UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended  May 28, 2005 OR oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to
_________ Commission file number 1-11479 E-Z-EM, Inc.(Exact name of registrant as specified in its charter)  Delaware
  
  11-1999504(State or other jurisdiction of
  incorporation or organization)
  
  (I.R.S. Employer
  Identification No.)1111 Marcus Avenue, Lake Success, New York
  
  11042(Address of principal executive
  offices)
  
  (Zip Code) Registrants
telephone number, including area code (516)
333-8230 Securities
registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act: Common stock, par value $.10(Title of class) 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   xNo   o Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.o    Indicate by
check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).

Yes   xNo   o

The aggregate
market value of the registrants common stock held by non-affiliates on
November 26, 2004, the last business day of the registrants most recently
completed second fiscal quarter, was approximately $115,470,000. Such aggregate
market value is computed by reference to the closing sale price of the
registrants common stock as reported on the American Stock Exchange on such
date.

As of August
1, 2005, there were 10,842,622 shares of the registrants common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the
registrants 2005 Annual Meeting of Stockholders to be held October 19, 2005
are incorporated by reference in Part III of this Form 10-K Report.

-2-


E-Z-EM, Inc. and Subsidiaries



INDEXPagePart I:Item
  l.
  Business
  4Item
  2.
  Properties
  17Item
  3.
  Legal
  Proceedings
  17Item
  4.
  Submission
  of Matters to a Vote of Security Holders
  18Part II:Item
  5.
  Market
  for Registrants Common Equity, Related Stockholder Matters and Issuer
  Purchases of Equity Securities
  19Item
  6.
  Selected
  Financial Data
  21Item
  7.
  Managements
  Discussion and Analysis of Financial Condition and Results of Operations
  22Item
  7A.
  Quantitative
  and Qualitative Disclosures About Market Risk
  39Item
  8.
  Financial
  Statements and Supplementary Data
  40Item
  9.
  Changes
  in and Disagreements with Accountants on Accounting and Financial Disclosure
  40Item
  9A.
  Controls
  and Procedures
  40Item
  9B.
  Other Information
  42Part III:Item
  10.
  Directors
  and Executive Officers of the Registrant
  43Item
  11.
  Executive
  Compensation
  47Item
  12.
  Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters
  51Item
  13.
  Certain
  Relationships and Related Transactions
  53Item
  14.
  Principal
  Accountant Fees and Services
  54Part IV:Item
  15.
  Exhibits
  and Financial Statement Schedules
  55-3-


Part I

Item 1.
  Business(a)
  General Development of BusinessOverview


  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. We develop, manufacture and market medical
  diagnostic products used for colorectal cancer screening, evaluation of
  swallowing disorders (dysphagia), and testing for other diseases and
  disorders of the GI system. We are also a third-party contract manufacturer,
  which enables us to leverage our quality control, process, automation and
  manufacturing capabilities.
  Prior to our spin-off of AngioDynamics to
  our shareholders on October 30, 2004, we were also a provider of innovative
  medical devices used in minimally invasive, image-guided procedures to treat
  peripheral vascular disease, or PVD. AngioDynamics designed, developed,
  manufactured and marketed a broad line of therapeutic and diagnostic devices
  that enabled interventional physicians (interventional radiologists, vascular
  surgeons and others) to treat PVD and other non-coronary diseases.We have been
in business for more than 43 years. Our global headquarters are located at 1111
Marcus Avenue, Suite LL-26, Lake Success, N.Y. 11042.

Our company
web site is www.ezem.com1.  We make available free of charge through our web site, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all
amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the SEC.

History

We were
founded in 1961 by Howard Stern and Phillip Meyers, M.D. to develop and market
a unit dose product for delivering barium sulfate contrast media to patients
for the X-ray visualization of the GI tract and the detection of colorectal
cancer and other GI-related diseases. The Stern-Meyers product was considered
to be a major innovation that virtually eliminated cross contamination in lower
GI examinations. The product also established E-Z-EMs brand among radiologists
around the world.

In 1983, we
reorganized in Delaware and completed an initial public offering. In 1985, we
acquired Therapex, a Canadian manufacturer of barium sulfate, creating enhanced
manufacturing capacity and providing a platform for our contract manufacturing
operations. In 1988, we founded AngioDynamics to provide medical devices for
new procedures being developed by interventional radiologists. AngioDynamics
was spun-off in a tax-free distribution to our shareholders on October 30,
2004.


1 This website address is not intended to
function as a hyperlink and information on our website is not part of this
annual report on Form 10-K.

-4-


Recent Developments

On October 30,
2004, we completed our spin-off of AngioDynamics by means of a tax-free
distribution of our remaining 80.4% ownership of AngioDynamics. AngioDynamics
had previously completed an initial public offering in June 2004. In February
2004, we received a favorable private letter ruling from the Internal Revenue
Service regarding the tax-free treatment of the distribution of our remaining
ownership in AngioDynamics. We made a pro rata distribution of our 9,200,000
shares of AngioDynamics on October 30, 2004 to our shareholders of record as of
October 11, 2004 (the Record Date). Based on the shares outstanding of each
company on the Record Date, our shareholders received .856377 of a share of
AngioDynamics stock for each share of E-Z-EM stock they owned on the Record
Date. For all periods presented, AngioDynamics is accounted for as a
discontinued operation in our financial statements.

For fiscal
2005, our net sales increased 12%, or $12,466,000, to $113,075,000 due to: i)
sales growth, of which we estimate from $5,600,000 to $6,300,000 was
attributable to the liquid barium product recall by Mallinckrodt, our principal
competitor; ii) foreign currency exchange rate fluctuations, which increased
the translated amounts of our foreign subsidiaries sales to U.S. dollars for
financial reporting purposes by $1,818,000; and iii) price increases, which accounted
for less than 1% of net sales for 2005. Price increases have had minimal effect
on sales since a significant portion of our domestic products are sold under
long-term group purchasing organization contracts. On a product line basis, the
net sales increase resulted from increased sales of computed tomography (CT)
imaging contrast products, particularly our CT Smoothie lines, and CT injector
systems totaling $11,268,000.

On April 7,
2005, we acquired from our strategic partner, ODell Engineering, all its
assets related to Reactive Skin Decontamination Lotion (RSDL). RSDL is a
liquid skin decontaminant that breaks down chemical agents such as Sarin or VX
in seconds, leaving a non-toxic liquid that can be washed away with water. RSDL
is packaged in a tear-open pouch that first-responders and soldiers can use to
aid victims of a chemical attack or for personal protection. RSDL was
originally developed by the Canadian Defense Research Establishment. The U.S.
Department of Defense (DoD) is currently conducting final configuration and
compatibility testing on the product, a required process for the replacement of
product currently used in this role. RSDL is currently used by several NATO
countries as their exclusive product for personal chemical agent decontamination.
Under the rights we acquired through this agreement, RSDL can be marketed to
military and first-responder organizations worldwide. Prior to the acquisition,
we were the exclusive manufacturer of RSDL under an agreement between ODell
Engineering and our wholly owned Canadian subsidiary.

Unless the
context requires otherwise, all references herein to a particular year are
references to our fiscal year, which concludes on the Saturday nearest to May
31st.

(b)
  Financial Information About Industry SegmentsNot
Applicable.

(c)
  Narrative
  Description of BusinessGeneral

We are a
leading provider of medical products that can be categorized into the following
product groupings:


  CT Imaging-5-



  X-Ray Fluoroscopy
  Contract Manufacturing
  Accessory Medical Devices
  Gastroenterology
  Virtual Colonoscopy
  Defense DecontaminantsVirtually all
of our products are cleared for sale in the U.S. Certain products are cleared
for sale in the European Community, Japan and other countries.

The following
table sets forth revenues from external customers for the last three fiscal
years:



2005
  
  2004
  
  2003$
  
  %
  
  $
  
  %
  
  $
  
  %(dollars in thousands)CT Imaging
  
  $
  45,666
  
  
  40.4
  
  $
  34,398
  
  
  34.2
  
  $
  29,932
  
  
  31.3X-Ray Fluoroscopy
  
  
  40,649
  
  
  36.0
  
  
  40,810
  
  
  40.6
  
  
  40,639
  
  
  42.5Contract Manufacturing
  
  
  9,183
  
  
  8.1
  
  
  8,054
  
  
  8.0
  
  
  8,571
  
  
  9.0Accessory Medical Devices
  
  
  5,328
  
  
  4.7
  
  
  5,351
  
  
  5.3
  
  
  5,392
  
  
  5.6Gastroenterology
  
  
  4,627
  
  
  4.1
  
  
  4,246
  
  
  4.2
  
  
  3,877
  
  
  4.0Virtual Colonoscopy
  
  
  3,654
  
  
  3.2
  
  
  3,698
  
  
  3.7
  
  
  2,610
  
  
  2.7Defense Decontaminants
  
  
  956
  
  
  .8
  
  
  1,164
  
  
  1.1
  
  
  1,410
  
  
  1.5Other
  
  
  3,012
  
  
  2.7
  
  
  2,888
  
  
  2.9
  
  
  3,252
  
  
  3.4$
  113,075
  
  
  100.0
  
  $
  100,609
  
  
  100.0
  
  $
  95,683
  
  
  100.0GI Disease and Colorectal Cancer

The GI system
is one of the most complex systems in the human body. It processes food,
extracts nutrients and passes wastes and involves all major body parts and
organs used in chewing, swallowing, digestion, absorption and defecation.
Digestive glands also provide moisture, lubrication, emulsification and enzymes
for digestion of proteins, carbohydrates and fats.

Diseases of
the GI tract are considered to be the second most prevalent after cardiac
diseases. According to the National Institute of Diabetes and Digestive and
Kidney Diseases, 60 to 70 million people each year are affected by digestive
disease, leading to more than 190,000 deaths, 10 million hospitalizations
(equal to 13 percent of all hospitalizations), 6 million diagnostic and
therapeutic procedures (equal to 14 percent of all procedures), 50 million
physician office visits, 1.4 million people with disabilities, and costs of $107
billion, including $87 billion in direct medical costs and $20 billion in
indirect costs (e.g., disability and mortality). Colorectal cancer is the
second most common cancer in the U.S., striking 140,000 people annually and
causing 56,000 deaths, according to the American Society of Colon and Rectal
Surgeons.

We believe
there are four major healthcare trends that will continue to cause a
significant shift in spending from direct care to screening and early detection
and preventative treatment of GI disease:


  Early
  Detection - Research has shown that colorectal cancer and other GI diseases have higher
  cure rates if caught early. As a result, the American Cancer Society
  recommends that Americans age 50 or older should be screened-6-


on a regular basis and, in
  1998, Medicare began reimbursing for colorectal cancer screening utilizing GI
  contrast X-ray examinations, as well as other GI-related procedures.
  Aging of
  the Population - The number of Americans affected by GI diseases is expected to increase
  substantially as the population grows older. While colorectal cancer may
  occur at any age, more than 90% of the patients are over age 40, at which
  point the risk doubles every ten years, according to the American Society of
  Colon and Rectal Surgeons. The American Cancer Society estimates that less
  than 50% of the people age 50 or over in the United States have had a recent
  test.
  Technological
  Innovation - Growth
  of multi-slice CT, magnetic resonance (MR) scanners, three-dimensional and
  harmonic ultrasound, and innovations in digital imaging software are
  increasing the ability of radiologists and gastroenterologists to detect GI
  problems earlier.
  Increasing
  Healthcare Costs - The need to reduce escalating healthcare costs for direct care is leading to
  increased use of lower cost diagnostic procedures and minimally invasive
  preventative treatment.CT Imaging

CT Imaging is
an increasingly important technology for the diagnostic imaging of the GI
tract. Frost & Sullivan, a leading market research firm, has estimated that
CT procedures will grow at an 11.25% compound annual growth rate from 2003
through 2010, and we are focused on finding solutions to capitalize on this
trend. During this past year, sales of CT products surpassed those of our X-ray
fluoroscopy products for the first time in our history and they now represent
our largest product group.

CT scanners
take a rapid stream of X-ray photographs from different angles. Through
computerization, this block of data is used to create two- and
three-dimensional images of bone and hard tissue, and soft tissue when contrast
media is introduced inside the body. CT examination is significantly more
expensive than X-ray fluoroscopy but, as the cost of CT technology declines and
utilization increases, per procedure costs are expected to decline.
Radiologists typically employ barium sulfate contrast media for thoracic,
abdominal and pelvic studies to mark the GI tract, while water-soluble contrast
media are typically used for vascular studies.

We believe we
have the most comprehensive line of barium sulfate formulations for thoracic,
abdominal and pelvic CT scanning. We market 11 formulations under our
Esopho-CAT®, E-Z-CAT® and Readi-CAT® Smoothie
lines. Early in fiscal 2005, we introduced VoLumen, the next generation,
low-density barium sulfate suspension for use as an oral contrast in
Multidetector CT (MDCT) and Positron Emission Tomography (PET)/CT studies.
VoLumen is designed to overcome the limitations of water and higher-density
positive oral contrasts currently used in these studies, and allows for the
simultaneous MDCT investigation of all organs, vasculature, and surrounding
structures of the abdominal/pelvic region.The entire
CT contrast line consists of formulations that are packaged as a liquid or
powder for oral use and in various sizes from unit dose to multi-dose for
administration convenience and economy. Each formulation and size is designed
to meet the radiologists need for consistent performance in lumen marking and
transit through the GI tract, while maintaining optimal patient comfort and
management.

We also
address the CT market with our Empower line of electromechanical injectors.
Radiologists use injectors to deliver a controlled volume of iodine-based
contrast media into patients to visualize the vascular structure

-7-


of the
circulatory system and organs in the thoracic, abdominal and pelvic regions.
Our injectors, EmpowerCT® and EmpowerCTA® with EDATM technology, aid in the detection of extravasation, an accidental infiltration
of contrast media into surrounding tissue. Empower injectors are comprised of
an electromechanical injector, and a consumable syringe and EDA detector patch.

Based upon
sales, we believe that we are the leading manufacturer of CT barium contrast
media and the second largest manufacturer of CT injectors in the U.S. We were
recently rated Number 1 in user satisfaction among vendors of CT power
injectors by MD Buyline.

X-Ray Fluoroscopy

GI X-ray
contrast media has been our principal business for more than 43 years. A
standard X-ray takes a photograph of bones (hard tissue). When contrast media
is introduced inside the body, the X-ray can also photograph soft tissue
details. For more than 85 years, barium sulfate has been the contrast medium of
choice for virtually all X-rays of the GI tract and is still one of the most
common methods used by radiologists for diagnostic imaging of the GI tract. It
permits the visualization of the entire GI tract; has a high absorption
coefficient for X-rays; and it is biologically inert, insoluble in water and
chemically stable. Compared to endoscopic procedures, X-ray fluoroscopy with
barium sulfate contrast can be safer, less expensive and provide increased
visualization, depending upon the condition being diagnosed.

We believe we
offer the most comprehensive line of barium sulfate formulations. We market
approximately 30 fluoroscopy formulations. Formulations focus on five key areas
- pharynx, esophagus, stomach and small intestine and large intestine (colon) -
and are packaged in different sizes in oral, enema, liquid and powder forms.
Each formulation is designed to meet the radiologists need to optimize
visualization of the condition under diagnosis while providing patient comfort
and management. Based on sales figures, we believe that we are the leading
manufacturer of these contrast media.

We have an
ongoing program to develop new formulations, to extend the GI diagnostic power
of X-ray fluoroscopy and to enhance the effectiveness of our existing
formulations. In recent years, we introduced Varibar®, the first
family of barium sulfate contrast for the X-ray diagnosis of dysphagia, or
swallowing disorders. Varibar provides a range of viscosity barium
suspensions from juice to honey to pudding to evaluate a patients ability to
swallow liquid and solid materials of differing viscosities and volumes,
resulting in consistent, repeatable radiographic results. We estimate 10
million Americans have some degree of swallowing disorder.

We also sell
accessory medical devices for use in X-ray procedures, such as empty enema
administration kits and components.

Contract Manufacturing

Contract
manufacturing focuses on three product areas:


  Diagnostic
  Contrast Media - We
  manufacture an oral iodinated contrast medium for a third party.
  Pharmaceuticals - This includes products for dermatology,
  sunscreen lotions and creams, and cough and cold medicines.
  Cosmetics - This includes anti-aging and moisturizer
  skin care products, as well as topical liquids.-8-


Accessory Medical Devices

We develop,
manufacture and market consumable and non-consumable radiological medical
devices, such as entry biopsy needles and trays, mammography wipes and related
accessories.

Gastroenterology

We are
leveraging our core competency in GI imaging to expand on our presence in the
gastroenterology market. Our product offerings to this market include the
Suction Polyp TrapTM, E-Z-GuardTM mouthpieces, Visipace
electrogastrogram analyzer, as well as other medical devices. We also market
several virtual colonoscopy products, including the LoSo PrepTM bowel cleanser and NutraPrepTM pre-procedure meal plan product
lines, to gastroenterologists for use in optical colonoscopy procedures, and
distribute a hydrogen breath analyzer under the E-Z-EM trade name H2 ScoreTM Breath Meter. H2 Score is a convenient hand-held screening tool for
lactose malabsorption. We believe we are well positioned to continue building
our presence in this market.

Virtual Colonoscopy

Virtual
colonoscopy, or CT colonography, employs a CT scanner and three-dimensional
imaging software to look inside the body without having to insert a long fiber
optic tube (optical colonoscopy) into the colon or having to fill the colon
with liquid barium sulfate (barium enema). We support the virtual colonoscopy
marketplace with a comprehensive suite of trademarked products:


  PROTOCO2LTM is an automated insufflation system that delivers carbon dioxide into the
  colon to achieve optimal distention for better visualization and greater
  patient comfort.
  Tagitol VTM is
  a next generation radiopaque marker that blends into stool as it forms.
  Tagitol V provides immediate, visible identification of retained feces via
  comparative density analysis, enhancing the accurate detection of pathology
  and helping to reduce the potential for false positive/negative results.
  NutraPrepTM is
  a pre-packaged, low-residue patient food system that provides a nutritionally
  sound diet for the day prior to an exam while minimizing the amount of
  retained fecal material. NutraPrep is covered by U.S. Patent No. 6,866,873
  that was issued on March 15, 2005.
  LoSo PrepTM is
  a relatively mild, low sodium, patient colon cleanser. LoSo Prep and other
  E-Z-EM laxative products are marketed to radiologists and gastroenterologists
  for the preparation and increased compliance of patients for any medical
  procedure requiring a clean colon, including X-ray examinations (barium
  enema), virtual or optical colonoscopy or surgery.
  InnerviewGITM is an application software that processes CT scan data to create two- and
  three-dimensional views of the GI tract. InnerviewGI was jointly developed
  with Vital Images, Inc., which develops, markets and supports
  three-dimensional medical imaging software for use primarily in disease
  screening, clinical diagnosis and surgical and therapy planning. Vital Images
  markets InnerviewGI and pays a royalty to us based on sales. We share the
  cost of InnerviewGI product development with Vital Images.We are
marketing our virtual colonoscopy products as a more patient-friendly procedure
to encourage screening. We believe that patients, when given the choice, prefer
virtual colonoscopy because it is less invasive than optical

-9-


colonoscopy,
does not require sedation as with optical colonoscopy (which generally requires
missing a day of work) and is more comfortable than both optical colonoscopy
and barium enema without compromising visualization. Virtual colonoscopy is
gaining academic and clinical acceptance.

Defense Decontaminants

Our principal product
offering is Reactive Skin Decontamination Lotion (RSDL), a liquid
decontaminant that reacts very rapidly with chemical warfare (CW) agents,
including VX nerve agent. RSDL neutralizes these agents within a matter of
seconds or minutes, leaving a non-toxic, water-soluble residue. RSDLs efficacy
in neutralizing toxic industrial chemicals is also being evaluated under a U.S.
Government Cooperative Research and Development Agreement (CRADA). RSDL can
potentially be used to decontaminate intact skin surfaces and is being tested
for safety in open wounds. RSDL is currently used by all service branches of
the Canadian Forces, as well as the armed forces of Australia, Belgium,
Ireland, Holland, Sweden and Slovenia. The U.S. Army is currently conducting
final testing of RSDL. The U.S. Food and Drug Administration (FDA) issued a
510(k) clearance for RSDL in March 2003. Developed by Defense Research and
Development Canada (DRDC) and licensed to us by the Canadian government, on a
worldwide basis, for military, first-responders, and first-receivers, RSDL is
patented in the U.S., Canada and more than a dozen European countries. We also
serve as a contract manufacturer of a non-RSDL decontaminant.

Other

Revenues from
our Other product category totaled 2.7%, 2.9% and 3.4% of net sales in 2005,
2004 and 2003, respectively. This category consists primarily of freight
charges billed to customers, miscellaneous products distributed through our
foreign operations and royalty income.

Research and Development and Engineering

We believe
that the success of our business is due to our ability to improve our existing
products and develop new diagnostic contrast formulations and devices for
different imaging modalities and procedures. To support these activities, we
operate a Research and Development (R&D) department with a staff of seven
and a product Engineering department with a staff of 11. To take advantage of
synergies and efficiencies, and in anticipation of the relocation of our powder
manufacturing from our facility in Westbury, N.Y. to our facility in Montreal,
Canada, the Westbury R&D laboratory was closed and all formulation R&D
activities now occur at our Montreal facility. This reorganization was
completed in 2005.


  The Montreal R&D
  laboratory specializes in liquid and powder barium sulfate contrast
  formulations. Capabilities include the ability to evaluate barium sulfate
  particle size and concentration for optimal imaging characteristics,
  suspension stabilization, coating or non-coating properties depending on the
  application, flavoring modification, and expertise in analytic, organic and
  physical chemistry, including colloidal suspensions.
  The Engineering department
  (in Westbury, N.Y.) specializes in FDA Class 2 Medical Device development,
  manufacturing and regulation for hardware and disposables. Capabilities
  include mechanical, electrical and software design.We have a product steering
committee to review and evaluate all new product ideas. Furthermore, we have a
product development project management process that incorporates all
disciplines, including sales and marketing, to ensure

-10-


that we accurately address our markets needs. This
team approach is responsible for developing new projects under all applicable
design control validation procedures throughout the various stages of product
development. These procedures include bench testing, animal testing,
biocompatibility testing, human-use testing conducted by independent
physicians, and post-initial test-market surveillance of product performance.
The feedback we receive throughout the process, especially from physicians, is
used to confirm product functionality, safety and effectiveness before
commencing full-scale marketing.

We conduct clinical research studies to support our
product development activities and also to evaluate post-market performance,
particularly in comparison to competitive products in the market. We manage and
monitor the clinical studies performed by investigators and institutions to
study the clinical outcome of our products. In addition to offering
administrative support and funding, our clinical applications team assists
investigators in writing protocols and collecting and analyzing data when
necessary.

We are jointly developing with Berlex Laboratories, a
U.S. affiliate of Schering AG, the ULTRAVIST® Glass Pre-filled
Cartridge (PFC), a pre-filled contrast syringe loaded with ULTRAVIST
(iopromide) injection.  We will adapt
our EmpowerCT® injector system to permit the use of the ULTRAVIST
Glass PFC. The program is expected to be completed in fiscal 2006.

Our research and development (R&D) expenditures
totaled $5,494,000, $4,467,000, and $4,267,000 in 2005, 2004 and 2003,
respectively. R&D expenditures are expected to continue at or exceed
current levels.

Sales
and Marketing

We also believe that the success of our business is
due to the effectiveness of our sales, marketing and distribution
infrastructure.

In North America, our products are sold through a
38-person sales force (including three regional managers), some of whom began
their careers as X-ray or CT technologists or had other specialized training
before joining our company. The sales force calls on the 1,500 major hospitals
in North America where approximately 25,000 radiologists and an increasing
number of gastroenterologists are located.

We promote our products through exhibits at major
medical conventions worldwide. We also advertise in select medical journals and
trade publications, conduct direct mail campaigns and sponsor web sites, and
sponsor continuing medical education seminars in virtual colonoscopy to reach
our target markets. In 2005, we supported 18 such courses, which trained over
430 physicians in virtual colonoscopy. Each course typically lasts for two days
and consists of didactic lectures and hands-on training sessions focused on
performing and interpreting virtual colonoscopy examinations. We
offer a marketing program for virtual colonoscopy, through which customers can
receive comprehensive marketing support materials for use in promoting their
practices.

We sell our products in the U.S. through a network of
approximately 150 distributors.

Outside North America, our products are marketed
through a 17-person sales force. We market and distribute directly in the
United Kingdom, Benelux and Tokyo, Japan, reaching major hospitals in these
markets. Independent distributors, such as GE Medical in Central and Eastern
Europe, Bracco in Italy, and Astra in Scandinavia, are used in other markets.
Significant sales are made in the United Kingdom, Holland, Japan, Italy,
Belgium, Germany,

-11-


Sweden, South Africa, Australia and Austria. Foreign
distributors are generally granted exclusive distribution rights, where
permissible by applicable law, and some hold governmental product registrations
in their names. New registrations are filed in our name when permissible under
applicable law.

Competition

We believe that our CT and X-ray fluoroscopy contrast
products are the most widely used diagnostic imaging products of their kind in
the U.S., Canada and certain European countries. We face competition in the
domestic contrast systems market primarily from Mallinckrodt, a division of
Tyco International Ltd., GE Healthcare, a segment of General Electric Co., and
Bracco. Significant competition exists outside of the U.S. We compete primarily
on the basis of product quality, customer service, and the availability of a
full line of barium sulfate formulations tailored to user needs, while
maintaining competitive pricing.

The CT and X-ray fluoroscopy procedures for which we
provide products complement, as well as compete with, procedures such as
colonoscopy and endoscopy. Such procedures involve direct visual inspection of
the GI tract by a gastroenterologist using a flexible fiber optic instrument
inserted into the patient. The use of gastroenterology procedures has been
growing in both upper and lower GI examinations, as patients have been
increasingly referred to gastroenterologists rather than radiologists. Also,
the availability of drugs that successfully treat ulcers and other GI disorders
has tended to reduce the need for upper GI tract X-ray examinations.

We also compete in the medical device radiology
market, which is highly competitive. To our knowledge, no single company,
domestic or foreign, competes with us across all of our medical device product
lines. In electromechanical injectors and syringes, our main competitors are
Medrad, a division of Schering AG, and Liebel-Flarsheim, a division of
Mallinckrodt. In needles and trays, we compete with C.R. Bard, Inc., Baxter
Healthcare Corporation, Sherwood Medical Co., as well as other competitors. We
also encounter competition for our other medical device products.

Significant
Customer

Sales to SourceOne Healthcare Technologies, Inc.,
a distributor of our products, accounted for 30% of our net sales for 2005.

Backlog

At July 31, 2005, we had a backlog of unfilled
customer orders of $7,056,000, compared to a backlog of $5,089,000 at July 31,
2004. The backlog figures represent sales less estimated rebates. We expect all
backlog at July 31, 2005 will be filled during fiscal 2006. The changes in
backlog are not necessarily indicative of comparable variations in sales or
earnings.

Raw
Materials and Supplies

Most barium sulfate used in our X-ray fluoroscopy and
CT imaging products is supplied by several European and U.S. manufacturers. A
minor portion of our barium sulfate requirements is supplied by E-Z-EM Canada
Inc., our wholly owned subsidiary, which operates a barium sulfate mine and
processing facility in Nova Scotia and whose reserves are anticipated to last a
minimum of five years at current usage rates. We believe that these sources
should be adequate for our foreseeable needs.

-12-


We have generally been able to obtain adequate
supplies of all raw materials and components for our business in a timely
manner from existing sources. However, the inability to develop alternative
sources, if required, or a reduction or interruption in supply, or a
significant increase in the price of components, could adversely affect
operations.

We recently received notice of price increases from
several of our single-source processed barium suppliers. While this had no
effect on the current year operating results, we estimate it will increase our
material cost by approximately $0.8 million in 2006. We currently are
evaluating various alternatives to mitigate this cost increase.

Patents
and Trademarks

We believe that our success is dependent, in part, on
patent protection and the proprietary nature of our technology. We file and
prosecute patent applications for our technology in jurisdictions where we
believe that patent protection is effective and advisable. Generally, for
products that we believe are appropriate for patent protection, we attempt to
obtain patents in the U.S., European Union and other appropriate jurisdictions.

