$
85,720Exercise of stock
options


16,968


1


70










71Income tax benefits on stock
options exercised








539










539Compensation related to stock
option plans, net of income tax benefit








28










28Issuance of stock


8,000


1


128










129Net earnings











4,078







4,078

$
4,078Unrealized holding gain on debt
and equity securities















258



258


258Foreign currency translation
adjustments















2,253



2,253


2,253Comprehensive income





















$
6,589Balance at December 3,
2005


10,852,740

$
1,085

$
29,243

$
58,575

$

4,173


$
93,076The
accompanying notes are an integral part of this statement.

-6-

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED
STATEMENTS OF CASH FLOWS 
(unaudited)
(in thousands)

Twenty-seven
  weeks ended
  December 3,
  2005

Twenty-six
  weeks ended
  November 27,
  2004Cash flows from operating
activities:Net earnings

$
4,078

$
2,682Earnings from discontinued
operation, net
  of tax





(1,228
)Adjustments to reconcile net
earnings to
  net cash used in operating activitiesDepreciation and
amortization


1,887


1,515Gain on sale of
investments





(1,406
)Provision for doubtful
accounts


19


48Tax benefit on exercise of
stock options


539


286Deferred income tax
provision


21


67Stock option compensation
cost


44


385Other non-cash items


126


98Changes in operating assets and
liabilitiesAccounts receivable


(4,440
)

(712
)Inventories


(4,638
)

(4,607
)Other current assets


1,304


486Other assets


(164
)

(315
)Accounts payable


232


190Accrued liabilities


(1,545
)

(52
)Accrued income taxes


352


30Other noncurrent
liabilities


155


74Net cash provided by operating
activities
  of discontinued operation





567Net cash used in operating
activities


(2,030
)

(1,892
)Cash flows from investing
activities:Additions to property, plant
and equipment,
  net


(966
)

(2,234
)Available-for-sale
securitiesPurchases


(89,650
)

(18,280
)Proceeds from sale


89,414


15,926Net cash used in investing
activities of
  discontinued operation





(11,140
)Net cash used in investing
activities


(1,202
)

(15,728
)The
accompanying notes are an integral part of these statements.

-7-

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(unaudited)
(in thousands)

Twenty-seven
  weeks ended
  December 3,
  2005





Twenty-six
  weeks ended
  November 27,
  2004Cash flows from financing
activities:Repayments of
debt


$
(163
)


$
(183
)Proceeds from
issuance of debt








92Proceeds from
repayment of debt by
  discontinued operation








3,000Dividends
paid








(3,220
)Proceeds from
exercise of stock options



71




225Proceeds from
issuance of stock in
  connection with the stock purchase plan



3




6Cash
distributed with discontinued
  operation








(8,453
)Net cash
provided by financing activities
  of discontinued operation








18,958Net cash
provided by (used in) financing
  activities



(89
)



10,425Effect of exchange rate changes
on cash and
  cash equivalents



1,579




2,685DECREASE IN
CASH AND CASH EQUIVALENTS



(1,742
)



(4,510
)Cash and cash
equivalentsBeginning of
period



10,183




12,334End of
period


$
8,441



$
7,824Supplemental disclosures of
cash flow
  information:Cash paid
during the period for:Interest


$
135



$
69Income
taxes


$
1,056



$
1,526The
accompanying notes are an integral part of these statements.

-8-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE A  NATURE OF BUSINESS AND BASIS OF
PRESENTATION

Nature of BusinessE-Z-EM, Inc.
  and its subsidiaries (the Company or E-Z-EM) is a leading provider of
  medical products used by radiologists, gastroenterologists and speech
  language pathologists primarily in screening for and diagnosing diseases and
  disorders of the gastrointestinal (GI) tract.  Products are used for colorectal cancer screening, evaluation
  of swallowing disorders (dysphagia), and testing for other diseases and
  disorders of the GI system.  The
  Company is also a third-party contract manufacturer, a business that enables
  the Company to leverage its capacity in quality control, process, automation
  and manufacturing.  Prior to the
  spin-off of AngioDynamics, Inc. (AngioDynamics) on October 30, 2004, the Company
  was also a provider of innovative medical devices used in minimally invasive,
  image-guided procedures to treat peripheral vascular disease, or PVD.  AngioDynamics designed, developed,
  manufactured and marketed a broad line of therapeutic and diagnostic devices
  that enabled interventional physicians (interventional radiologists, vascular
  surgeons and others) to treat PVD and other non-coronary diseases.Basis of PresentationThe
  consolidated balance sheet as of December 3, 2005, the consolidated statement
  of stockholders equity and comprehensive income for the twenty-seven weeks
  ended December 3, 2005, and the consolidated statements of earnings and cash
  flows for the periods ended December 3, 2005 and November 27, 2004, have been
  prepared by the Company without audit.
  The consolidated balance sheet as of May 28, 2005 was derived from
  audited consolidated financial statements.
  In the opinion of management, all adjustments (which include normal
  recurring adjustments) necessary to present fairly the financial position,
  changes in stockholders equity and comprehensive income, results of
  operations and cash flows at December 3, 2005 (and for all periods presented)
  have been made.Certain
  information and footnote disclosures, normally included in financial
  statements prepared in accordance with accounting principles generally
  accepted in the United States of America, have been condensed or
  omitted.  It is suggested that these
  consolidated financial statements be read in conjunction with the financial
  statements and notes thereto included in the Annual Report on Form 10-K for
  the fiscal year ended May 28, 2005 filed by the Company on August 11,
  2005.  The results of operations for
  the periods ended December 3, 2005 and November 27, 2004 are not necessarily
  indicative of the operating results for the respective full years.-9-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE A  NATURE OF BUSINESS AND BASIS OF
PRESENTATION (continued)

The consolidated
  financial statements include the accounts of E-Z-EM, Inc. and all wholly
  owned subsidiaries, as well as the accounts of AngioDynamics, an 80.4%-owned
  subsidiary, through its spin-off on October 30, 2004.  As a result of the spin-off, AngioDynamics
  is reported separately as a discontinued operation for the periods ended
  November 27, 2004 within the consolidated financial statements (see Note B.
  Discontinued Operation).  All
  significant intercompany balances and transactions have been eliminated.NOTE B  DISCONTINUED OPERATION

On May 27,
  2004, AngioDynamics, the Companys former subsidiary, sold 1,950,000 shares
  of its common stock at $11.00 per share through an initial public offering
  (IPO).  Proceeds from the IPO, net
  of certain financing costs, totaling $19,949,000 were received by
  AngioDynamics on June 2, 2004.  At May
  29, 2004, E-Z-EM owned 9,200,000 shares, or 82.5% of the 11,150,000 shares
  outstanding.  On June 15, 2004, the
  underwriters of the IPO exercised their over-allotment option and acquired
  292,500 shares at $11.00 per share, less underwriting discounts and
  commissions, and on June 18, 2004, AngioDynamics received net proceeds of
  $2,992,000.  At June 15, 2004,
  E-Z-EMs ownership interest in AngioDynamics decreased to 80.4%.On October
  30, 2004, the Company completed the spin-off of AngioDynamics by means of a
  tax-free distribution of the Companys remaining 80.4% ownership of
  AngioDynamics.  In February 2004, the
  Company received a favorable private letter ruling from the Internal Revenue
  Service regarding the tax-free treatment of the distribution of E-Z-EMs
  remaining ownership in AngioDynamics.
  The Company made a pro rata distribution of its 9,200,000 shares of
  AngioDynamics common stock on October 30, 2004 to E-Z-EM shareholders of
  record as of October 11, 2004 (the Record Date).  Based on the shares outstanding of each company on the Record
  Date, E-Z-EM shareholders received .856377 of a share of AngioDynamics stock
  for each share of E-Z-EM stock they owned on the Record Date.  For all periods presented, AngioDynamics
  is accounted for as a discontinued operation in the Companys financial
  statements in accordance with Statement of Financial Accounting Standards
  (SFAS) No. 144, Accounting for Impairment and Disposal of Long-Lived
  Assets.  Amounts in the financial
  statements and related notes for all periods shown have been reclassified to
  reflect the discontinued operation.In fiscal
  2004, E-Z-EM entered into three agreements with AngioDynamics  a master separation
  and distribution agreement, a corporate agreement and a tax allocation and
  indemnification agreement  that relate to its relationship with
  AngioDynamics both before and after the separation of AngioDynamics from the
  Company.  All of the agreements between
  the Company and AngioDynamics were made in the context of a parent-subsidiary
  relationship and were negotiated in the overall context of the spin-off.-10-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE B  DISCONTINUED OPERATION (continued)

Summarized
  results of operations for AngioDynamics, including minority interest, as
  reported in earnings from discontinued operation in the accompanying
  consolidated statements of earnings are as follows:Thirteen
  weeks ended
  November 27,
  2004





