UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF 
THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September
2, 2006 OR o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF 
THE SECURITIES EXCHANGE ACT OF 1934 For 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 a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and
large accelerated filer in Rule 12b-2 of the Exchange Act (Check one). Large accelerated filer o          Accelerated
filer x          Non-accelerated
filer 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 October
6, 2006, there were 10,879,881 shares of the issuers common stock outstanding.   E-Z-EM, Inc. and Subsidiaries

INDEX

PagePart I: Financial InformationItem l.
Financial
  StatementsConsolidated
Balance Sheets  September 2,
  2006 and June 3, 2006
3  4Consolidated
Statements of Earnings 
  Thirteen weeks ended September 2, 2006 and fourteen weeks ended September 3,
  2005
5Consolidated
Statement of Stockholders
  Equity and Comprehensive Income  Thirteen weeks ended September 2, 2006
6Consolidated
Statements of Cash Flows 
  Thirteen weeks ended September 2, 2006 and fourteen weeks ended September 3,
  2005
7  8Notes to
Consolidated Financial Statements
9  21Item
  2.
Managements
  Discussion and Analysis of Financial Condition and Results of Operations
22  31Item
  3.
Quantitative
  and Qualitative Disclosures About Market Risk
32Item
  4.
Controls
  and Procedures
33Part II: Other InformationItem
  1.
Legal
  Proceedings
34Item
  1A.
Risk Factors
34Item
  2.
Unregistered
Sales of Equity Securities and
  Use of Proceeds
34Item
  3.
Defaults
  Upon Senior Securities
34Item
  4.
Submission of
Matters to a Vote of Security
  Holders
34Item
  5.
Other
  Information
34Item
  6.
Exhibits
34  35-2-

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(in thousands)

ASSETS

September 2,

June 3,2006

2006(unaudited)

(audited)CURRENT ASSETSCash and cash
equivalents

$
8,982

$
6,749Debt and
equity securities, at fair value


28,822


33,446Accounts
receivable, principally trade, net


21,383


20,680Inventories,
net


29,137


27,028Refundable
income taxes


890


2,040Other current
assets


4,725


5,012Current assets
of discontinued operation


280


426Total current
assets


94,219


95,381PROPERTY, PLANT AND EQUIPMENT -
AT COST,
  less accumulated depreciation and amortization


12,857


12,445INTANGIBLE ASSETS, less
accumulated
  amortization


3,937


4,123DEBT AND EQUITY SECURITIES, at
fair value


1,239


1,088CASH SURRENDER VALUE OF LIFE
INSURANCE


6,359


6,335OTHER ASSETS


3,436


3,815NONCURRENT ASSETS OF
DISCONTINUED OPERATION


652


605Total
assets

$
122,699

$
123,792The accompanying notes are an integral part
of these financial statements.

-3-

E-Z-EM, Inc. and Subsidiaries

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

LIABILITIES
          AND STOCKHOLDERS EQUITY

September
  2,

June 3,2006

2006(unaudited)

(audited)CURRENT LIABILITIESCurrent maturities of long-term
debt

$
18

$
31Accounts payable


5,451


5,702Accrued liabilities


9,504


12,123Accrued income taxes


204


47Current liabilities of
discontinued
  operation


264


417Total current
liabilities


15,441


18,320OTHER NONCURRENT
LIABILITIES


3,616


3,630Total liabilities


19,057


21,950COMMITMENTS 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 10,870,199 shares at
  September 2, 2006 and 10,862,899 shares at June 3, 2006 (excluding 89,205
  shares held in treasury at September 2, 2006 and June 3, 2006)


1,087


1,086Additional paid-in
capital


30,248


30,071Retained earnings


65,825


64,263Accumulated other comprehensive
income


6,482


6,422Total stockholders
equity


103,642


101,842Total liabilities and
stockholders equity

$
122,699

$
123,792The accompanying notes are an integral part
of these financial statements.

-4-

E-Z-EM, Inc. and Subsidiaries

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





Thirteen
  
  Fourteenweeks
  ended
  
  weeks
  endedSeptember
  2,
  
  September
  3,2006
  
  2005Net sales
  
  $
  33,440
  
  $
  34,394Cost of
  goods sold
  
  
  18,849
  
  
  18,712Gross
profit
  
  
  14,591
  
  
  15,682Operating expensesSelling,
general and administrative
  
  
  11,141
  
  
  10,219Plant
closing and operational restructuring
  costs
  
  
  
  
  
  158Research
and development
  
  
  1,376
  
  
  1,340Total
operating expenses
  
  
  12,517
  
  
  11,717Operating
profit
  
  
  2,074
  
  
  3,965Other income
(expense)Interest
income
  
  
  356
  
  
  160Interest
expense
  
  
  (70
  )
  
  (116
  )Other,
net
  
  
  274
  
  
  (101
  )Earnings
from continuing operations before
  income taxes
  
  
  2,634
  
  
  3,908Income tax
provision
  
  
  851
  
  
  1,365Earnings
from continuing operations
  
  
  1,783
  
  
  2,543Earnings (loss) from
discontinued
  operation, net of income tax benefit
  
  
  (221
  )
  
  10NET
EARNINGS
  
  $
  1,562
  
  $
  2,553Basic earnings (loss) per common shareFrom
continuing operations
  
  $
  0.16
  
  $
  0.24From
discontinued operation, net of income
  tax benefit
  
  
  (0.02
  )From total
operations
  
  $
  0.14
  
  $
  0.24Diluted earnings (loss) per
common shareFrom
continuing operations
  
  $
  0.16
  
  $
  0.23From
discontinued operation, net of income
  tax benefit
  
  
  (0.02
  )From total
operations
  
  $
  0.14
  
  $
  0.23The accompanying
notes are an integral part of these financial statements.

