|                                               
|-----------------------------------------------
|UNITED STATESSECURITIES 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 March 3, 2007           | 
|  |  |                                                        | 
|  |  | 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  0-13003                        | 
|  |  |                                                        | 
|  |  | E-Z-EM, Inc.                                           | 
|  |  |                                                        | 
|  |  | (Exact name of registrant as specified in its charter) | 

| |                                 |  |                     | 
| | ------------------------------- |  | ------------------- | 
| | Delaware                        |  | 11-1999504          | 
| |                                 |  |                     | 
| | (State
or other jurisdiction of |  | (I.R.S. Employer    | 
| | incorporation
or organization)  |  | Identification No.) | 

|                                           |  |            | 
|------------------------------------------ |  | ---------- | 
|1111 Marcus Avenue, Lake Success, New York |  | 11042      | 
|                                           |  |            | 
|(Address of principal executive offices)   |  | (Zip Code) | 

|                                                  
|--------------------------------------------------
|(516) 333-8230                                    
|                                                  
|Registrant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 April 5, 2007, there were 10,974,669 shares of the issuers common stock outstanding.

|
|



|E-Z-EM, Inc. and Subsidiaries
|-----------------------------
|                             
|INDEX                        
|                             

|Part I:       Financial Information | Page                                                                                                                                                    |        
|----------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -------
|
|                                   
|                                    | Item l.      Financial Statements                                                                                                                       |        
|                                    |                                                                                                                                                         |        
|                                    | Consolidated Balance Sheets  March 3, 2007 and June 3, 2006                                                                                            | 3  4  
|                                    |                                                                                                                                                         |        
|                                    | Consolidated Statements of Earnings  Thirteen and thirty-nine        weeks ended March 3, 2007 and thirteen and forty weeks ended        March 4, 2006 | 5      
|                                    |                                                                                                                                                         |        
|                                    | Consolidated Statement of Stockholders Equity and        Comprehensive Income  Thirty-nine weeks ended March 3, 2007                                  | 6      
|                                    |                                                                                                                                                         |        
|                                    | Consolidated Statements of Cash Flows  Thirty-nine weeks        ended March 3, 2007 and forty weeks ended March 4, 2006                                | 7  8  
|                                    |                                                                                                                                                         |        
|                                    | Notes to Consolidated Financial Statements                                                                                                              | 9  21 
|                                    |                                                                                                                                                         |        
|                                    | Item 2.      Managements Discussion and Analysis of Financial                      Condition and Results of Operations                                 | 22  36
|                                    |                                                                                                                                                         |        
|                                    | Item 3.      Quantitative and Qualitative Disclosures About                      Market Risk                                                            | 36  37
|                                    |                                                                                                                                                         |        
|                                    | Item 4.      Controls and Procedures                                                                                                                    | 37     
|                                    |                                                                                                                                                         |        
|**Part II:    Other Information**   |                                                                                                                                                         |        
|                                    |                                                                                                                                                         |        
|                                    | Item 1.      Legal Proceedings                                                                                                                          | 38     
|                                    |                                                                                                                                                         |        
|                                    | Item 1A.   Risk Factors                                                                                                                                 | 38     
|                                    |                                                                                                                                                         |        
|                                    | Item 2.      Unregistered Sales of Equity Securities                      and Use of Proceeds                                                           | 39     
|                                    |                                                                                                                                                         |        
|                                    | Item 3.      Defaults Upon Senior Securities                                                                                                            | 39     
|                                    |                                                                                                                                                         |        
|                                    | Item 4.      Submission of Matters to a Vote of Security Holders                                                                                        | 39     
|                                    |                                                                                                                                                         |        
|                                    | Item 5.      Other Information                                                                                                                          | 39     
|                                    |                                                                                                                                                         |        
|                                    | Item 6.      Exhibits                                                                                                                                   | 39     

|-2-
|---



|E-Z-EM, Inc. and Subsidiaries            
|-----------------------------------------
|                                         
|CONSOLIDATED BALANCE SHEETS(in thousands)
|                                         

|ASSETS                                                                                          | March 3,
      2007 |         | June 3,
      2006 |  
|----------------------------------------------------------------------------------------------- | ------------------- | ------- | ------------------ | -
|
|                                                                                                |                    
|                                                                                               
|CURRENT ASSETS                                                                                  |                    
|Cash and cash equivalents                                                                       | $                   | 14,676  |                    | $
|Debt and equity securities, at fair value                                                       |                     | 28,049  |                    |  
|Accounts receivable, principally
       trade, net                                              |                     | 23,436  |                    |  
|Inventories, net                                                                                |                     | 27,108  |                    |  
|Refundable income taxes                                                                         |                     | 989     |                    |  
|Other current assets                                                                            |                     | 4,706   |                    |  
|Current assets of discontinued operation                                                        |                     |         |                    |  
|
|                                                                                               
|Total current assets                                                                            |                     | 98,964  |                    |  
|                                                                                               
|PROPERTY, PLANT AND EQUIPMENT - AT COST,
    less accumulated depreciation and
    amortization |                     | 14,536  |                    |  
|                                                                                               
|INTANGIBLE ASSETS, less accumulated
    amortization                                            |                     | 3,566   |                    |  
|                                                                                               
|DEBT AND EQUITY SECURITIES, at fair value                                                       |                     | 1,328   |                    |  
|                                                                                               
|CASH SURRENDER VALUE OF LIFE INSURANCE                                                          |                     | 6,626   |                    |  
|                                                                                               
|OTHER ASSETS                                                                                    |                     | 2,486   |                    |  
|                                                                                               
|NONCURRENT ASSETS OF DISCONTINUED OPERATION                                                     |                     |         |                    |  
|
|                                                                                               
|Total assets                                                                                    | $                   | 127,506 |                    | $
|

|                                                                          
|--------------------------------------------------------------------------
|The 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                                                                                                                                                                                                                                                           | March 3,
      2007 |         | June 3,
      2006 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------- | ------------------ | -
|
|
|                                                                                                                                                                                                                                                                                              
|CURRENT LIABILITIES                                                                                                                                                                                                                                                                            |                     |         |                    |  
|Current maturities of long-term debt                                                                                                                                                                                                                                                           | $                   | 4       |                    | $
|Accounts payable                                                                                                                                                                                                                                                                               |                     | 6,933   |                    |  
|Accrued liabilities                                                                                                                                                                                                                                                                            |                     | 9,027   |                    |  
|Accrued income taxes                                                                                                                                                                                                                                                                           |                     | 599     |                    |  
|Current liabilities of discontinued
       operation                                                                                                                                                                                                                                           |                     |         |                    |  
|
|                                                                                                                                                                                                                                                                                              
|Total current liabilities                                                                                                                                                                                                                                                                      |                     | 16,563  |                    |  
|                                                                                                                                                                                                                                                                                              
|OTHER NONCURRENT LIABILITIES                                                                                                                                                                                                                                                                   |                     | 3,669   |                    |  
|
|                                                                                                                                                                                                                                                                                              
|Total liabilities                                                                                                                                                                                                                                                                              |                     | 20,232  |                    |  
|
|                                                                                                                                                                                                                                                                                              
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                  |                     |         |                    |  
|                                                                                                                                                                                                                                                                                              
|STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                                           |                     |         |                    |  
|Preferred stock, par value $.10 per
       share - authorized, 1,000,000 shares;
       issued, none                                                                                                                                                                                           |                     |         |                    |  
|Common stock, par value $.10 per share -
       authorized, 16,000,000 shares; issued
       and outstanding 10,974,669 shares at
       March 3, 2007 and 10,862,899 shares
       at June 3, 2006 (excluding 89,205 shares
       held in treasury at March 3, 2007 and
       June 3, 2006) |                     | 1,098   |                    |  
|Additional paid-in capital                                                                                                                                                                                                                                                                     |                     | 31,766  |                    |  
|Retained earnings                                                                                                                                                                                                                                                                              |                     | 70,028  |                    |  
|Accumulated other comprehensive income                                                                                                                                                                                                                                                         |                     | 4,382   |                    |  
|
|                                                                                                                                                                                                                                                                                              
|Total stockholders equity                                                                                                                                                                                                                                                                     |                     | 107,274 |                    |  
|
|                                                                                                                                                                                                                                                                                              
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                     | $                   | 127,506 |                    | $
|