Twenty-six
  weeks ended
  November 27,
  2004(in
  thousands)Net salesFrom
unaffiliated customers


$
9,484



$
22,342From
affiliates



173




420Total net sales


$
9,657



$
22,762Earnings before income taxes
and minority
  interest


$
1,338



$
2,628Income tax provision



579




1,103Earnings before minority
interest



759




1,525Minority interest



151




297Earnings from discontinued
operation


$
608



$
1,228For the
  thirteen weeks ended November 27, 2004, the results of operations for
  AngioDynamics represented nine weeks activity.  For the twenty-six weeks ended November 27, 2004, the results
  of operations for AngioDynamics represented twenty-two weeks activity.NOTE C - STOCK-BASED COMPENSATION

At December
  3, 2005, the Company had three stock-based compensation plans.  The Company accounts for these plans under
  the recognition and measurement principles of APB Opinion No. 25, Accounting
  for Stock Issued to Employees and related interpretations.  Accordingly, no compensation expense has
  been recognized under these plans concerning options granted to key employees
  and to members of the Board of Directors, as all such options granted had an
  exercise price equal to or greater than the market value of the underlying
  common stock on the date of grant.
  For the thirteen weeks ended December 3, 2005 and November 27, 2004,
  compensation expense of $21,000 and $385,000, respectively, was recognized
  under these plans for options granted to a former director serving as a
  consultant.  For the twenty-seven
  weeks ended December 3, 2005 and the twenty-six weeks ended November 27,
  2004, compensation expense of $44,000 and $385,000, respectively, was
  recognized under these plans for options granted to a former director serving
  as a consultant.-11-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE C - STOCK-BASED COMPENSATION (continued)

The
  following table illustrates the effect on net earnings and earnings per share
  if the Company had applied the fair value recognition provisions of SFAS No.
  123 to options granted under these plans to key employees and to members of
  the Board of Directors:Thirteen weeks ended

Twenty-seven
  weeks ended
  December 3,
  2005

Twenty-six
  weeks ended
  November 27,
  2004December 3,
  2005

November 27,
  2004(in thousands, except per share data)Net earnings, as
reported

$
1,525

$
1,431

$
4,078

$
2,682Deduct: Total stock-based
employee compensation expense determined
  under the fair value based method for all awards, net of income tax effects


(272
)

(222
)

(558
)

(580
)Pro forma net
earnings

$
1,253

$
1,209

$
3,520

$
2,102Earnings per common
shareBasic - as
reported

$
.14

$
.13

$
.38

$
.25Basic - pro
forma


.12


.11


.32


.20Diluted - as reported

$
.14

$
.13

$
.37

$
.25Diluted - pro
forma


.11


.11


.32


.19During the
  twenty-seven weeks ended December 3, 2005, options for 207,500 shares were
  granted at $14.48 per share, options for 16,968 shares were exercised at
  prices ranging from $3.55 to $14.23 per share, options for 995 shares expired
  at $3.55 per share, and no options were forfeited under the 1983, 1984 and
  2004 Stock Option Plans.-12-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE D - EARNINGS PER COMMON SHARE

Basic
  earnings per share are based on the weighted average number of common shares
  outstanding without consideration of potential common stock. Diluted earnings
  per share are based on the weighted average number of common and potential
  common shares outstanding. The calculation takes into account the shares that
  may be issued upon exercise of stock options, reduced by the shares that may
  be repurchased with the funds received from the exercise, based on the
  average price during the period.The
  following table sets forth the reconciliation of the weighted average number
  of common shares:Thirteen
  weeks ended

Twenty-seven
  weeks ended
  December 3,
  2005

Twenty-six
  weeks ended
  November 27,
  2004December 3,
  2005

November
  27,
  2004(in
  thousands)Basic


10,847


10,749


10,842


10,741Effect of dilutive securities
(stock options)


263


187


213


193Diluted


11,110


10,936


11,055


10,934NOTE E - EFFECTS OF RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS

In March
  2004, the Financial Accounting Standards Board (FASB) Emerging Issues Task
  Force (EITF) released Issue No. 03-1, The Meaning of Other-Than-Temporary
  Impairment and Its Application to Certain Investments. EITF 03-1 provides
  guidance for determining whether impairment for certain debt and equity
  investments is other-than-temporary and the measurement of an impaired loss.
  Certain disclosure requirements of EITF 03-1 were adopted in fiscal 2004 and
  the Company has complied with the new disclosure requirements in its
  consolidated financial statements. The recognition and measurement
  requirements of EITF 03-1 were initially effective for reporting periods
  beginning after June 15, 2004. In September 2004, the FASB Staff issued FASB
  Staff Position (FSP) EITF 03-1-1 that delayed the effective date for
  certain measurement and recognition guidance contained in EITF 03-1. The FSP
  requires that entities continue to apply previously existing
  other-than-temporary guidance until a final consensus is reached. The
  Company does not anticipate that the issuance of a final consensus will
  materially impact its financial condition or results of operations.-13-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004 
(unaudited)

NOTE E - EFFECTS OF RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (continued)

In November
  2004, the FASB issued Statement of Financial Accounting Standards (SFAS)
  No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. The
  amendments made by SFAS No. 151 will improve financial reporting by
  clarifying that abnormal amounts of idle facility expense, freight, handling
  costs, and wasted materials (spoilage) should be recognized as current-period
  charges and by requiring the allocation of fixed production overheads to
  inventory based on the normal capacity of the production facilities. SFAS No.
  151 is effective for inventory costs incurred during fiscal years beginning
  after June 15, 2005. Earlier application is permitted for inventory costs
  incurred during fiscal years beginning after November 24, 2004. The adoption
  of this statement is not expected to have a material impact on the Companys
  financial condition or results of operations.In December
  2004, the FASB issued SFAS No. 123 (R), Share-Based Payment, which revises
  SFAS No. 123, Accounting for Stock-Based Compensation and supercedes APB
  Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123 (R)
  establishes standards for the accounting for transactions in which an entity
  exchanges its equity instruments for goods or services. This statement
  focuses primarily on accounting for transactions in which an entity obtains
  employee services in share-based payment transactions. SFAS No. 123 (R)
  requires that the fair value of such equity instruments be recognized as an
  expense in the historical financial statements as services are performed.
  Prior to SFAS No. 123 (R), only certain pro forma disclosures of fair value
  were required. In April 2005, the Securities and Exchange Commission adopted
  a new rule that amended the compliance dates of SFAS No. 123 (R) to require
  the implementation no later than the beginning of the first annual reporting
  period beginning after June 15, 2005. The adoption of this statement may have
  a material impact on the Companys financial condition or results of
  operations commencing with the fiscal quarter ending September 2, 2006.On December
  31, 2004, the FASB issued FASB Staff Position No. FAS 109-2, Accounting and
  Disclosure Guidance for the Foreign Earnings Repatriation Provision within
  the American Jobs Creation Act of 2004, (FSP No. 109-2). This staff
  position provides accounting guidance on how companies should account for the
  effects of the American Jobs Creation Act of 2004 (AJCA) that was signed
  into law on October 22, 2004. FSP No. 109-2 gives a company additional time
  to evaluate the effects of the legislation on any plan for reinvestment or
  repatriation of foreign earnings for purposes of applying FASB Statement No.
  109. The Company is investigating the repatriation provision to determine
  whether it might repatriate extraordinary dividends, as defined in the AJCA.
  The Company is currently evaluating all available U.S. Treasury guidance.In June
  2005, the FASB issued SFAS No. 154, Accounting Changes and Error
  Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and
  FASB Statement No. 3, Reporting Accounting Changes in Interim Financial
  Statements. SFAS No. 154 changes the requirements for the accounting for-14-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005 and November 27, 2004
(unaudited)

NOTE E - EFFECTS OF RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (continued)

and
  reporting of a change in accounting principle. Previously, most voluntary
  changes in accounting principles required recognition via a cumulative effect
  adjustment within net income for the period of the change. SFAS No. 154
  requires retrospective application to prior periods financial statements,
  unless it is impracticable to determine either the period-specific effects or
  the cumulative effect of the change. SFAS No. 154 is effective for accounting
  changes made in fiscal years beginning after December 15, 2005; however, SFAS
  No. 154 does not change the transition provisions of any existing accounting
  pronouncements. The Company does not believe the adoption of SFAS No. 154
  will have a material impact on its financial condition or results of
  operations.NOTE F - COMPREHENSIVE INCOME

The
  components of comprehensive income, net of related tax, are as follows:Thirteen
  weeks ended