-5-

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED
STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME

Thirteen weeks ended September 2, 2006 
(unaudited) 
(in thousands, except share data)

Common stock

Additional
  paid-in
  capital

Retained
  earnings

Accumulated
  other
  comprehensive
  income

Total

Compre-
  hensive
  incomeShares

AmountBalance at
June 3, 2006


10,862,899

$
1,086

$
30,071

$
64,263

$
6,422

$
101,842Exercise of
stock options


7,300


1


49








50Income tax
benefits on stock options exercised








115








115Compensation
related to stock option plans, net of income tax benefit








13








13Net
earnings











1,562





1,562

$
1,562Unrealized
holding gain on debt and equity securities














100


100


100Foreign
currency translation adjustments














(40
)

(40
)

(40
)Comprehensive
income



















$
1,622Balance at
September 2, 2006


10,870,199

$
1,087

$
30,248

$
65,825

$
6,482

$
103,642The accompanying notes are an integral part
of this financial statement.

-6-

E-Z-EM, Inc. and Subsidiaries

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

Thirteen
  weeks ended
  September 2,
  2006

Fourteen
  weeks ended
  September 3,
  2005Cash flows
from operating activities:Net
earnings

$
1,562

$
2,553(Earnings)
loss from discontinued
  operation, net of tax


221


(10
)Adjustments to
reconcile net earnings to
  net cash used in operating activitiesDepreciation
and amortization


884


915Provision for
doubtful accounts


23


14Tax benefit on
exercise of stock options





427Deferred
income tax provision


288


4Other non-cash
items


21


23Changes in
operating assets and
  liabilities, net of business divestedAccounts
receivable


(726
)

(4,138
)Inventories


(2,109
)

(3,328
)Other current
assets


1,522


358Other
assets


43


(169
)Accounts
payable


(251
)

1,025Accrued
liabilities


(2,619
)

(2,787
)Accrued
income taxes


157


108Other
noncurrent liabilities


(12
)

78Net cash used
in operating activities of
  discontinued operation


(208
)

(24
)Net cash used in
operating activities


(1,204
)

(4,951
)Cash flows
from investing activities:Additions to
property, plant and equipment,
  net


(1,190
)

(414
)Available-for-sale securitiesPurchases


(147,140
)

(41,495
)Proceeds from
sale


151,764


41,372Net cash
provided by investing activities
  of discontinued operation


2Net cash
provided by (used in) investing
  activities


3,436


(537
)The accompanying notes are an integral part
of these financial statements.

-7-

E-Z-EM, Inc. and Subsidiaries

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

Thirteen
  weeks ended
  September 2,
  2006

Fourteen
  weeks ended
  September 3,
  2005Cash flows
from financing activities:Repayments of
debt

$
(13
)
$
(20
)Proceeds from
exercise of stock options


50


52Tax benefit on
exercise of stock options


115Proceeds from
issuance of stock in
  connection with the stock purchase plan





3Net cash used
in financing activities of
  discontinued operation


(105
)

(41
)Net cash
provided by (used in) financing
  activities


47


(6
)Effect of
exchange rate changes on cash and
  cash equivalents


(46
)

1,270INCREASE
(DECREASE) IN CASH AND CASH
  EQUIVALENTS


2,233


(4,224
)Cash and cash
equivalentsBeginning of
period


6,749


10,123End of
period

$
8,982

$
5,899Supplemental
disclosures of cash flow
  information:Cash paid
(refunded) during the period for:Interest

$
34

$
125Income taxes
(net of refunds of $1,162 in
  2006)

$
(858
)
$
378The accompanying notes are an integral part
of these financial statements.

-8-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005(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 the exclusive worldwide manufacturer and marketer of Reactive Skin
  Decontamination Lotion (RSDL) for first-responder organizations and military
  services. RSDL is a patented, broad spectrum liquid chemical warfare agent
  decontaminant, that neutralizes or removes chemical agents from skin on
  contact, leaving a non-toxic residue that can be rinsed off with water. The
  Company also leverages its capacities in manufacturing, automation and
  quality control by offering contract manufacturing to third-party businesses.Basis of PresentationThe
  consolidated balance sheet as of September 2, 2006, the consolidated
  statement of stockholders equity and comprehensive income for the period
  ended September 2, 2006, and the consolidated statements of earnings and cash
  flows for the thirteen weeks ended September 2, 2006 and fourteen weeks ended
  September 3, 2005, have been prepared by the Company without audit. The
  consolidated balance sheet as of June 3, 2006 was derived from audited
  consolidated financial statements. In the opinion of management, all
  adjustments (which include only normally recurring adjustments) necessary to
  present fairly the financial position, changes in stockholders equity and
  comprehensive income, results of operations and cash flows at September 2,
  2006 (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.
  These consolidated financial statements should 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 June 3, 2006, filed by the Company on
  August 17, 2006. The results of operations for the periods ended September 2,
  2006, and September 3, 2005, are not necessarily indicative of the operating
  results for the respective full years.The
  consolidated financial statements include the accounts of E-Z-EM, Inc. and
  all wholly owned subsidiaries. Toho Kagaku Kenkyusho Co., Ltd., the Companys
  wholly owned Japanese subsidiary, is reported separately as a discontinued
  operation for all periods presented within the consolidated financial
  statements (see Note B). All significant intercompany balances and
  transactions have been eliminated.-9-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005(unaudited)