|                                                                          
|--------------------------------------------------------------------------
|The 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 weeks ended |        | Thirty-nine
      weeks ended |   | Forty
      weeks ended |  
|-------------------------------------------------------------------------------------- | -------------------- | ------ | ----------------------------- | - | ----------------------- | -
|
|
|                                                                                      
|Net sales                                                                              | $                    | 33,558 |                               | $ | 32,096                  |  
|Cost of goods sold                                                                     |                      | 19,372 |                               |   | 19,390                  |  
|
|                                                                                      
|Gross profit                                                                           |                      | 14,186 |                               |   | 12,706                  |  
|
|                                                                                      
|Operating expenses                                                                     |                      |        |                               |   |                         |  
|Selling, general and
    administrative                                                |                      | 10,548 |                               |   | 9,919                   |  
|Plant closing and operational
    restructuring costs (credits)                        |                      |        |                               |   | (39                     | )
|Gain on sale of real property                                                          |                      |        |                               |   | (1,205                  | )
|Research and development                                                               |                      | 888    |                               |   | 1,562                   |  
|                                                                                       |                      |        |                               |  
|
|                                                                                      
|Total operating expenses                                                               |                      | 11,436 |                               |   | 10,237                  |  
|
|                                                                                      
|Operating profit                                                                       |                      | 2,750  |                               |   | 2,469                   |  
|                                                                                      
|Other income (expense)                                                                 |                      |        |                               |   |                         |  
|Interest income                                                                        |                      | 366    |                               |   | 230                     |  
|Interest expense                                                                       |                      | (68    | )                             |   | (99                     | )
|Other, net                                                                             |                      | 120    |                               |   | 154                     |  
|
|                                                                                      
|Earnings from continuing
        operations before income
        taxes                |                      | 3,168  |                               |   | 2,754                   |  
|                                                                                      
|Income tax provision                                                                   |                      | 985    |                               |   | 389                     |  
|
|                                                                                      
|Earnings from continuing
        operations                                            |                      | 2,183  |                               |   | 2,365                   |  
|                                                                                      
|Earnings (loss) from discontinued
  operation, net of income tax
  provision (benefit) |                      | 216    |                               |   | 1,977                   |  
|
|                                                                                      
|NET EARNINGS                                                                           | $                    | 2,399  |                               | $ | 4,342                   |  
|
|                                                                                      
|Basic earnings (loss) per common
  share                                               |                      |        |                               |   |                         |  
|From continuing operations                                                             | $                    | 0.20   |                               | $ | 0.22                    |  
|From discontinued operation,
      net of income tax provision
      (benefit)         |                      | 0.02   |                               |   | 0.18                    |  
|
|                                                                                      
|From total operations                                                                  | $                    | 0.22   |                               | $ | 0.40                    |  
|
|                                                                                      
|Diluted earnings (loss) per common
  share                                             |                      |        |                               |   |                         |  
|From continuing operations                                                             | $                    | 0.20   |                               | $ | 0.21                    |  
|From discontinued operation,
      net of income tax provision
      (benefit)         |                      | 0.02   |                               |   | 0.18                    |  
|
|                                                                                      
|From total operations                                                                  | $                    | 0.22   |                               | $ | 0.39                    |  
|

|                                                                          
|--------------------------------------------------------------------------
|The 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

|                                                                                 
|---------------------------------------------------------------------------------
|Thirty-nine weeks ended March 3, 2007(unaudited)(in thousands, except share data)
|                                                                                 

|                                                                          | Common stock |  | Additional
      paid-in |       | Retained |   | Accumulated
      other
      comprehensive |  |   |        | Compre-
      hensive |  
|------------------------------------------------------------------------- | ------------ |  | ------------------------ | ----- | -------- | - | ------------------------------------------- |  | - | ------ | --------------------- | -
|
|
|                                                                         
|Balance at June 3, 2006                                                   | 10,862,899   |  | $                        | 1,086 |          | $ | 30,071                                      |  | $ | 64,263 |                       | $
|                                                                         
|Exercise of stock options                                                 | 104,020      |  |                          | 11    |          |   | 1,145                                       |  |   |        |                       |  
|Income tax benefits on
  stock options exercised                          |              |  |                          |       |          |   | 386                                         |  |   |        |                       |  
|Compensation related to
  stock option plans, net
  of income tax benefit |              |  |                          |       |          |   | 31                                          |  |   |        |                       |  
|Issuance of stock                                                         | 7,750        |  |                          | 1     |          |   | 133                                         |  |   |        |                       |  
|Net earnings                                                              |              |  |                          |       |          |   |                                             |  |   | 5,765  |                       |  
|Unrealized holding gain on debt
  and equity securities                   |              |  |                          |       |          |   |                                             |  |   |        |                       |  
|Foreign currency translation
  adjustments                                |              |  |                          |       |          |   |                                             |  |   |        |                       |  
|
|                                                                         
|Comprehensive income                                                      |              |  |                          |       |          |   |                                             |  |   |        |                       |  
|                                                                          |              |  |                          |       |          |   |                                             |  |   |        |                       |  
|                                                                         
|Balance at March 3, 2007                                                  | 10,974,669   |  | $                        | 1,098 |          | $ | 31,766                                      |  | $ | 70,028 |                       | $
|

|                                                                        
|------------------------------------------------------------------------
|The 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)
|                                                              

|                                                                                                     | Thirty-nine
      weeks ended
      March 3,
      2007 |          | Forty
      weeks ended
      March 4,
      2006 |  
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | -------- | ------------------------------------------------- | -
|
|
|Cash flows from operating activities:                                                                |                                                         |          |                                                   |  
|Net earnings                                                                                         | $                                                       | 5,765    |                                                   | $
|(Earnings) loss from discontinued operation,
    net of tax                                          |                                                         | 19       |                                                   |  
|Adjustments to reconcile net earnings to
    net cash provided by (used in) operating
    activities |                                                         |          |                                                   |  
|Depreciation and amortization                                                                        |                                                         | 2,604    |                                                   |  
|Gain on sale of assets                                                                               |                                                         |          |                                                   |  
|Provision for doubtful accounts                                                                      |                                                         | 67       |                                                   |  
|Tax benefit on exercise of stock options                                                             |                                                         |          |                                                   |  
|Deferred income tax provision (benefit)                                                              |                                                         | 1,048    |                                                   |  
|Stock option compensation cost                                                                       |                                                         | 49       |                                                   |  
|Stock compensation cost                                                                              |                                                         | 134      |                                                   |  
|Changes in operating assets and
        liabilities, net of business divested                        |                                                         |          |                                                   |  
|Accounts receivable                                                                                  |                                                         | (2,823   | )                                                 |  
|Inventories                                                                                          |                                                         | (80      | )                                                 |  
|Other current assets                                                                                 |                                                         | 1,348    |                                                   |  
|Other assets                                                                                         |                                                         | (106     | )                                                 |  
|Accounts payable                                                                                     |                                                         | 1,231    |                                                   |  
|Accrued liabilities                                                                                  |                                                         | (3,096   | )                                                 |  
|Accrued income taxes                                                                                 |                                                         | 552      |                                                   |  
|Other noncurrent liabilities                                                                         |                                                         | 85       |                                                   |  
|Net cash used in operating activities
        of discontinued operation                              |                                                         | (570     | )                                                 |  
|
|Net cash provided by (used in)
              operating activities                                    |                                                         | 6,227    |                                                   |  
|                                                                                                     |                                                         |         
|
|Cash flows from investing activities:                                                                |                                                         |          |                                                   |  
|Additions to property, plant and
    equipment, net                                                  |                                                         | (4,824   | )                                                 |  
|Proceeds from sale of assets                                                                         |                                                         |          |                                                   |  
|Advanced royalty fee                                                                                 |                                                         |          |                                                   |  
|Available-for-sale securities                                                                        |                                                         |          |                                                   |  
|Purchases                                                                                            |                                                         | (295,825 | )                                                 |  
|Proceeds from sale                                                                                   |                                                         | 301,222  |                                                   |  
|Net cash provided by (used in) investing
    activities of discontinued operation                    |                                                         | 1,068    |                                                   |  
|                                                                                                     |                                                         |         
|
|Net cash provided by (used in) investing
        activities                                          |                                                         | 1,641    |                                                   |  
|

|                                                                          
|--------------------------------------------------------------------------
|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)
|                                                                          