Notwithstanding the foregoing, the patent positions of
pharmaceutical and medical device companies, including our company, are
uncertain and involve complex and evolving legal and factual questions. The
coverage sought in a patent application can be denied or significantly reduced
either before or after the patent is issued. Consequently, there can be no
assurance that any of our pending or future patent applications will result in
an issued patent. There is also no assurance that any existing or future patent
will provide significant protection or commercial advantage, or whether any
existing or future patent will be circumvented by a more basic patent, thus
requiring us to obtain a license to produce and sell the product. Generally,
patent applications can be maintained in secrecy for at least 18 months after
their earliest priority date. In addition, publication of discoveries in the
scientific or patent literature often lags behind actual discoveries.
Therefore, we cannot be certain that we were the first to invent the subject
matter covered by each of our pending U.S. patent applications or that we were
the first to file non-U.S. patent applications for such subject matter.

If a third party files a patent application relating
to an invention claimed in our patent application, we may be required to participate
in an interference proceeding declared by the U.S. Patent and Trademark Office
to determine who owns the patent. Such proceeding could involve substantial
uncertainties and cost, even if the eventual outcome is favorable to us. There
can be no assurance that our patents, if issued, would be upheld as valid in
court.

Third parties may claim that our products infringe on
their patents and other intellectual property rights. The pharmaceutical and
medical device industries are highly competitive and companies in these areas
may have large patent portfolios. Some companies in the medical device industry
have used intellectual property infringement litigation to gain a competitive
advantage. If a competitor were to challenge our patents, licenses or other
intellectual property rights, or assert that our products infringe its patent
or other intellectual property rights, we could incur substantial litigation
costs, be forced to stop selling our products and/or make expensive changes to
our product designs, license rights in order to continue manufacturing and
selling our products, or pay substantial damages. Third-party infringement
claims, regardless of their outcome, would not only consume our financial
resources but also divert our managements time and effort. Such claims could
also cause our customers or potential customers to defer or limit their
purchase or use of the affected products until resolution of the claim.

-13-


We rely on trade secret protection for certain
unpatented aspects of other proprietary technology. There can be no assurance
that others will not independently develop or otherwise acquire substantially
equivalent proprietary information or techniques or gain access to our
proprietary technology or disclose such technology, or that we can meaningfully
protect our trade secrets. We require key employees and consultants to execute
confidentiality agreements upon the commencement of an employment or consulting
relationship with us. These agreements also require our employees and,
generally, our consultants to assign to us all rights to any inventions made or
conceived during their employment with or engagement by us. There can be no
assurance, however, that these agreements will provide meaningful protection or
adequate remedies for us in the event of unauthorized use, transfer or
disclosure of confidential information or inventions.

We believe that a good trademark can help establish
brand recognition and awareness for our company and our products. We file and
prosecute trademark applications in jurisdictions where we believe that
registered trademark protection is effective and advisable. We have registered
numerous trademarks in the U.S. and certain foreign jurisdictions. Because the
registration of trademarks in the U.S. and foreign countries can be expensive,
we also rely on common law protection for certain trademarks.

The laws of foreign countries generally do not protect
our proprietary rights to the same extent, as do the laws of the U.S. In
addition, we may experience more difficulty enforcing our proprietary rights in
certain foreign jurisdictions.

Government
Regulation

The products we manufacture
and market are subject to regulation by the U.S. Food and Drug Administration,
or FDA, and, in some instances, state authorities and foreign governments.

U.S.
Regulation

In the U.S., before a
pharmaceutical or medical device product can be introduced into the market, a
manufacturer must, depending on the product, either register the product with
the FDA or obtain clearance or approval from the FDA.

We manufacture and market
both pharmaceutical products and medical devices. Our pharmaceutical products,
such as contrast agents used in X-ray fluoroscopy and CT imaging procedures,
are registered with the FDA. Our medical devices have been cleared and
approved by the FDA.

The FDA clearance and approval processes for
pharmaceuticals and medical devices are expensive, uncertain and lengthy, and a
number of products for which approval or clearance has been sought by other
companies have never been approved for marketing. There can be no assurance
that we will be able to obtain necessary regulatory clearances or approvals for
any future products on a timely basis or at all. Delays in receipt of or
failure to receive such clearances or approvals, the loss of previously
received clearances or approvals, or the failure to comply with existing or
future regulatory requirements could have a material adverse effect on our
business, financial condition and results of operations.

If and when FDA marketing clearance or approvals are
granted for a drug or device, the products and their manufacture are subject to
pervasive and continuing regulation by the FDA, including Current Good
Manufacturing Practices (CGMP), record keeping requirements and the MedWatch
and Medical

-14-


Device Reporting regulation, which requires that
manufacturers report to the FDA if their drug or device may have caused or
contributed to a death or serious injury or malfunctioned in a way that would
likely cause or contribute to a death or serious injury if it were to recur.
The labeling and promotion activities with respect to products are subject to
scrutiny by the FDA and, in certain instances, by the Federal Trade Commission.
The FDA actively enforces regulations prohibiting marketing of drugs and devices
for unapproved new indications or uses.

The products we manufacture are subject to the FDAs
Quality System Regulations. Drug and device manufacturers are required to
register and list their facilities with the FDA and certain state agencies.
Every phase of production, including raw materials, components and
subassemblies, manufacturing, testing, quality control, labeling, traceability
after distribution, and follow-up and reporting of complaint information is
governed by FDA regulations. The FDA periodically conducts inspections of
manufacturing facilities and, if there are alleged violations, the operator of
a facility must correct them or satisfactorily demonstrate the absence of the
violations or face regulatory action.

In 2005, we had two unrelated product recalls. The
first was due to the incomplete or inadequate joint weld on a ceiling mount
used with our Empower CT injector. This recall is 95% complete and pending
final closure by the FDA.

The second incident involved the recall of Evacupaste.
This product is manufactured for us by Mallinckrodt, a division of Tyco
International Ltd, and was part of the overall recall of their liquid barium
products in December 2004. The Evacupaste recall is about 70% complete with
closure expected in the next several months.

We are subject to inspection and marketing
surveillance by the FDA to determine our compliance with regulatory
requirements. Non-compliance with applicable FDA requirements can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the FDA to
grant marketing approvals, withdrawal of marketing approvals, a recommendation
by the FDA to disallow us to enter into government contracts, and criminal prosecutions.
The FDA also has the authority to request repair, replacement or refund of the
cost of any device manufactured or distributed by us.

We believe that we are in
compliance, in all material respects, with all applicable FDA regulatory
requirements for our products.

Non-U.S.
Regulation

Internationally, our products have been registered and
approved in each foreign country where such registration and approval is
required to market and sell our products. Some of the regulatory requirements
in foreign countries are similar to those in the U.S. for product approval and
maintenance of such approval. However, the regulatory review process may vary
greatly from country to country.

In some cases, we rely on our non-U.S. distributors to
obtain registration and approval for our products in a particular foreign
jurisdiction.

Non-U.S. sales of pharmaceuticals and medical devices
manufactured in the U.S. that are not approved or cleared by the FDA for use in
the U.S., or are banned or deviate from lawful performance standards, are
subject to FDA export requirements. Before exporting such products to a foreign
country, we must first comply with the FDAs regulatory procedures.

-15-


We believe that we are in
compliance, in all material respects, with all applicable regulatory
requirements in those countries where our products are sold.

Other

We are subject to various Federal and state laws
governing our relationships with the physicians and others who purchase or make
referrals for our products. For instance, Federal law prohibits payments of any
form that are intended to induce a referral for any item payable under
Medicare, Medicaid or any other Federal healthcare program. Many states have
similar laws. There can be no assurance that we will not be required to incur
significant costs to comply with such laws and regulations now or in the future
or that such laws or regulations will not have a material adverse effect on our
ability to do business.

We received International Standards Organization (ISO)
9001 and 13485 certification in January 2005 of our facility in Montreal,
Canada. Our facility in Westbury, NY is also certified as compliant with these
standards.

Environmental and other
Regulations

We and our products are also subject to a variety of
state and local laws in those jurisdictions where our products are or will be
marketed, and Federal, state and local laws relating to matters such as safe
working conditions, manufacturing practices, environmental protection, fire
hazard control and disposal of hazardous or potentially hazardous substances.
For example, we are registered with the New York State Board of Pharmacy. These
include laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emissions, effluent discharge, handling and disposal
of certain hazardous and potentially hazardous substances used in connection
with our operations. Although we believe that we have complied with these laws
and regulations in all material respects and to date have not been required to
take any action to correct any noncompliance, there can be no assurance that we
will not be required to incur significant costs to comply with environmental
regulations in the future.

We operate several facilities within a broad
industrial area located in Nassau County, New York, which has been designated
by New York State as a Superfund site. This industrial area has been listed as
an inactive hazardous waste site due to ground water investigations conducted
on Long Island during the 1980s. Due to the broad area of the designated site,
the potential number of responsible parties, and the lack of information
concerning the degree of contamination and potential clean-up costs, it is not
possible to estimate what, if any, liability we may have. Further, it has not
been alleged that we contributed to the contamination, and it is our belief
that we have not done so.

Employees

As of May 28, 2005, we employed 553 persons, 153 of
whom were covered by various collective bargaining agreements. Collective
bargaining agreements covering 26 and 125 employees expire in December 2005 and
December 2010, respectively. A third collective bargaining agreement, covering
2 employees, automatically renews every May. We consider employee relations to
be satisfactory.

-16-


(d)
  Financial Information Regarding
  Foreign and Domestic Operations and Export SalesWe derived about 35% of our sales for 2005 from
customers outside the U.S. Profit margins on export sales are somewhat lower
than domestic sales margins. Our domestic operations bill third-party export
sales in U.S. dollars and, therefore, do not incur foreign currency transaction
gains or losses. Third-party sales to local customers, which are made by our
subsidiaries in Canada, the United Kingdom, Holland and Japan, are billed in
their local currency.

As of May 28, 2005, 358 of our employees are involved
in the developing, manufacturing and marketing of our products outside of the
U.S. Of this amount, 268 employees are based at our Canadian subsidiary
supporting most of our worldwide manufacturing requirements. Our product lines
are marketed through approximately 137 foreign distributors to 87 countries
outside of the U.S.

The net sales of each geographic area and the
long-lived assets attributable to each geographic area are set forth in Note R
to the Consolidated Financial Statements included elsewhere in this annual
report on Form 10-K, which information is incorporated by reference into this
Item 1 (d).

Item 2.
  PropertiesOur global headquarters, located in Lake Success, New
York, consist of leased offices aggregating 25,608 square feet. We also occupy
two facilities located in Westbury, New York, of which we own one and lease the
other, containing an aggregate of 163,800 square feet used for manufacturing,
warehousing and administration. We entered into an agreement to sell our
Company-owned facility in Westbury, subject to certain conditions to closing.
We also occupy manufacturing and warehousing facilities located in Montreal,
Canada consisting of two buildings, of which we own one and lease the other,
containing an aggregate of 140,544 square feet. We also own a 29,120
square-foot building in Debert, Nova Scotia and both own and lease land
encompassing our barium sulfate mining operation in Nova Scotia.

Item 3.
  Legal ProceedingsWe were named as a co-defendant in an action entitled Jeffrey
Madison d/b/a Maqguide.com vs. Avail Medical Products, Inc. et al.,
Case No. 05CC03584 filed in Superior Court for the State of California, Orange
County, on February 28, 2005. The complaint alleges that in March 2003, we
sought a contract manufacturer to manufacture and supply certain medical
products and, acting through our agent, Sopheon Corporation, solicited Maqguide
to assist in this process. Acting on this information, Maqguide contacted Avail
Medical Products, Inc., or Avail, about this opportunity and helped negotiate a
final agreement between us and Avail. The complaint alleges that Maqguide had
an agreement with Avail that required Avail to pay a commission to Maqguide
upon the execution of the agreement with us. The complaint alleges 18 causes of
action against all of the defendants, including breach of contract, breach of
the covenant of good faith, quantum meruit, fraud and deceit, promissory
estoppel, conspiracy and conversion. The complaint seeks compensatory, punitive
and other monetary damages in an unspecified amount in excess of $25,000. We
have tendered the case to Avails counsel. We will defend this matter and
believe that the allegations against us are without merit and intend to vigorously
defend this action.

-17-


AngioDynamics and E-Z-EM were named as co-defendants
in an action entitled Duhon, et. al vs. Brezoria Kidney Center, Inc.
et. al, case no. 27084 filed in the District Court of Brezoria County, Texas,
239th Judicial District on December 29, 2003. The complaint alleged
that AngioDynamics and its co-defendants, E-Z-EM and Medical Components, Inc.
or Medcomp, designed, manufactured, sold, distributed and marketed a defective
catheter that was used in the treatment of, and caused the death of, a
hemodialysis patient, as well as committed other negligent acts. The complaint
sought compensatory and other monetary damages in unspecified amounts. Under
AngioDynamics distribution agreement with Medcomp, Medcomp was required to
indemnify AngioDynamics against all its costs and expenses, as well as losses,
liabilities and expenses (including reasonable attorneys fees) that relate in
any way to products covered by the agreement, and Medcomp has accepted the
defense of the action. We have been advised by counsel that the matter was
settled on June 30, 2005 and that the action will be dismissed with prejudice.
We believe that Medcomp has a sufficient amount of insurance coverage and funds
available to fully cover the settlement of this action and, based upon our
agreement with Medcomp, we do not expect that either we or AngioDynamics will
be required to contribute to the settlement of this matter.

In accordance with the Master Separation and
Distribution Agreement between AngioDynamics and E-Z-EM, AngioDynamics has
agreed to indemnify us from any claims that arise out of the business
operations of AngioDynamics prior to its spin-off (October 30, 2004) in which
we are a named defendant solely because we were the sole stockholder of
AngioDynamics.

We are party to other claims, legal actions and
complaints that arise in the ordinary course of our business. We believe 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
our financial position or results of operations.

Item 4.
  Submission of Matters to a Vote of
  Security HoldersNone.

-18-


Part II

Item 5.
  Market for Registrants Common Equity, Related Stockholder Matters
  and Issuer Purchases of Equity SecuritiesEffective
April 12, 2005, our common stock began trading on the Nasdaq National Market
under the symbol EZEM. Previously, our common stock was traded on the
American Stock Exchange (AMEX) under the symbol EZM. The following table
sets forth, for the periods indicated, the high and low sales prices of the
common stock as reported by the AMEX (through April 11, 2005) and the Nasdaq
National Market (from April 12, 2005 through May 28, 2005).

Sales PricesHigh
  
  LowFifty-two weeks ended May 28, 2005Fourth
  Quarter
  
  $
  14.84
  
  $
  11.31Third
  Quarter
  
  
  15.58
  
  
  12.25Second
  Quarter (1)
  
  
  21.45
  
  
  10.76First
  Quarter
  
  
  19.94
  
  
  13.50Fifty-two weeks ended May 29, 2004Fourth
  Quarter
  
  $
  20.65
  
  $
  14.52Third
  Quarter
  
  
  21.50
  
  
  11.45Second
  Quarter
  
  
  14.95
  
  
  10.38First
  Quarter
  
  
  11.90
  
  
  8.11(1)
  During the
  second quarter, we completed the spin-off of our subsidiary, AngioDynamics,
  Inc., to our shareholders by means of a tax-free distribution.As of August
1, 2005 there were 385 registered holders of our common stock. This number of
registered holders does not represent the actual number of beneficial owners of
shares of our common stock because shares are frequently held in street name
by securities dealers and others for the benefit of individual owners who have
the right to vote their shares.

During the
first quarter of fiscal 2004, our Board of Directors declared a cash dividend
on our common stock at the rate of $.25 per share. During the first quarter of
fiscal 2005, the Board of Directors declared a cash dividend on our common
stock at the rate of $.30 per share. We will continue to evaluate our dividend
policy on an ongoing basis. Any future dividends are subject to our Board of
Directors review of operations and financial and other conditions then
prevailing.

-19-


Equity Compensation Plan Information

The following
table sets forth information, as of May 28, 2005, with respect to compensation
plans under which our equity securities are authorized for issuance.

(a)
  
  (b)
  
  (c)Plan category
  
  
  Number of securities
  to be issued upon
  exercise of
  outstanding options,
  warrants and rights
  
  Weighted-average
  exercise price
  of outstanding
  options, warrants
  and rights
  
  Number of securities
  remaining available
  for future issuance
  under equity
  compensation plans
  (excluding securities
  reflected in
  column (a))Equity compensation
  plans approved by security holders
  
  
  
  959,888
  
  
  
  $
  10.32
  
  
  
  
  565,570
  (1)Equity compensation
  plans not approved by security holders
  
  
  
  None
  
  
  
  
  None
  
  
  
  
  NoneTotal
  
  
  
  959,888
  
  
  
  $
  10.32
  
  
  
  
  565,570(1)
  Consists of 460,925 shares
  reserved for issuance under our 2004 Stock and Incentive Award Plan and
  104,645 shares reserved for issuance under our 1985 Employee Stock Purchase
  Plan.Issuer Purchases of Equity Securities

The following
table presents information regarding repurchases of our common stock during the
quarter ended May 28, 2005:



Period
    
    
    Total
        number
        of shares
        purchased
    
    Average
        price paid
        per share
    
    Total
        number of
        shares purchased
        as part of publicly
        announced plans
        or programs
    
    Maximum
        number
        of shares that may
        yet be purchased
        under the plans
        or programs(a)
    
    (b)
    
    (c)
    
    (d)2/27/05
         4/2/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4/3/05
         4/30/05
    
    
    
    2,917
    (1)
    
    
    $
    12.94
    
    
    
    
    
    
    
    
    
    5/1/05
         5/28/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    2,917
    
    
    
    $
    12.94
    
    
    
    
    
    
    
    
    
    (1)
  Our
  repurchase of these shares was in settlement of tax withholding obligations
  of an employee from the exercise of stock options.In March 2003,
our 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
fiscal year ended May 28, 2005, no shares were repurchased under this program.
In aggregate, we have repurchased 74,234 shares of common stock for
approximately $716,000 under this program.

-20-


Item 6.
  Selected Financial DataYou should
read the following selected financial data in conjunction with our consolidated
financial statements and the related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere
in this report. The consolidated statements of earnings data for the fifty-two
weeks ended May 28, 2005, May 29, 2004 and May 31, 2003, and the consolidated
balance sheet data as of May 28, 2005 and May 29, 2004, are derived from our
audited consolidated financial statements that are included elsewhere in this
report. The consolidated statements of earnings data for the fifty-two weeks
ended June 1, 2002 and June 2, 2001, and the consolidated balance sheet data as
of May 31, 2003, June 1, 2002 and June 2, 2001, are derived from our audited
consolidated financial statements not included in the report. Historical
results are not necessarily indicative of the results of operations to be
expected for future periods. See Note A of Notes to Financial Statements for
a description of the method that we used to compute our historical basic and
diluted earnings per common share.

Fifty-two weeks endedMay 28,
  2005
  
  May 29,
  2004*
  
  May 31,
  2003*
  
  June 1,
  2002*
  
  June 2,
  2001*(in thousands, except
  per share data)Income statement data:Net sales
  
  $
  113,075
  
  $
  100,609
  
  $
  95,683
  
  $
  92,288
  
  $
  90,610Gross profit
  
  
  48,036
  
  
  40,057
  
  
  37,887
  
  
  35,786
  
  
  34,770Operating profit (loss)
  
  
  3,453
  
  
  2,099
  
  
  544
  
  
  (425
  )
  
  3,865Earnings from continuing operations
  before income taxes
  
  
  6,559
  
  
  5,542
  
  
  1,936
  
  
  919
  
  
  4,858Earnings (loss) from continuing
  operations
  
  
  5,708
  
  
  3,598
  
  
  1,508
  
  
  (366
  )
  
  2,993Net earnings
  
  
  6,936
  
  
  6,726
  
  
  2,741
  
  
  585
  
  
  3,286Earnings (loss) from continuing
  operations per common shareBasic
  
  
  .53
  
  
  .35
  
  
  .15
  
  
  (.04
  )
  
  .30Diluted
  
  
  .52
  
  
  .34
  
  
  .14
  
  
  (.04
  )
  
  .30Earnings per common shareBasic
  
  
  .64
  
  
  .65
  
  
  .27
  
  
  .06
  
  
  .33Diluted
  
  
  .63
  
  
  .63
  
  
  .26
  
  
  .06
  
  
  .32Cash dividends declared per common
  share
  
  
  .30
  
  
  .25
  
  
  .00
  
  
  .00
  
  
  .00Weighted average common sharesBasic
  
  
  10,762
  
  
  10,344
  
  
  10,048
  
  
  9,848
  
  
  9,881Diluted
  
  
  10,951
  
  
  10,625
  
  
  10,419
  
  
  10,160
  
  
  10,145May 28,
  2005
  
  May 29,
  2004*
  
  May 31,
  2003*
  
  June 1,
  2002*
  
  June 2,
  2001*(in thousands)Balance sheet data:Working capital
  
  $
  59,612
  
  $
  88,636
  
  $
  60,123
  
  $
  56,746
  
  $
  56,184Cash, certificates of deposit and
  short-term debt and equity securities
  
  
  28,602
  
  
  24,464
  
  
  16,296
  
  
  21,221
  
  
  16,192Total assets
  
  
  105,648
  
  
  142,536
  
  
  110,624
  
  
  102,281
  
  
  97,455Long-term debt, less current
  maturities
  
  
  85
  
  
  178
  
  
  215
  
  
  327
  
  
  408Stockholders equity
  
  
  85,720
  
  
  111,775
  
  
  88,602
  
  
  83,522
  
  
  81,004-21-

*
  Reclassified to reflect
  the discontinued operation described in Note B to the Consolidated Financial
  Statements included herein.Item 7.
  Managements Discussion and Analysis of Financial Condition and
  Results of OperationsThe following
information should be read together with the audited consolidated financial
statements and the notes thereto and other information included elsewhere in
this Annual Report on Form 10-K.

Forward-Looking Statements

Our disclosure
and analysis in this report, including but not limited to the information
discussed in the sections entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations and Business, contain
forward-looking information about our companys financial results and
estimates, business prospects and products in research that involve substantial
risks and uncertainties. These risks and other factors include those listed
under Managements Discussion and Analysis of Financial Condition and Results
of Operations - Risk Factors and elsewhere in this Annual Report on Form 10-K.
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 operating
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. Investors
should bear this in mind as they consider forward-looking statements.

We undertake
no obligation to publicly update forward-looking statements, whether as a
result of new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related subjects in our
Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. You
should understand that it is not possible to predict or identify all such
factors. Consequently, you should not consider any such list to be a complete
set of all potential risks or uncertainties.

Overview

We are a
leading provider of medical diagnostic oral contrast agents and devices used in
the diagnosis of abdominal disease. Our customers include radiologists and
gastroenterologists. We are focused on becoming a worldwide CT solutions
company for the computed tomography (CT) market. This focus is driven by the
trend away from older fluoroscopic procedures (e.g., barium enema) to CT based
applications for imaging the abdominal tract. Frost & Sullivan, a leading
market research firm, has estimated that CT procedures in

-22-


the U.S. will
grow at 11.25% compound annual growth rate over the period 2003 through 2010.
For the first time in 2005, sales from our CT imaging business surpassed our
legacy X-ray fluoroscopy business, $45,666,000 to $40,649,000. We expect this
trend to continue.

We have
pioneered solutions for the emerging area of Virtual Colonography, which may
offer unique capabilities for the early detection of colorectal cancer, and
have also developed new contrast agents (e.g., VoLumen) that focus on CT and CT
Angiography applications in Multidetector CT technology. We also manufacture
and market several lines of CT power injectors, which are used to deliver CT
contrast agents. We were recently rated Number 1 in user satisfaction among vendors
of CT power injectors by MD Buyline.

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

Prior to our
spin-off of AngioDynamics on October 30, 2004, we were also a provider of
innovative medical devices used in minimally invasive, image-guided procedures
to treat peripheral vascular disease, or PVD. AngioDynamics designed,
developed, manufactured and marketed a broad line of therapeutic and diagnostic
devices that enabled interventional physicians (interventional radiologists,
vascular surgeons and others) to treat PVD and other non-coronary diseases.

AngioDynamics Initial Public Offering

On May 27,
2004, AngioDynamics, our former subsidiary, sold 1,950,000 shares of its common
stock at $11.00 per share through an initial public offering (IPO). Proceeds
from the IPO, net of certain financing costs, totaling $19,949,000 were
received by AngioDynamics on June 2, 2004. At May 29, 2004, we owned 9,200,000
shares or 82.5% of the 11,150,000 shares outstanding. On June 15, 2004, the
underwriters of the IPO exercised their over-allotment option and acquired
292,500 shares at $11.00 per share, less underwriting discounts and commissions,
and on June 18, 2004, AngioDynamics received net proceeds of $2,992,000. At
June 15, 2004, our ownership interest in AngioDynamics decreased to 80.4%.

AngioDynamics Spin-off

On October 30,
2004, we completed our spin-off of AngioDynamics by means of a tax-free
distribution of our remaining 80.4% ownership of AngioDynamics. In February
2004, we received a favorable private letter ruling from the Internal Revenue
Service regarding the tax-free treatment of the distribution of our remaining
ownership in AngioDynamics. We made a pro rata distribution of our 9,200,000
shares of AngioDynamics on October 30, 2004 to our shareholders of record as of
October 11, 2004 (the Record Date). Based on the shares outstanding of each
company on the Record Date, our shareholders received .856377 of a share of
AngioDynamics stock for each share of E-Z-EM stock they owned on the Record
Date. For all periods presented, AngioDynamics is accounted for as a
discontinued operation in our financial statements in

-23-


accordance with
SFAS No. 144, Accounting for Impairment and Disposal of Long-Lived Assets.

Results of Operations

Our fiscal
years ended May 28, 2005, May 29, 2004 and May 31, 2003 represent fifty-two
weeks.

Recent Developments

In
mid-December 2004, our principal competitor, Mallinckrodt, a division of Tyco
International Ltd., initiated a recall of its liquid barium products due to
potential microbial contamination. As a result, we estimate that our 2005 net
sales were favorably affected by $5.6 million to $6.3 million due to our
ability to provide replacement products. In the fourth quarter of 2005,
Mallinckrodt returned to market with one of their products, but we believe that
the majority of their products will remain offline for the next several weeks
and possibly longer. We are unable to predict what portion of the business, if
any, we will be able to retain.

We recently
received notice of price increases from several of our single-source processed
barium suppliers. While this had no affect on the current year operating
results, we estimate it will increase our materials cost by approximately $0.8
million in 2006. We currently are evaluating various alternatives to mitigate
this cost increase.

As of the end
of fiscal 2005, we became subject to the accelerated filing requirements and
the Section 404 internal control requirements of the Sarbanes-Oxley Act of
2002. As an accelerated filer, our quarterly and annual SEC reports are subject
to more stringent filing deadlines. Additionally, under Section 404 of the Act,
we are required to design and implement a system of internal control over
financial reporting and to evaluate and determine the effectiveness of our
internal control over financial reporting. During fiscal 2005, we dedicated
significant amounts of time and resources to these compliance efforts. We
incurred outside consulting and auditing costs of $550,000 in fiscal 2005, and
we expect that our costs for continuing Sarbanes-Oxley compliance will be
significant.

Consolidated Results of Operations

We reported
net earnings of $6,936,000, or $.64 and $.63 per common share on a basic and
diluted basis, respectively, for 2005, as compared to net earnings of
$6,726,000, or $.65 and $.63 per common share on a basic and diluted basis,
respectively, for 2004, and net earnings of $2,741,000, or $.27 and $.26 per
common share on a basic and diluted basis, respectively, for 2003.