Twenty-seven
  weeks ended
  December 3,
  2005

Twenty-six
  weeks ended
  November 27,
  2004December 3,
  2005

November
  27,
  2004(in
  thousands)Net earnings

$
1,525

$
1,431

$
4,078

$
2,682Unrealized holding gain on debt
and equity securities:Arising during
the period


195


776


258


1,151Reclassification adjustment for gains included in net earnings





(688
)




(1,406
)Decrease in fair value on
interest rate swap arising during the period











(55
)Foreign currency translation
adjustments arising during the period


496


3,277


2,253


4,153Comprehensive
income

$
2,216

$
4,796

$
6,589

$
6,525The
  components of accumulated other comprehensive income, net of related tax, are
  as follows:December 3,
  2005

May 28,
  2005(in
  thousands)Unrealized holding gain on debt
and equity securities

$
566

$
308Cumulative translation
adjustments


3,607


1,354Accumulated
other comprehensive income

$
4,173

$
1,662-15-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005
and November 27, 2004
(unaudited)

NOTE G 
PLANT CLOSING AND OPERATIONAL RESTRUCTURING

In the fourth quarter of
  fiscal 2005, the Company substantially completed its plan to further
  streamline its operations, specifically by moving its powder-based barium
  production in Westbury, N.Y. to its manufacturing facility in
  Montreal, Canada.  For the
  twenty-seven weeks ended December 3, 2005 and the twenty-six weeks ended November
  27, 2004, project costs aggregated $135,000 and $1,425,000,
  respectively.  At December 3, 2005 and
  May 28, 2005, the liability for this restructuring, which is included in
  accrued liabilities, approximated $132,000 and $598,000, respectively.  On November 30, 2005, the Company
entered
  into an agreement to sell the property encompassing its Westbury
  manufacturing facility for $5,100,000 and expects to complete the sale by the
  end of January 2006.  As a result, no
  loss is expected on the sale of this property, which had a carrying value of
  $3,554,000 at December 3, 2005 and has been reported as assets held for
  disposal in the accompanying balance sheet.NOTE H - INVENTORIES

Inventories consist of the following:December 3,
  2005

May 28,
  2005(in thousands)Finished goods

$

12,220


$

10,305Work in process



157




573Raw materials



15,083




11,944$

27,460


$

22,822NOTE I  DEBT AND EQUITY SECURITIES

During the thirteen and
  twenty-six weeks ended November 27, 2004, the Company sold 100,000 shares and
  200,000 shares, respectively, of its investment in Cedara Software
  Corporation.  The Company recognized
  gains on these sales totaling $688,000 and $1,406,000, respectively, during
  the thirteen and twenty-six weeks ended November 27, 2004, which are included
  in the consolidated statements of earnings under the caption Other, net.-16-

E-Z-EM, Inc. and
Subsidiaries

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005
and November 27, 2004
(unaudited)

NOTE J 
INCOME TAXES

For the thirteen weeks ended November 27, 2004, the
  Companys effective tax rate of 25% differed from the Federal statutory tax
  rate of 34% due primarily to the reversal of a valuation allowance relating
  to a previously impaired, non-core equity security, partially offset by
  non-deductible expenses.  For the
  twenty-six weeks ended November 27, 2004, the Companys effective tax rate of
  14% differed from the Federal statutory tax rate of 34% due primarily to the
  reversal of a valuation allowance relating to a previously impaired, non-core
  equity security, partially offset by non-deductible expenses, including stock
  option compensation costs of $377,000.NOTE K  CONTINGENCIES

Litigation
  MattersThe Company was named as a co-defendant in an action
  entitled Jeffrey Madison d/b/a Maqguide.com vs. Avail Medical
  Products, Inc. et al., Case No. 05CC03584 filed in Superior Court for the
  State of California, Orange County, on February 28, 2005.  The complaint alleges that in March 2003,
  the Company sought a contract manufacturer to manufacture and supply certain
  medical products and the Company, acting through its agent, Sopheon
  Corporation, solicited Maqguide to assist in this process.  The complaint alleges that, acting on this
  information, Maqguide contacted Avail Medical Products, Inc., or Avail, about
  this opportunity and helped negotiate a final agreement between the Company
  and Avail.  The complaint further
  alleges that Maqguide had an agreement with Avail that required Avail to pay
  a commission to Maqguide upon the execution of the agreement with the
  Company.  The complaint alleges 18
  causes of action against all of the defendants, including breach of contract,
  breach of the covenant of good faith, quantum meruit, fraud and deceit,
  promissory estoppel, conspiracy and conversion.  The complaint seeks compensatory, punitive and other monetary
  damages in an unspecified amount in excess of $25,000.  The Company has engaged counsel to defend
  this matter and believes that the allegations against it are without merit
  and intends to vigorously defend this action.-17-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005
and November 27, 2004
(unaudited)

NOTE K 
CONTINGENCIES (continued)

AngioDynamics and E-Z-EM were named as co-defendants
  in an action entitled Duhon, et. al vs. Brezoria Kidney Center,
  Inc. et. al, case no. 27084 filed in the District Court of Brezoria County,
  Texas, 239th Judicial District on December 29, 2003.  The complaint alleged that AngioDynamics
  and its co-defendants, E-Z-EM and Medical Components, Inc. or Medcomp,
  designed, manufactured, sold, distributed and marketed a defective catheter
  that was used in the treatment of, and caused the death of, a hemodialysis
  patient, as well as committed other negligent acts.  The complaint sought compensatory and other monetary
damages in
  unspecified amounts.  Under
  AngioDynamics distribution agreement with Medcomp, Medcomp was required to
  indemnify AngioDynamics against all its costs and expenses, as well as
  losses, liabilities and expenses (including reasonable attorneys fees) that
  relate in any way to products covered by the agreement, and Medcomp accepted
  the defense of the action.  This
  matter has been settled and an order for dismissal with prejudice was entered
  into the court on August 5, 2005.In accordance with the Master Separation and
  Distribution Agreement between AngioDynamics and E-Z-EM, AngioDynamics has
  agreed to indemnify E-Z-EM against any claims that arise out of the business
  operations of AngioDynamics prior to its spin-off (October 30, 2004) in which
  E-Z-EM is a named defendant solely because E-Z-EM was the sole stockholder of
  AngioDynamics.The Company is party to other claims, legal actions
  and complaints that arise in the ordinary course of business.  The Company believes that any liability
  that may ultimately result from the resolution of these matters will not,
  individually or in the aggregate, have a material adverse effect on its
  financial position or results of operations.Other
  MattersDuring 2004, the Company was notified by a
  competitor that it believed specific claims contained in issued United States
  patents owned by this competitor may be relevant to certain features of the
  Companys electromechanical injector systems.  In August 2005, the Company entered into a licensing
  arrangement covering the design and form of its injector systems as of the
  date of such agreement.  At May 28,
  2005, the Company recorded an estimated liability in this matter of $350,000
  that the Company believes relieved it of all claims relating to prior sales.-18-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

December 3, 2005
and November 27, 2004
(unaudited)

NOTE K 
CONTINGENCIES (continued)

Concentration of Credit RiskIn November 2005, Merry X-Ray Corporation (Merry
  X-Ray), a significant distributor of the Companys products in the U.S.,
  acquired SourceOne Healthcare Technologies, Inc. (SourceOne), the Companys
  largest distributor in the U.S.  For
  the twenty-seven weeks ended December 3, 2005 and the twenty-six weeks ended
  November 27, 2004, sales of products to Merry X-Ray, including sales to
  SourceOne before its acquisition by Merry X-Ray, represented 38% and 36% of
  total sales, respectively.
  Approximately 37% of accounts receivable pertained to Merry X-Ray at
  December 3, 2005 and approximately 6% and 31% of accounts receivable
  pertained to Merry X-Ray and SourceOne, respectively, at May 28, 2005.  While the accounts receivable related to
  Merry X-Ray are significant, the Company does not believe the credit risk to
  be significant given the consistent payment history of this distributor.NOTE L -
COMMON STOCK

Stock
  Repurchase ProgramIn March 2003, the Board of Directors authorized the
  repurchase of up to 300,000 shares of the Companys common stock at an
  aggregate purchase price of up to $3,000,000.  During the twenty-seven weeks ended December 3, 2005, no shares
  were repurchased under this program.
  In aggregate, the Company has repurchased 74,234 shares of common
  stock for approximately $716,000 under this program.Cash
  DividendsIn June 2004, the Companys Board of Directors
  declared a cash dividend of $.30 per outstanding share of the Companys
  common stock.  The dividend, which
  aggregated $3,220,000, was distributed on July 1, 2004 to shareholders of
  record as of June 15, 2004.  Future
  dividends are subject to Board of Directors review of operations and
  financial and other conditions then prevailing.-19-