|                                                                                      | Thirty-nine
      weeks ended
      March 3,
      2007 |        | Forty
      weeks ended
      March 4,
      2006 |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------------------------------------------------- | -
|
|
|Cash flows from financing activities:                                                 |                                                         |        |                                                   |  
|Repayments of debt                                                                    | $                                                       | (27    | )                                                 | $
|Proceeds from exercise of stock options                                               |                                                         | 1,156  |                                                   |  
|Tax benefit on exercise of stock options                                              |                                                         | 386    |                                                   |  
|Proceeds from issuance of stock in connection
    with the stock purchase plan        |                                                         |        |                                                   |  
|Net cash provided by (used in) financing
    activities of discontinued operation     |                                                         | 73     |                                                   |  
|                                                                                      |                                                         |       
|
|
|Net cash provided by (used in)
        financing activities                           |                                                         | 1,588  |                                                   |  
|
|
|Effect of exchange rate changes on
  cash and cash equivalents                        |                                                         | (1,529 | )                                                 |  
|
|
|INCREASE (DECREASE) IN CASH AND CASH
        EQUIVALENTS                              |                                                         | 7,927  |                                                   |  
|
|Cash and cash equivalents
      Beginning of period                                   |                                                         | 6,749  |                                                   |  
|
|
|End of period                                                                         | $                                                       | 14,676 |                                                   | $
|
|
|Supplemental disclosures of cash flow
  information:                                  |                                                         |        |                                                   |  
|Cash paid during the period for:                                                      |                                                         |        |                                                   |  
|Interest                                                                              | $                                                       | 171    |                                                   | $
|
|
|Income taxes (net of refunds of $1,457 and
        $2 in 2007 and 2006, respectively) | $                                                       | (153   | )                                                 | $
|

|                                                                          
|--------------------------------------------------------------------------
|The accompanying notes are an integral part of these financial statements.

|-8-
|---



|E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 3, 2007 and March 4, 2006(unaudited)
|-------------------------------------------------------------------------------------------------------------------
|                                                                                                                   

|NOTE A  NATURE OF BUSINESS AND BASIS OF PRESENTATION
|-----------------------------------------------------
|                                                     

| | Nature of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | E-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 RSDL for military services and first-responder organizations. 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 Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The consolidated balance sheet as of March 3, 2007, the consolidated statement of stockholders
  equity and comprehensive income for the thirty-nine weeks ended March 3, 2007, the consolidated statements
  of earnings for the thirteen and thirty-nine weeks ended March 3, 2007 and thirteen and forty weeks
  ended March 4, 2006, and the consolidated statements of cash flows for the thirty-nine weeks ended
  March 3, 2007 and forty weeks ended March 4, 2006, 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 normal recurring adjustments)
  necessary to present fairly the financial position, changes in stockholders equity and comprehensive
  income, results of operations and cash flows at March 3, 2007 (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 March 3, 2007, and March 4, 2006, 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
      March 3, 2007 and March 4, 2006(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 operation. Also, a 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 gains (losses) of ($35,000) and $257,000, respectively,
  included in accumulated other comprehensive income have been charged to results of operations for
  the thirty-nine weeks ended March 3, 2007 and forty weeks ended March 4, 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. In December 2006, the Company completed
  the closing by selling the land and building comprising its Toho facility for $1,101,000 and recognized
  a gain on the sale of $281,000. The decision to close the Toho operations resulted in a deduction
  for U.S. Federal income tax purposes approximating $7,383,000. During the thirty-nine weeks ended
  March 3, 2007 and forty weeks ended March 4, 2006, the Company recorded Federal tax benefits of $29,000
  and $2,347,000, respectively, relating to this tax deduction. 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Changes in project costs, primarily severance and the above-mentioned impairment, are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                   | Thirty-nine
      weeks ended
      March 3,
      2007 |      | Forty
      weeks ended
      March 4,
      2006 |  
| | ----------------- | ------------------------------------------------------- | ---- | ------------------------------------------------- | -
|
|
| | Beginning balance | $                                                       | 333  |                                                   |  
| | Recorded          |                                                         | 217  |                                                   | $
| | Paid              |                                                         | (550 | )                                                 |  
|
| | Ending balance    | $                                                       |     |                                                   | $
|

|-10-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(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 at June 3, 2006 (amounts in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                

| | ASSETS                                        |   |     |  | 
| | --------------------------------------------- | - | --- |  | 
|
| | Cash and cash equivalents                     | $ | 73  |  | 
| | Accounts receivable, net                      |   | 229 |  | 
| | Inventory                                     |   | 124 |  | 
| |                                               |   |     | 
|
| | Current assets of discontinued operation      | $ | 426 |  | 
| |                                               |  
| |                                               |   |     | 
|
| | Property, plant and equipment                 | $ | 603 |  | 
| | Other assets                                  |   | 2   |  | 
| |                                               |   |     | 
|
| | Noncurrent assets of discontinued operation   | $ | 605 |  | 
| |                                               |   |     | 
| | LIABILITIES                                   |   |     |  | 
|
| | Accounts payable                              | $ | 19  |  | 
| | Accrued liabilities                           |   | 392 |  | 
| | Accrued income taxes                          |   | 6   |  | 
| |                                               |   |     | 
|
| | Current liabilities of discontinued operation | $ | 417 |  | 
| |                                               |   |     | 

| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Summarized 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 |      | Thirty-nine
      weeks ended |   | Forty
      weeks ended |  
| | ------------------------------------------------- | -------------------- | ---- | ----------------------------- | - | ----------------------- | -
|
|
|
|
| | Net sales (credits)
  From unaffiliated customers | $                    | (102 | )                             | $ | 170                     |  
| |                                                   |                      |      |                               |  
|
|
| | Total net sales (credits)                         | $                    | (102 | )                             | $ | 170                     |  
| |                                                   |                      |      |                               |  
|
|
| | Earnings (loss) before income
  taxes             | $                    | 327  |                               | $ | (370                    | )
| | Income tax provision (benefit)                    |                      | 111  |                               |   | (2,347                  | )
|
|
| | Earnings (loss) from
  discontinued operation     | $                    | 216  |                               | $ | 1,977                   |  
|

|-11-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(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. No awards other than stock options have been granted under the
  Companys plans.                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 employee and director 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 and thirty-nine weeks ended March 3, 2007, the Company did not recognize any share-based
  compensation expense in the consolidated financial statements for awards to employees or members
  of the Board of Directors since no awards were granted and no outstanding awards were modified. For
  the thirteen and thirty-nine weeks ended March 3, 2007, and for the thirteen and forty weeks ended
  March 4, 2006, pre-tax compensation expense of $7,000 ($4,000 after tax effects), $49,000 ($31,000
  after tax effects), $21,000 ($13,000 after tax effects) and $65,000 ($41,000 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
      March 3, 2007 and March 4, 2006(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
  its stock-based compensation plans to employees and to members of the Board of Directors:                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                                                                                                                                                        | Thirteen
      weeks ended
      March 4,
      2006 |       | Forty
      weeks ended
      March 4,
      2006 |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ----- | ------------------------------------------------- | -
|
|
|
| | Net earnings, as reported                                                                                                                              | $                                                    | 4,342 |                                                   | $
| | Deduct: Total stock-based employee
  compensation expense determined
  under the fair value based method
  for all awards, net of income
  tax effects |                                                      | (267  | )                                                 |  
|
|
| | Pro forma net earnings                                                                                                                                 | $                                                    | 4,075 |                                                   | $
|
|
| |                                                                                                                                                        |                                                      |      
| | Earnings per common share                                                                                                                              |                                                      |       |                                                   |  
| | Basic - as reported                                                                                                                                    | $                                                    | 0.40  |                                                   | $
| | Basic - pro forma                                                                                                                                      |                                                      | 0.38  |                                                   |  
|
| | Diluted  as reported                                                                                                                                  | $                                                    | 0.39  |                                                   | $
| | Diluted  pro forma                                                                                                                                    |                                                      | 0.36  |                                                   |  

| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The 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:
| |                                                                                                                                                                                    

| |                         | Forty
      weeks ended
      March 4,
      2006 |  
| | ----------------------- | ------------------------------------------------- | -
|
|
| | Expected life (years)   | 5.0                                               |  
| | Expected volatility     | 47.86                                             | %
| | Risk-free interest rate | 3.64                                              | %
| | Dividend yield          | None                                              |  