NOTE B  -  DISCONTINUED
OPERATION

In February
  2006, the Executive Committee of the Board of Directors approved a plan to
  wind down and close the operations of Toho Kagaku Kenkyusho Co., Ltd.
  (Toho), a wholly owned Japanese subsidiary. The decision to close Toho
  resulted from an inability to generate income from operations and to grow the
  business due to a limited product offering and scope of operations. Also, a
  recent change in manufacturing location required a re-registration of Tohos
  principal products with Japanese regulatory authorities, resulting in a
  projected interruption of supply during the first quarter of fiscal 2007.
  Management planned a market withdrawal on a staged basis so that current
  inventory could be sold, accounts receivable collected and the property sold
  in an organized fashion, while also satisfying all outstanding liabilities.
  As a result of this plan, foreign currency translation losses of $33,000
  included in accumulated other comprehensive income have been charged to
  results of operations for the thirteen weeks ended September 2, 2006 in
  accordance with EITF Issue No. 01-5, Application
  of FASB Statement No. 52 to an Investment Being Evaluated for Impairment That
  Will Be Disposed Of. EITF 01-5 requires that accumulated foreign currency
  translation adjustments be included as part of the carrying amount of a
  foreign investment being evaluated for impairment under a committed plan of
  disposal. For all periods presented, Toho is accounted for as a discontinued
  operation in the Companys financial statements in accordance with 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.For the
  thirteen weeks ended September 2, 2006, project costs, primarily severance
  and the above-mentioned impairment, aggregated $230,000, and the Company
  expects to incur up to an additional $51,000 in project costs during the
  second quarter of fiscal 2007. Changes in project costs are as follows:September 2,
  2006(in thousands)Beginning
  balance

$
333Recorded


230Paid


(300
)Ending
  balance

$
263-10-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005(unaudited)

NOTE B  -  DISCONTINUED
OPERATION (continued)

The
  following table sets forth the carrying amounts of the major classes of
  assets and liabilities of Toho, which are classified as assets and
  liabilities of discontinued operation in the accompanying consolidated
  balance sheet:September 2,
  2006

June 3,
  2006(in thousands)ASSETSCash and
  cash equivalents

$
178

$
73Accounts
  receivable


102


229Inventory





124Current
  assets of discontinued operation

$
280

$
426Property,
  plant and equipment

$
651

$
603Other assets


1


2Noncurrent
  assets of discontinued operation

$
652

$
605LIABILITIESAccounts
  payable




$
19Accrued
  liabilities

$
263


392Accrued
  income taxes


1


6Current
  liabilities of discontinued operation

$
264

$
417Summarized
results of operations for Toho as reported in earnings (loss) from discontinued
operation in the accompanying consolidated statements of earnings are as
follows:Thirteen
  weeks ended
  September 2,
  2006

Fourteen
  weeks ended
  September 3,
  2005(in thousands)Net salesFrom
unaffiliated customers

$
194

$
390Total net
  sales

$
194

$
390Earnings
  (loss) before income taxes

$
(341
)
$
10Income tax
  benefit


(120
)Earnings
  (loss) from discontinued operation

$
(221
)
$
10-11-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE C  -  STOCK-BASED COMPENSATION

Effective
  June 4, 2006, the Company adopted the provisions of Statement of Financial
  Accounting Standards (SFAS) No. 123(R), Share-Based Payment, which
  revises SFAS No. 123, Accounting for Stock-Based Compensation and
  supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.
  SFAS No. 123(R) requires that all stock-based compensation be recognized as
  an expense in the financial statements and that such cost be measured at the
  fair value of the award.Prior to the
  adoption of SFAS No. 123(R), the Company accounted for stock-based
  compensation awards under its three stock-based compensation plans using the
  intrinsic value method of Accounting Principles Board (APB) Opinion No. 25,
  Accounting for Stock Issued to Employees and related interpretations.
  Accordingly, no compensation expense had been recognized under these plans
  concerning stock options granted to employees and to members of the Board of
  Directors, as all such stock options granted had exercise prices equal to or
  greater than the market value of the underlying common stock on the dates of
  grant.Additionally,
  in periods prior to June 4, 2006, the Company followed the disclosure-only
  requirements of SFAS No. 123 which allowed entities to continue to apply the
  provisions of APB No. 25 for transactions with employees and directors and
  provide pro forma net earnings and pro forma earnings per share disclosures
  for employees and directors stock option grants made as if the fair value
  based method of accounting in SFAS No. 123 had been applied to these
  transactions.SFAS No.
  123(R) was adopted using the modified prospective method, which requires the
  Company to recognize compensation expense on a prospective basis. Therefore,
  prior period financial statements have not been restated. Under this
  transition method, the Company will apply the provisions of SFAS No. 123(R)
  to new awards and to awards modified, repurchased or cancelled on or after
  June 4, 2006. The provisions of SFAS No. 123(R) will not apply to any stock
  options outstanding as of June 4, 2006, since all such options were fully
  vested.For the
  thirteen weeks ended September 2, 2006, the Company did not recognize any
  share-based compensation expense in the consolidated financial statements for
  awards concerning employees or members of the Board of Directors since no
  stock options were granted nor were there any modifications of outstanding
  stock options. For the thirteen weeks ended September 2, 2006, and the
  fourteen weeks ended September 3, 2005, pre-tax compensation expense of
  $21,000 ($13,000 after tax effects) and $23,000 ($15,000 after tax effects),
  respectively, was recognized for stock options granted in prior years to a
  former director serving as a consultant. This expense is included in selling,
  general and administrative expense in the accompanying consolidated
  statements of earnings.-12-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE C  -  STOCK-BASED COMPENSATION (continued)