Item 2.
Managements Discussion and
  Analysis of Financial Condition and Results of OperationsThe following information should be read together
  with the consolidated financial statements and the notes thereto and other
  information included elsewhere in this Quarterly Report on Form 10-Q.
Forward-Looking Statements and Risk
  Factors
Our disclosure and analysis in this report,
  including but not limited to the information discussed in this Item 2,
  contain forward-looking information about our companys financial results and
  estimates, business prospects and products in research that involve
  substantial risks and uncertainties.
  From time to time, we also may provide oral or written forward-looking
  statements in other materials we release to the public.  Forward-looking statements give our
  current expectations or forecasts of future events.  You can identify these statements by the fact that they do
not
  relate strictly to historic or current facts.  They use words such as anticipate,
estimate, expect, project,
  intend, plan, believe, will, and other words and terms of
similar
  meaning in connection with any discussion of future operations or financial
  performance.  In particular, these
  include statements relating to future actions, prospective products or
  product approvals, future performance or results of current and anticipated
  products, sales efforts, expenses, interest rates, foreign exchange rates,
  the outcome of contingencies, such as legal proceedings, and financial
  results.  Among the risk factors that
  could cause actual results to differ materially are the following:


our pricing flexibility is
  constrained by the formation of large Group Purchasing Organizations;
our reliance on our sole
  Canadian manufacturing facility to produce substantially all of our CT and
  X-ray fluoroscopy barium sulfate formulation products may impair our ability
  to respond to natural disasters or other adverse events, and also exposes us
  to the effects of changes in Canadian dollar  U.S. dollar exchange rate;
we currently purchase
  significant amounts of finished products, product components and raw
  materials from several single-source suppliers;
the market dynamics and
  competitive environment in the healthcare industry are subject to rapid
  change, which may affect our operations;
if third parties claim
  that our products infringe their intellectual rights, we may be forced to
  expend significant financial resources and management time defending against
  such actions and our results of operations could suffer;
we sell our products in
  the U.S. through a network of approximately 150 distributors, although one
  distributor accounted for approximately 37% of our net sales in fiscal 2005,
  which exposes us to a concentration of credit risk;
the market potential for our Reactive Skin
  Decontamination Lotion product is uncertain and sales in this market are
  complex;
if we fail to develop new products
  and enhance existing products, we could lose market share to our competitors
  and our results of operations could suffer;-20-


if we fail to adequately
  protect our intellectual property rights, our business may suffer;
the adoption rate of virtual colonoscopy as a
  screening modality for colon cancer continues to be slower than we
  anticipated;
if we cannot obtain
  approval from governmental agencies for new or modified products, we will not
  be able to sell those products;
inadequate levels of reimbursement
  from governmental or other third-party payors for procedures using our
  products may cause our revenues to decline; and
if we incur a tax
  liability in connection with our spin-off of AngioDynamics, we would be
  required to pay a potentially significant expense, which would diminish our
  financial resources.We cannot guarantee that any forward-looking
  statement will be realized, although we believe we have been prudent in our
  plans and assumptions.  Achievement of
  future results is subject to risks, uncertainties and inaccurate
  assumptions.  Should known or unknown
  risks or uncertainties materialize, or should underlying assumptions prove
  inaccurate, actual results could vary materially from past results and those
  anticipated, estimated or projected.
  Investors should bear this in mind as they consider forward-looking
  statements.
We undertake no obligation to publicly update
  forward-looking statements, whether as a result of new information, future
  events or otherwise.  You are advised,
  however, to consult any further disclosures we make on related subjects in
  our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange
  Commission.  Our Form 10-K filing for
  the 2005 fiscal year listed various important factors that could cause actual
  results to differ materially from expected and historic results.  We note these factors for investors as
  permitted by the Private Securities Litigation Reform Act of 1995.  Readers can find them in Item 7 of that
  filing under the heading Risk Factors.
  You should understand that it is not possible to predict or identify
  all such factors.  Consequently, you
  should not consider any such list to be a complete set of all potential risks
  or uncertainties.
Overview
We are a leading provider of medical diagnostic oral
  contrast agents and devices used in the diagnosis of abdominal disease.  Our customers include radiologists and
  gastroenterologists.  We are focused
  on becoming a worldwide CT solutions company for the computed tomography (CT)
  market.  This focus is driven by the
  trend away from older fluoroscopic procedures (e.g., barium enema) to
  CT-based applications for imaging the abdominal tract.
We have pioneered solutions for the emerging area of
  Virtual Colonography, which may offer unique capabilities for the early detection
  of colorectal cancer, and have also developed new contrast agents (e.g.,
  VoLumen) that focus on CT and CT Angiography applications in Multidetector CT
  technology.  We also manufacture and
  market a line of CT power injectors, that deliver CT contrast agents.
We recently introduced our IRiSCTTM
  software technology at the Radiological Society of North America convention.
   We believe this software platform is the first contrast information
  management system to be brought to market, and will enhance both the clinical
  and operational efficiency of our CT power

-21-

injectors. The platform allows for multiple Empower CT power injectors
to be networked to a central computer database. Injector performance and
contrast utilization data is collected on a real-time basis and is
automatically transferred to a central database for remote review. This
information can be used to evaluate and quantify the clinical aspects of the
injectors performance, thus enabling more effective and productive use in
treating patients.

In addition to our products for the radiology market, we have continued
to focus our efforts in the area of defense decontaminants. Reactive Skin
Decontamination Lotion (RSDL) is a liquid skin decontaminant that is effective
in neutralizing a broad spectrum of chemical warfare and toxic agents. On April
7, 2005, we purchased from our strategic partner, ODell Engineering, all its
assets related to the RSDL technology, principally consisting of the marketing
rights to this product. We now have exclusive, worldwide rights to the RSDL
technology for the military and first-responder markets. Prior to the
acquisition, we were the exclusive manufacturer of RSDL under an agreement
between ODell Engineering and our Canadian subsidiary. We are continuing to
staff key positions within our RSDL product team.

In mid-December 2004, our principal competitor, Mallinckrodt, a
division of Tyco International Ltd., initiated a recall of its liquid barium
products due to potential microbial contamination. As a result, we estimate
that our current quarter net sales were favorably affected by $3.0 million to
$3.2 million and our current six-month net sales were favorably affected by
$8.5 million to $9.2 million due to our ability to provide replacement
products. In the fourth quarter of our fiscal 2005, Mallinckrodt returned to
market with one of their products. However, we have no specific knowledge of
Mallinckrodts plans to re-enter the market with their remaining products, but
we expect their re-entry shortly. We are unable to predict the extent of the
effect that Mallinckrodts return to the market will have on our business.

Results of Operations

Quarters ended
December 3, 2005 and November 27, 2004

Our quarters
ended December 3, 2005 and November 27, 2004 both represent thirteen weeks.

Consolidated Results of Operations

For the quarter ended December 3, 2005, we reported net earnings of
$1,525,000, or $.14 per common share on both a basic and diluted basis, as
compared to net earnings of $1,431,000, or $.13 per common share on both a
basic and diluted basis, for the comparable period of last year.

The following
table sets forth earnings from continuing operations and earnings from
discontinued operation:

Thirteen
  weeks endedDecember
  3,
  
  November
  27,2005
  
  2004(in
thousands)Earnings
  from continuing operations
  
  $
  1,525
  
  $
  823Earnings from discontinued operation
  
  
  
  
  
  608Net earnings
  
  $
  1,525
  
  $
  1,431-22-

Our operating
results are expressed as a percentage of net sales in the following table:

Thirteen
  weeks endedDecember
  3,





  November
  27,2005
  
  2004Net sales
  
  
  100.0
  %
  
  100.0
     %Cost of
  goods sold
  
  
  55.2
  
  
  54.8Gross
profit
  
  
  44.8
  
  
  45.2Operating
  expensesSelling and
administrative
  
  
  33.4
  
  
  33.5Plant
closing and operational restructuring
  costs (credits)
  
  
  (0.1
  )
  
  3.1Research
and development
  
  
  4.1
  
  
  5.6Total
operating expenses
  
  
  37.4
  
  
  42.2Operating
profit
  
  
  7.4
  
  
  3.0Other income
  (expense)Interest
income
  
  
  0.5
  
  
  0.3Interest
expense
  
  
  (0.4
  )
  
  (0.3

     )Other,
net
  
  
  (0.7
  )
  
  1.2Earnings
from continuing operations before
  income taxes
  
  
  6.8
  
  
  4.2Income tax
  provision
  
  
  2.3
  
  
  1.1Earnings
from continuing operations
  
  
  4.5
  
  
  3.1Earnings
  from discontinued operation, net of income tax provision
  
  
  
  
  
  2.3NET
  EARNINGS
  
  
  4.5
  %
  
  5.4
     %Continuing Operations

Operating results for the current quarter were favorably affected by
increased sales and gross profit, partially offset by increased operating
expenses. Results for the comparable quarter of last year included $824,000
pre-tax, or $.05 per basic share, in plant closing and operational
restructuring costs incurred in moving our powder-based barium production to
our manufacturing facility in Montreal, Canada.