|-13-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(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 recently paid any dividends and does not expect to in the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2004 Stock and Incentive Award Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In 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 1,708,425
  shares of the Companys common stock are available 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
  and the terms and conditions of any other awards made under the 2004 Plan. 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 March 3, 2007,
  there were 730,675 shares available for grants of options and other awards under the 2004 Plan.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 1983 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In 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 (giving 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
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE C - STOCK-BASED COMPENSATION (continued)
|---------------------------------------------
|                                             

| | 1984 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In 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 (giving 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 thirty-nine weeks ended March 3,
  2007:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                               | 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 |                                                                                    | 7.65 |                                                   |  
| | Exercised                                     | (104                               | ) | $                                                 | 11.11 |                                                                                    | 6.52 |                                                   |  
| | Forfeited                                     | (7                                 | ) | $                                                 | 12.97 |                                                                                    | 7.75 |                                                   |  
| |                                               |                                    |   |                                                   |      
|
|
| | Outstanding at end of period                  | 1,247                              |   | $                                                 | 12.32 |                                                                                    | 6.95 |                                                   | $
|
|
| | Vested or expected to vest
  at end of period | 1,247                              |   | $                                                 | 12.32 |                                                                                    | 6.95 |                                                   | $
|
|
| | Exercisable at end of period                  | 1,247                              |   | $                                                 | 12.32 |                                                                                    | 6.95 |                                                   | $
|

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The weighted-average grant-date fair value of stock options granted during the forty weeks ended March
  4, 2006 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 and
  thirty-nine weeks ended March 3, 2007 was $248,000 and $571,000, respectively, and during the thirteen
  and forty weeks ended March 4, 2006 was $46,000 and $220,000, respectively.

|-15-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE C - STOCK-BASED COMPENSATION (continued)
|---------------------------------------------
|                                             

| | The Company received cash of $396,000 and $1,156,000 from stock options exercised during the thirteen
  and thirty-nine weeks ended March 3, 2007, respectively, and cash of $63,000 and $134,000 from stock
  options exercised during the thirteen and forty weeks ended March 4, 2006, respectively. These cash
  receipts are 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 and
  thirty-nine weeks ended March 3, 2007 of $47,000 and $386,000, respectively, and during the thirteen
  and forty weeks ended March 4, 2006 of $324,000 and $863,000, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | On November 1, 2006 and November 1, 2005, the Company issued 7,750 shares of common stock to members
  of its Board of Directors and, as a result, recognized share-based compensation expense of $133,000
  for the thirty-nine weeks ended March 3, 2007 and $126,000 for the forty weeks ended March 4, 2006.
  These expenses are included in selling, general and administrative expense in the accompanying consolidated
  statements of earnings.                                                                                                                                                                                                                                                         

|                                  
|----------------------------------
|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 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 |        | Thirty-nine
      weeks ended |  | Forty
      weeks ended | 
| | ----------------------------------------------- | -------------------- | ------ | ----------------------------- |  | ----------------------- | 
|
|
|
|
| | Basic                                           |                      | 10,964 |                               |  | 10,855                  | 
| | Effect of dilutive securities
  (stock options) |                      | 220    |                               |  | 335                     | 
|
|
| | Diluted                                         |                      | 11,184 |                               |  | 11,190                  | 
|

| |                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Excluded from the calculation of earnings per common share, are options to purchase 193,750 shares
  of common stock at an exercise price of $17.49 per share for the thirteen and thirty-nine weeks ended
  March 3, 2007 as their inclusion would be anti-dilutive.

|-16-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE E - EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
|-------------------------------------------------------------
|                                                             

| | 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.                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In June 2006, the Financial Accounting Standards Board (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 is currently evaluating the effect of the adoption
  of FIN 48 on its financial condition and results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In June 2006, the FASB ratified the consensus of Emerging Issues Task Force Issue No. 06-3, How
  Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the
  Income Statement (That Is, Gross versus Net Presentation) (EITF 06-3). EITF 06-3
  concluded that the presentation of taxes imposed on revenue-producing transactions (sales, use, value
  added and excise taxes) on either a gross (included in revenues and costs) or a net (excluded from
  revenues) basis is an accounting policy that should be disclosed pursuant to Accounting Principles
  Board Opinion No. 22. EITF 06-3 is effective for the Company in the fourth quarter of fiscal 2007.
  The Company does not believe that the adoption of EITF 06-3 will have a material impact on its financial
  condition or results of operations.                                                                                                                            

|-17-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

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

| | In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
  statement defines fair value, establishes a framework for measuring fair value in generally accepted
  accounting principles, and expands disclosures about fair value measurements. The standard applies
  whenever other standards require (or permit) assets or liabilities to be measured at fair value but
  does not expand the use of fair value in any new circumstances. This statement is effective for financial
  statements issued for fiscal years beginning after November 15, 2007, and interim periods within
  those fiscal years. The Company does not believe that the adoption of SFAS No. 157 will have a material
  impact on its financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting
  Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements
  in Current Year Financial Statements (SAB No. 108). SAB No. 108 provides interpretative
  guidance on how public companies quantify financial statement misstatements. There have been two
  common approaches used to quantify such errors. Under an income statement approach, the roll-over
  method, the error is quantified as the amount by which the current year income statement is misstated.
  Alternatively, under a balance sheet approach, the iron curtain method, the error is
  quantified as the cumulative amount by which the current year balance sheet is misstated. In SAB
  No. 108, the SEC established an approach that requires quantification of financial statement misstatements
  based on the effects of the misstatements on each financial statement and the related financial statement
  disclosures. This model is commonly referred to as a dual approach because it requires
  quantification of errors under both the roll-over and iron curtain methods. SAB No. 108 is effective
  for annual financial statements covering the first fiscal year ending after November 15, 2006.
  The Company does not believe that the adoption of SAB No. 108 will have a material impact on its
  financial condition or results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB

  Statement No. 115*. SFAS No. 159 permits entities to choose to measure many financial instruments and certain
  other items at fair value that are not currently required to be measured at fair value. The objective
  of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by
  measuring related assets and liabilities differently without having to apply hedge accounting provisions.
  SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons
  between companies that choose different measurement attributes for similar types of assets and liabilities.
  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company does not
  believe that the adoption of SFAS No. 159 will have a material impact on its financial condition
  or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                              

|-18-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE F - COMPREHENSIVE INCOME
|-----------------------------
|                             

| | The components of comprehensive income, net of related tax, are as follows:
| | ---------------------------------------------------------------------------
| |                                                                            

| |                                                                                            | Thirteen weeks ended |       | Thirty-nine
      weeks ended |   | Forty
      weeks ended | 
| | ------------------------------------------------------------------------------------------ | -------------------- | ----- | ----------------------------- | - | ----------------------- | 
|
|
|
|
| | Net earnings                                                                               | $                    | 2,399 |                               | $ | 4,342                   | 
| | Unrealized holding gain (loss)
  on debt and equity securities
  arising during the period |                      | (20   | )                             |   | 142                     | 
| | Foreign currency translation
  adjustments arising during
  the period                     |                      | (944  | )                             |   | 821                     | 
|
|
| | Comprehensive income                                                                       | $                    | 1,435 |                               | $ | 5,305                   | 
|

| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The components of accumulated other comprehensive income, net of related tax, are as follows:
| |                                                                                              

| |                                                         | March 3,
      2007 |       | June 3,
      2006 |  
| | ------------------------------------------------------- | ------------------- | ----- | ------------------ | -
|
|
|
| | Unrealized holding gain on debt and equity
  securities | $                   | 680   |                    | $
| | Cumulative translation adjustments                      |                     | 3,702 |                    |  
|
|
| | Accumulated other comprehensive income                  | $                   | 4,382 |                    | $
|

|                                                    
|----------------------------------------------------
|NOTE G  PLANT CLOSING AND OPERATIONAL RESTRUCTURING
|                                                    

| | In May 2005, the Company completed its plan to move its powder-based barium production in Westbury,
  N.Y. to its manufacturing facility in Montreal, Canada. For the forty weeks ended March 4, 2006,
  project costs aggregated $96,000. On January 31, 2006, the Company completed the sale of its Westbury
  manufacturing facility for $5,100,000. As a result, the Company recognized a gain on the sale of
  this property of $1,205,000 during the thirteen weeks ended March 4, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Changes in project costs are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                   | March 4,
      2006 |      |  
| | ----------------- | ------------------- | ---- | -
|
|
|
| | Beginning balance | $                   | 598  |  
| | Recorded          |                     | 96   |  
| | Paid              |                     | (694 | )
|
|
| | Ending balance    | $                   |     |  
|