The following
table sets forth earnings from continuing operations and earnings from
discontinued operation for the last three fiscal years:

2005
  
  2004
  
  2003(in thousands)Earnings from continuing
  operations
  
  $
  5,708
  
  $
  3,598
  
  $
  1,508Earnings from discontinued
  operation
  
  
  1,228
  
  
  3,128
  
  
  1,233Net earnings
  
  $
  6,936
  
  $
  6,726
  
  $
  2,741-24-


Our operating
results for 2005, 2004 and 2003 are expressed as a percentage of net sales in
the following table:

Fifty-two
        weeks endedMay
        28,2005
    
    May
        29,2004
    
    May
        31,2003Net
        sales
    
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %Cost
        of goods sold
    
    
    57.5
    
    
    60.2
    
    
    60.4Gross
        profit
    
    
    42.5
    
    
    39.8
    
    
    39.6Operating
        expensesSelling
        and administrative
    
    
    32.0
    
    
    31.5
    
    
    34.4Plant
        closings and operational restructuring costs
    
    
    2.6
    
    
    1.8Asset
        impairment
    
    
    
    
    
    
    
    
    0.1Research
        and development
    
    
    4.8
    
    
    4.4
    
    
    4.5Total
        operating expenses
    
    
    39.4
    
    
    37.7
    
    
    39.0Operating
        profit
    
    
    3.1
    
    
    2.1
    
    
    0.6Other
        income (expense)Interest
        income
    
    
    0.3
    
    
    0.8
    
    
    1.1Interest
        expense
    
    
    (0.3
    )
    
    (0.3
    )
    
    (0.3
    )Other,
        net
    
    
    2.7
    
    
    2.9
    
    
    0.6Earnings
        from continuing operations before income taxes
    
    
    5.8
    
    
    5.5
    
    
    2.0Income
        tax provision
    
    
    0.8
    
    
    1.9
    
    
    0.4Earnings
        from continuing operations
    
    
    5.0
    
    
    3.6
    
    
    1.6Earnings
        from discontinued operation, net of income tax provision
    
    
    1.1
    
    
    3.1
    
    
    1.3NET
        EARNINGS
    
    
    6.1
    %
    
    6.7
    %
    
    2.9
    %Continuing Operations

Operating
results for 2005 improved by $1,354,000 due to increased sales and improved
gross profit, partially offset by increased operating expenses, including
increased plant closing and operational restructuring costs of $1,146,000.

Operating
results for 2004 improved by $1,555,000 due to increased sales and improved
gross profit, partially offset by increased operating expenses, including
increased costs of $1,062,000 to restructure and reposition our company.

The 2005, 2004
and 2003 results included charges for restructuring our manufacturing
operations and repositioning our company. The 2005 results included $2,917,000,
or $.18 per basic share, in plant closing and operational restructuring costs
related to moving our powder-based barium production to our manufacturing
facility in Montreal, Canada. The project has been substantially completed and
all barium manufacturing activities are now centralized in our

-25-


ISO certified
Montreal facility. The 2004 results included $1,771,000 pre-tax, or $.15 per
basic share, in plant closing and operational restructuring costs related to
the closings of our device manufacturing facility in San Lorenzo, Puerto Rico,
and our heat-sealing operation in Westbury, New York, both of which were
completed in the fourth quarter of 2004. The 2003 results included $709,000, or
$.07 per basic share, in costs associated with our common stock
recapitalization, which combined two classes of common stock into one class and
which was completed in the second quarter of 2003.

Both 2005 and
2004 were favorably affected by gains on the sales of non-core equity
securities. For 2005, such gains totaled $3,270,000, or $.30 per basic share
and, for 2004, such gains totaled $2,622,000, or $.25 per basic share.

Net sales
increased 12%, or $12,466,000, to $113,075,000 for 2005, and 5%, or $4,926,000,
to $100,609,000 for 2004. The increase for 2005 was due to: i) sales growth, of
which we estimate from $5,600,000 to $6,300,000 was attributable to the liquid
barium product recall by Mallinckrodt, our principal competitor; ii) foreign
currency exchange rate fluctuations, which increased the translated amounts of
our foreign subsidiaries sales to U.S. dollars for financial reporting
purposes by $1,818,000; and iii) price increases, which accounted for less than
1% of net sales for 2005. Price increases have had minimal effect on sales
since a significant portion of our domestic products are sold under long-term group
purchasing organization contracts. On a product line basis, the net sales
increase resulted from increased sales of CT imaging contrast products,
particularly our CT Smoothie lines, and CT injector systems totaling
$11,268,000. Net sales for 2004 were favorably affected by a decline in
distributor rebates resulting from a shift in sales from products under
contract with significant discounts to products not currently under contract or
to products under contract with lower discounts. On a product line basis, the
net sales increase resulted from increased sales of CT imaging contrast
products, particularly our CT smoothie lines, and CT injector systems totaling
$4,466,000 and increased sales of virtual colonoscopy products of $1,088,000.
Price increases, excluding the decline in rebates, had minimal effect on net
sales in 2004.

Net sales in
international markets, including direct exports from the U.S., increased 11%,
or $3,728,000, to $39,049,000 for 2005, and 1%, or $490,000, to $35,321,000 for
2004. For 2005, the increase resulted from foreign currency exchange rate
fluctuations, which increased the translated amounts of foreign subsidiaries
sales to U.S. dollars for financial reporting purposes by $1,818,000, and sales
volume increases of $1,778,000. For 2004, increased sales of CT imaging
contrast and injector systems of $914,000 and X-ray fluoroscopy products of
$308,000 were partially offset by decreased sales of contract manufacturing
products of $795,000.

Gross profit
expressed as a percentage of net sales was 42% for 2005, as compared to 40% for
both 2004 and 2003. The percentage improvement in 2005 was due primarily to:
(i) cost savings from the closings of our device manufacturing facility in San
Lorenzo, Puerto Rico, and our heat-sealing operation in Westbury, New York;
(ii) favorable changes in sales product mix; and (iii) sales price increases,
including the effects of lower distributor rebates as a percentage of sales.
For 2004 as compared to 2003, increased raw material costs and unfavorable changes
in sales product mix offset manufacturing overhead cost reductions and the
decline in rebates.

Selling and
administrative (S&A) expenses were $36,172,000 for 2005, $31,720,000 for
2004 and $32,960,000 for 2003. The increase for 2005 compared to 2004 of
$4,452,000, or 14%, was due, in large part, to: (i) increased compensation
costs of $1,186,000; (ii) foreign currency exchange rate

-26-


fluctuations,
which increased the translated amounts of our foreign subsidiaries S&A
expenses to U.S. dollars for financial reporting purposes by $656,000; (iii)
outside consulting and auditing costs of $550,000 for Sarbanes-Oxley Act
Section 404 compliance efforts; and (iv) the recording of a non-cash
compensation charge of $427,000, resulting from the modification of certain
stock options previously granted to one of our former directors. The decrease
for 2004 compared to 2003 of $1,240,000, or 4%, resulted from planned
reductions in selling and marketing promotional activities, costs associated
with our common stock recapitalization of $709,000 in 2003, and decreased
severance costs of $539,000, partially offset by 365,000 in costs associated
with the spin-off of our AngioDynamics subsidiary.

R&D
expenditures for 2005 totaled $5,494,000, or 5% of net sales, as compared to
$4,467,000, or 4% of net sales, for 2004, and $4,267,000, or 4% of net sales,
for 2003. The increase for 2005 compared to 2004 of $1,027,000 was due
primarily to increased spending of $397,000 relating to gastroenterology
projects, $329,000 relating to X-ray fluoroscopy and CT imaging projects,
$166,000 relating to general regulatory costs and $81,000 relating to virtual
colonoscopy projects. The increase for 2004 compared to 2003 of $200,000 was
mainly due to increased general regulatory costs of $407,000 and
gastroenterology projects of $263,000, partially offset by decreased spending
relating to X-ray fluoroscopy and CT imaging projects of $250,000 and virtual
colonoscopy projects of $179,000. Of the R&D expenditures for 2005,
approximately 47% related to X-ray fluoroscopy and CT imaging projects, 29% to
general regulatory costs, 13% to gastroenterology projects, 9% to virtual
colonoscopy projects and 2% to other projects. R&D expenditures are
expected to continue at or exceed current levels. In addition to its in-house
technical staff, we are presently sponsoring various independent R&D
projects and are committed to continued expansion of our product lines through
R&D.

Other income,
net of other expenses, totaled $3,106,000 for 2005, compared to $3,443,000 for
2004 and $1,392,000 for 2003. The decrease for 2005 compared to 2004 was due
primarily to the impairment of a non-core equity security of $500,000 and
reduced interest income of $423,000, partially offset by increased gains of
$648,000 on the sales of non-core equity securities. The increase for 2004
compared to 2003 was due primarily to gains on the sales of non-core equity
securities of $2,622,000, slightly offset by declines in interest income of
$312,000 and foreign currency exchange gains of $253,000. Interest income for
2004 and 2003 included $596,000 and $892,000, respectively, in imputed interest
on loans to AngioDynamics. Certain of these loans were capitalized in
connection with the initial public offering of AngioDynamics and the balance
was repaid early in 2005.

Note I to the
Consolidated Financial Statements included in this report details the major
elements affecting income taxes for 2005, 2004 and 2003. For 2005, our
effective tax rate of 13% differed from the Federal statutory tax rate of 34%
due primarily to the reversal of valuation allowances relating to a previously
impaired, non-core equity security sold in 2005 and utilized losses of our
subsidiary in Puerto Rico, partially offset by non-deductible expenses,
including stock option compensation costs of $377,000. For 2004, our effective
tax rate of 35% differed from the Federal statutory tax rate of 34% due
primarily to not currently deductible losses incurred at our subsidiary in
Puerto Rico and non-deductible expenses, partially offset by non-taxable
imputed interest on loans to AngioDynamics of $596,000 and the utilization of
previously unrecorded net operating loss carryforwards in certain foreign
jurisdictions. The losses incurred at our Puerto Rican subsidiary resulted from
the closing of this facility and the outsourcing of its operations. For 2003,
our effective tax rate of 22% differed from the Federal statutory tax rate of
34% due primarily to non-taxable imputed interest on loans to

-27-


AngioDynamics
of $892,000. The effects of non-deductible expenses, resulting, in large part,
from our common stock recapitalization, offset the effects of utilizing
previously unrecorded net operating loss carryforwards in certain foreign
jurisdictions and R&D tax credits.

Discontinued
Operation

We have consolidated the financial statements of AngioDynamics and
reported its results as a discontinued operation in an amount equal to our
percentage of equity ownership through October 30, 2004, the spin-off date.

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

Twenty-two
  weeks ended
  May 28,
  2005
  
  Fifty-two
  weeks ended
  May 29,
  2004
  
  Fifty-two
  weeks ended
  May 31,
  2003(in thousands)Net salesFrom unaffiliated customers
  
  $
  22,342
  
  $
  48,162
  
  $
  37,475From affiliates
  
  
  420
  
  
  893
  
  
  959Total net sales
  
  $
  22,762
  
  $
  49,055
  
  $
  38,434Earnings before income
  taxes
  
  $
  2,628
  
  $
  4,381
  
  $
  2,302Income tax provision
  
  
  1,103
  
  
  1,238
  
  
  1,069Earnings before minority
  interest
  
  
  1,525
  
  
  3,143
  
  
  1,233Minority interest
  
  
  297
  
  
  15Earnings from discontinued
  operation
  
  $
  1,228
  
  $
  3,128
  
  $
  1,233The results for the discontinued operation for 2005 represent only
twenty-two weeks activity and, therefore, are not comparative to the results
for 2004 and 2003.

Operating
profit for the discontinued operation for 2004 improved by $1,884,000 due to
increased sales and improved gross profit, partially offset by increased
operating expenses. Net sales increased by $10,687,000, or 29%, to $48,162,000
due to new product introductions, the expansion of its domestic sales force and
increased sales in its existing product lines. Sales of hemodialysis catheters
for 2004 increased by $4,013,000 compared to 2003 principally due to the
introduction of the DURA-FlowTMchronic hemodialysis catheter in September 2002. VenaCureTM
products, devices used in the treatment of varicose veins, were introduced in
June 2002 and accounted for $3,550,000 of the increase in net sales for 2004.
Sales of angiographic products and accessories, image-guided vascular access
products, PTA dilation catheters and thrombolytic products in the aggregate
accounted for $3,315,000 of the increase in net sales for 2004. Price increases
had minimal effect on net sales in 2004. Gross profit expressed as a percentage
of net sales improved to 53% for 2004 from 52% for 2003, due to increased sales
volume, favorable sales product mix and improved manufacturing efficiencies.
Operating expenses increased $4,055,000 due to the continued expansion of the
domestic sales force, increased marketing and promotional activities,
investment in new product introductions, and increased administrative and
R&D expenses.

-28-


Liquidity and Capital Resources

For 2005,
operations, the purchase of intangible assets, capital expenditures and cash
dividends were funded by working capital, cash reserves and the repayment of
intercompany debt by AngioDynamics from the proceeds of its public offering.
For 2004, operations, capital expenditures, cash dividends, repayments of debt
and the purchase of treasury stock were funded by working capital and proceeds
from the exercise of stock options. For 2003, operations, capital expenditures, equity
investments at cost, the purchase of treasury stock and working capital were
funded by cash reserves. Our policy has generally been to fund operations and
capital requirements without incurring significant debt. At May 28, 2005, debt
(notes payable, current maturities of long-term debt and long-term debt) was
$531,000, as compared to $767,000 at May 29, 2004. We have $1,595,000 available
under a bank line of credit, of which no amounts were outstanding at May 28,
2005.

Our
contractual obligations and their effect on liquidity and cash flows as of May
28, 2005 are set forth in the table below. We have no variable interest
entities or other off-balance sheet obligations.

Payments
  Due By Period as of May 28, 2005Total
  
  Less than
  1 year
  
  1-3
  years
  
  3-5
  years
  
  More than
  5 years(in
  thousands)Contractual Obligations:Long-term debt
  
  $
  184
  
  $
  99
  
  $
  85Notes payable
  
  
  347
  
  
  347Operating leases (1)
  
  
  8,605
  
  
  1,707
  
  
  3,313
  
  $
  3,267
  
  $
  318Purchase obligations (1)
  
  
  1,610
  
  
  1,610Employment contract (1)
  
  
  680
  
  
  680Consulting contracts (1)
  
  
  67
  
  
  42
  
  
  25Other long-term liabilities reflected on the consolidated balance
  sheetDeferred compensation (2)
  
  
  2,629
  
  
  17
  
  
  41
  
  
  52
  
  
  2,519Accrued retirement benefits
  
  
  182
  
  
  44
  
  
  
  
  
  70
  
  
  68Total
  
  $
  14,304
  
  $
  4,546
  
  $
  3,464
  
  $
  3,389
  
  $
  2,905(1)
  The
  non-cancelable operating leases, purchase obligations, and employment and
  consulting contracts are not reflected on the consolidated balance sheet
  under accounting principles generally accepted in the United States of
  America. The purchase obligations consist of finished good product and
  component parts.(2)
  Deferred
  compensation costs covering active employees are assumed payable after five
  years, although certain circumstances, such as termination, would require
  earlier payment.At May 28,
2005, approximately $28,602,000, or 27%, of our assets consisted of cash and
cash equivalents and short-term debt and equity securities. The current ratio
was 4.81 to 1, with net working capital of $59,612,000, at May 28, 2005,
compared to the current ratio of 6.07 to 1, with net working capital of
$88,636,000, at May 29, 2004. The decrease in net working capital resulted from
our spin-off of AngioDynamics in October 2004. We believe that our cash reserves, cash provided from continuing
operations and our existing bank line of

-29-


credit will provide sufficient liquidity to meet our current
obligations for the next 12 months.

Net capital
expenditures, primarily for machinery and equipment, were $4,163,000 for 2005,
compared to $2,352,000 for 2004 and $2,663,000 for 2003. Of the 2005
expenditures, approximately $775,000 related to the moving of our powder-based
barium production to our manufacturing facility in Montreal, Canada. The
aggregate level of capital expenditures for 2006 is currently expected to
approximate 2005 levels.

In July 2002,
we concluded a program to repurchase 500,000 shares of our Class A and Class B
common stock. In aggregate, we repurchased 53,706 shares of Class A common
stock and 446,294 shares of Class B common stock for approximately $3,548,000.
Effective August 15, 2002, we retired all treasury shares. 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 2005,
no shares were repurchased under this program. In aggregate, we have
repurchased 74,234 shares of common stock for approximately $716,000 under this
program.

In June 2003,
our Board of Directors declared a cash dividend of $.25 per outstanding share
of our common stock. The dividend was distributed on August 1, 2003 to
shareholders of record as of July 15, 2003. In June 2004, our Board of
Directors declared a cash dividend of $.30 per outstanding share of our common
stock. The dividend was distributed on July 1, 2004 to shareholders of record
as of June 15, 2004. Future dividends are subject to our Board of Directors
review of operations and financial and other conditions then prevailing.

Critical Accounting Policies

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

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

Revenue Recognition

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

-30-


shipped
primarily to distributors at an agreed upon list price. The distributor then
resells the products primarily to hospitals and, depending upon contracts
between us, the distributor and the hospital, the distributor may be entitled
to a rebate. We deduct all rebates from sales and have a provision for rebates
based on historical information for all rebates that have not yet been
submitted to us by the distributors.

Changes in our
rebate allowance are as follows:

May 28,
  2005
  
  May 29,
  2004(in
  thousands)Beginning balance
  
  $
  1,611
  
  $
  1,159Provision for rebates
  
  
  21,949
  
  
  20,918Rebate credits issued
  
  
  (22,163
  )
  
  (20,466
  )Ending balance
  
  $
  1,397
  
  $
  1,611The rebate
accrual is comprised of three components:


  actual
  rebate requests received from distributors prior to the closing of our financial
  statements;
  an estimate,
  compiled by distributor, of rebate requests not yet received based on
  historical submissions, adjusted for any material changes in purchasing
  patterns or market conditions; and
  an estimate
  of distributors inventory-on-hand available for future sale pursuant to a
  group purchasing organization (GPO) contract. We do not have visibility as
  to the specific inventory levels held by our distributors. However, based on
  discussions with our customers, who uniformly attempt to maintain a
  just-in-time purchasing program, and our knowledge of their ordering
  patterns, we estimate a one-week wholesale inventory level. Since most of our
  product sales are subject to GPO contracts, most distributor
  inventory-on-hand will be subject to rebate. This portion of the rebate
  estimate is derived by first determining the total quantity of each product
  sold by us during the last week of the fiscal period multiplied by two
  factors, (a) and (b), where (a) is the percentage of each product rebated
  during the prior six-month period based on historical sales and (b) is the
  average rebate paid on that product during this period.All product
returns must be pre-approved by us and customers may be subject to a 20%
restocking charge. To be accepted, a returned product must be unadulterated,
undamaged and must have at least 12 months remaining prior to its 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 are
$505,000 and $356,000 at May 28, 2005 and May 29, 2004, respectively. Service
costs are expensed as incurred.

Accounts Receivable

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

-31-


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 31% and 33%, respectively, of our total accounts
receivable balance at May 28, 2005 and May 29, 2004 is concentrated in one
distributor. While the accounts receivable related to this distributor are
significant, we do not believe the credit loss risk to be significant given the
distributors consistent payment history and credit worthiness.

Changes in our
allowance for doubtful accounts are as follows:

May 28,
  2005
  
  May 29,
  2004(in thousands)Beginning balance
  
  $
  851
  
  $
  798Provision for doubtful
  accounts
  
  
  111
  
  
  106Write-offs
  
  
  (93
  )
  
  (53
  )Ending
  balance
  
  $
  869
  
  $
  851Income 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. At May 28, 2005 and May
29, 2004, our valuation allowance totaled $2,924,000 and $4,333,000,
respectively. The total net deferred tax asset at May 28, 2005 and May 29, 2004
was $1,641,000 and $1,504,000, respectively.

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 May 28, 2005 and May 29, 2004, our reserve for excess
and obsolete inventory was $1,902,000 and $1,683,000, respectively.

Property, Plant and Equipment

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

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change our estimate of the useful lives of a group or
class of assets may significantly affect depreciation expense on a prospective
basis.

Effects
of Recently Issued Accounting Pronouncements

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

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

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

In December 2004, the
FASB issued FASB Staff Position No. 109-1 (FSP 109-1), Application of SFAS
No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004. It is effective
immediately. FSP 109-1 states that the tax deduction of qualified domestic
production activities, which is provided by the American Jobs Creation Act of
2004, will be treated as a special deduction as described in SFAS No. 109. Consequently,
the impact of the deduction, which

-33-


is effective January 1, 2005, will be reported in the
period in which the deduction is claimed on our income tax returns. To date,
FSP 109-1 has not had a material effect on our financial statements.

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

Risk
Factors

The risks described below
are not the only ones we face. Our business is also subject to the risks that
affect many other companies in our industry, such as competition, technology,
results of pending or future clinical trials, overall economic conditions,
general market conditions, foreign currency exchange rate fluctuations and
international operations. Additional risks not currently known to us or that we
believe are immaterial also may impair our business operations and our
liquidity.

Our
pricing flexibility is constrained by the formation of large Group Purchasing
Organizations.

Our pricing flexibility
is constrained by the formation of large Group Purchasing Organizations (GPO
or GPOs) - groups of hospitals and other large customers formed to combine
purchasing power. Due to the multi-year term of typical GPO contracts, our
ability to pass along base cost increases through increased prices is limited. Consolidation
in the healthcare industry has also resulted in a broader product range in
typical GPO contracts. Transactions with GPOs are often larger, more complex,
and involve more long-term contracts than in the past. GPOs enhanced
purchasing power may continue to increase the pressure on product pricing in
the market as a whole. Several GPOs have executed contracts with our market
competitors that exclude us, and other GPOs may do so in the future. In many
cases, we have continued to sell to individual members of these GPOs on a
direct basis by lowering our pricing. However, if the contracts are enforced
against the GPO members, it may adversely affect our sales in the future.

If we
fail to adequately protect our intellectual property rights, our business may
suffer.

Our success depends in
part on obtaining, maintaining and enforcing our patents, trademarks and other
proprietary rights, and our ability to avoid infringing the proprietary rights
of others. We take precautionary steps to protect our technological advantages
and intellectual property. We rely upon patent, trade secret, copyright,
know-how and trademark laws, as well as license agreements and contractual
provisions, to establish our intellectual property rights and protect our
products. These measures may not adequately protect our intellectual property
rights.

-34-


Our patents may not
provide commercially meaningful protection, as competitors may be able to
design around our patents to produce alternative, non-infringing designs. Additionally,
we may not be able to effectively protect our rights in unpatented technology,
trade secrets and confidential information. Although we require our new
employees, consultants and corporate partners to execute confidentiality
agreements, these agreements may not provide effective protection of our
information or, in the event of unauthorized use or disclosure, may not provide
adequate remedies.

If third
parties claim that our products infringe their intellectual rights, we may be
forced to expend significant financial resources and management time defending
against such actions and our results of operations could suffer.

Third parties may claim
that our products infringe on third-party patents and other intellectual
property rights. Identifying third-party patent rights can be particularly
difficult because, in general, patent applications can be maintained in secrecy
for at least 18 months after their earliest priority date. Some companies in
the medical device industry have used intellectual property infringement
litigation to gain a competitive advantage. If a competitor were to challenge
our patents, licenses or other intellectual property rights, or assert that our
products infringe its patents or other intellectual property rights, we could
incur substantial litigation costs, be forced to stop selling products and/or
make expensive changes to our product designs, license rights in order to
continue manufacturing and selling our products, or pay substantial damages. Third-party
infringement claims, regardless of their outcome, would not only consume our
financial resources but also divert our managements time and effort. Such
claims could also cause our customers or potential customers to purchase
competitors products or defer or limit their purchase or use of our affected
products until resolution of the claim.

We currently purchase significant amounts of finished products, product components and
raw materials from several single-source suppliers.

We currently purchase
significant amounts of finished products, product components and raw materials
from single and limited source suppliers. We depend on these suppliers to
provide specialized medical devices, product components and chemicals used in
our contrast media formulations. We may experience an interruption of supply if
a supplier is unable or unwilling to meet our time, quantity and quality
requirements. There are relatively few alternative sources of supply for some
of these components. Any or all of these suppliers could interrupt or discontinue
the manufacture or supply of these products and components at any time or
alternatively, initiate significant price increases at the expiration of the
underlying supply contract. We may not be able to identify and integrate
alternative sources of supply in a timely fashion or at all. Any transition to
alternate suppliers may result in production delays and increased costs and may
limit our ability to deliver products to our customers. Furthermore, if we are
unable to identify alternative sources of supply, we would have to modify our
products to use substitute components, which may cause delays in shipments,
increased design and manufacturing costs, increased prices for our products and
lost product sales.

-35-


Our
reliance on a single Canadian manufacturing facility to produce substantially
all of our CT and X-ray fluoroscopy barium sulfate formulation products may
impair our ability to respond to natural disasters or other adverse events, and
also exposes us to the effects of changes in Canadian dollar  U.S. dollar
exchange rate.

While we carry insurance for natural disasters and business
interruption, the occurrence of such an event could result in losses that
exceed the amount of our insurance coverage. Also, if we are unable to adequately
supply our core products to our customers, there is no assurance that we would
regain lost market share once our products are again available for sale. We
purchase, in Canadian dollars, X-ray and CT barium sulfate formulation products
for sale in the U.S. and for export outside of the U.S. from our Canadian
subsidiary. This activity exposes us to the effects of changes in the Canadian
dollar  U.S. dollar exchange rate.

The
market potential for our Reactive Skin Decontamination Lotion product is uncertain
and sales in this market are complex.

The market potential for
Reactive Skin Decontamination Lotion (RSDL) is subject to a number of
uncertainties. One factor is the nature of the military and first-responder
procurement process itself  an unpredictable and lengthy bureaucratic process
that often requires rigorous testing and product modifications before
substantial orders are placed. Working with governmental agencies often
involves several layers of administration which can greatly reduce the speed of
funding and increase the complexity of the procurement process itself, which
can impact the timing and amount of sales. Another factor related to U.S.
government sales is the uncertainty of Congress continued funding approval of
U.S. government contracts. Congress usually appropriates funds for a given
program each fiscal year. Consequently, at the beginning of a major program,
the contract is usually partially funded, and additional monies are normally
committed to the contract only if Congress makes appropriations for future
fiscal years. A third factor is the uncertainty surrounding the fielding of
RSDL to military and first-responder personnel. A fourth factor is the
uncertainty surrounding the threat from chemical weapons as instruments of
terror, making it difficult to quantify the potential of the civilian emergency
service organization market. A fifth factor is the nature of supplying products
through government contracts which often contain clauses permitting the
government to unilaterally cancel or change individual orders, terminate the
entire contract, audit our contract-related operations and control and
potentially prohibit the export of the product. These and other factors may
have an impact on RSDL sales in the future.

If we fail
to develop new products and enhance existing products, we could lose market
share to our competitors and our results of operations could suffer.

The market for our
products is characterized by rapid technological change, new and improved
product introductions, changes in customer requirements and evolving industry
standards. To be successful, we must develop and commercialize new products and
enhanced versions of our existing products. Our products are technologically
complex and require significant planning, design, development and testing
before they may be marketed. This process generally takes at least nine to 12
months and may take up to several years. Our success in developing and
commercializing new versions of our products is affected by our ability to:


  timely and accurately identify new market trends;
  accurately assess customer needs;-36-



  minimize the time and costs required to obtain
  regulatory clearance or approval;
  adopt competitive pricing;
  timely manufacture and deliver products;
  accurately predict and control costs associated with
  the development, manufacturing and support of our products; and
  anticipate and compete effectively with our
  competitors efforts.Market acceptance of our
products depends in part on our ability to demonstrate that our products are
cost-effective and easier to use, as well as offer technological advantages. Additionally,
we may experience design, manufacturing, marketing or other difficulties that
could delay or prevent our development, introduction or marketing of new
versions of our products. As a result of such difficulties and delays, our
development expenses may increase and, as a consequence, our results of
operations could suffer.

The
adoption rate of virtual colonoscopy as a screening modality for colon cancer
has been slower than we anticipated.

Our growth strategy
involves investing a portion of our financial, management and other resources
on the further development of a proprietary product set for use in virtual
colonoscopy. However, to date, the adoption rate of virtual colonoscopy as a
screening modality for colon cancer has been slower than we anticipated. We
believe this is principally due to the present lack of private and public
reimbursement standards for virtual colonoscopy screening. Additionally, the
American Cancer Society (ACS) has not yet included virtual colonoscopy in its
published screening guidelines for colon cancer, believing the evidence of its
efficacy is insufficient at this time. Together, these and other factors
contribute to the uncertainly surrounding the evolution of the virtual
colonoscopy market and our position in it.

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. As such, the market dynamics and
competitive environment are subject to rapid change, which may affect our
growth plans and operating results.

If we
cannot obtain approval from governmental agencies for new or modified products,
we will not be able to sell those products.