Prior to the
  adoption of SFAS No. 123(R), the Company presented all tax benefits resulting
  from the exercise of stock options as operating cash flows in the
  consolidated statement of cash flows. SFAS No. 123(R) requires that cash
  flows from the exercise of stock options resulting from tax benefits in
  excess of recognized cumulative compensation cost (excess tax benefits) be
  classified as financing cash flows.The
  following table illustrates the effect on net earnings and earnings per
  common share if the Company had applied the fair value recognition provisions
  of SFAS No. 123 to stock options granted under these plans to employees and
  to members of the Board of Directors:Fourteen
  weeks ended
  September 3,
  2005(in thousands,
  except per share data)Net earnings, as
reported

$
2,553Deduct: Total stock-based
employee
  compensation expense determined under the fair value based method for all
  awards, net of income tax effects


(286
)Pro forma net
earnings

$
2,267Earnings per common
shareBasic - as
reported

$
.24Basic - pro
forma


.21Diluted - as reported

$
.23Diluted - pro
forma


.21The fair
  value of options granted is estimated on the date of grant using the
  Black-Scholes option-pricing model based on the following weighted-average
  assumptions for all plans:Fourteen
  weeks ended
  September 3,
  2005Expected life (years)


5.0Expected volatility


47.86%Risk-free interest
rate


3.64%Dividend yield


None-13-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005 
(unaudited)

NOTE C - STOCK-BASED COMPENSATION (continued)

The expected
  life of the options represents the estimated period of time until exercise
  and is based on historical experience of similar awards, giving consideration
  to the contractual terms, vesting schedules and expectations of future
  behavior. The expected volatility is estimated using the historical
  volatility of the Companys stock. The risk-free interest rate is based on
  the U.S. Treasury rates at the date of grant with maturity dates
  approximately equal to the expected life at the grant date. The Company has
  not historically issued any dividends and does not expect to in the foreseeable
  future.2004 Stock and Incentive Award PlanIn October
  2004, the Company adopted the 2004 Stock and Incentive Award Plan (the 2004
  Plan). The 2004 Plan provides for the grant of incentive stock options to
  employees and for the grant of nonstatutory stock options, restricted stock,
  stock appreciation rights, performance units, performance shares and
  incentive awards to employees, directors and other service providers. A total
  of 1,008,425 shares of the Companys common stock have been reserved for
  issuance under the 2004 Plan, including 576,346 shares and 82,079 shares
  reallocated from the 1983 Stock Option Plan and 1984 Directors and
  Consultants Stock Option Plan, respectively. A committee of the board
  administers the 2004 Plan. The committee determines the vesting terms and
  exercise price of options granted under the 2004 Plan, but for all incentive
  stock options the exercise price must at least be equal to the fair market
  value of the Companys common stock on the date of grant. The term of an
  incentive stock option may not exceed ten years, and up to 800,000 shares of
  the Companys common stock may be issued upon exercise of incentive stock
  options. No awards may be granted under the 2004 Plan after October 26, 2014.
  At September 2, 2006, there were 30,675 shares available for grants of
  options and other awards under the 2004 Plan.1983 Stock Option PlanIn 1983, the
  Company adopted the 1983 Stock Option Plan (the 1983 Plan). The 1983 Plan
  provides for the grant to key employees of both nonqualified stock options
  and incentive stock options. A total of 2,041,628 shares (given effect to the
  reallocation of 576,346 shares to the 2004 Plan) of the Companys common
  stock may be issued under the 1983 Plan pursuant to the exercise of options.
  All outstanding stock options have an exercise price of not less than the
  market value of the shares on the date of grant. Outstanding options are
  exercisable over a period of time designated by the administrators of the
  1983 Plan (but not more than 10 years from the date of grant) and are subject
  to such other terms and conditions as the administrators have determined. No
  further options will be issued under the 1983 Plan.-14-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005 (unaudited)

NOTE C - STOCK-BASED COMPENSATION (continued)

1984 Stock Option PlanIn 1984, the
  Company adopted the 1984 Directors and Consultants Stock Option Plan (the
  1984 Plan). The 1984 Plan provides for the grant to members of the Board of
  Directors and consultants of nonqualified stock options. A total of 377,411
  shares (given effect to the reallocation of 82,079 shares to the 2004 Plan)
  of the Companys common stock may be issued under the 1984 Plan pursuant to
  the exercise of options. All outstanding stock options have an exercise price
  of not less than the market value of the shares on the date of grant.
  Outstanding options are exercisable over a period of time designated by the administrators
  of the 1984 Plan (but not more than 10 years from the date of grant) and are
  subject to such other terms and conditions as the administrators have
  determined. No further options will be issued under the 1984 Plan.The
  following is a summary of the stock option activity during the thirteen weeks
  ended September 2, 2006:Number of
  Shares
  (000)

Weighted
  Average
  Exercise
  Price

Weighted
  Average
  Remaining
  Contractual
  Life in
  Years

Aggregate
  Intrinsic
  Value
  (000)Outstanding at beginning of
period


1,358

$
12.23


7.65Exercised


(7
)
$
6.75


5.93Forfeited


(6
)
$
14.39


8.50Outstanding at end of
period


1,345

$
12.25


7.40

$
3,608Vested or expected to vest at
end of period


1,345

$
12.25


7.40

$
3,608Exercisable at end of
period


1,345

$
12.25


7.40

$
3,608The
  weighted-average grant-date fair value of stock options granted during the
  fourteen weeks ended September 3, 2005 was $6.67 per share. The aggregate
  intrinsic value in the table above is before applicable income taxes and is
  based on the Companys closing stock price as of the last business day of the
  respective period. The total intrinsic value of stock options exercised
  during the thirteen weeks ended September 2, 2006 and fourteen weeks ended
  September 3, 2005 was $51,000 and $174,000, respectively.-15-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE C - STOCK-BASED COMPENSATION (continued)