Net sales for the quarter ended December 3, 2005 increased 30%, or
$7,982,000, as compared to the quarter ended November 27, 2004, due to sales
growth, of which we estimate from $3,000,000 to $3,200,000 was attributable to
the liquid barium product recall by our principal competitor, Mallinckrodt. The
increase in net sales attributable to the Mallinckrodt recall affected both CT
imaging and X-ray fluoroscopy product categories. Price increases accounted for
less than 1% of net sales for the current quarter, as a significant portion of
our domestic products are sold under long-term group purchasing organization
contracts. On a product line basis, the net sales increase resulted from
increased sales of CT imaging contrast

-23-

products,
particularly our CT Smoothie lines, and CT injector systems, totaling
$3,116,000, X-ray fluoroscopy products of $2,470,000 and all other products of
$2,396,000.

Net sales in international markets, including direct exports from the
U.S., increased 19%, or $1,814,000, for the current quarter from the prior
years quarter due to increased sales of defense decontaminants of $857,000,
X-ray fluoroscopy products of $497,000, CT imaging products of $205,000 and all
other products of $255,000.

The following
table sets forth net sales by product category for the quarters ended December
3, 2005 and November 27, 2004:


2005
  
  2004$
  
  %
  
  $
  
  %(dollars in thousands)CT Imaging
  Contrast
  
  $
  8,194
  
  
  24.0
  
  $
  5,944
  
  
  22.7CT Injector
  Systems
  
  
  5,346
  
  
  15.6
  
  
  4,480
  
  
  17.1Total CT
Imaging
  
  
  13,540
  
  
  39.6
  
  
  10,424
  
  
  39.8X-Ray Fluoroscopy
  
  
  12,342
  
  
  36.1
  
  
  9,872
  
  
  37.6Contract
  Manufacturing
  
  
  2,724
  
  
  8.0
  
  
  1,595
  
  
  6.1Accessory
  Medical Devices
  
  
  1,337
  
  
  3.9
  
  
  1,359
  
  
  5.2Gastroenterology
  
  
  1,200
  
  
  3.5
  
  
  1,130
  
  
  4.3Virtual
  Colonoscopy
  
  
  1,079
  
  
  3.1
  
  
  890
  
  
  3.4Defense Decontaminants
  
  
  1,063
  
  
  3.1
  
  
  193
  
  
  0.7Other
  
  
  919
  
  
  2.7
  
  
  759
  
  
  2.9$
  34,204
  
  
  100.0
  
  $
  26,222
  
  
  100.0Gross profit, expressed as a percentage of net sales, was 45% for both
the current quarter and the comparable quarter of the prior year. Favorable
changes in sales product mix and sales price increases, including the effects
of lower distributor rebates as a percentage of sales, offset the effects of
raw material cost increases. Favorable changes in sales product mix can be
attributed, in part, to the increased sales resulting from the Mallinckrodt
recall.

Selling and administrative (S&A) expenses were $11,415,000 for
the quarter ended December 3, 2005 compared to $8,788,000 for the quarter ended
November 27, 2004. This increase of $2,627,000, or 30%, was due, in large part,
to: i) increased compensation costs, including fringe benefits, of $794,000;
ii) additional infrastructure to support our defense decontaminants business of
$670,000; iii) costs of $442,000 associated with our participation in the
Radiological Society of North America convention (this convention occurred in
the last month of our current fiscal quarter and the first month of our third
fiscal quarter of the prior year); and iv) outside consulting and auditing
costs of $95,000 for Sarbanes-Oxley Act Section 404 compliance.

Research and development (R&D) expenditures decreased 4% for the
current quarter to $1,414,000, or 4% of net sales, from $1,469,000, or 6% of
net sales, for the comparable quarter of the prior year due primarily to
decreased spending relating to virtual colonoscopy projects of $159,000 and
gastroenterology projects of $150,000, partially offset by increased general
regulatory costs of $135,000 and increased spending relating to X-ray
fluoroscopy and CT imaging projects of $123,000. Of the R&D expenditures
for the current quarter, approximately 53% related to X-ray fluoroscopy and CT
imaging projects, 34% to general regulatory costs, 8% to gastroenterology

-24-

projects and 5% to other projects.  R&D expenditures are expected to
continue at approximately current levels.

Other income and expenses totaled $198,000 of expense
for the current quarter compared to $323,000 of income for the comparable
period of last year.  The comparable
period of last year included gains of $688,000 on the sales of a non-core
equity security.

For the quarter ended December 3, 2005, our effective
tax rate of 34% equaled the Federal statutory tax rate as the effects of
non-deductible expenses offset tax-exempt income.  For the quarter ended November 27, 2004, our effective tax rate
of 25% differed from the Federal statutory tax rate of 34% due primarily to the
reversal of a valuation allowance relating to a previously impaired, non-core equity
security sold during the quarter, partially offset by non-deductible expenses,
including stock option compensation costs of $377,000.

Discontinued Operation

We have consolidated the
financial statements of AngioDynamics and reported its results as a discontinued
operation in an amount equal to our percentage of equity ownership through
October 30, 2004, the date on which our spin-off of AngioDynamics was
completed.  Since the spin-off occurred
in the second quarter of our prior fiscal year, the results for the
discontinued operation were excluded from the accompanying consolidated
statement of earnings for the current quarter.

Summarized results of
operations for AngioDynamics, including minority interest, as reported in
earnings from discontinued operation in the accompanying consolidated statement
of earnings for the nine weeks ended October 30, 2004 are as follows (amounts
in thousands):

Net salesFrom
unaffiliated customers
  
  $
  9,484From
affiliates
  
  
  173Total net sales
  
  $
  9,657Earnings before income taxes
and minority interest
  
  $
  1,338Income tax
  provision
  
  
  579Earnings before
  minority interest
  
  
  759Minority interest
  
  
  151Earnings from
  discontinued operation
  
  $
  608Six months ended December 3, 2005 and November 27, 2004

Our six months ended December 3, 2005 and November 27,
2004 represent twenty-seven weeks and twenty-six weeks, respectively.

Consolidated
Results of Operations

For the six months ended December 3, 2005, we reported
net earnings of $4,078,000, or $.38 and $.37 per common share on a basic and
diluted basis, respectively, compared to net earnings of $2,682,000, or $.25
per common

-25-

share on both a basic and diluted basis, for the
comparable period of last year.

The following table sets forth earnings from
continuing operations and earnings from discontinued operation:

Twenty-seven
  weeks ended
  December 3,
  2005
  
  Twenty-six
  weeks ended
  November 27,
  2004(in thousands)Earnings from
  continuing operations
  
  $

  
  
  4,078

  
  $
  
  

  1,454Earnings from
  discontinued operation
  
  
  
  
  
  
  
  
  
  1,228Net earnings
  
  $
  
  
  4,078
  
  $
  
  

  2,682Our operating results are expressed as a percentage of
net sales in the following table:

Twenty-seven
  weeks ended
  December 3,
  2005
  
  Twenty-six
  weeks ended
  November 27,
  2004Net sales
  
  
  100.0
  %
  
  100.0
  %Cost of goods sold
  
  
  54.8
  
  
  56.4Gross profit
  
  
  45.2
  
  
  43.6Operating expensesSelling and
  administrative
  
  
  31.6
  
  
  34.4Plant closing and
  operational restructuring costs
  
  
  0.2
  
  
  2.8Research and
  development
  
  
  4.0
  
  
  5.0Total operating
  expenses
  
  
  35.8
  
  
  42.2Operating profit
  
  
  9.4
  
  
  1.4Other income (expense)Interest income
  
  
  0.4
  
  
  0.3Interest expense
  
  
  (0.3
  )
  
  (0.3
  )Other, net
  
  
  (0.5
  )
  
  2.0Earnings from
  continuing operations before income taxes
  
  
  9.0
  
  
  3.4Income tax provision
  
  
  3.1
  
  
  0.5Earnings from
  continuing operations
  
  
  5.9
  
  
  2.9Earnings from
  discontinued operation, net of income tax provision
  
  
  
  
  
  2.4NET EARNINGS
  
  
  5.9
  %
  
  5.3
  %-26-

Continuing Operations

Operating results for the current period were
favorable affected by increased sales and improved gross profit, partially
offset by increased operating expenses.
Results for the current six months included $135,000 pre-tax, or $.01
per basic share, and the comparable period of last year included $1,425,000
pre-tax, or $.09 per basic share, in plant closing and operational
restructuring costs incurred in moving our powder-based barium production to
our manufacturing facility in Montreal, Canada.