Our products are subject
to extensive regulation in the U.S. and in foreign countries where they are
sold. Unless an exemption applies, each medical device product that we wish to
market in the U.S. must receive either 510(k) clearance or premarket approval
from the FDA before the product can be sold. Either process can be lengthy and
expensive. The FDAs 510(k) clearance procedure, also known as premarket
notification, is the process used for our current products. This process
usually takes from four to 12 months from the date the application is submitted
to, and filed with, the FDA, but may take significantly longer. Although we
have obtained 510(k) clearances for our current products, our clearances may be
revoked by the FDA if safety or effectiveness problems develop with the
products. The premarket approval process is much more costly, lengthy and
uncertain. It generally takes from

-37-


one to three years from
the date the application is submitted to, and filed with, the FDA, and may take
even longer. Achieving premarket approval may take numerous clinical trials and
require the filing of numerous amendments over time. Regulatory regimes in
other countries similarly require approval or clearance prior to our marketing
or selling products in those countries. If we are unable to obtain additional
clearances or approvals needed to market existing or new products in the U.S.
or elsewhere, or obtain these clearances or approvals in a timely fashion, our
revenues and profitability may decline.

Inadequate
levels of reimbursement from governmental or other third-party payors for
procedures using our products may cause our revenues to decline.

Changes in healthcare
systems in the U.S. or elsewhere could adversely affect the demand for our
products, as well as the way we conduct business. Third-party payors have
adopted, and are continuing to adopt, a number of healthcare policies intended
to curb rising healthcare costs. These policies include:


  controls on
  government-funded reimbursement for healthcare services and price controls on
  medical products and service providers;
  challenges to the
  pricing of medical procedures or limits or prohibitions on reimbursement for
  specific devices and therapies through other means; and
  the introduction of
  managed care systems in which healthcare providers contract to provide
  comprehensive healthcare for a fixed cost per person.We are unable to predict
whether Federal, state or local healthcare reform legislation or regulation
affecting our business may be proposed or enacted in the future, or what effect
any such legislation or regulation would have on our business. These policies,
or any reductions in the number of authorizations granted for procedures
performed using our current and proposed products or in the levels of
reimbursement for those procedures, could cause our revenues to decline.

Outside of the U.S.,
reimbursement systems vary significantly by country. Many foreign markets have
government-managed healthcare systems that govern reimbursement for new devices
and procedures. These systems are subject to the same pressures to curb rising
healthcare costs and control healthcare expenditures as those in the U.S. If
adequate levels of reimbursement from third-party payors outside of the U.S.
are not obtained, sales of our products outside of the U.S. may decrease and we
may fail to achieve or maintain significant non-U.S. sales.

If we
incur a tax liability in connection with our spin-off of AngioDynamics, we
would be required to pay a potentially significant expense, which would
diminish our financial resources.

On October 30, 2004, we
effected a spin-off to our stockholders of all of the AngioDynamics common
stock we owned. We received a private letter ruling from the U.S. Internal
Revenue Service (IRS) to the effect that the distribution is tax-free to us
and to our shareholders for U.S. Federal income tax purposes. Although private
letter rulings are generally binding on the IRS, we will not be able to rely on
the ruling if any of the factual representations or assumptions we made to
obtain the ruling are, or become, incorrect or untrue in any material respect. If
the IRS subsequently holds our spin-off to be taxable, the above favorable tax
treatment would not apply and both E-Z-EM and our stockholders could be subject
to tax. These liabilities could be substantial.

-38-


Even if the distribution
of AngioDynamics stock in the spin-off otherwise qualifies as tax-free, it may
be disqualified as tax-free to us (but not to the holders of our common stock
who receive the AngioDynamics stock) under Section 355(e) of the Internal
Revenue Code if the distribution is part of a plan or series of related
transactions pursuant to which 50% or more of the stock of AngioDynamics, or E-Z-EM,
is acquired by one or more third parties. For this purpose, acquisitions of our
stock or AngioDynamics stock within two years before or after the distribution
are presumed to be part of such a plan, although we or AngioDynamics might be
able to rebut that presumption. If such an acquisition of our stock or AngioDynamics
stock triggers the application of Section 355(e), we would recognize taxable
gain on the distribution, but the distribution would generally be tax-free to
our shareholders.

Item 7A.
  Quantitative and Qualitative
  Disclosures About Market RiskWe are exposed to market
risk from changes in foreign currency exchange rates and, to a much lesser
extent, interest rates on investments and financing, which could impact our
results of operations and financial position. We do not currently engage in any
hedging or market risk management tools. There have been no material changes
with respect to market risk previously disclosed in our Annual Report on Form
10-K for our 2004 fiscal year.

Foreign
Currency Exchange Rate Risk

The financial reporting
of our international subsidiaries is denominated in currencies other than the
U.S. dollar. Since the functional currency of our international subsidiaries is
the local currency, foreign currency translation adjustments are accumulated as
a component of accumulated other comprehensive income in stockholders equity. Assuming
a hypothetical aggregate change in the exchange rates of foreign currencies
versus the U.S. dollar of 10% at May 28, 2005, our assets and liabilities would
increase or decrease by $4,049,000 and $556,000, respectively, and our net
sales and net earnings would increase or decrease by $2,793,000 and $496,000,
respectively, on an annual basis.

We also maintain
intercompany balances and loans receivable with subsidiaries with different
local currencies. These amounts are at risk of foreign exchange losses if
exchange rates fluctuate. Assuming a hypothetical aggregate change in the
exchange rates of foreign currencies versus the U.S. dollar of 10% at May 28,
2005, our pre-tax earnings would be favorably or unfavorably impacted by
approximately $384,000 on an annual basis.

Interest
Rate Risk

Our excess cash is invested in highly liquid,
short-term, investment grade securities with maturities of less than one year. These
investments are not held for speculative or trading purposes. Changes in
interest rates may affect the investment income we earn on cash, cash
equivalents and debt securities and therefore affect our cash flows and results
of operations. As of May 28, 2005, we were exposed to interest rate change
market risk with respect to our investments in tax-free municipal bonds in the
amount of $18,260,000. The bonds bear interest at a floating rate established
between seven and 35 days. For 2005, the after-tax interest rate on the bonds approximated
1.7%. Each 100 basis point (or 1%) fluctuation in interest rates will increase
or decrease interest income on the bonds by approximately $183,000 on an annual
basis.

As our principal amount of fixed interest rate
financing approximated $531,000 at May 28, 2005, a change in interest rates
would not materially impact results of operations or financial position. At May
28, 2005, we did not maintain any variable interest rate financing.

-39-


As of May 28, 2005, we have $1,595,000 available  under
a working capital bank line of credit. Advances under this line of credit will
bear interest at an annual rate indexed to prime. We will thus be exposed to
interest rate risk with respect to this credit facility to the extent that
interest rates rise when there are amounts outstanding under this facility.

Item 8.
  Financial Statements and
  Supplementary DataFinancial statements and supplementary data required
by Part II, Item 8 are included in Part IV of this report as indexed at Item 15
(a) 1, and are incorporated by reference into this Item 8.

Item 9.
  Changes in and Disagreements with
  Accountants on Accounting and Financial DisclosureNone.

Item 9A.
  Controls and ProceduresEvaluation
of Disclosure Controls and Procedures

As required by Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934, as amended (the Exchange Act), we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of May 28, 2005. This evaluation was
carried out under the supervision and with participation of our Chief Executive
Officer and Chief Financial Officer. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures. Therefore,
effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives. Based upon our evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective as of May 28, 2005, to
provide reasonable assurance that information required to be disclosed in the
reports that are filed under the Exchange Act is recorded, processed,
summarized and reported in a timely manner and is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

Changes
in Internal Control over Financial Reporting

There was no change in our internal control over
financial reporting during the fourth quarter ended May 28, 2005 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

Management
Report on Internal Control over Financial Reporting

Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America.

Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with

-40-


generally accepted accounting principles and includes
those policies and procedures that:


  Pertain to the maintenance of records that in
  reasonable detail accurately and fairly reflect the transactions and
  dispositions of our assets;
  Provide reasonable assurance that transactions are
  recorded as necessary to permit preparation of financial statements in
  accordance with generally accepted accounting principles, and that our
  receipts and expenditures are being made only in accordance with
  authorizations of management and our directors; and
  Provide reasonable assurance regarding prevention
  and timely detection of unauthorized acquisition, use or disposition of our
  assets that could have a material effect on our financial statements.Internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems which are determined
to be effective provide only reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal
control over financial reporting based on criteria for effective internal
control over financial reporting described in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

Based on its assessment, management concluded that we
maintained effective internal control over financial reporting as of
May 28, 2005. Grant Thornton LLP, our independent registered public
accounting firm, has issued an attestation report on managements assessment of
the effectiveness of our internal control over financial reporting as of May 28,
2005. This report, in which Grant Thornton has expressed an unqualified
opinion, appears in this Item 9A.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and StockholdersE-Z-EM, Inc. and SubsidiariesWe have audited managements assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that E-Z-EM, Inc. and Subsidiaries (the Company) maintained effective internal control over financial reporting as of May 28, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control

-41-


over financial reporting, evaluating
managements assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, managements assessment that E-Z-EM,
Inc. and Subsidiaries maintained effective internal control over financial
reporting as of May 28, 2005, is fairly stated, in all material respects, based
on the COSO criteria. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of May 28,
2005, based on the COSO criteria.

We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company as of May 28, 2005 and May 29, 2004,
and the related consolidated statements of earnings, stockholders equity and
comprehensive income, and cash flows for the fifty-two weeks ended May 28, 2005, May 29,
2004 and May 31, 2003, and our report dated July 21, 2005 expressed an
unqualified opinion thereon.

/s/  Grant Thornton LLPMelville, New YorkJuly 21, 2005Item 9B.
    Other InformationNone.
-42-


Part
III

Certain information
required by Part III is omitted from this Annual Report on Form 10-K because we
will file a definitive proxy statement within 120 days after the end of our
fiscal year pursuant to Regulation 14A (the Proxy Statement) for our Annual
Meeting of Stockholders, currently scheduled for October 19, 2005. The
information included in the Proxy Statement under the respective headings noted
below is incorporated herein by reference.

Item 10.
  Directors and Executive Officers of
  the RegistrantThe following table sets forth certain information
with respect to our executive officers and directors.

Name
    Age
    PositionsAnthony
        A. Lombardo
    58
    President,
        Chief Executive Officer, DirectorDennis
        J. Curtin
    58
    Senior
        Vice President - Chief Financial OfficerPeter
        J. Graham
    39
    Senior
        Vice President - Chief Legal Officer, Global Human Resources and SecretaryJoseph
        J. Palma
    63
    Senior
        Vice President - North America Imaging Sales and National AccountsJeffrey
        S. Peacock
    48
    Senior
        Vice President - Global Scientific, Technical and Manufacturing OperationsBrad S.
        Schreck
    48
    Senior
        Vice President - Global Marketing, Engineering and International SalesPaul S.
        Echenberg (1)
    61
    Chairman
        of the Board, Chairman of the Board of E-Z-EM Canada, DirectorRobert
        J. Beckman (1)(2)(3)
    57
    DirectorJames
        L. Katz CPA, JD (2)(4)(5)
    69
    DirectorDavid
        P. Meyers (5)
    41
    DirectorJohn T.
        Preston (1)(2)
    55
    DirectorHoward
        S. Stern
    74
    DirectorJames
        H. Thrall, M.D. (3)(4)
    62
    DirectorGeorge
        P. Ward (3)(4)
    67
    Director(1)
  Member of Executive Committee(2)
  Member of Audit Committee(3)
  Member of Nominating and Governance Committee(4)
  Member of Compensation Committee(5)
  Member of Finance CommitteeDirectors are elected for a three-year term and each
holds office until his successor is elected and qualified. The term of office
for Class I directors, consisting of James L. Katz, Anthony A. Lombardo and
James H. Thrall, M.D., expires in 2006. The term of office for Class II directors,
consisting of Robert J. Beckman, Paul S. Echenberg and John T. Preston, expires
in 2007. The term of office for Class III directors, consisting of David P.
Meyers, Howard S. Stern and George P. Ward, expires in 2005. All executive
officers are elected annually and serve at the pleasure of the board of
directors.

-43-


Mr. Lombardo has served as our President, Chief
Executive Officer and a director since 2000. Prior to joining us, he served as
President of ALI Imaging Systems, Inc. (radiology information management) from
1998 to 2000. Mr. Lombardo is also a director of BioPhotonics, Inc., a publicly
held company.

Mr. Curtin has served as our Senior Vice President -
Chief Financial Officer since 1999, and as our Vice President - Chief Financial
Officer from 1985 to 1999. Mr. Curtin has been an employee of ours since 1983.

Mr. Graham has served as our Senior Vice President 
Chief Legal Officer, Global Human Resources and Secretary since May 2005, and
as our Vice President - General Counsel and Secretary from 2001 until May 2005.
He has been an employee of ours since 1997.

Mr. Palma has served as our Senior Vice President 
North America Imaging Sales and National Accounts since May 2005. Previously,
he served as our Senior Vice President - Global Sales from 2002 until May 2005,
Senior Vice President - Sales and Marketing from 1999 to 2002, Vice President -
Sales and Marketing from 1996 to 1999, and Vice President - Sales from 1995 to
1996. Mr. Palma has been an employee of ours since 1994.

Mr. Peacock has served as our Senior Vice President 
Global Scientific, Technical and Manufacturing Operations since May 2005.
Previously, he served as our Senior Vice President - Global Scientific and
Technical Operations from 2002 until May 2005, and as our Vice President -
Scientific and Technical Operations from 2000 until 2002. Mr. Peacock has been
an employee of ours since 1986.

Mr. Schreck has served as our Senior Vice President 
Global Marketing, Engineering and International Sales since May 2005, and as
our Senior Vice President - Global Marketing from 2002 until May 2005. Before
joining us, he served as a consultant for Vyteris, Inc. (pharmaceutical/drug
delivery) and ACMI, Inc. (urology, gynecology, laproscopy) from 2000 until
2002. From 1999 to 2000, he served as Vice President, Worldwide Marketing of
Surgical Dynamics Inc., a wholly owned subsidiary of Tyco Inc. (spine/sports
medicine).

Mr. Beckman has been a director of our company since
2002. He is a founder and has been a Managing Partner of The Channel Group, a
venture management and corporate advisory business focusing on global life
sciences, since 2002. Previously, he founded Intergen Co., a company focused on
providing technology and biologicals to the pharmaceutical/biotechnology and
clinical diagnostic industries, and served as its Chief Executive Officer from
1987 until 2001.

Mr. Echenberg has been a director of our company since
1987 and has served as Chairman of our board of directors since January 2005,
and Chairman of the board of directors of E-Z-EM Canada since 1994. He has been
the President, Chief Executive Officer and a director of Schroders &
Associates Canada Inc. (investment buy-out advisory services) and a director of
Schroders Ventures Ltd. since 1997. He is also a founder and has been a general
partner and a director of Eckvest Equity Inc. (personal investment and
consulting services) since 1989. He is also the Chairman of the board of
directors of AngioDynamics, Inc., a former subsidiary of ours and a publicly
held company, and is a director of Lallemand Inc., Benvest New Look Income
Fund, a publicly held company, ITI Medical Technologies, Inc., Flexia Corp.,
Fib-Pak Industries Inc., Med-Eng Systems Inc., MacroChem Corp., a publicly held
company, Matra Plast Industries Inc. and A.P. Plasman Corp. We have an investment
in ITI Medical Technologies, Inc.

Mr. Katz has been a director of our company since
1983. He is a founder and a director of Lakeshore Medical Fitness, LLC (owns
and manages medical fitness facilities), and has served as its Chief Executive
Officer since 2000. He is

-44-


also a founder of Medical Imaging of Northbrook Court,
LLC (screening and diagnostic imaging), and has served as an administrative
member since 2001. Previously, he had been a founder and managing director from
its organization in 1995 until 2000 of Chapman Partners LLC (investment
banking). From its acquisition in 1985 until its sale in 1994, he was the
co-owner and President of Ever Ready Thermometer Co., Inc. From 1971 until 1980
and from 1983 until 1985, he held various executive positions with Baxter
International and its subsidiaries, principally that of Chief Financial Officer
of Baxter International. He is also a director of Intec, Inc., as well as a
member of the Board of Advisors of Jerusalem Global and AEG Partners.

Mr. Meyers has been a director of our company since
1996. He is a founder of Alpha Cord, Inc., which provides cryopreservation of
umbilical cord blood, and has served as its President since 2002. Previously,
he founded MedTest Express, Inc., an Atlanta, Georgia based provider of
contracted laboratory services for home health agencies, and served as its
President, Chief Executive Officer and a director from 1994 to 2002. He is also
a director of AngioDynamics, Inc.

Mr. Preston has been a director of our company since
October 2004. He has served as the President and CEO of Atomic Ordered
Materials, LLC since 1999 and has been a Senior Lecturer at the Massachusetts
Institute of Technology (MIT) since 1996. He is the founder of Quantum Energy,
LLC and served as its CEO from 1996 to 1999. He was the Director of Technology
Development at MIT from 1992 to 1996. From 1986 to 1992, Mr. Preston served as
Director of Technology Licensing at MIT. Mr. Preston held various technology
management positions with MIT from 1977 to 1986. He is also a director of Clean
Harbors, Inc. and Boston Life Science, Inc. as well as several private
companies.

Mr. Stern is a co-founder of our company and has been
a director since its formation in 1962 and Chairman Emeritus since January
2005. Mr. Stern also served as our Chairman of the Board from our companys
formation until December 2004. He served as our President and Chief Executive
Officer from 1997 to 2000. From 1990 to 1994, Mr. Stern served as our Chief
Executive Officer, and from our companys formation until 1990, as our
President and Chief Executive Officer. Mr. Stern is also a director of
AngioDynamics, Inc. and ITI Medical Technologies, Inc. We have an investment in
ITI Medical Technologies, Inc.

Dr. Thrall has been
a director of our company since January 2005. He is a radiologist by profession
and chairs the Department of Diagnostic Radiology of the Massachusetts General
Hospital. He serves as a member of the Board of Trustees of the Massachusetts
General Physicians Organization. He has been a director of WorldCare, Inc., a
company providing telemedicine and clinical trial support services, and has
served as its Chairman of the Board since 1999. He has been a director of Mobil
Aspects Inc. since 2002, a company focused on radio frequency identification
(RFID) technology, and has served as its Chairman of the Board since March
2005. Among other professional organizations, Dr. Thrall serves on the Board of
Trustees of the Society of Chairman of Academic Radiology Departments, the Board
of Chancellors of the American College of Radiology and the Board of Trustees
of the Research and Education Foundation of the Radiological Society of North
America.

Mr. Ward has been a director of our company since
2002. Prior to his retirement in 2002, Mr. Ward served as Executive Vice
President - Business Development of Health Center Internet Services, Inc. in
San Francisco, California from 1997 until 2001. He served as a director and
consultant for ALI Technologies, Inc. of Richmond, British Columbia, Canada
from 1996 until 2002. After servicing as an officer in the U.S. Air Force, he
began his career as a rocket engineer with Thiokol Chemical Corp. in 1962, then
joined the General Electric Space Division as a program manager and marketing
manager in 1966. After a GE corporate headquarters assignment in 1973, Mr. Ward
moved to

-45-


the GE Medical Business, where he managed the X-ray
and other medical imaging businesses. In 1977, he became President, CEO and a
director of Systron Donner Corp., Concord, California (then NYSE-listed). In
1982, he became President, CEO and a director of Vitalink Communications Corp.,
Mountain View, California, and in 1986, he founded MEICOR, Inc., Pleasanton,
California, as Chairman, CEO and a director. From 1987 until 1991, he was a
Worldwide Business Group Managing Director for Philips Medical, and since 1991,
a director/consultant for several high technology companies. He also was a
director of Blue Cross of California, Woodland Hills, California from 1986 to
1996.

Audit Committee
Financial Expert

The information required by this caption is
incorporated herein by reference to our Proxy Statement under the heading Audit
Committee Report.

Identification
of the Audit Committee

The information required by this caption is incorporated
herein by reference to our Proxy Statement under the heading Audit Committee
Report.

Material
Changes to Procedure for Shareholder Recommendations of Nominees to the Board
of Directors

The information required by this caption is
incorporated herein by reference to our Proxy Statement under the heading Material
Changes to Procedure for Shareholder Recommendations of Nominees to the Board
of Directors.

Section
16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our
executive officers and directors, and persons who own more than 10% of a
registered class of our equity securities, to file reports of initial ownership
and changes in ownership with the Securities and Exchange Commission. Based
solely on our review of copies of such forms received by us, or on written
representations from certain reporting persons that no reports were required
for such persons, we believe that, during the fiscal year ended May 28, 2005,
all of the filing requirements applicable to our executive officers, directors
and 10% shareholders were complied with, except as follows:

(1)
  David P. Meyers filed a Form 4 on August 9, 2004
  that was two business days late, reporting the sale of stock.(2)
  Donald A. Meyer filed a Form 4 on August 11, 2004
  that was two business days late, reporting the sale of stock.(3)
  David P. Meyers filed a Form 4 on January 25, 2005
  reporting i) our companys issuance of stock to Mr. Meyers on November 1,
  2004 and ii) our companys granting of stock options to Mr. Meyers on January
  17, 2005, as compensation for services as a director of our Company. Mr.
  Meyers failed to report each of these two transactions within the required
  two business days of each of the applicable transaction dates.(4)
  David P. Meyers filed a Form 4 on April 28, 2005
  that was one business day late, reporting the sale of stock.Code of Ethics

The information required by this caption is
incorporated herein by reference to our Proxy Statement under the heading Code
of Conduct and Ethics.

-46-


Item 11.
  Executive CompensationSummary
Compensation Table

The following table sets forth information concerning
the compensation for services, in all capacities for 2005, 2004 and 2003, of
(i) those persons who were, during 2005, our Chief Executive Officer (CEO)
(Anthony A. Lombardo), and (ii) those persons who were, at the end of 2005, our
four most highly compensated executive officers other than the CEO
(collectively, the Named Executive Officers):


Annual Compensation
  
  Long-Term CompensationName and
  Principal
  Position
  
  Fiscal
  Year
  
  Salary
  ($)
  
  Bonus
  ($)
  
  OtherAnnualCompensa-tion (1)($)
  
  Awards
  
  Payouts
  
  All OtherCompensa-tion (3)($)RestrictedStockAwards($)
  
  SecuritiesUnderlyingOptions# (2)
  
  LTIPPayouts($)Anthony A. Lombardo,
  
  
  2005
  
  $
  340,370
  
  $
  256,190
  
  
  None
  
  
  None
  
  
  90,000
  
  
  None
  
  $
  11,240President and Chief
  
  
  2004
  
  
  320,000
  
  
  132,828
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  10,380Executive Officer
  
  
  2003
  
  
  320,000
  
  
  46,560
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  9,773Jeffrey S. Peacock,
  
  
  2005
  
  $
  207,454
  
  $
  99,828
  
  
  None
  
  
  None
  
  
  15,000
  
  
  None
  
  $
  11,159Senior Vice President
  
  
  2004
  
  
  185,000
  
  
  53,754
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  10,0632003
  
  
  183,309
  
  
  20,098
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  10,342Dennis J. Curtin,
  
  
  2005
  
  $
  206,211
  
  $
  99,616
  
  
  None
  
  
  None
  
  
  35,000
  
  
  None
  
  $
  11,053Senior Vice President
  
  
  2004
  
  
  188,402
  
  
  81,427
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  9,8722003
  
  
  188,402
  
  
  31,541
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  10,164Brad S. Schreck,
  
  
  2005
  
  $
  198,783
  
  $
  95,733
  
  
  None
  
  
  None
  
  
  15,000
  
  
  None
  
  $
  10,989Senior Vice President
  
  
  2004
  
  
  185,000
  
  
  53,754
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  9,2922003
  
  
  185,000
  
  
  20,098
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  481Peter J. Graham,
  
  
  2005
  
  $
  194,690
  
  $
  76,090
  
  
  None
  
  
  None
  
  
  10,000
  
  
  None
  
  $
  10,957Senior Vice President
  
  
  2004
  
  
  178,000
  
  
  68,619
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  10,3612003
  
  
  167,054
  
  
  23,037
  
  
  None
  
  
  None
  
  
  None
  
  
  None
  
  
  9,502(1)
  We have concluded that the aggregate amount of
  perquisites and other personal benefits paid to each of the Named Executive
  Officers for 2005, 2004 and 2003 did not exceed the lesser of 10% of such
  officers total annual salary and bonus for 2005, 2004 or 2003 or $50,000;
  such amounts are, therefore, not reflected in the table.(2)
  Options are exercisable into our common stock.(3)
  For each of the Named Executive Officers, the
  amounts reported include amounts we contributed under our Profit-Sharing Plan
  and, as matching contributions, under the companion 401(k) Plan. For 2005,
  2004 and 2003, such amounts contributed were: $10,385, $9,600 and $8,920,
  respectively, for Mr. Lombardo; $10,458, $9,486 and $9,795, respectively, for
  Mr. Peacock; $10,352, $9,284 and $9,585, respectively, for Mr. Curtin;
  $10,319, $8,715 and $0, respectively, for Mr. Schreck; and $10,324, $9,831
  and $9,029, respectively, for Mr. Graham.For each of the Named Executive Officers, the
  amounts reported include term life insurance premiums we paid. For 2005, 2004
  and 2003, such amounts paid were: $855, $780 and $853, respectively, for Mr.
  Lombardo; $701, $577 and $547, respectively, for Mr. Peacock; $701, $588 and
  $579, respectively, for Mr. Curtin; $670, $577 and $481, respectively, for
  Mr. Schreck; and $633, $530 and $473, respectively, for Mr. Graham.-47-


Option
Grants Table

The following table sets forth certain information
concerning stock option grants made during 2005 to the Named Executive
Officers. These grants are also reflected in the Summary Compensation Table. In
accordance with SEC disclosure rules, the hypothetical gains or option spreads
for each option grant are shown based on compound annual rates of stock price
appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the SEC and are for illustrative
purposes only; they are not intended to predict future stock prices, which will
depend upon market conditions and our future performance. We
did not grant any stock appreciation rights during 2005.

Individual Grants
  
  Potential Realizable
  Value at Assumed
  Annual Rates of
  Stock Price
  Appreciation for
  Option TermName
  
  Number ofSecuritiesUnderlyingOptionsGranted(#)
  
  % of TotalOptionsGranted toEmployees inFiscal Year2005
  
  Exerciseor BasePrice($/Sh)
  
  ExpirationDate
  
  5% ($)
  
  10% ($)Anthony A.
  Lombardo
  
  
  
  90,000
  (1)
  
  
  
  28.1
  %
  
  
  $
  14.225
  (2)
  
  
  
  11/14/14
  
  
  
  $
  805,142
  
  
  
  $
  2,040,389Jeffrey S.
  Peacock
  
  
  
  15,000
  (1)
  
  
  
  4.7
  %
  
  
  $
  14.225
  (2)
  
  
  
  11/14/14
  
  
  
  $
  134,190
  
  
  
  $
  340,065Dennis J.
  Curtin
  
  
  
  35,000
  (1)
  
  
  
  10.9
  %
  
  
  $
  14.225
  (2)
  
  
  
  11/14/14
  
  
  
  $
  313,111
  
  
  
  $
  793,485Brad S.
  Schreck
  
  
  
  15,000
  (1)
  
  
  
  4.7
  %
  
  
  $
  14.225
  (2)
  
  
  
  11/14/14
  
  
  
  $
  134,190
  
  
  
  $
  340,065Peter J.
  Graham
  
  
  
  10,000
  (1)
  
  
  
  3.1
  %
  
  
  $
  14.225
  (2)
  
  
  
  11/14/14
  
  
  
  $
  89,460
  
  
  
  $
  226,710(1)
  On January 17, 2005, our Board of Directors
  accelerated the vesting of outstanding unvested stock options awarded to the
  officers, directors and employees under the E-Z-EM, Inc. 2004 Stock and
  Incentive Award Plan, all of which had an exercise price greater than the
  price of our common stock on January 14, 2005. As a result of the
  acceleration, these options, which otherwise would have vested from time to
  time in one-third increments in 2005, 2006 and 2007, became immediately
  exercisable into our common stock. Our boards decision to accelerate the
  vesting of these options was in response to the issuance by the Financial
  Accounting Standards Board of Statement of Financial Accounting Standards No.
  123 (R), Share-Based Payment. By accelerating the vesting of these options,
  we avoided recognizing any compensation expense in future periods associated
  with these options.(2)
  The options granted during 2005 have an exercise
  price not less than the fair market value of our common stock on the date of
  grant, and expire in ten years.-48-


Aggregated
Option Exercises and Fiscal Year-End Option Value Table

The following table sets forth information concerning
all exercises of stock options during 2005 by our Named Executive Officers and
the fiscal year-end value of unexercised stock options on an aggregated basis:

Number ofSecurities
  Underlying
  Unexercised
  Options at
  May 28, 2005
  (#)
  
  Value of
  Unexercised
  In-the-Money
  Options at
  May 28, 2005
  ($)    (1)Name
  
  Shares
  Acquired on
  Exercise (#)
  
  Value
  Realized
  ($)
  
  Exercisable/
  Unexercisable
  (2)
  
  Exercisable/
  Unexercisable
  (2)Anthony A. Lombardo
  
  None
  
  None
  
  340,996/None
  
  $2,359,059/NoneJeffrey S. Peacock
  
  None
  
  None
  
  24,682/None
  
  $86,478/NoneDennis J. Curtin
  
  12,628
  
  $280,870
  
  35,000/None
  
  $17,325/NoneBrad S. Schreck
  
  None
  
  None
  
  30,972/7,986
  
  $148,509/$70,542Peter J. Graham
  
  None
  
  None
  
  28,025/4,792
  
  $211,429/$55,348(1)
  An option is in-the-money if on May 28, 2005, the
  market price of the common stock exceeded the exercise price of the
  option. At May 28, 2005, the closing
  price of our common stock was $14.72.
  The value of these options is calculated by determining the difference
  between the aggregate market price of the stock covered by the options on May
  28, 2005 and the aggregate exercise price of the options.(2)
  Options are exercisable into our common stock.Long-Term
Incentive Plan Awards Table and Defined Benefit or Actuarial Plan Table

We did not make any awards under any long-term
incentive plan in 2005 and do not maintain any defined benefit or actuarial
plans.