The Company
  received cash from stock options exercised during the thirteen weeks ended
  September 2, 2006 and fourteen weeks ended September 3, 2005 of $50,000 and
  $52,000, respectively. The impact of these cash receipts is included in
  financing activities in the accompanying consolidated statements of cash
  flows. The Company realized tax benefits from the exercise of stock options
  during the thirteen weeks ended September 2, 2006 and fourteen weeks ended
  September 3, 2005 of $115,000 and $427,000, respectively.NOTE D - EARNINGS PER COMMON SHAREBasic 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
  dilutive 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
  September 2,
  2006

Fourteen
  weeks ended
  September 3,
  2005(in thousands)Basic


10,867


10,837Effect of dilutive
  securities (stock options)


192


163Diluted


11,059


11,000Excluded
  from the calculation of earnings per common share, are options to purchase
  224,750 and 614,500 shares of common stock for the thirteen weeks ended
  September 2, 2006 and the fourteen weeks ended September 3, 2005,
  respectively, as their inclusion would be anti-dilutive. For the thirteen
  weeks ended September 2, 2006, the range of exercise prices on the excluded
  options was $15.64 to $17.49 per share and, for the fourteen weeks ended
  September 3, 2005, the range of exercise prices on the excluded options was
  $14.23 to $14.68 per share.-16-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE 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, which 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.Effective
  June 4, 2006, the Company adopted the provisions of SFAS No. 151, Inventory
  Costs, an amendment of ARB No. 43, Chapter 4. The amendments made by SFAS No.
  151 improve financial reporting by clarifying that abnormal amounts of idle
  facility expense, freight, handling costs, and wasted materials (spoilage) 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 facility. The adoption of SFAS No. 151 has had no current impact
  on the Companys financial condition or results of operations.Effective
  June 4, 2006, the Company adopted the provisions of SFAS No. 154, Accounting
  Changes and Error Corrections, a replacement of APB Opinion No. 20,
  Accounting Changes, and SFAS 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 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. The adoption
  of SFAS No. 154 has had no current impact on the Companys financial
  condition or results of operations.-17-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

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

In June
  2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
  in Income Taxes, an interpretation of FASB Statement No. 109, (FIN 48).
  FIN 48 clarifies the accounting for uncertainties in income taxes recognized
  in an enterprises financial statements. The Interpretation requires that the
  Company determine whether it is more likely than not that a tax position will
  be sustained upon examination by the appropriate taxing authority. If a tax
  position meets the more likely than not recognition criteria, FIN 48 requires
  the tax position be measured at the largest amount of benefit greater than 50
  percent likely of being realized upon ultimate settlement. This accounting
  standard is effective for fiscal years beginning after December 15, 2006. The
  Company does not believe the adoption of FIN 48 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
  September 2,
  2006

Fourteen
  weeks ended
  September 3,
  2005(in thousands)Net earnings

$
1,562

$
2,553Unrealized holding gain on debt
and equity
  securities arising during the period


100


63Foreign currency translation
adjustments
  arising during the period


(40
)

1,757Comprehensive income

$
1,622

$
4,373The
  components of accumulated other comprehensive income, net of related tax, are
  as follows:September 2,
  2006

June 3,
  2006(in thousands)Unrealized holding gain on debt
and equity
  securities

$
623

$
523Cumulative translation
adjustments


5,859


5,899Accumulated other comprehensive
income

$
6,482

$
6,422-18-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE G - PLANT CLOSING AND OPERATIONAL
RESTRUCTURING

In May 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
  fourteen weeks ended September 3, 2005, project costs aggregated $158,000. At
  September 3, 2005, the liability for this restructuring, which is included in
  accrued liabilities, approximated $296,000.Changes in
  project costs are as follows:September
  3,
  2005(in
  thousands)Beginning
  balance

$
598Recorded


158Paid


(460
)Ending
  balance

$
296NOTE H - DEBT AND EQUITY SECURITIES

Debt and
  equity securities at September 2, 2006 consisted of the following:Amortized
  cost

Fair
  value

Unrealized
  holding
  gain(in thousands)CurrentAvailable-for-sale securities
(carried on
  the balance sheet at fair value)Municipal
bonds with maturitiesDue after 10
years and through 20 years

$
14,950

$
14,950Due after 20
years


13,720


13,720Other


152


152$
28,822

$
28,822NoncurrentAvailable-for-sale securities
(carried on
  the balance sheet at fair value)Equity
securities

$
257

$
1,239

$
982$
257

$
1,239

$
982-19-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE H - DEBT AND EQUITY SECURITIES
(continued)

Debt
and equity securities at June 3, 2006 consisted of the following:

Amortized
  cost

Fair
  value

Unrealized
  holding
  gain(in thousands)CurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Municipal
bonds with maturitiesDue in 1 through
10 years

$
2,000

$
2,000Due after 10 years
and through 20 years



16,525



16,525Due after 20
years



14,765



14,765Other



156



156$
33,446


$
33,446NoncurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Equity
securities

$
257

$
1,088

$
831$
257

$
1,088

$
831NOTE I - INVENTORIES

Inventories
consist of the following:

September 2,
  2006

June 3,
  2006(in thousands)Finished
goods






$
12,585

$
12,140Work in
process








650



604Raw
materials








15,902



14,284$
29,137

$
27,028-20-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2, 2006 and September 3, 2005
(unaudited)

NOTE J - CONTINGENCIES

Litigation MattersThe Company
  is party to 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.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 thirteen weeks ended September 2, 2006 and the fourteen weeks
  ended September 3, 2005, sales of products to Merry X-Ray, including sales to
  SourceOne before its acquisition by Merry X-Ray, represented 35% and 41% of
  total sales, respectively. Approximately 40% and 39% of accounts receivable
  pertained to Merry X-Ray at September 2, 2006 and June 3, 2006,
  respectively. While the accounts receivable related to this distributor are
  significant, the Company does not believe the credit loss risk to be
  significant given the consistent payment history of this distributor.NOTE K - COMMON STOCKStock 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 thirteen weeks ended September 2 2006 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.-21-

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

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, intellectual property matters, the outcome of contingencies, such as
legal proceedings, and financial results.