Net sales for the six months ended December 3, 2005
increased 37%, or $18,754,000, compared to the six months ended November 27,
2004, due to sales growth, of which we estimate from $8,500,000 to $9,200,000
was attributable to the liquid barium product recall by our principal
competitor, Mallinckrodt, and the additional week in the current reporting
period.  The increase in net sales
attributable to the Mallinckrodt recall affected both CT imaging and X-ray
fluoroscopy product categories.  Price
increases accounted for less than 1% of net sales for the current period, as a
significant portion of our domestic products are sold under long-term group
purchasing organization contracts.  On a
product line basis, the net sales increase resulted from increased sales of CT
imaging contrast products, particularly our CT Smoothie lines, and CT injector
systems, totaling $10,346,000, X-ray fluoroscopy products of $4,413,000 and all
other products of $3,995,000.

Net sales in international markets, including direct
exports from the U.S., increased 24%, or $4,192,000, for the current period
from the comparable prior year period due to increased sales of defense
decontaminants of $1,543,000, X-ray fluoroscopy products of $1,029,000, CT
imaging products of $684,000, virtual colonoscopy products of $362,000,
contract manufacturing products of $348,000 and all other products of $226,000.

The following table sets forth net sales by product
category for the six months ended December 3, 2005 and November 27, 2004:

2005
  
  2004$
  
  %
  
  $
  
  %(dollars in thousands)CT Imaging
  Contrast
  
  $
  19,258
  
  
  27.9
  
  $
  11,414
  
  
  22.7CT Injector
  Systems
  
  
  10,833
  
  
  15.7
  
  
  8,331
  
  
  16.6Total CT Imaging
  
  
  30,091
  
  
  43.6
  
  
  19,745
  
  
  39.3X-Ray Fluoroscopy
  
  
  23,880
  
  
  34.6
  
  
  19,467
  
  
  38.8Contract
  Manufacturing
  
  
  4,135
  
  
  6.0
  
  
  2,655
  
  
  5.3Accessory Medical
  Devices
  
  
  2,744
  
  
  4.0
  
  
  2,667
  
  
  5.3Gastroenterology
  
  
  2,538
  
  
  3.7
  
  
  2,273
  
  
  4.5Virtual
  Colonoscopy
  
  
  1,907
  
  
  2.8
  
  
  1,753
  
  
  3.5Defense
  Decontaminants
  
  
  1,814
  
  
  2.6
  
  
  241
  
  
  0.5Other
  
  
  1,879
  
  
  2.7
  
  
  1,433
  
  
  2.8$
  68,988
  
  
  100.0
  
  $
  50,234
  
  
  100.0Gross profit, expressed as a percentage of net sales,
improved to 45% for the current period from 44% for the comparable period of
the prior year due primarily to favorable changes in sales product mix,
increased production throughput and sales price increases, including the
effects of lower distributor rebates as a percentage of sales, partially offset
by raw material cost increases.
Favorable changes in sales product mix can be

-27-

attributed, in part, to the increased sales resulting
from the Mallinckrodt recall.

S&A expenses were $21,815,000 for the six months
ended December 3, 2005 compared to $17,269,000 for the six months ended
November 27, 2004.  This increase of
$4,546,000, or 26%, was due, in large part, to: i) increased compensation
costs, including fringe benefits, of $1,659,000; ii) additional infrastructure
to support our defense decontaminants business of $1,118,000; iii) costs of
$442,000 associated with our participation in the Radiological Society of North
America convention (this convention occurred in the last month of our current
fiscal quarter and the first month of our third fiscal quarter of the prior year);
and iv) outside consulting and auditing costs of $207,000 for Sarbanes-Oxley
Act Section 404 compliance.  The
comparable period of the prior year included a non-cash compensation charge of
$385,000 resulting from the modification of certain stock options previously
granted to one of our former directors.

R&D expenditures increased 10% for the current
period to $2,755,000, or 4% of net sales, from $2,498,000, or 5% of net sales,
for the comparable period of the prior year due primarily to increased spending
relating to X-ray fluoroscopy and CT imaging projects of $378,000 and increased
general regulatory costs of $225,000, partially offset by decreased spending
relating to virtual colonoscopy projects of $172,000 and gastroenterology
projects of $158,000.  Of the R&D
expenditures for the current period, approximately 55% related to X-ray
fluoroscopy and CT imaging projects, 33% to general regulatory costs, 9% to
gastroenterology projects and 3% to other projects.

Other income and expenses totaled $254,000 of expense
for the current period compared to $1,008,000 of income for the comparable
period of last year.  The comparable
period of last year included gains of $1,406,000 on the sales of a non-core
equity security.

For the six months ended December 3, 2005, our
effective tax rate of 35% differed from the Federal statutory tax rate of 34%
due primarily to non-deductible expenses, partially offset by tax-exempt
income.  For the six months ended
November 27, 2004, our effective tax rate of 14% differed from the Federal
statutory tax rate of 34% due primarily to the reversal of a valuation
allowance relating to an impairment of a non-core equity security, partially
offset by non-deductible expenses, including stock option compensation costs of
$377,000.

Discontinued Operations

We have consolidated the
financial statements of AngioDynamics and reported its results as a
discontinued operation in an amount equal to our percentage of equity ownership
through October 30, 2004, the date on which our spin-off of AngioDynamics was
completed.  Since the spin-off occurred
in the second quarter of our prior fiscal year, the results for the
discontinued operation were excluded from the accompanying consolidated
statement of earnings for the current period.

Summarized results of operations for AngioDynamics, including minority
interest, as reported in earnings from discontinued operation in the
accompanying consolidated statement of earnings for the twenty-two weeks ended
October 30, 2004 are as follows (amounts in thousands):

-28-

Net salesFrom
  unaffiliated customers
  
  $
  22,342From
affiliates
  
  
  420Total net sales
  
  $
  22,762Earnings before income taxes and minority interest
  
  $
  2,628Income tax provision
  
  
  1,103Earnings before minority interest
  
  
  1,525Minority interest
  
  
  297Earnings from discontinued operation
  
  $
  1,228Liquidity
and Capital Resources

For the six months ended December 3, 2005, operations
and capital expenditures were funded by working capital and cash reserves. Our
policy has generally been to fund operations and capital requirements without
incurring significant debt. As of December 3, 2005, debt (notes payable,
current maturities of long-term debt and long-term debt) was $330,000, as
compared to $531,000 at May 28, 2005. We have available $1,723,000 under a bank
line of credit, of which no amounts were outstanding at December 3, 2005.

Our contractual obligations and their effect on
liquidity and cash flows as of December 3, 2005 are set forth in the table
below. We have no variable interest entities or other off-balance sheet
obligations.

Payments Due By Period as of December 3, 2005Total
  
  Less than 
  1 year
  
  1-3
  years
  
  3-5
  years
  
  More than 
  5 years(in thousands)Contractual
  Obligations:Long-term
debt
  
  $
  123
  
  $
  88
  
  $
  35Notes
payable
  
  
  207
  
  
  207Operating
leases (1)
  
  
  7,960
  
  
  1,766
  
  
  3,375
  
  $
  2,754
  
  $
  65Purchase
obligations (1)
  
  
  2,097
  
  
  2,097Employment
contract (1)
  
  
  680
  
  
  680Consulting
contracts (1)
  
  
  46
  
  
  42
  
  
  4Other
long-term liabilities
  reflected on the consolidated balance sheetDeferred
compensation (2)
  
  
  2,767
  
  
  19
  
  
  43
  
  
  55
  
  
  2,650Asset
acquisition
  
  
  1,400
  
  
  700
  
  
  700License
arrangement
  
  
  1,300
  
  
  650
  
  
  650Accrued
retirement benefits
  
  
  163
  
  
  40
  
  
  
  
  
  62
  
  
  61Total
  
  $
  16,743
  
  $
  6,289
  
  $
  4,807
  
  $
  2,871
  
  $
  2,776(1)
  The non-cancelable operating leases, purchase
  obligations, and employment and consulting contracts are not reflected on the
  consolidated balance sheet under accounting principles generally accepted in
  the United States of America. The purchase obligations consist primarily of
  finished good product and component parts.-29-

(2)
  Deferred compensation costs covering active
  employees are assumed payable after five years, although certain
  circumstances, such as termination, would require earlier payment.At December 3, 2005, approximately $27,096,000, or
24%, of our assets consisted of cash and cash equivalents and short-term debt
and equity securities. The current ratio was 5.37 to 1, with net working capital
of $66,331,000, at December 3, 2005, compared to the current ratio of 4.81 to
1, with net working capital of $59,612,000, at May 28, 2005. The increase in
working capital is due, in large part, to increased inventory of $4,638,000, to
support our increased business, and increased accounts receivable of
$4,421,000, resulting from increased sales. We believe that our cash reserves, cash provided from continuing
operations and existing bank line of credit will provide sufficient liquidity
to meet our current obligations for the next 12 months.