|-19-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE H - DEBT AND EQUITY SECURITIES
|-----------------------------------
|                                   

| | Debt and equity securities at March 3, 2007, consisted of the following:
| | ------------------------------------------------------------------------
| |                                                                         

| |                                                                                                                                                                        | Amortized
      cost |        | Fair
      value |   | Unrealized
      holding gain | 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------ | ---------------- | - | ----------------------------- | 
|
|
|
| | Current                                                                                                                                                                |                      |        |                  |   |                               | 
| | Available-for-sale securities (carried
  on the balance sheet at fair value)
    Municipal bonds with maturities
      Due after 10 years and through
        20 years | $                    | 9,150  |                  | $ | 9,150                         | 
| | Due after 20 years                                                                                                                                                     |                      | 18,745 |                  |   | 18,745                        | 
| | Other                                                                                                                                                                  |                      | 154    |                  |   | 154                           | 
| |                                                                                                                                                                        |                      |        |                 
|
|
| |                                                                                                                                                                        | $                    | 28,049 |                  | $ | 28,049                        | 
| |                                                                                                                                                                        |                      |        |                 
|
|
| | Noncurrent                                                                                                                                                             |                      |        |                  |   |                               | 
| | Available-for-sale securities
  (carried on the balance sheet
  at fair value)                                                                                         |                      |        |                  |   |                               | 
| | Equity securities                                                                                                                                                      | $                    | 257    |                  | $ | 1,328                         | 
| |                                                                                                                                                                        |                      |        |                 
|
|
| |                                                                                                                                                                        | $                    | 257    |                  | $ | 1,328                         | 
|
| |                                                                                                                                                                        |                      |        |                 

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

|  |                                                                                                                                                  | Amortized
      cost |        | Fair
      value |   | Unrealized
      holding gain | 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------- | ------ | ---------------- | - | ----------------------------- | 
|
|
| 
|  | Current                                                                                                                                          |                      |        |                  |   |                               | 
|  | Available-for-sale securities (carried
  on the balance sheet at fair value)
    Municipal bonds with maturities
      Due in 1 through 10 years | $                    | 2,000  |                  | $ | 2,000                         | 
|  | Due after 10 years and through
        20 years                                                                                                  |                      | 16,525 |                  |   | 16,525                        | 
|  | Due after 20 years                                                                                                                               |                      | 14,765 |                  |   | 14,765                        | 
|  | Other                                                                                                                                            |                      | 156    |                  |   | 156                           | 
|
| 
|$ | 33,446                                                                                                                                           |                      | $      | 33,446          
|
|  | Noncurrent                                                                                                                                       |                      |        |                  |   |                               | 
|  | Available-for-sale securities
  (carried on the balance sheet
  at fair value)                                                                   |                      |        |                  |   |                               | 
|  | Equity securities                                                                                                                                | $                    | 257    |                  | $ | 1,088                         | 
|
| 
|  |                                                                                                                                                  | $                    | 257    |                  | $ | 1,088                         | 
|

|-20-
|----



|E-Z-EM, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      March 3, 2007 and March 4, 2006(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 

|NOTE I - INVENTORIES
|--------------------
|                    

| | Inventories consist of the following:
| | -------------------------------------
| |                                      

|March 3,
      2007 |                 | June 3,
      2006
|------------------- | --------------- | ------------------
|                    |                 |                   
|                    |                 |                   
|                    | Finished goods  | $                 
|                    | Work in process |                   
|                    | Raw materials   |                   
|                    |                 |                   
|                   
|                    |                 | $                 
|                    |                 |                   

|                      
|----------------------
|NOTE J  CONTINGENCIES
|                      

| | Litigation Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The 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 Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In November 2005, Merry X-Ray Corporation (Merry X-Ray), a significant distributor of the
  Companys products in the United States, acquired SourceOne Healthcare Technologies, Inc. (SourceOne),
  the Companys largest distributor in the United States. For the thirty-nine weeks ended March
  3, 2007 and the forty weeks ended March 4, 2006, sales of products to Merry X-Ray, including sales
  to SourceOne before its acquisition by Merry X-Ray, represented 34% and 37% of total sales, respectively.
  Approximately 36% and 39% of accounts receivable pertained to Merry X-Ray at March 3, 2007 and June
  3, 2006, respectively. While the accounts receivable related to this distributor are significant,
  the Company does not believe the credit risk to be significant given the distributors consistent
  payment history.

|                     
|---------------------
|NOTE K - COMMON STOCK
|                     

| | Stock Repurchase Program                                                                                                                                                                                                                                                                                                                                                                                           
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In 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 and thirty-nine
  weeks ended March 3, 2007 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 Operations
|------- | -------------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The 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 and in Item 1A of Part II of this Report on Form 10-Q. 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 that 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 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

|-22-
|----



|driven by the trend away from older fluoroscopic procedures (e.g., barium 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 imaging contrast agents,
for example VoLumen, that allows enhanced images from CT and CT Angiography applications utilizing
Multidetector CT technology. We also manufacture and market a line of CT power injectors that deliver
injectable CT contrast agents.
In addition to our products for the radiology market, we also market a unique defense decontaminant
product. 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. Recently, the Joint Program Executive Office for Chemical Biological Defense
(JPEO-CBD) of the U.S. Department of Defense (DoD) determined that RSDL satisfied all final configuration
testing criteria, and approved RSDL for initial procurements by the individual service branches.
We were also notified that the DoD had waived its requirement for First Article Testing, thus allowing
us to ship the product without further delay. In March 2007, we also received an initial order for
$5.07 million for RSDL from the US Army Space and Missile Command.
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 scope of operation. Also, a change in manufacturing
location would have 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
Quarters ended March 3, 2007 and March 4, 2006
Our quarters ended March 3, 2007 and March 4, 2006 both represent thirteen weeks.
Consolidated Results of Operations
For the quarter ended March 3, 2007, we reported net earnings of $2,399,000, or $0.22 per common share
on both a basic and diluted basis, as compared to net earnings of $4,342,000, or $0.40 and $0.39
per common share on a basic and diluted basis, respectively, for the comparable period of last year.
Results for the comparable period of last year included a tax benefit of $2,347,000, or $.22 per
basic share, associated with the closing of our Japanese subsidiary. This tax benefit is included
in earnings from
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|-23-
|----



|discontinued operation. Results for the comparable period of last year also included the reversal of
a tax valuation allowance of $456,000, or $.04 per basic share, relating to a previously impaired,
non-core equity security.
The following table sets forth earnings from continuing operations and earnings from discontinued operation
for the quarters ended March 3, 2007 and March 4, 2006:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                     

|2007 |                                      | 2006
|---- | ------------------------------------ | ----
|     |                                      |     
|     |                                      |     
|    
|     | Earnings from continuing operations  | $   
|     | Earnings from discontinued operation |     
|     |                                      |     
|    
|     | Net earnings                         | $   
|     |                                      |     

|                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------
|Our results are expressed as a percentage of net sales for the quarters ended March 3, 2007 and March
4, 2006 in the following table:
|                                                                                                                                     

|2007 |                                                                               | 2006
|---- | ----------------------------------------------------------------------------- | ----
|     |                                                                               |     
|    
|     | Net sales                                                                     |     
|     | Cost of goods sold                                                            |     
|     |                                                                               |     
|    
|     | Gross profit                                                                  |     
|     |                                                                               |     
|    
|     | Operating expenses                                                            |     
|     | Selling, general and administrative                                           |     
|     | Plant closing and operational
    restructuring costs (credits)               |     
|     | Gain on sale of real property                                                 |     
|     | Research and development                                                      |     
|     |                                                                               |     
|    
|     | Total operating expenses                                                      |     
|     |                                                                               |     
|    
|     | Operating profit                                                              |     
|    
|     | Other income (expense)                                                        |     
|     | Interest income                                                               |     
|     | Interest expense                                                              |     
|     | Other, net                                                                    |     
|     |                                                                               |     
|    
|     | Earnings from continuing operations
        before income taxes               |     
|    
|     | Income tax provision                                                          |     
|     |                                                                               |     
|    
|     | Earnings from continuing operations                                           |     
|    
|     | Earnings from discontinued operation,
  net of income tax provision (benefit) |     
|     |                                                                               |     
|    
|     | NET EARNINGS                                                                  |     
|     |                                                                               |     