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. As a result, investors
are cautioned not to place undue reliance on any of our forward-looking
statements. Investors should bear this in mind as they consider forward-looking
statements.

We do not
assume any obligation to update or revise any forward-looking statement that we
make, even if new information becomes available or other events occur in the
future. We are also affected by other factors which may be identified from time
to time in our filings with the Securities and Exchange Commission some of
which are set forth in Item 1A  Risk Factors in our Form 10-K filing for the
2006 fiscal year. You are advised 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. Although we have attempted to provide a list of important
factors which may affect our business, investors are cautioned that other
factors may prove to be important in the future and could affect our operating
results. You should understand that it is not possible to predict or identify all
such factors or to assess the impact of each factor or combination of factors
on our business. 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

-22-

enema) to CT
based applications for imaging the entire abdominal tract because of the
enhanced benefits of Multidetector CT technology.

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.

In May 2006,
we announced the launch of our CO2EFFICIENTTM Endoscopic Insufflator, a new
device for insufflating, or filling, the upper and lower gastrointestinal tract with carbon dioxide (CO2)
gas. CO2EFFICIENT provides a quick and easy way to use CO2
gas insufflation in all endoscopic procedures. We believe that use of this
device will improve patient comfort and increase the efficiency of endoscopic procedures,
and that we are well positioned to continue building our presence in this
market.

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. In April 2005, we purchased from
our strategic partner, ODell Engineering, all its assets related to the RSDL
technology. 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.

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, our net sales have been favorably affected
by our ability to provide replacement products since the recall began. During
the fourth quarter of 2006, Mallinckrodt returned to the market with a reduced
product offering. In addition, Mallinckrodt announced its decision to partner
with a third-party organization to sell its barium products in the U.S. We
believe that Mallinckrodts return to the market has had minimal effect on our
sales and earnings to date.

In February
2006, the Executive Committee of our Board of Directors approved a plan to wind
down and close the operations of Toho Kagaku Kenkyusho Co., Ltd. (Toho), a
wholly owned Japanese subsidiary. We decided to close Toho because we were
unable to generate income from operations to grow the business due to a limited
product offering and the scope of Tohos operations. Also, a recent change in
manufacturing location required us to re-register Tohos principal products
with the Japanese regulatory authorities, which we projected would cause an
interruption of supply during the first quarter of 2007. We planned a staged
market withdrawal to allow us to sell current inventory, collect accounts
receivable and sell the property in an organized fashion, while also satisfying
all outstanding liabilities. For all periods presented, Toho is accounted for as
a discontinued operation in the Companys financial statements in accordance
with SFAS No. 144, Accounting for Impairment and Disposal of Long-Lived
Assets.

Results of Operations

Our quarters
ended September 2, 2006 and September 3, 2005 represent thirteen weeks and fourteen
weeks, respectively.

-23-

Consolidated Results of Operations

For the
quarter ended September 2, 2006, we reported net earnings of $1,562,000, or
$.14 per common share on both a basic and diluted basis, as compared to net
earnings of $2,553,000, or $.24 and $.23 per common share on a basic and
diluted basis, respectively, for the comparable period of last year.

The following
table sets forth earnings from continuing operations and earnings (loss) from
discontinued operation for the quarters ended September 2, 2006 and September
3, 2005:

2006

2005(in thousands)Earnings from continuing
operations

$
1,783

$
2,543Earnings (loss) from
discontinued operation


(221
)

10Net earnings

$
1,562

$
2,553Our results are expressed as a
percentage of net sales for the quarters ended September 2, 2006 and September
3, 2005 in the following table:

2006

2005Net sales


100.0
%

100.0
%Cost of goods sold


56.4


54.4Gross
profit


43.6


45.6Operating expensesSelling,
general and administrative


33.3


29.7Plant closing
and operational restructuring
  costs





0.5Research and
development


4.1


3.9Total
operating expenses


37.4


34.1Operating
profit


6.2


11.5Other income
(expense)Interest
income


1.1


0.5Interest
expense


(0.2
)

(0.3
)Other,
net


0.8


(0.3
)Earnings from
continuing operations before
  income taxes


7.9


11.4Income tax provision


2.5


4.0Earnings from
continuing operations


5.4


7.4Earnings (loss) from
discontinued
  operation, net of income tax benefit


(0.7
)

0.0NET
EARNINGS


4.7
%

7.4
%-24-

Continuing Operations

Operating
profit for the current quarter declined by $1,891,000 due to decreased sales
and gross profit and increased operating expenses. Results for the comparable
quarter of last year included $158,000 in plant closing and operational
restructuring costs related to the moving of our powder-based barium production
to our manufacturing facility in Montreal, Canada.

Net sales for
the quarter ended September 2, 2006 decreased 3%, or $954,000, as compared to
the quarter ended September 3, 2005. Net sales in the first quarter of the
prior year benefited from one additional week compared with the current
quarter, as well as from approximately $1,600,000 in backlog sales associated
with the Mallinckrodt recall. Price increases accounted for slightly less than
1% of net sales for the current quarter, as a significant portion of our
domestic products are sold under fixed pricing, long-term group purchasing
organization contracts. On a product line basis, the net sales decline resulted
from decreased sales of CT imaging contrast products of $1,816,000 and X-ray
fluoroscopy products of $298,000, partially offset by increased sales of CT
injector systems of $1,058,000.