Compensation
of Directors

Directors who are not our employees are entitled to
the following compensation: a monthly retainer of $2,000; a fee of $1,750 for
each board meeting attended in person; a fee of $500 for each telephonic board
meeting in which they participate; an annual grant of 1,000 shares of our
common stock; and an annual grant of an option to purchase 4,000 shares of our
common stock, which vests one year from date of grant. The Chairman of the Board is entitled to
1.75 times the above-referenced fees.
Directors who serve on committees of the board and who are neither our
employees nor the Chairman of the Board are entitled to a fee of $1,000 for
each committee meeting attended in person and a fee of $500 for each telephonic
committee meeting in which they participate, except that the committee chairmen
are entitled to a fee of $1,500 for each committee meeting attended in person and $750 for each
telephonic committee

-49-


meeting in which they participate. Directors who are our employees do not
receive any compensation for their services as directors.


Upon joining our board, new directors receive options
for 24,000 shares of our common stock, which vest one-third per year over three
years from date of grant.

James L. Katz also receives a monthly retainer of
$1,000 for serving as Chairman of our Audit Committee.

In January 2005, Howard S. Stern, a director, resigned
as our Chairman of the Board and was appointed to the position of Chairman
Emeritus. As Chairman Emeritus, we have
agreed to provide Mr. Stern with an annual travel budget of $40,000 to attend
industry related meetings and conferences.
We have also agreed to provide Mr. Stern with an office, secretary, and
car and to continue to provide Mr. Stern and his wife with health and dental
insurance.

See Item 13. Certain Relationships and Related
Transactions for a description of our former consulting agreement with Howard
S. Stern, a director and former Chairman of our board, and our current
consulting agreements with Michael A. Davis, a former director, and Donald A.
Meyer, a former director. The
information included therein is incorporated by reference into this Item 11.

Employment
Contracts and Termination of Employment and Change-In-Control Arrangements

Effective June 1, 2004, we amended our employment
contract, entered into in 2000, with Anthony A. Lombardo in his capacity as our
President and Chief Executive Officer.
This amended employment contract provides for annual base salary at
$340,000. The contract is cancelable at
any time by either Mr. Lombardo or us, but provides for severance pay of two
years base salary in the event of termination by us without cause, as defined
in the contract. Unless cancelled
earlier, the amended contract will terminate on May 31, 2007.

The information required by this caption for
termination of employment and change in control arrangements is incorporated
herein by reference to our Proxy Statement under the heading Severance
Arrangements.

Report
on Repricing of Options/SARs

In connection with the completion of the AngioDynamics
spin-off, as of October 30, 2004, all outstanding stock options (E-Z-EM
Pre-spin Options) were adjusted for E-Z-EM options (the E-Z-EM Post-spin
Options) and AngioDynamics options (the AngioDynamics Post-spin Options),
collectively referred to as (the Replacement Options).

The exercise price and the number of shares subject to
each of the Replacement Options was established pursuant to a formula designed
to ensure that: (1) the aggregate intrinsic value (i.e., the difference
between the exercise price of the option and the market price of the common
stock underlying the option) of the Replacement Option did not exceed the
aggregate intrinsic value of the outstanding E-Z-EM Pre-spin Option that was
replaced by such Replacement Option immediately prior to the spin-off and (2)
the ratio of the exercise price of each option to the market value of the
underlying stock immediately before and after the spin-off was preserved.

Substantially all of the other terms and conditions of
each Replacement Option, including the time or times when, and the manner in
which, each option is exercisable, the duration of the exercise period, the
permitted method of exercise, settlement and payment, the rules that apply in
the event of the termination of employment of the employee, is the same as
those of the replaced

-50-


E-Z-EM
Pre-spin Option, except that (1) in some cases, the exercise period of the
AngioDynamics Post-spin Options are shorter than the exercise period of the
E-Z-EM Pre-spin Options and (2) option holders who are employed by one company
are permitted to exercise options to acquire shares in the other company as if
such holder was an employee of such other company.

Compensation
Committee Interlocks and Insider Participation in Compensation Decisions

The following directors serve on our Compensation
Committee: James L. Katz, James H. Thrall, M.D. and George P. Ward. None of the directors serving on our
Compensation Committee is a current or former officer or employee of ours or
any of our subsidiaries. None of these
directors had any relationship required to be disclosed by us under Item 404 of
Regulation S-K under the Securities Exchange Act of 1934.

Compensation
and Stock Option Committee Report on Executive Compensation

The information required by this caption is
incorporated herein by reference to our Proxy Statement under the heading
Compensation Committee Report on Executive Compensation.

Common
Stock Performance Graph

The information required by this caption is
incorporated herein by reference to our Proxy Statement under the heading
Common Stock Performance Graph.

Item 12.
  Security Ownership of Certain Beneficial
  Owners and Management and Related Stockholder MattersThe following table sets forth information, as of
August 1, 2005, as to the beneficial ownership of our common stock, by (i) each
person known by us to own beneficially more than 5% of our common stock, (ii)
each of our directors, (iii) each of our Named Executive Officers, and (iv) all
our directors and executive officers as a group:

Name and Address of
  Beneficial Owner
  
  Shares
  Beneficially
  Owned (1)
  
  Percent of
  ClassHoward S. Stern,
  Director
  23 Willets Road
  Old Westbury, NY 11568
  
  
  
  2,008,773
  
  (2)
  
  
  18.5Wellington Management Company,
  75 State Street
  Boston, MA 02109
  
  
  
  1,016,900
  
  (3)
  
  
  9.4Ira Albert,
  1304 SW 160th Avenue, Suite 209
  Ft. Lauderdale, FL 33326
  
  
  
  800,042
  
  (4)
  
  
  7.4David P. Meyers,
  Director
  813 Springdale Road
  Atlanta, GA 30306
  
  
  
  589,803
  
  (5)
  
  
  5.4Peter J. Graham,
  Senior Vice President
  
  
  
  453,452
  
  
  
  
  4.2-51-


Name and Address of
  Beneficial Owner
  
  Shares
  Beneficially
  Owned (1)
  
  Percent of
  ClassAnthony A. Lombardo,
  President, Chief Executive
  Officer, Director
  
  
  
  340,996
  
  
  
  
  3.0Paul S. Echenberg,
  Chairman of the Board and Chairman
  of the Board of E-Z-EM Canada
  
  
  
  101,544
  
  
  
  
  *Dennis J. Curtin,
  Senior Vice President
  
  
  
  55,454
  
  
  
  
  *James L. Katz,
  Director
  
  
  
  53,138
  
  
  
  
  *Robert J. Beckman,
  Director
  
  
  
  38,451
  
  
  
  
  *George P. Ward,
  Director
  
  
  
  37,951
  
  
  
  
  *Brad S. Schreck,
  Senior Vice President
  
  
  
  30,972
  
  
  
  
  *Jeffrey S. Peacock,
  Senior Vice President
  
  
  
  24,682
  
  
  
  
  *John T. Preston,
  Director
  
  
  
  24,000
  
  
  
  
  *James H. Thrall, M.D.,
  Director
  
  
  
  24,000
  
  
  
  
  *All directors and executive
  officers as a group (14 persons)
  
  
  
  3,818,216
  
  (3)
  
  
  33.0*     Does not exceed 1%.

(1)
  Includes shares of our common stock issuable upon
  exercise of options currently exercisable or exercisable within 60 days from
  August 1, 2005 as follows: Howard S.
  Stern (29,475), David P. Meyers (26,736), Peter J. Graham (28,025), Anthony
  A. Lombardo (340,996), Paul S. Echenberg (32,291), Dennis J. Curtin (35,000),
  James L. Katz (32,291), Robert J. Beckman (34,951), George P. Ward (34,951),
  Brad S. Schreck (30,972), Jeffrey S. Peacock (24,682), John T. Preston
  (24,000), James H. Thrall, M.D. (24,000) and all directors and executive
  officers as a group (733,370).(2)
  The information relating to Mr. Sterns share ownership was obtained from a Form 4 filed
  by Mr. Stern on July 27, 2005.-52-


(3)
  Wellington Management Companys share information
  was obtained from a Schedule 13G dated February 14, 2005. Of the shares beneficially owned by
  Wellington Management, 392,700 shares are owned of record by Vanguard
  Specialized Funds  Vanguard HealthCare Fund, or Vanguard, as reflected in a
  Schedule 13G dated February 10, 2005 filed by Vanguard.(4)
  Mr. Alberts share ownership was obtained from a
  Schedule 13D dated July 18, 2003.(5)
  Excludes (i) 64,049 shares held by David P. Meyers
  wife, (ii) 25,773.6 shares held by a trust established for the benefit of his
  children, and (iii) 52,134 shares in which Mr. Meyers has a remainder
  interest and his mother has a life estate, as to which Mr. Meyers disclaims
  beneficial ownership. The information
  relating to Mr. Meyers share ownership was obtained from a Form 4 filed by
  Mr. Meyers on July 27, 2005 and other information.Item 13.
  Certain Relationships and Related
  TransactionsWe have split dollar life insurance arrangements with
Howard S. Stern (including his spouse), a director and former Chairman of the
Board, and Betty K. Meyers, which were entered into on May 27, 1998 and May 25,
1998, respectively. Betty K. Meyers is
a shareholder of our company and the widow of Phillip H. Meyers, a co-founder
of our company. She is the mother of
David P. Meyers, a director and a principal shareholder of our company. The Betty Meyers policy is owned by the
Betty Meyers Life Insurance Trust, the beneficiaries of which include David P.
Meyers. Annually, through fiscal 2002,
we paid approximately $100,000 toward the cost of each life insurance policy. Because of the uncertainty of the treatment
of split dollar life insurance policies under the Sarbanes-Oxley Act of 2002,
beginning in fiscal year 2003, we stopped making payments toward the cost of
such policies and do not anticipate making any payments in the future.

The aggregate amount of premiums paid by us for each
policy is $500,000, the proceeds of which, under collateral assignment
agreements, will be first used to repay all payments made by us for that
policy. Additionally, beneficiaries of
each policy may not borrow against the amount paid by us. Both Howard Stern (including his spouse) and
Betty Meyers have agreed to repay us for any shortfall between the cash
surrender value of his or her policy and the aggregate amount of premiums paid
by us. At May 28, 2005, the cash
surrender value of such policies aggregated $1,558,000 and the aggregate amount
of advances made by us totaled $1,000,000.

Michael A. Davis, M.D., a former director, provides
us, on an ongoing basis, with consulting services in his capacity as our
Medical Director. Fees for such
services were approximately $230,000 during 2005. Dr. Davis resigned as a director on December 31, 2004 and was appointed
a Director Emeritus.

We and AngioDynamics, our former subsidiary, each entered
into an agreement, effective as of January 1, 2004, with Donald A. Meyer, a
former director of ours and of AngioDynamics, under which Mr. Meyer agreed to
serve as the trustee of AngioDynamics and our 401(k) plans and to provide
AngioDynamics and us with such other services as we may reasonably request from
time-to-time. Each agreement is for a
term of 36 months unless terminated earlier pursuant to its terms. Mr. Meyer receives a monthly payment of
$3,500 and reimbursement for reasonable business expenses incurred in providing
services under each agreement. In 2005,
fees for such services totaled approximately $60,000. Mr. Meyer did not stand for re-election as a director at our
annual meeting of stockholders held on October 26, 2004 and was appointed a
Director Emeritus at that time.

-53-


Effective January 1, 2002, we entered into an
agreement with Howard S. Stern, a director and former Chairman of our board,
under which Mr. Stern agreed to provide us with services as we requested
through December 31, 2004. We agreed to
include Mr. Stern in our slate of directors for the 2002 annual meeting and to
appoint Mr. Stern as Chairman of the Board for a one-year term beginning at
that annual meeting. So long as Mr.
Stern remained Chairman of the Board, he was entitled to receive twice the
regular fees and other compensation (including cash, stock and options) paid to
directors for service on the board.
Under the terms of the agreement, Mr. Stern received 36 equal monthly
payments of $20,833. Mr. Stern also received
other benefits and perquisites and, so long as he remained Chairman, an annual
sum of up to $80,000 for reimbursement of reasonable business expenses. Prior to AngioDynamics initial public
offering, AngioDynamics reimbursed E-Z-EM for 35% of Mr. Sterns compensation
and expenses paid under the agreement.
Under AngioDynamics master separation and distribution agreement with
E-Z-EM, AngioDynamics assumed 35% of E-Z-EMs payment obligations to Mr. Stern
under the agreement, which totaled $7,300 in fees and $2,300 for expenses on a
monthly basis. This agreement expired
on December 31, 2004 and was not renewed.

Item 14.
  Principal Accountant Fees and
  ServicesThe information required by this caption is
incorporated herein by reference to our Proxy Statement under the
headings Principal Accountant Fees and Services.

-54-


Part IV

Item 15.
  Exhibits and Financial Statement
  SchedulesPage(a) l. Financial StatementsThe following
  consolidated financial statements and supplementary data of Registrant and
  its subsidiaries required by Part II, Item 8, are included in Part IV of this
  report:Report of Independent Registered Public Accounting
Firm
  
  60Consolidated balance sheets - May 28, 2005 and May 29,
2004
  
  61Consolidated statements of earnings - Fifty-two weeks ended
  May 28, 2005, May 29, 2004 and May 31, 2003
  
  63Consolidated statement of stockholders equity and
  comprehensive income - Fifty-two weeks ended May 28, 2005, May 29, 2004 and
  May 31, 2003
  
  64Consolidated statements of cash flows - Fifty-two weeks ended
  May 28, 2005, May 29, 2004 and May 31, 2003
  
  66Notes to consolidated financial statements
  
  68(a) 2. Financial Statement SchedulesThe following
  consolidated financial statement schedule is included in Part IV of this
  report:Schedule II -
  Valuation and qualifying accounts
  
  104All other
  schedules are omitted because they are not applicable, or not required, or
  because the required information is included in the consolidated financial
  statements or notes thereto.(a) 3. Exhibits3.1
  
  Restated
  Certificate of Incorporation of the Registrant, as amended
  
  (a)3.2
  
  Amended and
  Restated Bylaws of the Registrant
  
  (b)10.1
  
  1983 Stock Option
  Plan of the Registrant, as amended through October 19, 1999
  
  (c)10.2
  
  1984 Directors
  and Consultants Stock Option Plan of the Registrant, as amended through
  October 12, 1995
  
  (d)10.3
  
  Employee Stock
  Purchase Plan of the Registrant, as amended through September 30, 2002
  
  (e)10.4
  
  Employment Agreement
  dated April 3, 2000 between E-Z-EM, Inc. and Anthony A. Lombardo
  
  (f)10.5
  
  Income Deferral
  Program
  
  (g)-55-

Page(a) 3. Exhibits (continued)10.6
  
  Amendment dated
  August 24, 2004 to Employment Agreement dated April 3, 2000 between E-Z-EM,
  Inc. and Anthony A. Lombardo
  
  (h)10.7
  
  2004 Stock and
  Incentive Award Plan
  
  (i)10.8
  
  Asset Purchase
  Agreement dated January 16, 2005 by and among E-Z-EM, Inc. and ODell
  Engineering Ltd. and Philip ODell
  
  (j)10.9
  
  Form of
  Non-statutory Stock Option Agreement for 2004 Stock and Incentive Award Plan
  (Employee)
  
  (k)10.10
  
  Form of
  Non-statutory Stock Option Agreement for 2004 Stock and Incentive Award Plan
  (Member of the Board of Directors)
  
  (l)10.11
  
  Form of Incentive
  Stock Option Agreement for 2004 Stock and Incentive Award Plan (Employee)
  
  (m)10.12
  
  Amendment to
  Asset Purchase Agreement dated April 7, 2005 by and between E-Z-EM, Inc.,
  ODell Engineering Ltd. and Philip C. ODell
  
  10510.13
  
  Agreement for
  Purchase and Sale dated May 19, 2005 by and between E-Z-EM, Inc. and Kalaty
  Properties Corp.
  
  10810.14
  
  Side Letter dated
  May 19, 2005 from E-Z-EM, Inc. to Kalaty Properties Corp.
  
  12710.15
  
  Notice of
  Extension of Diligence Period dated June 18, 2005 from E-Z-EM, Inc. to Kalaty
  Properties Corp.
  
  12921
  
  Subsidiaries of
  the Registrant
  
  13023
  
  Consent of
  Independent Registered Public Accounting Firm
  
  13131.1
  
  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)
  
  13231.2
  
  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)
  
  13432.1
  
  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)
  
  13632.2
  
  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)
  
  137a)
  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.-56-


b)
  Incorporated by
  reference to Exhibit 3.2 to the Registrants Current Report on Form 8-K filed
  with the Commission on January 21, 2005.c)
  Incorporated by reference to Exhibit 3 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  February 26, 2000.d)
  Incorporated by reference to Exhibit 10(b) to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  December 2, 1995, filed under Commission File No. 0-13003.e)
  Incorporated by reference to Exhibit 10 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  August 31, 2002.f)
  Incorporated by reference to Exhibit 10(e) to the
  Registrants Annual Report on Form 10-K for the fiscal year ended June 3,
  2000.g)
  Incorporated by reference to Exhibit 10(c) to the
  Registrants Annual Report on Form 10-K for the fiscal year ended May 29,
  1993, filed under Commission File No. 0-13003.h)
  Incorporated by reference to Exhibit 10.7 to the
  Registrants Annual Report on Form 10-K for the fiscal year ended May 29,
  2004.i)
  Incorporated by reference to Exhibit 99.2 to the
  Registrants additional definitive proxy material filed with the Commission
  on October 25, 2004.j)
  Incorporated by reference to Exhibit 10.1 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  February 26, 2005.k)
  Incorporated by reference to Exhibit 10.2 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  February 26, 2005.l)
  Incorporated by reference to Exhibit 10.3 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  February 26, 2005.m)
  Incorporated by reference to Exhibit 10.4 to the
  Registrants Quarterly Report on Form 10-Q for the quarterly period ended
  February 26, 2005.-57-


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  August 11, 2005
    /s/ Paul S. Echenberg
    Paul S. Echenberg,
        Chairman of the
        Board, DirectorPursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

Date  August 11,
        2005
    /s/ Paul S. Echenberg
    Paul S. Echenberg,
        Chairman of theBoard, DirectorDate  August 11,
        2005
    /s/ Anthony A. Lombardo
    Anthony A. Lombardo,
        President,Chief Executive Officer,
        DirectorDate  August 11,
        2005
    /s/ Dennis J. Curtin
    Dennis J. Curtin, Senior
        VicePresident - Chief Financial
        Officer(Principal Financial
        and ChiefAccounting Officer)Date  August 11,
        2005
    /s/ Robert J. Beckman
    Robert J. Beckman,
        DirectorDate  August 11,
        2005
    /s/ James L. Katz
    James L. Katz, DirectorDate  August 11,
        2005
    /s/ David P. Meyers
    David P. Meyers, Director-58-


Date  August 11,
        2005
    /s/ John T. Preston
    John T. Preston, DirectorDate  August 11,
        2005
    /s/ James H. Thrall
    James H. Thrall, DirectorDate  August 11,
        2005
    /s/ George P. Ward
    George P. Ward, Director-59-


REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Board of
Directors and Stockholders  E-Z-EM, Inc.
and Subsidiaries

We have audited the accompanying consolidated balance sheets of E-Z-EM,
Inc. and Subsidiaries (the Company) as of May 28, 2005 and May 29, 2004, and
the related consolidated statements of earnings, stockholders equity and
comprehensive income, and cash flows for the fifty-two weeks ended May 28,
2005, May 29, 2004 and May 31, 2003. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
E-Z-EM, Inc. and Subsidiaries as of May 28, 2005 and May 29, 2004, and the
consolidated results of their operations and their consolidated cash flows for
the fifty-two weeks ended May 28, 2005, May 29, 2004 and May 31, 2003, in
conformity with accounting principles generally accepted in the United States
of America.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II  Valuation and Qualifying
Accounts is presented for the purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic financial statements.
For each of the fifty-two weeks ended May 28, 2005, May 29, 2004 and May 31,
2003, this schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of
E-Z-EM, Inc. and Subsidiaries internal control over financial reporting as of
May 28, 2005, based on criteria established in Internal
Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated July 21, 2005
expressed an unqualified opinion thereon.

/s/ Grant
Thornton LLP

Melville, New
York 
July 21, 2005

-60-


E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS(in thousands)

ASSETS
  
  May 28,
  2005
  
  
  May 29,
  2004CURRENT ASSETSCash and cash equivalents
  
  $
  10,183
  
  $
  12,334Debt and equity securities, at fair value
  
  
  18,419
  
  
  12,130Accounts receivable, principally trade, net
  of allowance for doubtful accounts of $869 in 2005 and $851 in 2004
  
  
  17,677
  
  
  16,673Inventories, net
  
  
  22,822
  
  
  18,901Refundable income taxes
  
  
  1,444
  
  
  107Other current assets
  
  
  4,705
  
  
  5,685Current assets of discontinued operation
  
  
  
  
  
  40,290Total current assets
  
  
  75,250
  
  
  106,120PROPERTY, PLANT AND EQUIPMENT - AT COST,
  less accumulated depreciation and amortization
  
  
  13,256
  
  
  11,669INTANGIBLE ASSETS, less accumulated
  amortization of $504 in 2005 and $267 in 2004
  
  
  4,867
  
  
  133DEBT AND EQUITY SECURITIES, at fair value
  
  
  746
  
  
  3,107INVESTMENTS AT COST
  
  
  
  
  
  1,000OTHER ASSETS
  
  
  7,936
  
  
  7,409NONCURRENT ASSETS HELD FOR DISPOSAL
  
  
  3,593
  
  
  3,746NONCURRENT ASSETS OF DISCONTINUED OPERATION
  
  
  
  
  
  9,352$
  105,648
  
  $
  142,536The
accompanying notes are an integral part of these statements.

-61-


E-Z-EM, Inc. and Subsidiaries

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

LIABILITIES AND STOCKHOLDERS
EQUITY
  
  May 28,
  2005
  
  May 29,
  2004CURRENT LIABILITIESNotes payable
  
  $
  347
  
  $
  440Current maturities of long-term debt
  
  
  99
  
  
  149Accounts payable
  
  
  5,069
  
  
  4,415Accrued liabilities
  
  
  9,916
  
  
  6,557Accrued income taxes
  
  
  207
  
  
  179Current liabilities of discontinued
  operation
  
  
  
  
  
  5,744Total current liabilities
  
  
  15,638
  
  
  17,484LONG-TERM DEBT, less current maturities
  
  
  85
  
  
  178OTHER NONCURRENT LIABILITIES
  
  
  4,205
  
  
  3,488NONCURRENT LIABILITIES AND MINORITY
  INTEREST OF DISCONTINUED OPERATION
  
  
  
  
  
  9,611Total liabilities
  
  
  19,928
  
  
  30,761COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred stock, par value $.10 per share
  - authorized, 1,000,000 shares; issued, noneCommon stock, par value $.10 per share
  - authorized, 16,000,000 shares; issued and outstanding 10,827,772 shares in
  2005 and 10,698,216 shares in 2004 (excluding 89,205 and 83,062 shares held in
  treasury in 2005 and 2004, respectively)
  
  
  1,083
  
  
  1,070Additional paid-in capital
  
  
  28,478
  
  
  38,445Retained earnings
  
  
  54,497
  
  
  70,638Accumulated other comprehensive income
  
  
  1,662
  
  
  1,622Total stockholders equity
  
  
  85,720
  
  
  111,775$
  105,648
  
  $
  142,536The
accompanying notes are an integral part of these statements.

-62-


E-Z-EM, Inc. and Subsidiaries

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

Fifty-two
  weeks endedMay 28,
  2005
  
  May 29,
  2004
  
  May 31,
  2003Net sales
  
  $
  113,075
  
  $
  100,609
  
  $
  95,683Cost of goods sold
  
  
  65,039
  
  
  60,552
  
  
  57,796Gross profit
  
  
  48,036
  
  
  40,057
  
  
  37,887Operating expensesSelling and administrative
  
  
  36,172
  
  
  31,720
  
  
  32,960Plant closings and operational
  restructuring costs
  
  
  2,917
  
  
  1,771Asset impairment
  
  
  
  
  
  
  
  
  116Research and development
  
  
  5,494
  
  
  4,467
  
  
  4,267Total operating expenses
  
  
  44,583
  
  
  37,958
  
  
  37,343Operating profit
  
  
  3,453
  
  
  2,099
  
  
  544Other income (expense)Interest income
  
  
  365
  
  
  788
  
  
  1,100Interest expense
  
  
  (349
  )
  
  (316
  )
  
  (307
  )Other, net
  
  
  3,090
  
  
  2,971
  
  
  599Earnings from continuing operations before
  income taxes
  
  
  6,559
  
  
  5,542
  
  
  1,936Income tax provision
  
  
  851
  
  
  1,944
  
  
  428Earnings from continuing operations
  
  
  5,708
  
  
  3,598
  
  
  1,508Earnings from discontinued operation, net
  of income tax provision of $1,103 in 2005, $1,238 in 2004 and $1,069 in 2003,
  respectively
  
  
  1,228
  
  
  3,128
  
  
  1,233NET EARNINGS
  
  $
  6,936
  
  $
  6,726
  
  $
  2,741Basic earnings per common shareFrom continuing operations
  
  $
  .53
  
  $
  .35
  
  $
  .15From discontinued operation, net of income
  tax provision
  
  
  .11
  
  
  .30
  
  
  .12Net earnings
  
  $
  .64
  
  $
  .65
  
  $
  .27Diluted earnings per common shareFrom continuing operations
  
  $
  .52
  
  $
  .34
  
  $
  .14From discontinued operation, net of income
  tax provision
  
  
  .11
  
  
  .29
  
  
  .12Net earnings
  
  $
  .63
  
  $
  .63
  
  $
  .26The
accompanying notes are an integral part of these statements.