|-24-
|----



|Continuing Operations
Operating profit for the current quarter increased by $281,000 due to increased sales and improved
gross profit, partially offset by increased operating expenses. The increase in operating expenses
was due to the recognition of a $1,205,000 gain on the sale of our former manufacturing facility
in Westbury, N.Y. in the prior years quarter. This sale was the culmination of the plan to
relocate our powder-based barium production from Westbury to our manufacturing facility in Montreal,
Canada.
Net sales for the quarter ended March 3, 2007 increased 5%, or $1,462,000, as compared to the quarter
ended March 4, 2006, due to price increases, higher sales volumes and favorable foreign currency
exchange fluctuations. Price increases accounted for approximately 2% of net sales for the current
quarter. A significant portion of our domestic products are sold under fixed priced, long-term group
purchasing organization contracts. Foreign currency exchange fluctuations increased the translated
amounts of foreign subsidiaries sales to U.S. dollars for financial reporting purposes by $337,000.
On a product line basis, the net sales increase resulted primarily from increased sales of CT imaging
products of $1,963,000 and virtual colonoscopy products of $377,000, partially offset by decreased
contract manufacturing sales of $1,027,000.
The Company believes that CT imaging growth in the current quarter may have been hindered by the Deficit
Reduction Act of 2005 (DRA), which took effect on January 1, 2007. Within radiology, the DRA effectively
reduces the Medicare and Medicaid reimbursement rates for MR, CT and PET/CT procedures performed
at outpatient imaging centers. The impact of DRA is now just being felt in the market and remains
to be quantified. Some of the Companys customers have delayed plans to purchase imaging equipment,
at least in the near term, in order to assess the impact of DRA on their businesses. The Company
believes that this may have reduced sales of its CT injector systems in the current quarter.
Net sales in international markets, including direct exports from the U.S., decreased 1%, or $118,000,
for the current quarter from the prior years quarter due to lower sales volumes, partially
offset by favorable foreign currency exchange fluctuations, which increased the translated amounts
of foreign subsidiaries sales to U.S. dollars for financial reporting purposes by $337,000.
Price increases had little effect on net international sales for the current quarter. On a product
line basis, the decline in net international sales resulted from decreased contract manufacturing
sales of $1,220,000, partially offset by increased sales of CT imaging products of $470,000, virtual
colonoscopy products of $356,000 and all other products of $276,000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|-25-
|----



|The following table sets forth net sales by product category for the quarters ended March 3, 2007 and
March 4, 2006:
|--------------------------------------------------------------------------------------------------------------------
|                                                                                                                    

|2007 |                           | 2006
|---- | ------------------------- | ----
|     |                           |     
|     |                           |     
|     |                           |     
|     |                           |     
|    
|     | CT Imaging Contrast       | $   
|     | CT Injector Systems       |     
|     |                           |     
|    
|     | Total CT Imaging          |     
|     | X-Ray Fluoroscopy         |     
|     | Contract Manufacturing    |     
|     | Accessory Medical Devices |     
|     | Gastroenterology          |     
|     | Virtual Colonoscopy       |     
|     | Defense Decontaminants    |     
|     | Other                     |     
|     |                           |     
|    
|     |                           | $   
|     |                           |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Gross profit, expressed as a percentage of net sales, increased to 42% for the current quarter from
40% for the comparable quarter of the prior year due to sales price increases and favorable changes
in sales product mix. Our third fiscal quarters historically have fewer production days than the
other fiscal quarters, resulting in somewhat lower gross profit percentages.
Selling, general and administrative (SG&A) expenses were $10,548,000 for the quarter
ended March 3, 2007 compared to $9,919,000 for the quarter ended March 4, 2006. This increase of
$629,000, or 6%, was due primarily to costs incurred in expanding our North American sales force.
Research and development (R&D) expenditures decreased 43% for the current quarter to
$888,000, or 3% of net sales, from $1,562,000, or 5% of net sales, for the comparable quarter of
the prior year due to the reversal of accrued expenses resulting from the termination of an R&D
cost-sharing project. Of the R&D expenditures for the current quarter, approximately 50% related
to general regulatory costs, 28% to CT imaging and X-ray fluoroscopy projects, 11% to gastroenterology
projects, 6% to virtual colonoscopy projects, 4% to defense decontaminant projects and 1% to other
projects. R&D expenditures are expected to be 4% of net sales for this fiscal year.
Other income, net of other expenses, totaled $418,000 for the current quarter compared to $285,000
for the comparable period of last year. This improvement is due to increased interest income of $136,000
resulting from increased funds available for investment and higher interest rates.
For the quarter ended March 3, 2007, our effective tax rate of 31% 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 March 4, 2006, our effective tax rate of 14% differed from the Federal statutory
tax rate of 34% due primarily to the reversal of a valuation allowance of $456,000 relating to a
previously impaired, non-core equity security, since, at that time, it was more likely than not that
such benefit would be realized.
Discontinued Operation
We have consolidated the financial statements of Toho and reported its results as a discontinued operation.
Summarized results of operations for

|-26-
|----



|Toho as reported in earnings from discontinued operation in the accompanying consolidated statements
of earnings for the quarters ended March 3, 2007 and March 4, 2006 are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                       

|2007 |                                      | 2006
|---- | ------------------------------------ | ----
|     |                                      |     
|     |                                      |     
|    
|     | Net sales (credits)                  |     
|     | From unaffiliated customers          | $   
|     |                                      |     
|    
|     | Total net sales (credits)            | $   
|     |                                      |     
|    
|     | Earnings (loss) before income taxes  | $   
|     | Income tax provision (benefit)       |     
|     |                                      |     
|    
|     | Earnings from discontinued operation | $   
|     |                                      |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The results for the discontinued operation for the current quarter are not comparable to the results
for the prior years third quarter since no operational activity occurred in the current quarter.
Nine months ended March 3, 2007 and March 4, 2006
Our nine months ended March 3, 2007 and March 4, 2006 represent thirty-nine and forty weeks, respectively.
Consolidated Results of Operations
For the nine months ended March 3, 2007, we reported net earnings of $5,765,000, or $0.53 and $0.52
per common share on a basic and diluted basis, respectively, as compared to net earnings of $8,420,000,
or $0.78 and $0.76 per common share on a basic and diluted basis, respectively, for the comparable
period of last year. Results for the comparable period of last year included a tax benefit of $2,347,000,
or $.22 per basic share, associated with the closing of our Japanese subsidiary. This tax benefit
is included in earnings from discontinued operation. Results for the comparable period of last year
also included the reversal of a tax valuation allowance of $456,000, or $.04 per basic share, relating
to a previously impaired, non-core equity security.
The following table sets forth earnings from continuing operations and earnings (loss) from discontinued
operation for the nine months ended March 3, 2007 and March 4, 2006:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|2007 |                                             | 2006
|---- | ------------------------------------------- | ----
|     |                                             |     
|     |                                             |     
|    
|     | Earnings from continuing operations         | $   
|     | Earnings (loss) from discontinued operation |     
|     |                                             |     
|    
|     | Net earnings                                | $   
|     |                                             |     

|-27-
|----



|Our results are expressed as a percentage of net sales for the nine months ended March 3, 2007 and
March 4, 2006 in the following table:
|----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                        