Net sales in
international markets, including direct exports from the U.S., increased 6%, or
$548,000, for the current quarter from the prior years quarter due to foreign
currency exchange fluctuations, which increased the translated amounts of
foreign subsidiaries sales to U.S. dollars for financial reporting purposes by
$453,000, and price increases, which accounted for approximately 1% of net
sales in international markets for the current quarter. On a product line
basis, the net sales increase resulted primarily from increased sales of CT
imaging products of $662,000, X-ray fluoroscopy products of $520,000 and
virtual colonoscopy products of $296,000, partially offset by decreased sales
of contract manufacturing products of $717,000 and defense decontaminants of
$266,000.

The following
table sets forth net sales by product category for the quarters ended September
2, 2006 and September 3, 2005:

2006

2005$

%

$

%(dollars in thousands)CT Imaging Contrast

$
9,248


27.6

$
11,064


32.2CT Injector Systems


6,545


19.6


5,487


15.9Total CT
Imaging


15,793


47.2


16,551


48.1X-Ray Fluoroscopy


10,858


32.5


11,156


32.4Contract
Manufacturing


1,684


5.0


1,411


4.1Accessory Medical
Devices


1,453


4.3


1,407


4.1Gastroenterology


1,135


3.4


1,338


3.9Virtual Colonoscopy


1,188


3.6


828


2.4Defense
Decontaminants


497


1.5


751


2.2Other


832


2.5


952


2.8$
33,440


100.0

$
34,394


100.0Gross profit,
expressed as a percentage of net sales, decreased to 44% for the current
quarter from 46% for the comparable quarter of the prior year due to increased
costs for purchased finished products and increased materials cost primarily
from our barium sulfate suppliers. Increased finished product costs related
primarily to finished goods purchased from our Canadian subsidiary which were
adversely affected by the continued weakening of the U.S. dollar against the
Canadian dollar.

-25-

Selling,
general and administrative (SG&A) expenses were $11,141,000 for the
quarter ended September 2, 2006 compared to $10,219,000 for the quarter ended
September 3, 2005. This increase of $922,000, or 9%, was due primarily to costs
of $392,000 associated with an expansion of our North American sales force and
additional infrastructure expenses of $305,000 to support our defense
decontaminants business.

Research and
development (R&D) expenditures remained at 4% of net sales and increased
3% for the current quarter to $1,376,000 from $1,340,000 for the comparable
quarter of the prior year. Increased costs of $54,000 for defense decontaminant
projects, $53,000 for virtual colonoscopy projects and $40,000 for other
projects were partially offset by decreased general regulatory costs of $86,000
and decreased costs of $25,000 for gastroenterology projects. Of the R&D expenditures
for the current quarter, approximately 57% related to X-ray fluoroscopy and CT
imaging projects, 25% to general regulatory costs, 7% to gastroenterology
projects, 4% to virtual colonoscopy projects, 4% to defense decontaminant
projects and 3% to other projects. R&D expenditures are expected to
continue at or exceed current amounts for the remainder of this fiscal year.

Other income
(expense) totaled $560,000 of income for the current quarter compared to
expense of $57,000 for the comparable period of last year. This improvement is
due to favorable changes in foreign currency exchange gains and losses of
$382,000, increased interest income of $196,000 and decreased interest expense
of $46,000.

For the
quarter ended September 2, 2006, our effective tax rate of 32% differed from
the Federal statutory tax rate of 34% due primarily to tax-exempt income,
partially offset by non-deductible expenses. For the quarter ended September 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.

Discontinued Operation

We have
consolidated the financial statements of Toho and reported its results as a
discontinued operation. Summarized results of operations for Toho as reported
in earnings (loss) from discontinued operation in the accompanying consolidated
statements of earnings for the quarters ended September 2, 2006 and September
3, 2005 are as follows:

2006

2005(in thousands)Net salesFrom
unaffiliated customers

$
194

$
390Total net sales

$
194

$
390Earnings (loss) before income
taxes

$
(341
)
$
10Income tax benefit


(120
)Earnings (loss) from
discontinued operation

$
(221
)
$
10The results
for the discontinued operation for the current quarter represent two months of
operational activity and, therefore, are not comparative to the results for the
prior years first quarter.

-26-

Liquidity and Capital Resources

For the
quarter ended September 2, 2006, 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. At
September 2, 2006, debt (current maturities of long-term debt) was $18,000, as
compared to $31,000 at June 3, 2006. We have available $1,811,000 under a bank
line of credit, of which no amounts were outstanding at September 2, 2006.

Our
contractual obligations and their effect on liquidity and cash flows as of
September 2, 2006 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 September 2, 2006Total

Less than
  1 year

1-3
  years

3-5
  years

More than
  5 years(in thousands)Contractual
Obligations:Long-term
debt

$
18

$
18Operating
leases (1)


6,881


1,843

$
3,425

$
1,613Purchase
obligations (1)


5,064


4,238


826Employment
contract (1)


720


720Consulting
contracts (1)


14


14Other
liabilities reflected on the consolidated balance sheetDeferred
compensation (2)


2,740


68


150


190

$
2,332Asset
acquisition


700


700License
arrangements


686


686Accrued
severance benefits


148


148Total

$
16,971

$
8,435

$
4,401

$
1,803

$
2,332(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 product and
  component parts.(2)
Deferred
  compensation costs covering active employees are assumed payable after five years,
  although certain circumstances, such as termination, would require earlier
  payment.At September
2, 2006, approximately $37,804,000, or 31%, of our assets consisted of cash and
cash equivalents and short-term debt and equity securities. The current ratio
was 6.10 to 1, with net working capital of $78,778,000, at September 2, 2006,
compared to the current ratio of 5.21 to 1, with net working capital of
$77,061,000, at June 3, 2006. We believe that our cash reserves, cash provided
from operations and existing bank line of credit will provide sufficient
liquidity to meet our cash requirements 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
quarter ended September 2, 2006, 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.