-63-


E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME

Fifty-two weeks ended May 28, 2005, May 29,
2004 and May 31, 2003(in thousands, except share data)

Class A
  and Class B
  
  
  
  Additional
  paid-in
  capital
  
  Retained
  earnings
  
  Accumulated
  other
  comprehensive
  income (loss)
  
  Total
  
  Compre-
  hensive
  incomecommon
  stock
  
  Common
  stockShares
  
  Amount
  
  Shares
  
  AmountBalance at June
  1, 2002
  
  
  9,985,705
  
  $
  998
  
  
  
  
  
  
  
  $
  21,062
  
  $
  63,723
  
  $
  (2,261
  )
  $
  83,522Exercise of stock
  options
  
  
  22,962
  
  
  2
  
  
  136,042
  
  $
  14
  
  
  738
  
  
  
  
  
  
  
  
  754Income tax benefits
  on stock options exercised
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  150
  
  
  
  
  
  
  
  
  150Compensation
  related to stock option plans
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  5
  
  
  
  
  
  
  
  
  5Issuance of stock
  
  
  
  
  
  
  
  
  9,851
  
  
  1
  
  
  76
  
  
  
  
  
  
  
  
  77Purchase of
  treasury stock
  
  
  (16,352
  )
  
  (1
  )
  
  (36,834
  )
  
  (4
  )
  
  (433
  )
  
  
  
  
  
  
  
  (438
  )Common stock
  recapitalization
  
  
  (9,992,315
  )
  
  (999
  )
  
  9,992,315
  
  
  999Net earnings
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  2,741
  
  
  
  
  
  2,741
  
  $
  2,741Unrealized
  holding loss on debt and equity securities
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (63
  )
  
  (63
  )
  
  (63
  )Decrease in fair
  market value on interest rate swap
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (300
  )
  
  (300
  )
  
  (300
  )Foreign currency
  translation adjustments
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  2,154
  
  
  2,154
  
  
  2,154Comprehensive
  income
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  $
  4,532Balance at May
  31, 2003
  
  
  
  
  
  
  
  
  10,101,374
  
  
  1,010
  
  
  21,598
  
  
  66,464
  
  
  (470
  )
  
  88,602Exercise of stock
  options, net of 8,828 shares tendered for exercise and withholding taxes
  
  
  
  
  
  
  
  
  624,146
  
  
  63
  
  
  3,046
  
  
  
  
  
  
  
  
  3,109Income tax
  benefits on stock options exercised
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  1,912
  
  
  
  
  
  
  
  
  1,912Compensation
  related to stock option plans
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  5
  
  
  
  
  
  
  
  
  5Issuance of stock
  
  
  
  
  
  
  
  
  10,096
  
  
  1
  
  
  123
  
  
  
  
  
  
  
  
  124Purchase of
  treasury stock
  
  
  
  
  
  
  
  
  (37,400
  )
  
  (4
  )
  
  (413
  )
  
  
  
  
  
  
  
  (417
  )Common stock
  subscription on effective date of subsidiarys initial public offering, net
  of financing costs and minority interest
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  12,174
  
  
  
  
  
  
  
  
  12,174Net earnings
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  6,726
  
  
  
  
  
  6,726
  
  $
  6,726Cash dividend
  ($.25 per common share)
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (2,552
  )
  
  
  
  
  (2,552
  )Unrealized
  holding gain on debt and equity securitiesArising during
  the year
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  3,543
  
  
  3,543
  
  
  3,543Reclassification
  adjustment for gains included in net earnings
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (1,868
  )
  
  (1,868
  )
  
  (1,868
  )Increase in fair
  market value on interest rate swap
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  182
  
  
  182
  
  
  182Foreign currency
  translation adjustments
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  235
  
  
  235
  
  
  235Comprehensive
  income
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  $
  8,818Balance at May
  29, 2004
  
  
  
  
  
  
  
  
  10,698,216
  
  
  1,070
  
  
  38,445
  
  
  70,638
  
  
  1,622
  
  
  111,775Exercise of stock
  options, net of 6,143 shares tendered to satisfy withholding taxes
  
  
  
  
  
  
  
  
  120,789
  
  
  12
  
  
  372
  
  
  
  
  
  
  
  
  384Income tax
  benefits on stock options exercised
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  1,358
  
  
  
  
  
  
  
  
  1,358Compensation
  related to stock option plans, net of income tax benefit
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  435
  
  
  
  
  
  
  
  
  435Issuance of stock
  
  
  
  
  
  
  
  
  8,767
  
  
  1
  
  
  107
  
  
  
  
  
  
  
  
  108Proceeds from
  subsidiarys initial public offering, net of financing costs and minority
  interest
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  1,442
  
  
  
  
  
  
  
  
  1,442Net earnings
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  6,936
  
  
  
  
  
  6,936
  
  $
  6,936Cash dividend
  ($.30 per common share)
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (3,220
  )
  
  
  
  
  (3,220
  )Net book value of
  discontinued operation at date of spin-off
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (13,681
  )
  
  (19,857
  )
  
  173
  
  
  (33,365
  )-64-


E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME (continued)

Fifty-two weeks ended May 28, 2005, May 29,
2004 and May 31, 2003
(in thousands, except share data)

Class A
  and Class B
  
  
  
  Additional
  paid-in
  capital
  
  Retained
  earnings
  
  Accumulated
  other
  comprehensive
  income (loss)
  
  Total
  
  Compre-
  hensive
  incomecommon
  stock
  
  Common
  stockShares
  
  Amount
  
  Shares
  
  AmountUnrealized holding gain on debt and equity securitiesArising during the year
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  1,148
  
  
  1,148
  
  
  1,148Reclassification adjustment for gains included
in net earnings
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (3,270
  )
  
  (3,270
  )
  
  (3,270
  )Decrease in fair market value on interest rate swap through date
of
  spin-off of discontinued operation
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  (55
  )
  
  (55
  )
  
  (55
  )Foreign currency translation adjustments
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  2,044
  
  
  2,044
  
  
  2,044Comprehensive income
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  $
  6,803Balance at May 28, 2005
  
  
  
  
  $
  
  
  
  10,827,772
  
  $
  1,083
  
  $
  28,478
  
  $
  54,497
  
  $
  1,662
  
  $
  85,720The
accompanying notes are an integral part of this statement.

-65-


E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Fifty-two
  weeks endedMay 28,
  2005
  
  May 29,
  2004
  
  May 31,
  2003Cash flows from operating activities:Net earnings
  
  $
  6,936
  
  $
  6,726
  
  $
  2,741Earnings from discontinued operation, net
  of tax
  
  
  (1,228
  )
  
  (3,128
  )
  
  (1,233
  )Adjustments to reconcile net earnings to
  net cash provided by (used in) operating activitiesDepreciation and amortization
  
  
  3,159
  
  
  2,992
  
  
  2,742Impairment of long-lived assets
  
  
  500
  
  
  
  
  
  116Gain on sale of investments
  
  
  (3,270
  )
  
  (2,622
  )Provision for doubtful accounts
  
  
  111
  
  
  106
  
  
  274(Gain) loss on sale of assets
  
  
  68
  
  
  (12
  )
  
  14Tax benefit on exercise of stock
options
  
  
  1,358
  
  
  1,912
  
  
  150Deferred income tax provision
(benefit)
  
  
  (325
  )
  
  (574
  )
  
  68Stock option compensation cost
  
  
  427Other non-cash items
  
  
  98
  
  
  (480
  )
  
  (821
  )Changes in operating assets and
  liabilities, net of business divestedAccounts receivable
  
  
  (1,201
  )
  
  (306
  )
  
  (4,044
  )Inventories
  
  
  (3,857
  )
  
  935
  
  
  (1,446
  )Other current assets
  
  
  (270
  )
  
  (814
  )
  
  (638
  )Other assets
  
  
  (457
  )
  
  (687
  )
  
  (652
  )Accounts payable
  
  
  1,308
  
  
  628
  
  
  (761
  )Accrued liabilities
  
  
  2,111
  
  
  905
  
  
  245Accrued income taxes
  
  
  32
  
  
  162
  
  
  (418
  )Other noncurrent liabilities
  
  
  96
  
  
  250
  
  
  263Net cash provided by operating activities
  of discontinued operation
  
  
  567
  
  
  2,499
  
  
  591Net cash provided by (used in) operating
activities
  
  
  6,163
  
  
  8,492
  
  
  (2,809
  )Cash flows from investing activities:Additions to property, plant and
equipment
  
  
  (4,163
  )
  
  (2,352
  )
  
  (2,663
  )Proceeds from sale of assets
  
  
  408
  
  
  1,392
  
  
  3Purchase of intangible assets
  
  
  (3,094
  )Proceeds from sale of investment at
cost
  
  
  600Investments at cost
  
  
  (100
  )
  
  (100
  )
  
  (300
  )Available-for-sale securitiesPurchases
  
  
  (65,295
  )
  
  (23,189
  )
  
  (106,514
  )Proceeds from sale
  
  
  62,670
  
  
  21,981
  
  
  113,465Net cash used in investing activities of
  discontinued operation
  
  
  (11,141
  )
  
  (996
  )
  
  (4,572
  )Net cash used in investing activities
  
  
  (20,115
  )
  
  (3,264
  )
  
  (581
  )-66-


E-Z-EM, Inc. and Subsidiaries

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

Fifty-two
  weeks endedMay 28,
  2005
  
  May 29,
  2004
  
  May 31,
  2003Cash flows
  from financing activities:Proceeds from issuance of debt
  
  $
  93
  
  $
  151
  
  $
  31Repayments of debt
  
  
  (344
  )
  
  (425
  )
  
  (304
  )Proceeds from repayment of debt by
  discontinued operation
  
  
  3,000Dividends paid
  
  
  (3,220
  )
  
  (2,552
  )Proceeds from exercise of stock
options
  
  
  384
  
  
  3,109
  
  
  754Purchase of treasury stock
  
  
  
  
  
  (417
  )
  
  (438
  )Proceeds from issuance of stock in
  connection with the stock purchase plan
  
  
  10
  
  
  8
  
  
  6Cash distributed with discontinued
  operation
  
  
  (8,453
  )Net cash provided by (used in) financing
  activities of discontinued operation
  
  
  18,958
  
  
  (1,503
  )
  
  3,981Net cash provided by (used in) financing
  activities
  
  
  10,428
  
  
  (1,629
  )
  
  4,030Effect of
  exchange rate changes on cash and cash equivalents
  
  
  1,373
  
  
  215
  
  
  1,386INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS
  
  
  (2,151
  )
  
  3,814
  
  
  2,026Cash and
  cash equivalentsBeginning of year
  
  
  12,334
  
  
  8,520
  
  
  6,494End of year
  
  $
  10,183
  
  $
  12,334
  
  $
  8,520Supplemental
  disclosure of cash flow information:Cash paid during the year for:Interest
  
  $
  95
  
  $
  236
  
  $
  198Income taxes (net of $269 and $3 in refunds
  in 2004 and 2003, respectively)
  
  $
  2,283
  
  $
  1,311
  
  $
  1,880Supplemental
  disclosure of non-cash financing activities:Purchase of intangible assets
  
  $
  1,877Common stock subscription on effective date
  of subsidiarys initial public offering, net of financing costs, excluding
  minority interest of $6,496
  
  
  
  
  $
  18,670The
accompanying notes are an integral part of these statements.

-67-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies is
  presented to assist the reader in understanding and evaluating the
  consolidated financial statements. These policies are in conformity with
  accounting principles generally accepted in the United States of America, and
  have been applied consistently in all material respects.Nature of BusinessE-Z-EM, Inc. and its subsidiaries (the Company or E-Z-EM)
  is a leading provider of medical products used by radiologists,
  gastroenterologists and speech language pathologists primarily in screening
  for and diagnosing diseases and disorders of the gastrointestinal (GI)
  tract. Products are used for colorectal cancer screening, evaluation of
  swallowing disorders (dysphagia), and testing for other diseases and
  disorders of the GI system. The Company is also a third-party contract
  manufacturer, which enables the Company to leverage its quality control,
  process, automation and manufacturing capabilities. Prior to the spin-off of
  AngioDynamics, Inc. (AngioDynamics) on October 30, 2004, the Company was
  also a provider of innovative medical devices used in minimally invasive,
  image-guided procedures to treat peripheral vascular disease, or PVD.
  AngioDynamics designed, developed, manufactured and marketed a broad line of
  therapeutic and diagnostic devices that enabled interventional physicians
  (interventional radiologists, vascular surgeons and others) to treat PVD and
  other non-coronary diseases.Basis of ConsolidationThe consolidated financial statements include the
  accounts of E-Z-EM, Inc. and all wholly owned subsidiaries, as well as the
  accounts of AngioDynamics through its spin-off on October 30, 2004. As a
  result of the spin-off, AngioDynamics is reported separately as a
  discontinued operation for all periods presented within the consolidated
  financial statements (see Note B. Discontinued Operation). All significant
  intercompany balances and transactions have been eliminated.Operations outside the U.S. are included in the
  consolidated financial statements and consist of: a subsidiary operating a
  mining and chemical processing operation in Nova Scotia, Canada and a
  manufacturing and marketing facility in Montreal, Canada; a subsidiary
  promoting and distributing products located in Japan; a subsidiary promoting
  and distributing products located in the United Kingdom; and a subsidiary
  promoting and distributing products located in Holland.Fiscal YearThe Company reports on a fiscal year that concludes
  on the Saturday nearest to May 31. Fiscal years 2005, 2004 and 2003 ended on
  May 28, 2005, May 29, 2004 and May 31, 2003, respectively, for reporting
  periods of fifty-two weeks.-68-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash EquivalentsThe Company considers all unrestricted highly liquid
  investments purchased with a maturity of less than three months to be cash
  equivalents. Included in cash equivalents are Eurodollar investments and
  certificates of deposit of $1,321,000 and $2,000,000 at May 28, 2005 and May
  29, 2004, respectively. The carrying amount of these financial instruments
  reasonably approximates fair value because of their short maturity.
  Foreign-denominated cash and cash equivalents aggregated $7,975,000 and
  $7,897,000 at May 28, 2005 and May 29, 2004, respectively.As of May 28, 2005 and May 29, 2004, approximately
  $9,003,000 and $11,682,000, respectively, of cash held by financial
  institutions in the U.S. and other countries exceeded Federal Deposit
  Insurance Corporation and other government agencies insured amounts.Debt and Equity SecuritiesDebt and equity securities are classified as available-for-sale
  securities and reported at fair value, with unrealized gains and losses
  excluded from operations and reported as a component of accumulated other
  comprehensive income, net of the related tax effects, in stockholders
  equity. Cost is determined using the specific identification method.Accounts ReceivableAccounts receivable, principally trade, are
  generally due within 30 to 90 days and are stated at amounts due from
  customers, net of an allowance for doubtful accounts. The Company performs
  ongoing credit evaluations and adjusts credit limits based upon payment
  history and the customers current credit worthiness, as determined by a review
  of their current credit information. The Company continuously monitors aging
  reports, collections and payments from customers and maintains a provision
  for estimated credit losses based upon historical experience and any specific
  customer collection issues that have been identified. While such credit
  losses have historically been within expectations and the provisions
  established, the Company cannot guarantee the same credit loss rates will be
  experienced in the future. The Company writes off accounts receivable when
  they become uncollectible.Changes in the Companys allowance for doubtful
  accounts are as follows:May 28,
  2005
  
  May 29,
  2004(in
  thousands)Beginning
  balance
  
  $
  851
  
  $
  798Provision for
  doubtful accounts
  
  
  111
  
  
  106Write-offs
  
  
  (93
  )
  
  (53
  )Ending balance
  
  $
  869
  
  $
  851-69-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

InventoriesInventories are valued at the lower of cost (on the
  first-in, first-out method) or market. On a quarterly basis, the Company
  reviews inventory quantities on hand and analyzes the provision for excess
  and obsolete inventory based primarily on product expiration dating and its
  estimated sales forecast, which is based on sales history and anticipated
  future demand. At May 28, 2005 and May 29, 2004, reserve for excess and
  obsolete inventory was $1,902,000 and $1,683,000, respectively.Property, Plant and EquipmentProperty, plant and equipment are stated at cost,
  less accumulated depreciation. Depreciation is computed principally using the
  straight-line method over the estimated useful lives of the assets. Leasehold
  improvements are amortized over the terms of the related leases or the useful
  life of the improvements, whichever is shorter. Expenditures for repairs and
  maintenance are charged to expense as incurred. Renewals and betterments are
  capitalized. Depreciation expense was $2,922,000, $2,859,000 and $2,609,000
  in 2005, 2004 and 2003, respectively.Accounting for Business
  Combinations, Goodwill and Intangible AssetsIn accordance with Statement of Financial Accounting
  Standards (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill
  and Other Intangible Assets, the Company accounts for all business
  combinations initiated after June 30, 2001 under the purchase method. In
  addition, all intangible assets acquired that are obtained through
  contractual or legal right, or are capable of being separately sold,
  transferred, licensed, rented or exchanged are recognized as an asset apart
  from goodwill. In accordance with SFAS No. 142, goodwill and intangibles with
  indefinite lives, which are no longer amortized, are assessed for impairment
  annually, or as events or circumstances indicate that an asset may be
  impaired, by applying a fair value based test.Intangible assets, which consist primarily of
  licenses, customer relationships, technology, trademarks and know-how, are
  being amortized on a straight-line basis over the estimated useful lives of
  the respective assets of approximately six and one half to ten years.
  Amortization of intangible assets was $237,000, $133,000 and $133,000 in
  2005, 2004 and 2003, respectively. Estimated amortization expense related to
  these intangibles for the succeeding five years is as follows:(in
  thousands)2006
  
  
  $
  7442007
  
  
  $
  7442008
  
  
  $
  7442009
  
  
  $
  7442010
  
  
  $
  744-70-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

On an ongoing basis, management reviews the
  valuation and amortization of intangible assets to determine possible
  impairment by considering current operating results and comparing the
  carrying values to the anticipated undiscounted future cash flows of the
  related assets (see Note E).Revenue RecognitionThe Company recognizes revenue on the date the
  product is shipped, which is when title passes to the customer. Shipping and
  credit terms are negotiated on a customer-by-customer basis. Products are
  shipped primarily to distributors at an agreed-upon list price. The
  distributor then resells the products primarily to hospitals and, depending
  upon contracts between the Company, the distributor and the hospital, the
  distributor may be entitled to a rebate. The Company deducts all rebates from
  sales and has a provision for rebates based on historical information for all
  rebates that have not yet been submitted to the Company by the distributors.Changes in our rebate allowance are as follows:May 28,
  2005
  
  May 29,
  2004(in
  thousands )Beginning
  balance
  
  $
  1,611
  
  $
  1,159Provision for
  rebates
  
  
  21,949
  
  
  20,918Rebate credits
  issued
  
  
  (22,163
  )
  
  (20,466
  )Ending balance
  
  $
  1,397
  
  $
  1,611All product returns must be pre-approved by the
  Company and customers may be subject to a 20% restocking charge. To be
  accepted, a returned product must be unadulterated, undamaged and must have
  at least 12 months remaining prior to its expiration date. The Company
  records 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 are
  $505,000 and $356,000 at May 28, 2005 and May 29, 2004, respectively, and
  reported as a component of other current liabilities and other noncurrent
  liabilities in the accompanying balance sheets. Service costs are expensed as
  incurred.Research
  and DevelopmentThe Company charges all costs incurred to establish
  the technological feasibility of a product or product enhancement to research
  and development expense.Shipping and Handling CostsShipping and handling costs, associated with the
  distribution of finished product to customers, are recorded in costs of goods
  sold and are recognized when the related finished product is shipped to the
  customer.-71-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

AdvertisingAll costs associated with advertising are expensed
  when incurred. Advertising expense, included in selling and administrative
  expenses, was $680,000, $435,000 and $1,218,000 in 2005, 2004 and 2003,
  respectively.Income TaxesDeferred income taxes are recognized for temporary
  differences between financial statement and income tax bases of assets and
  liabilities and loss carryforwards and tax credit carryforwards for which
  income tax benefits are expected to be realized in future years. A valuation
  allowance has been established to reduce deferred tax assets as it is more
  likely than not that all, or some portion, of such deferred tax assets will
  not be realized. The effect on deferred taxes of a change in tax rates is
  recognized in income in the period that includes the enactment date.Foreign Currency TranslationIn accordance with SFAS No. 52, Foreign Currency
  Translation, the Company has determined that the functional currency for its
  foreign subsidiaries is the local currency. This assessment considers that
  the subsidiaries day-to-day operations are not dependent upon the economic
  environment of the parents functional currency, financing is effected
  through their own operations, and the foreign operations primarily generate
  and expend foreign currency. Foreign currency translation adjustments are
  accumulated as a component of accumulated other comprehensive income in
  stockholders equity.Stock-Based CompensationIn December 2002, the Financial Accounting Standards
  Board (FASB) issued SFAS No. 148, Accounting for Stock-Based Compensation
  - Transition and Disclosure. SFAS No. 148 amends the disclosure provisions
  of SFAS No. 123, Accounting for Stock-Based Compensation, and APB Opinion
  No. 28, Interim Financial Reporting, to require disclosure in the summary
  of significant accounting policies of the effects of an entitys accounting
  policy with respect to stock-based employee compensation on reported net
  earnings and earnings per share in annual and interim financial statements.
  The adoption of SFAS No. 148 disclosure requirements, effective March 2,
  2003, did not have an effect on the Companys consolidated financial
  statements. At May 28, 2005, the Company had three stock-based compensation
  plans which are described more fully in Note P. The Company accounts for
  these plans under the recognition and measurement principles of APB Opinion
  No. 25, Accounting for Stock Issued to Employees and related
  interpretations. Accordingly, no compensation expense has been recognized
  under these plans concerning options granted to employees and to members of
  the Board of Directors, as all such options granted had an exercise price
  equal to or greater than the market value of the underlying common stock on
  the date of grant. Compensation expense of $453,000, $5,000 and $5,000 in
  2005, 2004 and 2003, respectively, was recognized under these and certain
  AngioDynamics plans for options granted to consultants and a former director
  serving as a consultant.-72-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The following table illustrates the effect on net
  earnings and earnings per share if the Company had applied the fair value
  recognition provisions of SFAS No. 123 to options granted under these plans
  to key employees and to members of the Board of Directors:2005
  
  2004
  
  2003(in thousands, except per share data)Net earnings, as reported
  
  $
  6,936
  
  $
  6,726
  
  $
  2,741Deduct: Total stock-based employee compensation expense
  determined under the fair value based method for all awards, net of income
  tax effects (see Note P)
  
  
  (2,808
  )
  
  (563
  )
  
  (596
  )Pro forma net earnings
  
  $
  4,128
  
  $
  6,163
  
  $
  2,145Earnings per common shareBasic - as reported
  
  $
  .64
  
  $
  .65
  
  $
  .27Basic - pro forma
  
  
  .38
  
  
  .60
  
  
  .21Diluted - as reported
  
  $
  .63
  
  $
  .63
  
  $
  .26Diluted - pro
  forma
  
  
  .38
  
  
  .58
  
  
  .21Earnings Per Common ShareBasic earnings per share are based on the weighted
  average number of common shares outstanding without consideration of
  potential common stock. Diluted earnings per share are based on the weighted
  average number of common and potential dilutive common shares outstanding.
  The calculation takes into account the shares that may be issued upon
  exercise of stock options, reduced by the shares that may be repurchased with
  the funds received from the exercise, based on the average price during the
  period.The following table sets forth the reconciliation of
  the weighted average number of common shares:2005
  
  2004
  
  2003(in
  thousands)Basic
  
  
  10,762
  
  
  10,344
  
  
  10,048Effect of dilutive securities (stock options)
  
  
  189
  
  
  281
  
  
  371Diluted
  
  
  10,951
  
  
  10,625
  
  
  10,419Excluded from the calculation of earnings per common
  share, are options to purchase 461,155 shares of common stock at May 31,
  2003, as their inclusion would be anti-dilutive. The ranges of exercise
  prices on the excluded options were $8.40 to $12.49 per share at May 31,
  2003.-73-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of EstimatesThe preparation of financial statements in
  conformity with accounting principles generally accepted in the United States
  of America requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities and disclosures of contingent
  assets and liabilities at year-end and the reported amounts of revenues and
  expenses during the reporting period. Actual results could differ from those
  estimates.Fair Value of Financial InstrumentsThe Company has estimated the fair value of
  financial instruments using available market information and other valuation
  methodologies in accordance with SFAS No. 107, Disclosures About Fair Value
  of Financial Instruments. Management of the Company believes that the fair
  value of financial instruments, consisting of cash and cash equivalents, accounts
  receivable and accounts payable, approximates carrying value due to the
  immediate or short-term maturity of these items. Management of the Company
  believes that the carrying value of notes payable and debt approximate their
  fair value based on rates available for debt with similar terms and maturities. Debt
  and equity securities are reported at their fair values.ReclassificationsCertain reclassifications have been made to the
  prior year amounts to conform to the 2005 presentation.Effects of Recently Issued
  Accounting PronouncementsIn March 2004, the Financial Accounting Standards
  Board (FASB) Emerging Issues Task Force (EITF) released Issue No. 03-1,
  The Meaning of Other-Than-Temporary Impairment and Its Application to
  Certain Investments. EITF 03-1 provides guidance for determining whether
  impairment for certain debt and equity investments is other-than-temporary
  and the measurement of an impaired loss. Certain disclosure requirements of
  EITF 03-1 were adopted in fiscal 2004 and the Company has complied with the
  new disclosure requirements in its consolidated financial statements. The
  recognition and measurement requirements of EITF 03-1 were initially
  effective for reporting periods beginning after June 15, 2004. In September
  2004, the FASB Staff issued FASB Staff Position (FSP) EITF 03-1-1 that
  delayed the effective date for certain measurement and recognition guidance
  contained in EITF 03-1. The FSP requires that entities continue to apply
  previously existing other-than-temporary guidance until a final consensus
  is reached. The Company does not anticipate that the issuance of a final
  consensus will materially impact its financial condition or results of
  operations.-74-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In November 2004, the FASB issued Statement of
  Financial Accounting Standards (SFAS) No. 151, Inventory Costs, an
  amendment of ARB No. 43, Chapter 4. The amendments made by SFAS No. 151 will
  improve financial reporting by clarifying that abnormal amounts of idle
  facility expense, freight, handling costs, and wasted materials (spoilage)
  should be recognized as current-period charges and by requiring the
  allocation of fixed production overheads to inventory based on the normal
  capacity of the production facilities. SFAS No. 151 is effective for
  inventory costs incurred during fiscal years beginning after June 15, 2005.
  Earlier application is permitted for inventory costs incurred during fiscal
  years beginning after November 24, 2004. The adoption of this statement is
  not expected to have a material impact on the Companys financial condition
  or results of operations.In December 2004, the FASB issued SFAS No. 123 (R),
  Share-Based Payment, which revises SFAS No. 123, Accounting for
  Stock-Based Compensation and supercedes APB Opinion No. 25, Accounting for
  Stock Issued to Employees. SFAS No. 123 (R) establishes standards for the
  accounting for transactions in which an entity exchanges its equity
  instruments for goods or services. This statement focuses primarily on
  accounting for transactions in which an entity obtains employee services in
  share-based payment transactions. SFAS No. 123 (R) requires that the fair
  value of such equity instruments be recognized as an expense in the
  historical financial statements as services are performed. Prior to SFAS No.
  123 (R), only certain pro forma disclosures of fair value were required. In
  April 2005, the Securities and Exchange Commission adopted a new rule that
  amended the compliance dates of SFAS No. 123 (R) to require the
  implementation no later than the beginning of the first annual reporting
  period beginning after June 15, 2005. The adoption of this statement may have
  a material impact on the Companys financial statements commencing with the
  fiscal quarter ending September 2, 2006.In December 2004, the FASB issued FASB Staff
  Position No. 109-1 (FSP 109-1), Application of SFAS No. 109, Accounting
  for Income Taxes, to the Tax Deduction on Qualified Production Activities
  Provided by the American Jobs Creation Act of 2004. It is effective
  immediately. FSP 109-1 states that the tax deduction of qualified domestic production
  activities, which is provided by the American Jobs Creation Act of 2004, will
  be treated as a special deduction as described in SFAS No. 109. Consequently,
  the impact of the deduction, which is effective January 1, 2005, will be
  reported in the period in which the deduction is claimed on the Companys
  income tax returns. To date, FSP 109-1 has not had a material effect on the
  Companys financial statements.-75-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE A  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