|2007 |                                                                          | 2006 |      
|---- | ------------------------------------------------------------------------ | ---- | -----
|     |                                                                         
|    
|     | Net sales                                                                |      | 100.0
|     | Cost of goods sold                                                       |      | 56.5 
|     |                                                                          |     
|    
|     | Gross profit                                                             |      | 43.5 
|     |                                                                          |     
|    
|     | Operating expenses                                                       |      |      
|     | Selling, general and administrative                                      |      | 32.7 
|     | Plant closing and operational
    restructuring costs                    |      |      
|     | Gain on sale of real property                                            |      |      
|     | Research and development                                                 |      | 3.8  
|     |                                                                          |     
|    
|     | Total operating expenses                                                 |      | 36.5 
|     |                                                                          |     
|    
|     | Operating profit                                                         |      | 7.0  
|    
|     | Other income (expense)                                                   |      |      
|     | Interest income                                                          |      | 1.0  
|     | Interest expense                                                         |      | (0.2 
|     | Other, net                                                               |      | 0.7  
|     |                                                                          |     
|    
|     | Earnings from continuing operations
        before income taxes          |      | 8.5  
|    
|     | Income tax provision                                                     |      | 2.8  
|     |                                                                          |     
|    
|     | Earnings from continuing operations                                      |      | 5.7  
|    
|     | Earnings (loss) from discontinued operation,
  net of income tax benefit |      |      
|     |                                                                          |     
|    
|     | NET EARNINGS                                                             |      | 5.7  
|     |                                                                          |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Continuing Operations
Operating profit for the current period declined by $1,854,000 due to increased operating expenses,
partially offset by increased sales and gross profit. Approximately one-half of the increase in operating
expenses was due to the recognition of a $1,205,000 gain on the sale of our former manufacturing
facility in Westbury, N.Y. in the comparable prior year period.
Net sales for the nine months ended March 3, 2007 increased 1%, or $893,000, as compared to the nine
months ended March 4, 2006, due to price increases and favorable foreign currency exchange fluctuations,
partially offset by lower sales volumes. Price increases accounted for approximately 1% of net sales
for the current period. Foreign currency exchange fluctuations increased the translated amounts of
foreign subsidiaries sales to U.S. dollars for financial reporting purposes by $1,188,000.
Net sales in the first nine months of the prior year benefited from one additional week compared
with the current period, as well as from approximately $1,600,000 in backlog sales associated with
the recall by Mallinckrodt, in December 2004, of its liquid barium products due to potential microbial
contamination. On a product line basis, the net sales increase resulted primarily from increased
sales of CT imaging products of $3,791,000 and virtual colonoscopy products

|-28-
|----



|of $1,058,000, partially offset by decreased contract manufacturing sales of $1,756,000, defense decontaminants
of $953,000, X-ray fluoroscopy products of $825,000 and gastroenterology products of $536,000.
Net sales in international markets, including direct exports from the U.S., increased 1%, or $380,000,
for the current period from the comparable prior year period due to favorable foreign currency exchange
fluctuations, which increased the translated amounts of foreign subsidiaries sales to U.S.
dollars for financial reporting purposes by $1,188,000, and price increases, which accounted for
approximately 1% of net sales in international markets for the current period, partially offset by
lower sales volumes. On a product line basis, the increase in net sales in international markets
resulted primarily from increased sales of CT imaging products of $1,905,000, virtual colonoscopy
products of $1,009,000 and X-ray fluoroscopy products of $647,000, partially offset by decreased
sales of contract manufacturing products of $2,501,000 and defense decontaminants of $988,000.
The following table sets forth net sales by product category for the nine months ended March 3, 2007
and March 4, 2006:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|2007 |                           | 2006
|---- | ------------------------- | ----
|     |                           |     
|     |                           |     
|     |                           |     
|     |                           |     
|    
|     | CT Imaging Contrast       | $   
|     | CT Injector Systems       |     
|     |                           |     
|    
|     | Total CT Imaging          |     
|     | X-Ray Fluoroscopy         |     
|     | Contract Manufacturing    |     
|     | Accessory Medical Devices |     
|     | Gastroenterology          |     
|     | Virtual Colonoscopy       |     
|     | Defense Decontaminants    |     
|     | Other                     |     
|     |                           |     
|    
|     |                           | $   
|     |                           |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Gross profit, expressed as a percentage of net sales, increased to 44% for the current period from
43% for the comparable period of the prior year due to sales price increases, partially offset by
increased costs for purchased finished products and increased materials cost primarily from our barium
sulfate suppliers. Finished product costs increased primarily due to the weakening of the U.S. dollar
against the Canadian dollar, which increased the cost of finished goods we purchased from our Canadian
subsidiary.
SG&A expenses were $33,126,000 for the nine months ended March 3, 2007 compared to $31,333,000
for the nine months ended March 4, 2006. This increase of $1,793,000, or 6%, was due to costs of
$1,162,000 incurred in expanding our North American sales force, additional expenses of $364,000
incurred to support our defense decontaminants business and unfavorable foreign currency exchange
fluctuations, which increased the translated amounts of foreign subsidiaries SG&A expenses
to U.S. dollars for financial reporting purposes by $455,000.
R&D expenditures remained at 4% of net sales and decreased 11% for the current period to $3,823,000
from $4,314,000 for the comparable period of the prior year due to the reversal of accrued expenses
resulting from the termination of an R&D cost-sharing project. Of the R&D expenditures for
the current period, approximately 52% related to CT imaging and X-ray fluoroscopy

|-29-
|----



|projects, 30% to general regulatory costs, 8% to gastroenterology projects, 4% to defense decontaminant
projects, 4% to virtual colonoscopy projects and 2% to other projects.
Other income, net of other expenses, totaled $1,486,000 for the current period compared to $44,000
for the comparable period of last year. This improvement is due to a favorable change in foreign
currency exchange gains and losses of $962,000 and increased interest income of $490,000, resulting
from increased funds available for investment and higher interest rates.
For the nine months ended March 3, 2007, our effective tax rate of 33% differed from the Federal statutory
tax rate of 34% due primarily to tax-exempt income, partially offset by non-deductible expenses.
For the nine months ended March 4, 2006, our effective tax rate of 28% differed from the Federal
statutory tax rate of 34% due primarily to the reversal of a valuation allowance of $456,000 relating
to a previously impaired, non-core equity security, since, at that time, it was more likely than
not that such benefit would be realized.
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 nine months ended March 3, 2007 and
March 4, 2006 are as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|2007 |                                             | 2006
|---- | ------------------------------------------- | ----
|     |                                             |     
|     |                                             |     
|    
|     | Net sales                                   |     
|     | From unaffiliated customers                 | $   
|     |                                             |     
|    
|     | Total net sales                             | $   
|     |                                             |     
|    
|     | Loss before income taxes                    | $   
|     | Income tax benefit                          |     
|     |                                             |     
|    
|     | Earnings (loss) from discontinued operation | $   
|     |                                             |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The results for the discontinued operation for the current period represent two months of operational
activity and, therefore, are not comparable to the results for the prior years first nine months.
Liquidity and Capital Resources
For the nine months ended March 3, 2007, operations and capital expenditures were funded by working
capital. Our policy has generally been to fund operations and capital requirements without incurring
significant debt. At March 3, 2007, debt (current maturities of long-term debt) was $4,000, as compared
to $31,000 at June 3, 2006. We have available $1,699,000 under a bank line of credit, of which no
amounts were outstanding at March 3, 2007.
Our contractual obligations and their effect on liquidity and cash flows as of March 3, 2007 are set
forth in the table below. We have no variable interest entities or other off-balance sheet obligations.

|-30-
|----



|Payments Due By Period as of March 3, 2007                               
|-------------------------------------------------------------------------
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Contractual Obligations:                                                 
|Long-term debt                                                           
|Operating leases (1)                                                     
|Purchase obligations (1)                                                 
|Employment contract (1)                                                  
|Other liabilities reflected
      on the consolidated
      balance sheet
|Deferred compensation (2)                                                
|Asset acquisition                                                        
|License arrangements                                                     
|                                                                         
|                                                                         
|Total                                                                    
|                                                                         
|                                                                         
|                                                                         

|   
|---
|(1)
|   
|(2)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|At March 3, 2007, approximately $42,725,000, or 34%, of our assets consisted of cash and cash equivalents
and short-term debt and equity securities. The current ratio was 5.98 to 1, with net working capital
of $82,401,000, at March 3, 2007, compared to a 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 nine months ended March 3, 2007,
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.
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 condition or liquidity for the periods presented in this report. The accounting policies
identified as critical are as follows:

|-31-
|----



|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
or when the product is delivered, depending on 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 nine months ended March 3, 2007 and March 4, 2006 are as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|2007 |                       | 2006
|---- | --------------------- | ----
|     |                       |     
|     |                       |     
|    
|     | Beginning balance     | $   
|     | Provision for rebates |     
|     | Rebate credits issued |     
|     |                       |     
|    
|     | Ending balance        | $   
|     |                       |     

|                                                      
|------------------------------------------------------
|The 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 just-in-time purchasing programs, 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 the product
  rebated during the prior six-month period based on historical sales and (b) is the average rebate
  paid on the product during that period.