In March 2003, the Board of Directors authorized the
repurchase of up to 300,000 shares of our common stock at an aggregate purchase
price of up to $3,000,000. During the six months ended December 3, 2005, no
shares were repurchased under this program. In aggregate, we have repurchased
74,234 shares of common stock for approximately $716,000 under this program.

In June 2004, our Board of Directors declared a cash
dividend of $.30 per outstanding share of our common stock. The dividend, which
aggregated $3,220,000, was distributed on July 1, 2004 to shareholders of
record as of June 15, 2004. Future dividends are subject to our Board of
Directors review of operations and financial and other conditions then prevailing.

Critical
Accounting Policies

Our significant accounting policies are summarized in
Note A to the Consolidated Financial Statements included in our Annual Report
on Form 10-K for our fiscal year ended May 28, 2005. While all these
significant accounting policies affect the reporting of our financial condition
and results of operations, we view certain of these policies as critical.
Policies determined to be critical are those policies that have the most
significant impact on our financial statements and require us to use a greater
degree of judgment and/or estimates. Actual results may differ from those
estimates.

We believe that given current facts and circumstances,
it is unlikely that applying any other reasonable judgment or estimate
methodologies would cause a material effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report. The accounting policies identified as critical are as follows:

Revenue
Recognition

We recognize revenues in accordance with generally
accepted accounting principles as outlined in Staff Accounting Bulletin No.
104, Revenue Recognition in Financial Statements, which requires that four
basic criteria be met before revenue can be recognized: (1) persuasive evidence
of an arrangement exists; (2) the price is fixed or determinable; (3)
collectibility is reasonably assured; and (4) product delivery has occurred or
services have been rendered. Decisions relative to criterion (3) regarding
collectibility are based upon our judgments, as discussed under Accounts
Receivable below, and should conditions change in the future and cause us to
determine this criterion is not met, our results of operations may be affected.
We recognize revenue on the date the product is shipped,

-30-

which is when title passes to the customer. Shipping
and credit terms are negotiated on a customer-by-customer basis. Products are
shipped primarily to distributors at an agreed upon list price. The distributor
then resells the products primarily to hospitals and, depending upon contracts
between us, the distributor and the hospital, the distributor may be entitled
to a rebate. We deduct all rebates from sales and have a provision for rebates
based on historical information for all rebates that have not yet been
submitted to us by the distributors.

Changes in our rebate allowance for the six months
ended December 3, 2005 are as follows (amounts in thousands):



Beginning balance
  
  $
  1,397Provision for rebates
  
  
  12,835Rebate credits issued
  
  
  (12,424
  )Ending balance
  
  $
  1,808The rebate allowance is comprised of three components:


  actual rebate requests received from distributors
  prior to the closing of our financial statements;
  an estimate, compiled by distributor, of rebate
  requests not yet received based on historical submissions, adjusted for any
  material changes in purchasing patterns or market conditions; and
  an estimate of distributors inventory-on-hand
  available for future sale pursuant to a group purchasing organization (GPO)
  contract. We do not have visibility as to the specific inventory levels held
  by our distributors. However, based on discussions with our customers, who
  uniformly attempt to maintain a just-in-time purchasing program, and our
  knowledge of their ordering patterns, we estimate a one-week wholesale
  inventory level.  Since most of our
  product sales are subject to GPO contracts, most distributor
  inventory-on-hand will be subject to rebate. This portion of the rebate
  estimate is derived by first determining the total quantity of each product
  sold by us during the last week of the fiscal period multiplied by two
  factors, (a) and (b), where (a) is the percentage of each product rebated
  during the prior six-month period based on historical sales and (b) is the
  average rebate paid on that product during this period.All product returns must be pre-approved by us and may
be subject to a 20% restocking charge. To be accepted, a returned product must
be unadulterated, undamaged and must have at least 12 months remaining on its
stated expiration date.

We record revenue on warranties and extended
warranties on a straight-line basis over the term of the related warranty
contracts, which generally cover one year. Deferred revenues related to warranties
and extended warranties were $519,000 and $505,000 at December 3, 2005 and May
28, 2005, respectively. Service costs are expensed as incurred.

Accounts
Receivable

Accounts receivable are generally due within 30 to 90
days and are stated at amounts due from customers, net of an allowance for
doubtful accounts. We perform ongoing credit evaluations and adjust credit
limits based upon payment history and the customers current credit worthiness,
as determined

-31-

by a review of their current credit information. We
continuously monitor aging reports, collections and payments from customers,
and maintain a provision for estimated credit losses based upon historical
experience and any specific customer collection issues we identify. While such
credit losses have historically been within expectations and the provisions
established, we cannot guarantee the same credit loss rates will be experienced
in the future. We write off accounts receivable when they become uncollectible.
At December 3, 2005 and May 28, 2005, our allowance for doubtful accounts was
$879,000 and $869,000, respectively. Concentration risk exists relative to our
accounts receivable, as 37% of our total accounts receivable balance at
December 3, 2005 is concentrated in one distributor. While the accounts
receivable related to this distributor are significant, we do not believe the
credit risk to be significant given the distributors consistent payment
history.

Changes in our allowance for doubtful accounts for the
six months ended December 3, 2005 are as follows (amounts in thousands):



Beginning balance
  
  $
  869Provision for doubtful accounts
  
  
  19Write-offs
  
  
  (9
  )Ending balance
  
  $
  879Income
Taxes

In preparing our financial statements, income tax
expense is calculated for each jurisdiction in which we operate. This involves
estimating actual current taxes due plus assessing temporary differences
arising from differing treatment for tax and accounting purposes that are
recorded as deferred tax assets and liabilities. Deferred tax assets are
periodically evaluated to determine their recoverability, based primarily on
our ability to generate future taxable income. Where their recovery is not
likely, we establish a valuation allowance and record a corresponding
additional tax expense in our statement of earnings. If actual results differ
from our estimates due to changes in assumptions, the provision for income
taxes could be materially affected.

Inventories

We value inventories at the lower of cost (on the first-in,
first-out method) or market. On a quarterly basis, we review inventory
quantities on hand and analyze the provision for excess and obsolete inventory
based primarily on product expiration dating and our estimated sales forecast,
which is based on sales history and anticipated future demand. Our estimates of
future product demand may not be accurate and we may understate or overstate
the provision required for excess and obsolete inventory. Accordingly, any
significant unanticipated changes in demand could have a significant impact on
the value of our inventory and results of operations. At December 3, 2005 and
May 28, 2005, our reserve for excess and obsolete inventory was $1,910,000 and
$1,902,000, respectively.

Property,
Plant and Equipment

We state property, plant and equipment at cost, less
accumulated depreciation, and depreciate principally using the straight-line
method over their estimated useful lives. We determine this based on our
estimates of the period over which the asset will generate revenue. Any change
in condition that would cause us to change our estimate of the useful lives of
a

-32-

group or class of assets may significantly affect
depreciation expense on a prospective basis.

Effects of Recently Issued Accounting Pronouncements

In March 2004, the Financial Accounting Standards
Board (FASB) Emerging Issues Task Force (EITF) released Issue No. 03-1,
The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. EITF 03-1 provides guidance for determining whether impairment
for certain debt and equity investments is other-than-temporary and the
measurement of an impaired loss. Certain disclosure requirements of EITF 03-1
were adopted in fiscal 2004 and we have complied with the new disclosure requirements
in our consolidated financial statements. The recognition and measurement
requirements of EITF 03-1 were initially effective for reporting periods
beginning after June 15, 2004. In September 2004, the FASB Staff issued FASB
Staff Position (FSP) EITF 03-1-1 that delayed the effective date for certain
measurement and recognition guidance contained in EITF 03-1. The FSP requires
that entities continue to apply previously existing other-than-temporary
guidance until a final consensus is reached. We do not anticipate that the
issuance of a final consensus will materially impact our financial condition or
results of operations.

In November 2004, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4. The amendments made by SFAS No.
151 will improve financial reporting by clarifying that abnormal amounts of
idle facility expense, freight, handling costs, and wasted materials
(spoilage) should be recognized as current-period charges and by requiring
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. SFAS No. 151 is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years
beginning after November 24, 2004. The adoption of this statement is not
expected to have a material impact on our financial condition or results of
operations.