On May 27, 2004,
  AngioDynamics, the Companys former subsidiary, sold 1,950,000 shares of its
  common stock at $11.00 per share through an initial public offering (IPO). Proceeds
  from the IPO, net of certain financing costs, totaling $19,949,000 were
  received by AngioDynamics on June 2, 2004. At May 29, 2004, E-Z-EM owned
  9,200,000 shares, or 82.5% of the 11,150,000 shares outstanding. On June 15,
  2004, the underwriters of the IPO exercised their over-allotment option and
  acquired 292,500 shares at $11.00 per share, less underwriting discounts and
  commissions, and on June 18, 2004, AngioDynamics received net proceeds of
  $2,992,000. At June 15, 2004, E-Z-EMs ownership interest in AngioDynamics
  decreased to 80.4% (see Note O).On October 30, 2004, the Company completed the
  spin-off of AngioDynamics by means of a tax-free distribution of the
  Companys remaining 80.4% ownership of AngioDynamics. In February 2004, the
  Company received a favorable private letter ruling from the Internal Revenue
  Service regarding the tax-free treatment of the distribution of E-Z-EMs
  remaining ownership in AngioDynamics. The Company made a pro rata
  distribution of its 9,200,000 shares of AngioDynamics on October 30, 2004 to
  E-Z-EM shareholders of record as of October 11, 2004 (the Record Date).
  Based on the shares outstanding of each company on the Record Date, E-Z-EM
  shareholders received .856377 of a share of AngioDynamics stock for each
  share of E-Z-EM stock they owned on the Record Date. For all periods
  presented, AngioDynamics is accounted for as a discontinued operation in the
  Companys financial statements in accordance with 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.-76-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE B  DISCONTINUED
OPERATION (continued)

In 2004, E-Z-EM entered
  into three agreements with AngioDynamics  a master separation and distribution
  agreement, a corporate agreement and a tax allocation and indemnification
  agreement  that relate to its relationship with AngioDynamics both before
  and after the separation of AngioDynamics from the Company. All of the
  agreements between the Company and AngioDynamics were made in the context of
  a parent-subsidiary relationship and were negotiated in the overall context
  of the spin-off.The following table sets
  forth the carrying amounts of the major classes of assets and liabilities of
  AngioDynamics, which are classified as assets and liabilities of discontinued
  operation in the accompanying consolidated balance sheet at May 29, 2004
  (amounts in thousands):ASSETSCash and cash
  equivalents
  
  $
  1,848Debt and equity
  securities
  
  
  737Accounts
  receivable
  
  
  7,858Inventory
  
  
  8,544Stock
  subscription receivable
  
  
  19,949Other current
  assets
  
  
  1,354Current assets
  of discontinued operation
  
  $
  40,290Property, plant
  and equipment
  
  $
  7,343Other assets
  
  
  2,009Noncurrent
  assets of discontinued operation
  
  $
  9,352LIABILITIESCurrent
  maturities of long-term debt
  
  $
  156Accounts payable
  
  
  2,142Accrued
  liabilities
  
  
  3,344Accrued income
  taxes
  
  
  102Current
  liabilities of discontinued operation
  
  $
  5,744Long-term debt
  
  $
  3,100Minority
  interest
  
  
  6,511Noncurrent
  liabilities and minority interest of discontinued operation
  
  $
  9,611-77-

E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE B  DISCONTINUED
OPERATION (continued)

Summarized results of
  operations for AngioDynamics, including minority interest, as reported in
  earnings from discontinued operation in the accompanying consolidated
  statements of earnings are as follows:Fifty-twoweeks ended
  
  Fifty-twoweeks ended
  
  Fifty-twoweeks endedMay 28,
  2005
  
  May 29,
  2004
  
  May 31,
  2003(in thousands)Net salesFrom unaffiliated customers
  
  $
  22,342
  
  $
  48,162
  
  $
  37,475From affiliates
  
  
  420
  
  
  893
  
  
  959Total net sales
  
  $
  22,762
  
  $
  49,055
  
  $
  38,434Earnings before income taxes
  
  $
  2,628
  
  $
  4,381
  
  $
  2,302Income tax provision
  
  
  1,103
  
  
  1,238
  
  
  1,069Earnings before minority interest
  
  
  1,525
  
  
  3,143
  
  
  1,233Minority interest
  
  
  297
  
  
  15Earnings from discontinued operation
  
  $
  1,228
  
  $
  3,128
  
  $
  1,233For 2005, the results of
  operations for AngioDynamics represented twenty-two weeks activity.-78-

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE B  DISCONTINUED OPERATION (continued)



The
  following table represents summarized balance sheet information for AngioDynamics,
  including minority interest, as of the date of the spin-off, and is provided
  to assist in understanding the impact of the disposition on the consolidated
  balance sheet of the Company (amounts in thousands):ASSETSCash and
  cash equivalents
  
  $
  10,237Debt and
  equity securities
  
  
  11,408Accounts
  receivable
  
  
  7,202Inventory
  
  
  9,200Other
  current assets
  
  
  1,363Property,
  plant and equipment
  
  
  7,559Other assets
  
  
  1,954Total assets
  
  $
  48,923LIABILITIES
  AND STOCKHOLDERS EQUITYCurrent
  maturities of long-term debt
  
  $
  160Accounts
  payable
  
  
  1,947Accrued
  liabilities
  
  
  2,214Accrued
  income taxes
  
  
  44Long-term
  debt
  
  
  3,060Minority
  interest
  
  
  8,133Stockholders
  equity
  
  
  33,365Total
  liabilities and stockholders equity
  
  $
  48,923-79-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE C  COMPREHENSIVE INCOME



The
  components of comprehensive income, net of related tax, are as follows:2005
  
  2004
  
  2003(in thousands)Net earnings
  
  $
  6,936
  
  $
  6,726
  
  $
  2,741Unrealized holding gain (loss) on debt and
  equity securities:Arising during the year, net of income tax
  provision of $124, $539 and $213 in 2005, 2004 and 2003, respectively
  
  
  1,148
  
  
  3,543
  
  
  (63
  )Reclassification adjustment for gains
  included in net earnings, net of income tax provision of $754 in 2004
  
  
  (3,270
  )
  
  (1,868
  )Increase (decrease) in fair value on
  interest rate swap:Arising during the year, net of income tax
  provision (benefit) of ($32), $106 and ($176) in 2005, 2004 and 2003,
  respectively
  
  
  (55
  )
  
  182
  
  
  (300
  )Foreign currency translation adjustments:Arising during the year
  
  
  2,044
  
  
  235
  
  
  2,154Comprehensive income
  
  $
  6,803
  
  $
  8,818
  
  $
  4,532The
  components of accumulated other comprehensive income, net of related
  tax, are as follows:May 28,
  2005
  
  May 29,
  2004(in thousands)Unrealized holding gain on debt and equity
  securities, net of income tax liability of $181 and $57 at May 28, 2005 and
  May 29, 2004, respectively
  
  $
  308
  
  $
  2,430Fair value on interest rate swap
  
  
  
  
  
  (118
  )Cumulative translation adjustments
  
  
  1,354
  
  
  (690
  )Accumulated other comprehensive income
  
  $
  1,662
  
  $
  1,622-80-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE D  ASSET PURCHASE



On January
  16, 2005, the Company entered into an Asset Purchase Agreement (the
  Agreement) with ODell Engineering Ltd. and Philip ODell, the sole
  shareholder and officer of ODell Engineering.Under the
  Agreement, the Company agreed to purchase all of ODell Engineerings assets
  related to its reactive skin decontamination lotion (RSDL) business and
  technology. These assets include all licenses, intellectual property,
  customer orders, contracts and all other assets and properties relating to
  ODell Engineerings RSDL business and technology (collectively, the RSDL
  Assets).The purchase
  price for the RSDL Assets was (i) $5.0 million, of which $500,000 was paid
  upon signing the Agreement, $2.5 million was paid at closing on April 7,
  2005, and the balance of which is payable in three installments over the two
  years following the closing and (ii) royalty payments, not to exceed $8.0 million
  in total, on sales of RSDL products over the seven years following the
  closing. The net present value of guaranteed payments totaled $4,877,000 and,
  together with transaction costs of $94,000, were allocated, based on their
  relative fair values as license agreements of $4,577,000 and customer
  relationships of $394,000 and reported in intangible assets in the
  accompanying balance sheet. The net present value of guaranteed future
  obligations totaling $1,877,000 are included in accrued liabilities and other
  noncurrent liabilities in the accompanying balance sheet (Note L).The
  Agreement also provides that Philip ODell will provide consulting services
  to the Company over a three-year term, with diminishing time commitments in
  the second and third years, relating to commercialization of the RSDL
  technology. Under the consulting arrangement, Mr. ODell is entitled to
  royalty payments, calculated at 4% of net sales of patented products and 2%
  of net sales of unpatented products, for seven years based on inventions
  created or developed by him, or introduced to the Company by him, related to
  decontamination that are not part of the RSDL technology acquired by the
  Company. ODell Engineering and Mr. ODell also agreed not to compete with
  the Company in the sale of RSDL products or other decontamination products
  anywhere in the world for seven years following the closing of the
  acquisition.-81-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE D  PLANT CLOSINGS AND OPERATIONAL
RESTRUCTURINGS



In the
  fourth quarter of 2004, the Company completed the closing of its device
  manufacturing facility in San Lorenzo, Puerto Rico, as well as its
  heat-sealing operation in Westbury, New York, each of which was part of the
  E-Z-EM segment. The Company currently outsources these operations to a
  third-party manufacturer. This realignment was part of the Companys
  strategic plan of restructuring its operations to achieve greater efficiency.
  The Company began realizing the savings it had anticipated from this project
  during the first quarter of 2005. For 2004, project costs, primarily
  severance relating to 98 employees, aggregated $1,771,000. At May 29, 2004,
  the liability for the plant closing and operational restructuring, which is
  included in accrued liabilities, approximated $219,000. In May 2004, the
  Company sold the land and building encompassing its San Lorenzo facility for
  $1,250,000 and recognized a gain on the sale of $114,000.In the
  fourth quarter of 2005, the Company substantially completed its plan to
  further streamline its operations, specifically by moving its powder-based
  barium production in Westbury, N.Y. to its manufacturing facility in
  Montreal, Canada. The Company expects the project to begin to generate
  savings in 2006. For 2005, project costs aggregated $2,917,000, of which
  approximately $1,761,000 was severance relating to 69 employees with the
  balance relating primarily to training, relocation and regulatory costs. At
  May 28, 2005, the liability for this restructuring, which is included in
  accrued liabilities, approximated $598,000. The Company expects to complete
  the sale of the property encompassing its Westbury facility by September
  2005. No loss is expected on the sale of this property, which had a carrying
  value of $3,593,000 at May 28, 2005 and has been reported as assets held for
  disposal in the accompanying balance sheet.NOTE E  ASSET IMPAIRMENT CHARGES



In
  accordance with EITF 03-1, The Meaning of Other-Than-Temporary Impairment
  and Its Application to Certain Investments, the Company recorded an
  impairment charge in the fourth quarter of 2005, with no associated tax
  benefit, of $500,000, relating to its investment in 3CPM Company, Inc.
  (3CPM), as it was determined that the fair value of such investment was
  zero, with no future cash flows anticipated due to 3CPMs inability to
  generate income from operations or raise additional capital. 3CPM is a
  Delaware corporation, based in Towson, Maryland, that develops non-invasive
  GI diagnostic equipment. The Companys investment in 3CPM was accounted for
  at cost. For 2005, the impairment charge is included in the consolidated
  statement of earnings under the caption Other, net.-82-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE F  DEBT AND EQUITY SECURITIES



Debt and
  equity securities at May 28, 2005 consisted of the following:Amortized
  cost
  
  Fair
  value
  
  Unrealized
  holding
  gain(in thousands)CurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Municipal bonds with maturitiesDue after
  10 years and through 20 years
  
  $
  10,000
  
  $
  10,000Due after 20 years
  
  
  8,260
  
  
  8,260Other
  
  
  159
  
  
  159$
  18,419
  
  $
  18,419NoncurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Equity securities
  
  $
  257
  
  $
  746
  
  $
  489$
  257
  
  $
  746
  
  $
  489Debt and
  equity securities at May 29, 2004 consisted of the following:Amortized
  cost
  
  Fair
  value
  
  Unrealized
  holding
  gain(in thousands)CurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Municipal bonds with maturitiesDue in 1
  through 10 years
  
  $
  890
  
  $
  890Due after 10 years and through 20
years
  
  
  3,070
  
  
  3,070Due after 20 years
  
  
  7,450
  
  
  7,450Other
  
  
  720
  
  
  720$
  12,130
  
  $
  12,130NoncurrentAvailable-for-sale securities (carried on
  the balance sheet at fair value)Equity securities
  
  $
  620
  
  $
  3,107
  
  $
  2,487$
  620
  
  $
  3,107
  
  $
  2,487-83-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE F  
DEBT AND EQUITY SECURITIES (continued)

During 2005, the Company
  sold 400,000 shares of its investment in Cedara Software Corporation,
  resulting in a gain of $3,270,000, which is included in the consolidated
  statement of earnings under the caption Other, net.  During 2004, the Company sold
  351,396 shares of its investment in Cedara Software Corporation and 40,000
  shares of its investment in Vital Images, Inc., resulting in a gain of
  $2,622,000, which is included in the consolidated statement of earnings under
  the caption Other, net.NOTE G  
INVENTORIES

Inventories consist of the following:May 28,
  2005
  
  May 29,
  2004(in thousands)Finished goods
  
  $
  10,305
  
  $
  9,850Work in process
  
  
  573
  
  
  252Raw materials
  
  
  11,944
  
  
  8,799$
  22,822
  
  $
  18,901NOTE H  
PROPERTY, PLANT AND EQUIPMENT, AT COST

Property, plant and equipment are summarized as
  follows:Estimated
  usefullives
  
  May
  28,2005
  
  May
  29,2004(in
  thousands)Building and building
improvements
  
  
  10 to 35 years
  
  $
  6,532
  
  $
  5,853Machinery and equipment
  
  
  2 to 10 years
  
  
  30,893
  
  
  31,731Leasehold improvements
  
  
  Term of lease
  
  
  1,144
  
  
  1,00238,569
  
  
  38,586Less accumulated depreciation and
  amortization
  
  
  
  
  
  26,658
  
  
  28,19711,911
  
  
  10,389Land
  
  
  
  
  
  1,345
  
  
  1,280$
  13,256
  
  $
  11,669-84-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE I  
INCOME TAXES

Income tax expense analyzed by category and by
  income statement classification is summarized as follows:2005
  
  2004
  
  2003(in
  thousands)CurrentFederal
  
  $
  291
  
  $
  1,409
  
  $
  (372
  )State and
local
  
  
  55
  
  
  41
  
  
  32Foreign
  
  
  830
  
  
  1,068
  
  
  700Subtotal
  
  
  1,176
  
  
  2,518
  
  
  360Deferred
  
  
  (325
  )
  
  (574
  )
  
  68Total
  
  $
  851
  
  $
  1,944
  
  $
  428Temporary differences that give rise to deferred tax
  assets and liabilities are summarized as follows:May
  28,
  2005
  
  May
  29,
  2004(in
  thousands)Deferred tax assetsTax operating loss
carryforwards
  
  $
  1,455
  
  $
  1,455Capital loss
carryforward
  
  
  141Tax credit
carryforwards
  
  
  65
  
  
  88Alternative minimum
tax credit
  carryforward
  
  
  4
  
  
  4Impairment of
long-lived assets
  
  
  745
  
  
  1,885Expenses incurred
not currently
  deductible
  
  
  1,104
  
  
  1,033Deferred
compensation costs
  
  
  973
  
  
  932Inventories
  
  
  305
  
  
  419Losses of a U.S.
subsidiary not
  currently deductible
  
  
  
  
  
  554Write-down of
investments
  
  
  681
  
  
  496Other
  
  
  233
  
  
  198Gross deferred tax
asset
  
  
  5,706
  
  
  7,064Deferred tax liabilitiesExcess tax over
book depreciation
  
  
  896
  
  
  1,121Unrealized
investment gains
  
  
  181
  
  
  57Tax on unremitted
profits of Puerto
  Rican subsidiary
  
  
  
  
  
  6Other
  
  
  64
  
  
  43Gross deferred tax
liability
  
  
  1,141
  
  
  1,227Valuation allowance
  
  
  (2,924
  )
  
  (4,333
  )Net deferred tax
asset
  
  $
  1,641
  
  $
  1,504-85-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE I  INCOME TAXES (continued)

If not utilized, the tax operating loss
  carryforwards of $1,455,000 will expire in various amounts over the years
  2006 through 2020 and the tax credit carryforwards of $65,000 will expire in
  various amounts over the years 2008 through 2020.  The capital loss carryforwards of $141,000 do not expire.At May 28, 2005, undistributed earnings of certain
  foreign subsidiaries aggregated $26,229,000 that will not be subject to U.S.
  tax until distributed as dividends. 
  Any taxes paid to foreign governments on these earnings may be used,
  in whole or in part, as credits against the U.S. tax on any dividends
  distributed from such earnings.  On
  remittance, certain foreign countries impose withholding taxes that are then
  available for use as credits against a U.S. tax liability, if any, subject to
  certain limitations.  The amount of
  withholding tax that would be payable on remittance of the entire amount of
  undistributed earnings would approximate $1,216,000.Deferred tax assets and liabilities are included in
  the consolidated balance sheets as follows:May 28,
  2005
  
  May 29,
  2004(in thousands)Current - Other current assets
  
  $
  1,378
  
  $
  1,292Current - Accrued income taxes
  
  
  
  
  
  (6
  )Noncurrent - Other assets
  
  
  872
  
  
  841Noncurrent - Other noncurrent liabilities
  
  
  (609
  )
  
  (623
  )Net deferred tax asset
  
  $
  1,641
  
  $
  1,504-86-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE I  
INCOME TAXES (continued)

Earnings from continuing operations before income
  taxes for U.S. and international operations consist of the following:2005
  
  2004
  
  2003(in thousands)U.S.
  
  $
  549
  
  $
  2,356
  
  $
  (797
  )International
  
  
  6,010
  
  
  3,186
  
  
  2,733$
  6,559
  
  $
  5,542
  
  $
  1,936The Companys consolidated income tax provision has
  differed from the amount that would be provided by applying the U.S. Federal
  statutory income tax rate to the Companys earnings from continuing
  operations before income taxes for the following reasons:2005
  
  2004
  
  2003(in thousands)Income tax
  provision
  
  $
  851
  
  $
  1,944
  
  $
  428Effect of:State income
  taxes, net of Federal tax benefit
  
  
  (34
  )
  
  (28
  )
  
  (28
  )Research and
  development tax credit
  
  
  47
  
  
  112
  
  
  86Extraterritorial
  income exclusion
  
  
  
  
  
  
  
  
  11Tax-exempt
  portion of investment income
  
  
  95
  
  
  24
  
  
  52Change in
  valuation allowance
  
  
  1,447
  
  
  (247
  )
  
  (20
  )Utilization of
  net operating loss carryforwards previously not given benefit by foreign
  entities
  
  
  
  
  
  174
  
  
  259Losses of
  foreign entities generating no current tax benefit
  
  
  (62
  )
  
  (107
  )
  
  (149
  )Nontaxable
  income
  
  
  108
  
  
  293
  
  
  398Nondeductible
  expenses
  
  
  (309
  )
  
  (167
  )
  
  (421
  )Other
  
  
  87
  
  
  (114
  )
  
  42Income tax
  provision at statutory tax rate of 34%
  
  $
  2,230
  
  $
  1,884
  
  $
  658-87-


E-Z-EM, Inc. and
Subsidiaries

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE I  
INCOME TAXES (continued)

For 2005, the Companys effective tax rate of 13%
  differed from the Federal statutory tax rate of 34% due primarily to the
  reversal of valuation allowances relating to a previously impaired, non-core
  equity security sold in 2005 and utilized losses of our subsidiary in Puerto
  Rico, partially offset by non-deductible expenses, including stock option
  compensation costs of $377,000.  For
  2004, the Companys effective tax rate of 35% differed from the Federal
  statutory tax rate of 34% due primarily to not currently deductible losses
  incurred at the Companys subsidiary in Puerto Rico and non-deductible
  expenses, partially offset by non-taxable imputed interest on loans to
  AngioDynamics of $596,000 and the utilization of previously unrecorded net operating
  loss carryforwards in certain foreign jurisdictions.  The losses incurred at the Companys
  subsidiary in Puerto Rico resulted from the closing of this facility and the
  outsourcing of its operations.  For
  2003, the Companys effective tax rate of 22% differed from the Federal
  statutory tax rate of 34% due primarily to non-taxable imputed interest on
  loans to AngioDynamics of $892,000. 
  The effects of non-deductible expenses, resulting, in large part, from
  the Companys common stock recapitalization, offset the effects of utilizing
  previously unrecorded net operating loss carryforwards in certain foreign
  jurisdictions and research and development tax credits.The U.S. Federal income tax returns of the Company
  through May 31, 2001 are closed by Internal Revenue Code regulations.-88-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE J  NOTES PAYABLE

Notes payable consist of the following:May 28,
  2005
  
  May 29,
  2004(in thousands)Japanese bank 4.80% note (1)
  
  $
  255
  
  $
  440Other
  
  
  92$
  347
  
  $
  440(1)
  Guaranteed
  by the Company and collateralized by property and plant having a net carrying
  value of $802,000 at May 28, 2005.The
  Companys Canadian subsidiary has available $1,595,000 (Canadian $2,000,000)
  under a line of credit with a bank, which is collateralized by accounts
  receivable and inventory and expires on October 31, 2005.During 2005,
  2004 and 2003, the weighted average interest rates on short-term debt were
  4.80%, 4.80% and 4.68%, respectively.NOTE K  LONG-TERM DEBT

Long-term
  debt consists of the following:May 28,
  2005
  
  May 29,
  2004(in
  thousands)Japanese bank loan, due October 2007, with
  interest at 5.65% (1)
  
  $
  95
  
  $
  155Other
  
  
  89
  
  
  172184
  
  
  327Less current maturities
  
  
  99
  
  
  149$
  85
  
  $
  178(1)
  Guaranteed
  by the Company and collateralized by property and plant having a net carrying
  value of $802,000 at May 28, 2005.At May 28,
  2005, future minimum principal payments on long-term debt were as follows:(in
  thousands)2006
  
  $
  992007
  
  
  712008
  
  
  14$
  184-89-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE L  ACCRUED LIABILITIES AND OTHER
NONCURRENT LIABILITIES

Accrued liabilities consist of the following:May 28,
  2005
  
  May 29,
  2004(in
  thousands)Payroll and
  related expenses
  
  $
  6,110
  
  $
  4,877Liability
  for assets acquired (Note D)
  
  
  1,258Other
  
  
  2,548
  
  
  1,680$
  9,916
  
  $
  6,557Other
  noncurrent liabilities consist of the following:May 28,
  2005
  
  May 29,
  2004(in
  thousands)Deferred
  compensation
  
  $
  2,629
  
  $
  2,520Liability
  for assets acquired (Note D)
  
  
  634Deferred
  taxes
  
  
  609
  
  
  623Other
  
  
  333
  
  
  345$
  4,205
  
  $
  3,488NOTE M  RETIREMENT PLANS

E-Z-EM
  provides pension benefits through a Profit-Sharing Plan, under which E-Z-EM
  makes discretionary contributions to eligible employees, and a companion
  401(k) Plan, under which eligible employees can defer a portion of their
  annual compensation, part of which is matched by E-Z-EM. This plan covers all
  E-Z-EM employees not otherwise covered by collective bargaining agreements.
  In 2005, 2004 and 2003, profit-sharing contributions were $466,000, $485,000
  and $494,000, respectively, and 401(k) matching contributions were $294,000,
  $293,000 and $291,000, respectively. E-Z-EM also contributed $29,000, $40,000
  and $43,000 in 2005, 2004 and 2003, respectively, to a multiemployer pension
  plan for employees covered by a collective bargaining agreement. This plan is
  not administered by E-Z-EM and contributions are determined in accordance
  with provisions of negotiated labor contracts.E-Z-EM
  Canada Inc., a wholly owned subsidiary of the Company, also provides pension
  benefits to eligible employees through two Defined Contribution Plans. In
  2005, 2004 and 2003, contributions were $180,000, $150,000 and $115,000,
  respectively.-90-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE N  COMMITMENTS AND CONTINGENCIES

Operating LeasesThe Company
  is committed under non-cancelable operating leases for facilities,
  automobiles and equipment. During 2005, 2004 and 2003, aggregate rental costs
  under all operating leases were approximately $1,766,000, $1,658,000 and
  $1,611,000, respectively, of which approximately $0, $28,000 and $170,000,
  respectively, were paid to related parties. Future annual operating lease
  payments in the aggregate, which include escalation clauses and real estate
  taxes, with initial remaining terms of more than one year at May 28, 2005,
  are summarized as follows:Total
  leases(in
  thousands)2006
  
  $
  1,7072007
  
  
  1,7042008
  
  
  1,6092009
  
  
  1,6172010
  
  
  1,650Thereafter
  
  
  318$
  8,605Purchase CommitmentsPurchase
  commitments for open purchase orders at May 28, 2005 for which goods and
  services had not been received were approximately $1,600,000.Employment ContractThe Company
  has an employment contract with its president and chief executive officer
  that is cancelable at any time, but provides for severance pay of two years
  base salary in the event such executive is terminated by the Company without
  cause, as defined in the contract. Unless cancelled earlier, the contract
  will terminate on May 31, 2007. Aggregate minimum compensation commitments
  under this contract at May 28, 2005, and relating to fiscal 2006, are
  $680,000.Other MattersThe Company
  has been notified by a competitor that it believes specific claims contained
  in issued United States patents owned by this competitor may be relevant to
  certain features of the Companys Empower CT injector. Management is
  currently in discussions with this competitor about acquiring rights to these
  patents and expects to resolve this matter in the near future. As a result,
  the Company recorded an estimated liability in this matter of $350,000, at
  May 28, 2005, that the Company believes will relieve it of all claims relating to prior sales and is
  included in accrued liabilities in the accompanying balance sheet.-91-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE N  COMMITMENTS AND CONTINGENCIES
(continued)

Litigation MattersThe Company
  was named as a co-defendant in an action entitled Jeffrey Madison d/b/a
  Maqguide.comvs. Avail Medical Products, Inc. et al., Case No. 05CC03584
  filed in Superior Court for the State of California, Orange County, on
  February 28, 2005. The complaint alleges that in March 2003, the Company
  sought a contract manufacturer to manufacture and supply certain medical
  products and the Company, acting through its agent, Sopheon Corporation,
  solicited Maqguide to assist in this process. Acting on this information,
  Maqguide contacted Avail Medical Products, Inc., or Avail, about this
  opportunity and helped negotiate a final agreement between the Company and
  Avail. The complaint alleges that Maqguide had an agreement with Avail that
  required Avail to pay a commission to Maqguide upon the execution of the
  agreement with the Company. The complaint alleges 18 causes of action against
  all of the defendants, including breach of contract, breach of the covenant
  of good faith, quantum meruit, fraud and deceit, promissory estoppel,
  conspiracy and conversion. The complaint seeks compensatory, punitive and
  other monetary damages in an unspecified amount in excess of $25,000. The
  Company has tendered the case to Avails counsel. The Company will defend
  this matter and believes that the allegations against it are without merit
  and intends to vigorously defend this action.AngioDynamics
  and E-Z-EM were named as co-defendants in an action entitled Duhon,
  et. al vs. Brezoria Kidney Center, Inc. et. al, case no. 27084 filed
  in the District Court of Brezoria County, Texas, 239th Judicial
  District on December 29, 2003. The complaint alleged that AngioDynamics and
  its co-defendants, E-Z-EM and Medical Components, Inc. or Medcomp, designed,
  manufactured, sold, distributed and marketed a defective catheter that was
  used in the treatment of, and caused the death of, a hemodialysis patient, as
  well as committed other negligent acts. The complaint sought compensatory and
  other monetary damages in unspecified amounts. Under AngioDynamics
  distribution agreement with Medcomp, Medcomp was required to indemnify
  AngioDynamics against all its costs and expenses, as well as losses, liabilities
  and expenses (including reasonable attorneys fees) that relate in any way to
  products covered by the agreement, and Medcomp has accepted the defense of
  the action. The Company has been advised by counsel that the matter was
  settled on June 30, 2005 and that the action will be dismissed with
  prejudice. The Company believes that Medcomp has a sufficient amount of
  insurance coverage and funds available to fully cover the settlement of this
  action and, based upon its agreement with Medcomp, the Company does not
  expect that either itself or AngioDynamics will be required to contribute to
  the settlement of this matter.In
  accordance with the Master Separation and Distribution Agreement between
  AngioDynamics and E-Z-EM, AngioDynamics has agreed to indemnify E-Z-EM from
  any claims that arise out of the business operations of AngioDynamics prior
  to its spin-off (October 30, 2004) in which E-Z-EM is a named defendant
  solely because E-Z-EM was the sole stockholder of AngioDynamics.-92-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE N  COMMITMENTS AND CONTINGENCIES
(continued)