-27-

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 June 3, 2006. 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. 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, 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 agreed upon list prices. 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 quarters ended September 2, 2006 and September 3, 2005
are as follows:

2006

2005(in thousands)Beginning
  balance

$
1,866

$
1,397Provision for
  rebates


6,691


6,963Rebate
  credits issued


(6,418
)

(6,250
)Ending
  balance

$
2,139

$
2,110The rebate
allowance is comprised of three components:


actual rebate requests received from distributors prior to the
  closing of our financial statements;-28-


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
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 $729,000
and $688,000 at September 2, 2006 and June 3, 2006, 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 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. Concentration risk exists relative
to our accounts receivable, as 40% and 39% of our total accounts receivable
balance at September 2, 2006 and June 3, 2006, respectively, was 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.

-29-

Changes in our
allowance for doubtful accounts for the quarters ended September 2, 2006 and
September 3, 2005 are as follows:

2006

2005(in thousands)Beginning
  balance

$
888

$
837Provision
  for doubtful accounts


23


14Write-offs





(1
)Ending
  balance

$
911

$
850Income 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 September 2, 2006 and June 3, 2006, our reserve
for excess and obsolete inventory was $2,385,000 and $2,053,000, respectively.

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, which 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.

-30-

Effective June
4, 2006, we adopted the provisions of 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 improve financial reporting by
clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) 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 facility. The adoption of SFAS
No. 151 has had no current impact on our financial condition or results of
operations.

Effective June
4, 2006, we adopted the provisions of SFAS No. 123(R), Share-Based Payment,
which revises SFAS No. 123, Accounting for Stock-Based Compensation and
supersedes 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 SFAS No. 123(R) has had no
current impact on our financial condition or results of operations.

Effective June
4, 2006, we adopted the provisions of SFAS No. 154, Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and
SFAS 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 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. The adoption of SFAS No. 154 has had no current impact on
our financial condition or results of operations.

In June 2006,
the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109, (FIN 48). FIN 48
clarifies the accounting for uncertainties in income taxes recognized in an
enterprises financial statements. The Interpretation requires that we
determine whether it is more likely than not that a tax position will be
sustained upon examination by the appropriate taxing authority. If a tax
position meets the more likely than not recognition criteria, FIN 48 requires
the tax position be measured at the largest amount of benefit greater than 50
percent likely of being realized upon ultimate settlement. This accounting
standard is effective for fiscal years beginning after December 15, 2006. We do
not believe the adoption of FIN 48 will have a material impact on our financial
condition or results of operations.

-31-

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, that 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 2006 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 against the U.S. dollar of 10% at September 2,
2006, our assets and liabilities would increase or decrease by $4,400,000 and
$695,000, respectively, and our net sales and net earnings would increase or
decrease by $2,972,000 and $152,000, 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 against the U.S. dollar of 10% at
September 2, 2006, our pre-tax earnings would be favorably or unfavorably
impacted by approximately $1,010,000 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 securities and
therefore affect our cash flows and results of operations. As of September 2,
2006, we were exposed to interest rate change market risk with respect to our
investments in tax-free municipal bonds in the principal amount of $28,670,000.
The bonds bear interest at a floating rate established between seven and 35
days. For the quarter ended September 2, 2006, the after-tax interest rate on
the bonds approximated 3.8%. Each 100 basis point (or 1%) fluctuation in
interest rates will increase or decrease interest income on the bonds by
approximately $287,000 on an annual basis.

As our
principal amount of fixed interest rate financing approximated $18,000 at
September 2, 2006, a change in interest rates would not materially impact
results of operations or financial position. At September 2, 2006, we did not
maintain any variable interest rate financing.

As of
September 2, 2006, we have available $1,811,000 under a working capital bank
line of credit. Advances under this line of credit will bear interest at an
annual rate indexed to the Canadian prime rate. 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.

-32-

Item 4.
Controls and ProceduresEvaluation of Disclosure Controls and
Procedures

As required by
Rule 13a-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 September 2,
2006. 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 September 2, 2006, 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 first
quarter ended September 2, 2006 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

-33-

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 June 3, 2006.

Item 1A.
Risk FactorsThere have
been no material changes from the risk factors previously disclosed in Part I,
Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 3,
2006.

Item 2.
Unregistered
Sales of Securities and Use of ProceedsNone.Item 3.
Defaults
Upon Senior SecuritiesNone.Item 4.
Submission
Of Matters to a Vote of Security HoldersNone.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 By-laws of the Registrant

(b)10.1

Annual
  Incentive Plan, as amended

3710.2

Summary of
  the Compensation of the Non-employee Directors of E-Z-EM, Inc.

(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)

46-34-

No.

Description

Page31.2

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)

4832.1

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)

5032.2

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)

51(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 August 25, 2006.-35-

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
October 12, 2006

/s/ Anthony A.
LombardoAnthony A.
Lombardo, President,Chief
Executive Officer, Director(Principal
Executive Officer)Date
October 12, 2006

/s/ Dennis J.
CurtinDennis J.
Curtin, Senior VicePresident -
Chief FinancialOfficer
(Principal Financial andChief
Accounting Officer)-36-