|-32-
|----



|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 $970,000 and $688,000 at March 3, 2007 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 histories and customers current creditworthiness, 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 36% and 39% of our
total accounts receivable balances at March 3, 2007 and June 3, 2006, respectively, were 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 nine months ended March 3, 2007 and March 4,
2006 are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|2007 |                                 | 2006
|---- | ------------------------------- | ----
|     |                                 |     
|     |                                 |     
|    
|     | Beginning balance               | $   
|     | Provision for doubtful accounts |     
|     | Write-offs                      |     
|     |                                 |     
|    
|     | Ending balance                  | $   
|     |                                 |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Income 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.

|-33-
|----



|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 March 3, 2007 and June 3, 2006, our reserves for excess and
obsolete inventory were $1,933,000 and $2,053,000, respectively.
Effects of Recently Issued Accounting Pronouncements
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 Financial Accounting Standards Board (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
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|-34-
|----



|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 are
currently evaluating the effect of the adoption of FIN 48 on our financial condition and results
of operations.
In June 2006, the FASB ratified the consensus of Emerging Issues Task Force Issue No. 06-3, How
Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the
Income Statement (That Is, Gross versus Net Presentation) (EITF 06-3). EITF 06-3
concluded that the presentation of taxes imposed on revenue-producing transactions (sales, use, value
added and excise taxes) on either a gross (included in revenues and costs) or a net (excluded from
revenues) basis is an accounting policy that should be disclosed pursuant to Accounting Principles
Board Opinion No. 22. EITF 06-3 is effective for our fourth quarter of fiscal 2007. We do not believe
that the adoption of EITF 06-3 will have a material impact on our financial condition or results
of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. The standard applies
whenever other standards require (or permit) assets or liabilities to be measured at fair value but
does not expand the use of fair value in any new circumstances. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. We do not believe the adoption of SFAS No. 157 will have a material impact on
our financial condition or results of operations.
In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements
in Current Year Financial Statements (SAB No. 108). SAB No. 108 provides interpretative
guidance on how public companies quantify financial statement misstatements. There have been two
common approaches used to quantify such errors. Under an income statement approach, the roll-over
method, the error is quantified as the amount by which the current year income statement is misstated.
Alternatively, under a balance sheet approach, the iron curtain method, the error is
quantified as the cumulative amount by which the current year balance sheet is misstated. In SAB
No. 108, the SEC established an approach that requires quantification of financial statement misstatements
based on the effects of the misstatements on each financial statement and the related financial statement
disclosures. This model is commonly referred to as a dual approach because it requires
quantification of errors under both the roll-over and iron curtain methods. SAB No. 108 is effective
for annual financial statements covering the first fiscal year ending after November 15, 2006.
We do not believe the adoption of SAB No. 108 will have a material impact on our financial condition
or results of operations.
In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB

Statement No. 115*. SFAS No. 159 permits entities to choose to measure many
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|-35-
|----



|financial instruments and certain other items at fair value that are not currently required to be measured
at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to
apply hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose different measurement attributes
for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. We do not believe the adoption of SFAS No. 159 will have a material impact
on our financial condition or results of operations.
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
We 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 non-U.S. subsidiaries is denominated in currencies other than the U.S.
dollar. Since the functional currency of our non-U.S. 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 of 10% in the exchange
rates of foreign currencies against the U.S. dollar at March 3, 2007, our assets and liabilities
would increase or decrease by $4,270,000 and $601,000, respectively, and our net sales and net earnings
would increase or decrease by $2,995,000 and $271,000, 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 of 10% in the exchange rates of foreign currencies against the U.S.
dollar at March 3, 2007, our pre-tax earnings would be favorably or unfavorably impacted by approximately
$447,000 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 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 March 3, 2007, we were exposed
to interest rate change market risk with respect to our investments in tax-free municipal bonds in
the principal amount of $27,895,000. The bonds bear interest at a floating rate established between
seven and 35 days. For the quarter ended March 3, 2007, the after-tax interest rate on the bonds
approximated 3.5%. Each 100 basis point (or 1%) fluctuation in interest rates will increase or decrease
interest income on the bonds by approximately $279,000 on an annual basis.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|-36-
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|As our principal amount of fixed interest rate financing approximated $4,000 at March 3, 2007, a change
in interest rates would not materially impact results of operations or financial position. At March
3, 2007, we did not maintain any variable interest rate financing.
As of March 3, 2007, we have available $1,699,000 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 the facility.
Item 4. Controls and Procedures
Evaluation 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 March 3, 2007. This evaluation was carried out under the supervision
and with the 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 March 3, 2007, to provide
reasonable assurance that information required to be disclosed in the reports that we file under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms, 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 fiscal quarter ended
March 3, 2007 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|E-Z-EM, Inc. and Subsidiaries
Part II:  Other Information
Item 1. Legal Proceedings
None.
Item 1A.  Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors
discussed below and in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K
for the fiscal year ended June 3, 2006, which could materially affect our business, financial condition
and/or future results. The risks described below and in our Form 10-K are not the only risks facing
our company. Additional risks and uncertainties not currently known to us or that we currently deem
to be immaterial also may materially adversely affect our business, financial condition and/or future
results.
The market dynamics and competitive environment in the healthcare industry are subject to rapid change,
which may affect our operations.
We believe that government regulation, private sector programs and reimbursement policies will continue
to change the worldwide healthcare industry, potentially resulting in further business consolidations
and alliances. Consequently, the market dynamics and competitive environment in which we operate
are subject to rapid change, which may affect our growth plans and operating results.
In November 2006, the Centers for Medicare & Medicaid Services (CMS) announced 2007
reimbursement rates for U.S. healthcare providers treating Medicare and Medicaid patients and also
implemented various provisions of the Deficit Reduction Act of 2005 related to medical imaging procedures
that affect our industry. CMS reimbursement rates now factor in a Sustainable Growth Rate (SGR)
cut, which requires a 5% reduction in physician payments as determined by the SGR formula. A new
CMS rule, effective January 1, 2007, caps payment rates for imaging services provided outside of
hospital outpatient departments at the same amount paid under the physician fee schedule for such
services performed in hospital outpatient departments. The new rule also establishes a policy of
reducing by 25% the payment for the technical component of multiple imaging procedures on contiguous
body parts. While the long-term impact of these factors on our business is unclear, they have created
uncertainty in the marketplace and, we believe, adversely affected the purchases of imaging capital
equipment, at least in the short-term. We believe some hospitals and imaging centers have delayed
plans to expand or upgrade their imaging services to newer CT imaging technology in order to further
assess the economic impact of these factors on their businesses. There is risk that these factors
may inhibit the growth of radiology procedures that utilize our existing or future products and have
an adverse effect on our future sales and results of operations.
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|-38-
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|Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.  Defaults Upon Senior Securities
None.
Item 4.   Submission Of Matters to a Vote of Security Holders
None.
Item 5.  Other Information
None.
Item 6.  Exhibits
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                

|No.  |  | Description                                                                                                                                                       |                                                                                                                                             | Page
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ----
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|    
|3.1  |  | 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                                                                                                                                 |                                                                                                                                             | 42  
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|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)                 |                                                                                                                                             | 51  
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|31.2 |  | 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)                    |                                                                                                                                             | 53  
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|32.1 |  | 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) |                                                                                                                                             | 55  
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|32.2 |  | 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)    |                                                                                                                                             | 56  
|     |  |                                                                                                                                                                   |                                                                                                                                             |     
|     |  | (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.      |     

|-39-
|----



|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 | April 12, 2007 |                                               
|     |                |                                               
|     |                | Anthony A. Lombardo, President,               
|     |                | Chief Executive Officer, Director             
|     |                | (Principal Executive Officer)                 
|     |                |                                               
|Date | April 12, 2007 |                                               
|     |                |                                               
|     |                | Dennis J. Curtin, Senior Vice                 
|     |                | President - Chief Financial Officer (Principal
|     |                | Financial and Chief Accounting Officer)       

|-40-
|----



|EXHIBIT INDEX
|-------------
|             

|No.  |  | Description                                                                                                                                                     |                                                                                                                                             | Page
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ----
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|    
|3.1  |  | 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                                                                                                                               |                                                                                                                                             | 42  
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|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)                   |                                                                                                                                             | 51  
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|31.2 |  | 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)                      |                                                                                                                                             | 53  
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|32.1 |  | 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) |                                                                                                                                             | 55  
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|32.2 |  | 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)    |                                                                                                                                             | 56  
|     |  |                                                                                                                                                                 |                                                                                                                                             |     
|     |  | (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.      |     

|-41-
|----