In December 2004, the FASB issued SFAS No. 123 (R),
Share-Based Payment, which revises SFAS No. 123, Accounting for Stock-Based
Compensation and supercedes APB Opinion No. 25, Accounting for Stock Issued
to Employees. SFAS No. 123 (R) establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. This statement focuses primarily on accounting for transactions in
which an entity obtains employee services in share-based payment transactions.
SFAS No. 123 (R) requires that the fair value of such equity instruments be
recognized as an expense in the historical financial statements as services are
performed. Prior to SFAS No. 123 (R), only certain pro forma disclosures of
fair value were required. In April 2005, the Securities and Exchange Commission
adopted a new rule that amended the compliance dates of SFAS No. 123 (R) to
require the implementation no later than the beginning of the first annual
reporting period beginning after June 15, 2005. The adoption of this statement
may have a material impact on our financial condition or results of operations
commencing with the fiscal quarter ending September 2, 2006.

On December 31, 2004, the FASB issued FASB Staff
Position No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004,
(FSP No. 109-2). This staff position provides accounting guidance on how
companies should account for the effects of the American Jobs Creation Act of 2004
(AJCA) that was signed into law on October 22, 2004. FSP No. 109-2 gives a
company additional time to evaluate the effects of the legislation on any plan
for

-33-

reinvestment or repatriation of foreign earnings for
purposes of applying FASB Statement No. 109. We are investigating the
repatriation provision to determine whether we might repatriate extraordinary
dividends, as defined in the AJCA. We are currently evaluating all available
U.S. Treasury guidance.

In June 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements. SFAS No. 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. Previously,
most voluntary changes in accounting principles required recognition via a
cumulative effect adjustment within net income of the period of the change.
SFAS No. 154 requires retrospective application to prior periods financial
statements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS No. 154 is effective for
accounting changes made in fiscal years beginning after December 15, 2005;
however, SFAS No. 154 does not change the transition provisions of any existing
accounting pronouncements. We do not believe the adoption of SFAS No. 154 will
have a material impact on our financial condition or results of operations.

Item 3.
  Quantitative and Qualitative
  Disclosures About Market RiskWe are exposed to market risk from changes in foreign
currency exchange rates and, to a much lesser extent, interest rates on
investments and financing, which could impact our results of operations and
financial position. We do not currently engage in any hedging or market risk
management tools. There have been no material changes with respect to market
risk previously disclosed in our Annual Report on Form 10-K for our 2005 fiscal
year.

Foreign
Currency Exchange Rate Risk

The financial reporting of our international
subsidiaries is denominated in currencies other than the U.S. dollar. Since the
functional currency of our international subsidiaries is the local currency,
foreign currency translation adjustments are accumulated as a component of
accumulated other comprehensive income in stockholders equity. Assuming a
hypothetical aggregate change in the exchange rates of foreign currencies
versus the U.S. dollar of 10% at December 3, 2005, our assets and liabilities
would increase or decrease by $4,162,000 and $681,000, respectively, and our
net sales and net earnings would increase or decrease by $2,930,000 and
$376,000, respectively, on an annual basis.

We also maintain intercompany balances and loans
receivable with subsidiaries with different local currencies. These amounts are
at risk of foreign exchange losses if exchange rates fluctuate. Assuming a
hypothetical aggregate change in the exchange rates of foreign currencies
versus the U.S. dollar of 10% at December 3, 2005, our pre-tax earnings would
be favorably or unfavorably impacted by approximately $852,000 on an annual
basis.

Interest
Rate Risk

Our excess cash is invested in highly liquid,
short-term, investment grade securities with maturities of less than one year.
These investments are not held for speculative or trading purposes. Changes in
interest rates may affect the investment income we earn on cash, cash
equivalents and debt

-34-

securities and therefore affect our cash flows and results
of operations. As of December 3, 2005, we were exposed to interest rate change
market risk with respect to our investments in tax-free municipal bonds in the
amount of $18,500,000. The bonds bear interest at a floating rate established
between seven and 35 days. For the six months ended December 3, 2005, the
after-tax interest rate on the bonds approximated 2.5%. Each 100 basis point
(or 1%) fluctuation in interest rates will increase or decrease interest income
on the bonds by approximately $185,000 on an annual basis.

As our principal amount of fixed interest rate
financing approximated $330,000 at December 3, 2005, a change in interest rates
would not materially impact results of operations or financial position. At
December 3, 2005, we did not maintain any variable interest rate financing.

As of December 3, 2005, we have available $1,723,000
under a working capital bank line of credit. Advances under this line of credit
will bear interest at an annual rate indexed to prime. We will thus be exposed
to interest rate risk with respect to this credit facility to the extent that
interest rates rise when there are amounts outstanding under this facility.

Item 4.
  Controls and ProceduresEvaluation
of Disclosure Controls and Procedures

As required by Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934, as amended (the Exchange Act), we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 3, 2005. This evaluation
was carried out under the supervision and with participation of our Chief
Executive Officer and Chief Financial Officer. There are inherent limitations
to the effectiveness of any system of disclosure controls and procedures.
Therefore, effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives. Based upon our
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective as of
December 3, 2005, to provide reasonable assurance that information
required to be disclosed in the reports that are filed under the Exchange Act
is recorded, processed, summarized and reported in a timely manner and is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.

Changes
in Internal Control over Financial Reporting

There was no change in our internal control over financial
reporting during the quarter ended December 3, 2005 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

-35-

E-Z-EM,
Inc. and Subsidiaries

Part II: Other Information

Item 1.
  Legal ProceedingsCertain legal proceedings in which we are involved are
discussed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal
year ended May 28, 2005.

Item 1A.
  Risk
  FactorsNot applicable.

Item 2.
  Unregistered Sales of Securities
  and Use of ProceedsOn November 1, 2005, we issued 1,750 shares of common
stock to our Chairman of the Board, Paul S. Echenberg, and 1,000 shares of
common stock to each of the following directors: Robert J. Beckman, James L.
Katz, David P. Meyers, John T. Preston, Howard S. Stern and George P. Ward. All
such shares were issued in consideration for services rendered as directors and
were issued pursuant to Section 4(2) of the Securities Act of 1933. The basis
upon which the exemption is claimed is that the shares were issued only to our
directors in transactions not involving any public offering.

Item 3.
  Defaults Upon Senior SecuritiesNone.

Item 4.
  Submission Of Matters to a Vote of
  Security HoldersAt the Annual Meeting of Shareholders held on October
19, 2005, the following persons were elected as directors of the Company:

Class
III Directors:   (until the 2008 Annual Meeting)

David
P. Meyers
                       Howard
S. Stern                       George
P. Ward





In this election, 7,923,849, 7,921,149 and 8,055,177
votes were cast for Mr. Meyers, Mr. Stern and Mr. Ward, respectively, and
330,913, 333,613 and 199,585 shares were withheld from voting for Mr. Meyers,
Mr. Stern and Mr. Ward, respectively.

The action of the Board of Directors in appointing Grant Thornton LLP
as our independent registered public accounting firm for our fiscal year ending
June 3, 2006 was ratified by a vote of 8,250,947 in favor, 1,736 against and
2,079 shares abstaining.

-36-

Item 5.
  Other InformationNone.Item 6.
  ExhibitsNo.
  
  
  Description
  

  Page3.1
  
  Restated Certificate of Incorporation of the
  Registrant, as Amended

  (a)3.2
  
  Amended and Restated Bylaws of the Registrant

  (b)10.1
  
  Agreement for Purchase and Sale dated November 30,
  2005 by and between E-Z-EM, Inc. and B&R Machine Tool Corp.

  (c)31.1
  
  Certification pursuant to
  Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002 (Anthony A. Lombardo)



3931.2
  
  Certification pursuant to
  Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002 (Dennis J. Curtin)





 4132.1
  
  Certification pursuant to
  Title 18, United States Code, Section 1350 as adopted pursuant to Section 906
  of the Sarbanes-Oxley Act of 2002 (Anthony A. Lombardo)




 4332.2
  
  Certification pursuant to
  Title 18, United States Code, Section 1350 as adopted pursuant to Section 906
  of the Sarbanes-Oxley Act of 2002 (Dennis J. Curtin)




 44(a)
  Incorporated by reference to Exhibit 3.1 to the
  Registrants Registration Statement on Form 8-A filed with the Commission on
  April 8, 2005.(b)
  Incorporated by reference to Exhibit 3.2 to the
  Registrants Current Report on Form 8-K filed with the Commission on January
  21, 2005.(c)
  Incorporated by reference to Exhibit 10.1 to the
  Registrants Current Report on Form 8-K filed with the Commission on December
  5, 2005.-37-

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.


E-Z-EM,
Inc.(Registrant)Date
  January 12,
2006
  
  /s/ Anthony
A. LombardoAnthony A. Lombardo, President,

  Chief Executive Officer, DirectorDate
  January 12,
2006
  
  /s/ Dennis
J. CurtinDennis J. Curtin, Senior Vice
  President - Chief Financial
  Officer (Principal Financial and 
  Chief Accounting Officer)-38-