The Company
  is party to other claims, legal actions and complaints that arise in the ordinary
  course of business. We believe 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 our financial position or
  results of operations.Concentration of Credit RiskThe
  Companys exposure to credit risk is dependent, to a certain extent, on the
  healthcare industry. The Company performs ongoing credit evaluations of its
  customers and does not generally require collateral; however, in certain
  circumstances, the Company may require letters of credit from its customers.In 2005,
  2004 and 2003, sales of products to SourceOne Healthcare Technologies, Inc.
  (SourceOne) represented 30%, 30% and 32% of total sales, respectively. In
  November 2002, Platinum Equities, LLC completed the acquisitions of
  Diagnostic Imaging Inc. and the Health Care Products division of Phillips
  Medical Systems, Inc. (HCP) and merged these companies into a newly formed
  subsidiary, SourceOne. Approximately 31% and 33% of accounts receivable
  pertained to SourceOne at May 28, 2005 and May 29, 2004, respectively. While
  the accounts receivable related to this distributor are significant, the
  Company does not believe the credit loss risk to be significant given the consistent
  payment history and credit worthiness of this distributor.In 2005,
  purchases of finished products from Coeur, Inc. and Avail Medical Products, Inc.
  represented 13% and 11%, respectively, of total purchases.NOTE O  COMMON STOCK

AngioDynamics Initial Public OfferingOn May 27,
  2004, AngioDynamics, the Companys former subsidiary, sold 1,950,000 shares
  of its common stock at $11.00 per share through an initial public offering
  (IPO). Proceeds from the IPO, net of certain financing costs, totaling
  $19,949,000 were received by AngioDynamics on June 2, 2004. At May 29, 2004,
  the Company owned 9,200,000 shares, or 82.5% of the 11,150,000 shares
  outstanding. At May 29, 2004, the Company recorded a credit to common stock
  and additional paid-in capital of $12,174,000 which is net of financing costs
  of $1,279,000 and minority interest of $6,496,000. On June 15, 2004, the
  underwriters of the IPO exercised their over-allotment option and acquired
  292,500 shares at $11.00 per share, less underwriting discounts and
  commissions, and on June 18, 2004, AngioDynamics received net proceeds of
  $2,992,000. At June 15, 2004, the Companys ownership interest in
  AngioDynamics decreased to 80.4%. From May 30, 2004 through the separation
  date, the Company recorded a credit to common stock and additional paid-in
  capital of $1,442,000 which is net of financing costs of $225,000 and
  minority interest of $1,325,000.-93-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE O  COMMON STOCK (continued)

AngioDynamics Spin-offOn October
  30, 2004, the Company completed the spin-off of AngioDynamics by means of a
  tax-free distribution of the Companys remaining 80.4% ownership of
  AngioDynamics. In February 2004, the Company received a favorable private
  letter ruling from the Internal Revenue Service regarding the tax-free
  treatment of the distribution of E-Z-EMs remaining ownership in
  AngioDynamics. The Company made a pro rata distribution of its 9,200,000
  shares of AngioDynamics on October 30, 2004 to E-Z-EM shareholders of record
  as of October 11, 2004 (the Record Date). Based on the shares outstanding
  of each company on the Record Date, E-Z-EM shareholders received .856377 of a
  share of AngioDynamics stock for each share of E-Z-EM stock they owned on the
  Record Date.Stock Repurchase ProgramIn July
  2002, the Company concluded a program to repurchase 500,000 shares of its
  then Class A and Class B common stock. In aggregate, the Company repurchased
  53,706 shares of Class A common stock and 446,294 shares of Class B common
  stock for approximately $3,548,000, of which 847 shares of Class A common
  stock and 15,505 shares of Class B common stock were repurchased for approximately
  $139,000 during the first quarter of fiscal 2003. Effective August 15, 2002,
  the Company retired all treasury shares. 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 2005,
  no shares were repurchased under this program. In aggregate, the Company has
  repurchased 74,234 shares of common stock for approximately $716,000 under
  this program.Cash DividendsIn June 2003,
  the Companys Board of Directors declared a cash dividend of $.25 per
  outstanding share of the Companys common stock. The dividend was distributed
  on August 1, 2003 to shareholders of record as of July 15, 2003. In June
  2004, the Companys Board of Directors declared a cash dividend of $.30 per
  outstanding share of the Companys common stock. The dividend was distributed
  on July 1, 2004 to shareholders of record as of June 15, 2004. Future
  dividends are subject to Board of Directors review of operations and
  financial and other conditions then prevailing.-94-


E-Z-EM, Inc. and
Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE O 
COMMON STOCK (continued)

RecapitalizationOn October 22, 2002, the Company completed the
  previously announced plan to combine its two former classes of common stock
  (Class A and Class B) into a single, newly created class of common stock. The
  transaction was effected by merging a newly formed subsidiary into E-Z-EM,
  with E-Z-EM continuing as the surviving corporation in the merger. As a
  result of this merger: each outstanding Class A share and each outstanding
  Class B share was converted into one share of a newly created class of common
  stock of the Company; the super-majority voting requirements contained in the
  Companys certificate of incorporation, relating to the former Class A
  shares, were eliminated and are not applicable to the Companys new class of
  common stock; each holder of common stock now has one vote per share; and all
  matters brought before the stockholders of the Company, other than the
  removal of directors, are now determined by a majority vote.NOTE P  STOCK COMPENSATION PLANS

2004 Stock and Incentive Award PlanIn October 2004, the Company adopted the 2004 Stock
  and Incentive Award Plan (the 2004 Plan). The 2004 Plan provides for the
  grant of incentive stock options to employees and for the grant of
  nonstatutory stock options, restricted stock, stock appreciation rights,
  performance units, performance shares and incentive awards to employees,
  directors and other service providers. A total of 1,008,425 shares of the
  Companys common stock have been reserved for issuance under the 2004 Plan,
  including 576,346 shares and 82,079 shares reallocated from the 1983 Stock
  Option Plan and 1984 Directors and Consultants Stock Option Plan,
  respectively. A committee of the board administers the 2004 Plan. The
  committee determines the vesting terms and exercise price of options granted
  under the 2004 Plan, but for all incentive stock options the exercise price
  must at least be equal to the fair market value of the Companys common stock
  on the date of grant. The term of an incentive stock option may not exceed
  ten years, and up to 800,000 shares of the Companys common stock may be
  issued upon exercise of incentive stock options. No awards may be granted
  under the 2004 Plan after October 26, 2014.1983 Stock Option PlanIn 1983, the Company adopted the 1983 Stock Option
  Plan (the 1983 Plan). The 1983 Plan provides for the grant to key employees
  of both nonqualified stock options and incentive stock options. A total of
  2,617,974 shares of the Companys common stock may be issued under the 1983
  Plan pursuant to the exercise of options. All stock options must have an
  exercise price of not less than the market value of the shares on the date of
  grant. Options will be exercisable over a period of time to be designated by
  the administrators of the 1983 Plan (but not more than 10 years from the date
  of grant) and will be subject to such other terms and conditions as the
  administrators may determine. No further options will be issued under the
  1983 Plan. The 1983 Plan terminates in December 2005.-95-


E-Z-EM, Inc. and
Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE P  STOCK COMPENSATION PLANS (continued)

1984 Stock Option PlanIn 1984, the Company adopted the 1984 Directors and
  Consultants Stock Option Plan (the 1984 Plan). The 1984 Plan provides for
  the grant to members of the Board of Directors and consultants of
  nonqualified stock options. A total of 459,490 shares of the Companys common
  stock may be issued under the 1984 Plan pursuant to the exercise of options.
  All stock options must have an exercise price of not less than the market
  value of the shares on the date of grant. Options will be exercisable over a
  period of time to be designated by the administrators of the 1984 Plan (but
  not more than 10 years from the date of grant) and will be subject to such
  other terms and conditions as the administrators may determine. No further
  options will be issued under the 1984 Plan. The 1984 Plan terminates in
  December 2005.In connection with the completion of the
  AngioDynamics spin-off, as of October 30, 2004, all outstanding stock options
  (E-Z-EM Pre-spin Options) were adjusted for E-Z-EM options (the E-Z-EM
  Post-spin Options) and AngioDynamics options (the AngioDynamics Post-spin
  Options), collectively referred to as (the Replacement Options).The exercise price and the number of shares subject
  to each of the Replacement Options was established pursuant to a formula
  designed to ensure that: (1) the aggregate intrinsic value (i.e., the
  difference between the exercise price of the option and the market price of
  the common stock underlying the option) of the Replacement Option did not
  exceed the aggregate intrinsic value of the outstanding E-Z-EM Pre-spin
  Option that was replaced by such Replacement Option immediately prior to the
  spin-off and (2) the ratio of the exercise price of each option to the market
  value of the underlying stock immediately before and after the spin-off was
  preserved.Substantially all of the other terms and conditions
  of each Replacement Option, including the time or times when, and the manner
  in which, each option is exercisable, the duration of the exercise period,
  the permitted method of exercise, settlement and payment, the rules that
  apply in the event of the termination of employment of the employee, is the
  same as those of the replaced E-Z-EM Pre-spin Option, except that (1) in some
  cases, the exercise period of the AngioDynamics Post-spin Options are shorter
  than the exercise period of the E-Z-EM Pre-spin Options and (2) option
  holders who are employed by one company are permitted to exercise options to
  acquire shares in the other company as if such holder was an employee of such
  other company.-96-


E-Z-EM, Inc. and
Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE P  STOCK COMPENSATION PLANS (continued)

A summary of the status of the Companys stock
  option plans as of May 28, 2005, May 29, 2004 and May 31, 2003, and changes
  for the three years then ended, is presented below:2005
  
  2004
  
  2003Weighted-
  
  
  
  Weighted-
  
  
  
  Weighted-average
  
  
  
  average
  
  
  
  averageShares
  
  exercise
  
  Shares
  
  exercise
  
  Shares
  
  exercise(000)
  
  price
  
  (000)
  
  price
  
  (000)
  
  price1983 PlanOutstanding at beginning of
year
  
  
  446
  
  $
  7.49
  
  
  1,018
  
  $
  6.13
  
  
  1,180
  
  $
  5.99Exercised
  
  
  (52
  )
  $
  3.66
  
  
  (570
  )
  $
  5.08
  
  
  (113
  )
  $
  4.97Forfeited
  
  
  
  
  
  
  
  
  (2
  )
  $
  5.63
  
  
  (25
  )
  $
  5.13Expired
  
  
  (21
  )
  $
  4.22
  
  
  
  
  
  
  
  
  (24
  )
  $
  5.39Spin-off
adjustment
  
  
  (35
  )Outstanding at end of
year
  
  
  338
  
  $
  5.23
  
  
  446
  
  $
  7.49
  
  
  1,018
  
  $
  6.13Options exercisable at
year-end
  
  
  326
  
  $
  5.25
  
  
  418
  
  $
  7.48
  
  
  901
  
  $
  5.87Weighted-average fair value
of
  options granted during the year
  
  
  
  
  
  None
  
  
  
  
  
  None
  
  
  
  
  
  None1984 PlanOutstanding at beginning of
year
  
  
  148
  
  $
  6.76
  
  
  202
  
  $
  6.05
  
  
  242
  
  $
  5.65Granted
  
  
  20
  
  $
  16.02
  
  
  8
  
  $
  18.70
  
  
  9
  
  $
  8.40Exercised
  
  
  (75
  )
  $
  3.90
  
  
  (62
  )
  $
  5.98
  
  
  (46
  )
  $
  4.18Forfeited
  
  
  (1
  )
  $
  12.04
  
  
  
  
  
  
  
  
  (3
  )
  $
  9.66Expired
  
  
  (6
  )
  $
  4.22Spin-off
adjustment
  
  
  (12
  )Outstanding at end of
year
  
  
  74
  
  $
  6.77
  
  
  148
  
  $
  6.76
  
  
  202
  
  $
  6.05Options exercisable at
year-end
  
  
  68
  
  $
  6.27
  
  
  131
  
  $
  5.92
  
  
  186
  
  $
  5.82Weighted-average fair value
of
  options granted during the year
  
  
  
  
  $
  7.68
  
  
  
  
  $
  9.08
  
  
  
  
  $
  4.35-97-


E-Z-EM, Inc. and
Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (continued)

May 28, 2005, May
29, 2004, May 31, 2003

NOTE P  STOCK COMPENSATION PLANS (continued)



2005
  
  2004
  
  2003Weighted-
  
  
  
  Weighted-
  
  
  
  Weighted-average
  
  
  
  average
  
  
  
  averageShares
  
  exercise
  
  Shares
  
  exercise
  
  Shares
  
  exercise(000)
  
  price
  
  (000)
  
  price
  
  (000)
  
  price2004 PlanGranted
  
  
  548
  
  $
  13.94Outstanding at end of
year
  
  
  548
  
  $
  13.94Options exercisable at
year-end
  
  
  513
  
  $
  13.89Weighted-average fair value
of
  options granted during the year
  
  
  
  
  $
  6.55The following information applies to options
  outstanding and exercisable at May 28, 2005:Outstanding
  
  ExercisableWeighted-Number
  
  average
  
  Weighted-
  
  Number
  
  Weighted-out-
  
  remaining
  
  average
  
  exer-
  
  averageRange of
  
  standing
  
  life in
  
  exercise
  
  cisable
  
  exerciseexercise
  prices
  
  (000)
  
  years
  
  price
  
  (000)
  
  price1983 Plan$3.17 to $3.64
  
  
  54
  
  
  4.89
  
  $
  3.47
  
  
  49
  
  $
  3.50$5.50 to $6.56
  
  
  284
  
  
  4.91
  
  $
  5.57
  
  
  277
  
  $
  5.56338
  
  
  
  
  
  
  
  
  3261984 Plan$3.23 to $3.80
  
  
  19
  
  
  1.95
  
  $
  3.52
  
  
  19
  
  $
  3.52$4.20 to $5.82
  
  
  28
  
  
  4.29
  
  $
  5.37
  
  
  28
  
  $
  5.37$8.08 to $12.10
  
  
  27
  
  
  8.57
  
  $
  10.61
  
  
  21
  
  $
  10.1474
  
  
  
  
  
  
  
  
  682004 Plan$12.66 to $14.68
  
  
  548
  
  
  9.55
  
  $
  13.94
  
  
  513
  
  $
  13.89548
  
  
  
  
  
  
  
  
  513At May 28, 2005, there were no shares available for
  granting of options under the 1983 and 1984 Plans and 460,925 shares
  available for granting of options under the 2004 Plan.-98-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE P  STOCK COMPENSATION PLANS (continued)

The fair
  value of these options was estimated at the date of grant using the Black-Scholes
  option-pricing model assuming no expected dividends and the following
  weighted-average assumptions for all plans:2005
  
  2004
  
  2003Expected
  stock price volatility
  
  
  49.48
  %
  
  50.98
  %
  
  50.74
  %Risk-free
  interest rate
  
  
  3.53
  %
  
  3.90
  %
  
  2.37
  %Expected
  life of options
  
  
  5 years
  
  
  5 years
  
  
  5 yearsOn January
  17, 2005, the Companys Board of Directors accelerated the vesting of the
  outstanding unvested stock options awarded to the officers, directors and
  employees under the 2004 Plan, all of which had an exercise price greater
  than the price of the common stock on January 14, 2005.  As a result of the acceleration, options
  to acquire 372,000 shares of common stock (representing approximately 38.6%
  of the total outstanding options under all of the Companys compensation
  plans), which otherwise would have vested from time to time in one-third
  increments in 2005, 2006 and 2007, became immediately exercisable.  The boards decision to accelerate the
  vesting of these options was in response to the issuance by the FASB of SFAS
  No. 123 (R), Share-Based Payment. 
  By accelerating the vesting of these options, the Company avoided
  recognizing any compensation expense in future periods associated with these
  options.  The pro forma charge
  relating to the accelerated options was $2,260,000 for 2005.Effective
  October 26, 2004, the Company extended the exercise period of expiring stock
  options of a former director who currently provides the Company with consulting
  services.  The Company recorded
  compensation charges of $427,000 during 2005 in connection with this
  extension.In 1985, the
  Company adopted an Employee Stock Purchase Plan (the Employee Plan).  The Employee Plan provides for the
  purchase by employees of the Companys common stock at a discounted price of
  85% of the market value of the shares on the date of purchase.  A total of 150,000 shares of the Companys
  common stock may be purchased under the Employee Plan.  The Board of Directors in its discretion
  may terminate the Employee Plan at any time. 
  Unless sooner terminated, the Employee Plan shall terminate at the
  time that all of the shares of common stock available for offer under the
  plan have been sold under the plan. 
  During 2005, employees purchased 767 shares, at prices ranging from
  $12.21 to $15.76 per share.  Total
  proceeds received by the Company approximated $10,000.-99-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE Q  RELATED PARTIES

The Company
  has split dollar life insurance arrangements with Howard S. Stern (including
  his spouse), a director and former Chairman of the Board, and Betty K.
  Meyers, which were entered into on May 27, 1998 and May 25, 1998,
  respectively.  Betty Meyers is a
  shareholder of the Company and the widow of Phillip H. Meyers, a co-founder
  of the Company.  The Betty Meyers
  policy is owned by the Betty Meyers Life Insurance Trust, the beneficiaries
  of which include David P. Meyers, a director and a principal shareholder of
  the Company.  Annually, through fiscal
  2002, the Company paid approximately $100,000 toward the cost of each life
  insurance policy.  Because of the
  uncertainty of the treatment of split dollar life insurance policies under
  the Sarbanes-Oxley Act of 2002, beginning in fiscal year 2003, the Company
  stopped making payments toward the cost of such policies and does not
  anticipate making any payments in the future.The
  aggregate amount of premiums paid by the Company for each policy is $500,000,
  the proceeds of which, under collateral assignment agreements, will be first
  used to repay all payments made by the Company for that policy.  Additionally, beneficiaries of each policy
  may not borrow against the amount paid by the Company.  Both Howard Stern (including his spouse)
  and Betty Meyers have agreed to repay to the Company any shortfall between
  the cash surrender value of his or her policy and the aggregate amount of
  premiums paid by the Company.At May 28,
  2005 and May 29, 2004, the cash surrender value of such policies aggregated
  $1,558,000 and $1,331,000, respectively. 
  At May 28, 2005 and May 29, 2004, advances of $1,000,000 are recorded
  in the consolidated balance sheets under the caption Other assets.Effective
  January 1, 2002, the Company entered into an agreement with Howard Stern,
  under which Mr. Stern agreed to provide certain services to the Company
  through December 31, 2004.  The
  Company agreed to include Mr. Stern in its slate of directors for the 2002
  annual meeting and to appoint Mr. Stern as Chairman of the Board for a
  one-year term beginning at that annual meeting.  So long as Mr. Stern remained Chairman of the Company, he was
  entitled to receive twice the regular fees and other compensation (including
  cash, stock and options) paid to directors for service on the board.  Under the terms of the agreement, Mr.
  Stern received 36 equal monthly payments of $20,833.  Mr. Stern also received other benefits and
  perquisites and, so long as he remained Chairman, an annual sum of up to
  $80,000 for reimbursement of reasonable business expenses.  This agreement expired on December 31,
  2004 and was not renewed.Two former
  directors provided consulting services to the Company and to the Companys
  benefit plans during 2005, 2004 and 2003. 
  Fees for such services were approximately $290,000, $267,000 and
  $161,000 during 2005, 2004 and 2003, respectively.-100-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE R  OPERATING SEGMENT AND GEOGRAPHIC
AREA OPERATIONS

The Company
  currently operates in one reportable segment: the E-Z-EM segment.  Prior to October 30, 2004, the Company
  operated in two reportable segments: the E-Z-EM segment and the AngioDynamics
  segment, through its majority-owned subsidiary, AngioDynamics, Inc.  Effective as of October 30, 2004, E-Z-EM
  spun off AngioDynamics by distributing to E-Z-EMs shareholders 9,200,000
  shares of AngioDynamics common stock then held by E-Z-EM.  As discussed in Note B. Discontinued
  Operation, the AngioDynamics segment is being reported as a discontinued
  operation and the E-Z-EM segment is being reported as the Companys
  continuing operations.In the E-Z-EM
  segment, the Company develops, manufactures and markets medical products used
  by radiologists, gastroenterologists and speech language pathologists
  primarily in screening for and diagnosing diseases and disorders of the GI
  tract.  Products in this segment are
  used for colorectal cancer screening, evaluation of swallowing disorders
  (dysphagia), and testing for other diseases and disorders of the GI
  system.  The Company is also a
  third-party contract manufacturer, which enables the Company to leverage its
  quality control, process, automation and manufacturing capabilities.  The entire business is focused in the
  following general areas: CT imaging, X-ray fluoroscopy, contract
  manufacturing, accessory medical devices, gastroenterology, virtual
  colonoscopy and defense decontaminants. 
  The Companys primary business activity is conducted with radiologists
  and hospitals throughout the U.S. and with distributors outside of the U.S.Geographic AreasThe
  following geographic area data includes net sales generated by and long-lived
  assets employed in operations located in each area:2005
  
  2004
  
  2003(in
  thousands)Net salesU.S. operations
  
  $
  90,901
  
  $
  81,332
  
  $
  76,972International operations:Canada
  
  
  37,253
  
  
  31,500
  
  
  28,968Other
  
  
  12,008
  
  
  10,044
  
  
  9,741Eliminations
  
  
  (27,087
  )
  
  (22,267
  )
  
  (19,998
  )Total net
  sales
  
  $
  113,075
  
  $
  100,609
  
  $
  95,683Long-lived
  assetsU.S. operations
  
  $
  7,764
  
  $
  7,242
  
  $
  9,164International operations:Canada
  
  
  9,752
  
  
  7,689
  
  
  7,645Other
  
  
  1,067
  
  
  1,039
  
  
  1,075Total
  long-lived assets
  
  $
  18,583
  
  $
  15,970
  
  $
  17,884-101-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE R  OPERATING SEGMENT AND GEOGRAPHIC
AREA OPERATIONS (continued)

Net Sales by Major Product LinesThe following
  table sets forth net sales to external customers by major product lines:2005
  
  2004
  
  2003(in
  thousands)CT Imaging
  
  $
  45,666
  
  $
  34,398
  
  $
  29,932X-Ray
  Fluoroscopy
  
  
  40,649
  
  
  40,810
  
  
  40,639Contract
  Manufacturing
  
  
  9,183
  
  
  8,054
  
  
  8,571Accessory
  Medical Devices
  
  
  5,328
  
  
  5,351
  
  
  5,392Gastroenterology
  
  
  4,627
  
  
  4,246
  
  
  3,877Virtual
  Colonoscopy
  
  
  3,654
  
  
  3,698
  
  
  2,610Defense
  Decontaminants
  
  
  956
  
  
  1,164
  
  
  1,410Other
  
  
  3,012
  
  
  2,888
  
  
  3,252$
  113,075
  
  $
  100,609
  
  $
  95,683NOTE S  QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)

Quarterly
  results of operations for 2005 and 2004 were as follows:2005First
  quarter
  
  Second
  quarter
  
  Third
  quarter
  
  Fourth
  quarter(in
  thousands, except per share data)Net sales (1)
  
  $
  24,012
  
  $
  26,222
  
  $
  30,833
  
  $
  32,008Gross profit (1)
  
  
  10,016
  
  
  11,862
  
  
  12,727
  
  
  13,431Earnings from continuing operations
  
  
  631
  
  
  823
  
  
  2,918
  
  
  1,336Earnings from discontinued operation
  
  
  620
  
  
  608Net earnings
  
  
  1,251
  
  
  1,431
  
  
  2,918
  
  
  1,336Basic earnings per common shareFrom continuing operations
  
  
  .06
  
  
  .08
  
  
  .27
  
  
  .12From discontinued operation, net of income
  tax provision
  
  
  .06
  
  
  .05Net earnings
  
  
  .12
  
  
  .13
  
  
  .27
  
  
  .12Diluted earnings per common share (2)From continuing operations
  
  
  .06
  
  
  .08
  
  
  .27
  
  
  .12From discontinued operation, net of income
  tax provision
  
  
  .05
  
  
  .05Net earnings
  
  
  .11
  
  
  .13
  
  
  .27
  
  
  .12(1)
  Reclassified
  to reflect the discontinued operation described in Note B.(2)
  The sum of
  the quarters does not equal the fiscal year due to rounding and changes in
  the calculation of weighted average shares.-102-


E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

May 28, 2005, May 29, 2004, May 31, 2003

NOTE S  QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)

2004First
  quarter
  
  Second
  quarter
  
  Third
  quarter
  
  Fourth
  quarter(in
  thousands, except per share data)Net sales (1)
  
  $
  22,642
  
  $
  25,287
  
  $
  24,950
  
  $
  27,730Gross profit (1)
  
  
  8,406
  
  
  10,475
  
  
  9,743
  
  
  11,433Earnings (loss) from continuing operations
  
  
  (634
  )
  
  1,181
  
  
  548
  
  
  2,503Earnings from discontinued operation
  
  
  335
  
  
  588
  
  
  681
  
  
  1,524Net earnings (loss)
  
  
  (299
  )
  
  1,769
  
  
  1,229
  
  
  4,027Basic earnings (loss) per common share (2)From continuing operations
  
  
  (.06
  )
  
  .11
  
  
  .05
  
  
  .24From discontinued operation, net of income
  tax provision
  
  
  .03
  
  
  .06
  
  
  .07
  
  
  .14Net earnings
  
  
  (.03
  )
  
  .17
  
  
  .12
  
  
  .38Diluted earnings per common share (2)From continuing operations
  
  
  (.06
  )
  
  .11
  
  
  .05
  
  
  .23From discontinued operation, net of income
  tax provision
  
  
  .03
  
  
  .06
  
  
  .07
  
  
  .14Net earnings
  
  
  (.03
  )
  
  .17
  
  
  .12
  
  
  .37(1)
  Reclassified
  to reflect the discontinued operation described in Note B.(2)
  The sum of
  the quarters does not equal the fiscal year due to rounding and changes in
  the calculation of weighted average shares.-103-


E-Z-EM, Inc. and Subsidiaries

SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS(in thousands)

Column A
    
    
    Column B
    
    Column C
    
    Column D
    
    Column EAdditions(1)
    
    (2)Description
    
    
    Balance
        at
        beginningof period
    
    Charged to
        costs andexpenses
    
    Charged to
        other
        accounts-describe
    
    Deductions-describe
    
    Balance
        at end
        ofperiodAllowance
        for doubtful accountsFifty-two
        weeks ended May 31, 2003
    
    
    $
    619
    
    
    
    $
    274
    
    
    
    
    
    
    $
    95
    (a)
    
    
    $
    798Fifty-two
        weeks ended May 29, 2004
    
    
    $
    798
    
    
    
    $
    106
    
    
    
    
    
    
    $
    53
    (a)
    
    
    $
    851Fifty-two
        weeks ended May 28, 2005
    
    
    $
    851
    
    
    
    $
    111
    
    
    
    
    
    
    $
    93
    (a)
    
    
    $
    869Rebate
        allowanceFifty-two
        weeks ended May 31, 2003
    
    
    $
    1,086
    
    
    
    $
    22,919
    
    
    
    
    
    
    $
    22,846
    (b)
    
    
    $
    1,159Fifty-two
        weeks ended May 29, 2004
    
    
    $
    1,159
    
    
    
    $
    20,918
    
    
    
    
    
    
    $
    20,466
    (b)
    
    
    $
    1,611Fifty-two
        weeks ended May 28, 2005
    
    
    $
    1,611
    
    
    
    $
    21,949
    
    
    
    
    
    
    $
    22,163
    (b)
    
    
    $
    1,397(a)
  Amounts written off as
  uncollectible.(b)
  Represents rebate credits
  issued.-104-