EZ EM INC, 10-K, 1995-09-01

EZ EM INC
10-K, 1995-09-01
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 3, 1995 Commission file number 0-13003

E-Z-EM, Inc.
------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

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

717 Main Street, Westbury, New York 11590
-------------------------------------------------------------------------
(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: Class A Common
Stock, par value $.10 and Class B Common Stock, par value $.10

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /

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. / X /

The aggregate market value of the registrant's voting Class A Common Stock held
by non-affiliates on August 2, 1995 was $10,900,000.

On August 2, 1995, there were 4,032,532 shares of the registrant's Class A
Common Stock outstanding and 4,785,812 shares of the registrant's Class B Common
Stock outstanding.

Page 1 of 69
Exhibit Index on Page 32

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E-Z-EM, Inc. and Subsidiaries

INDEX

Page

PART I:

Item 1. Business 3

Item 2. Properties 11

Item 3. Legal Proceedings 12

Item 4. Submission of Matters to a Vote of Security
Holders 12

PART II:

Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 13

Item 6. Selected Financial Data 14

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15

Item 8. Financial Statements and Supplementary Data 21

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 21

PART III:

Item 10. Directors and Executive Officers of the
Registrant 22

Item 11. Executive Compensation 26

Item 12. Security Ownership of Certain Beneficial
Owners and Management 29

Item 13. Certain Relationships and Related Transactions 31

PART IV:

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 32

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PART I

ITEM 1. BUSINESS

(a) GENERAL DEVELOPMENT OF BUSINESS

E-Z-EM, Inc. (the "Company" or "E-Z-EM"), was organized in the state of
Delaware in 1983, and has its corporate offices located at 717 Main Street,
Westbury N.Y. 11590. The Company has been in business for over 33 years and is
primarily engaged in developing, manufacturing and marketing diagnostic imaging
products designed to assist radiologists in the detection of physical
abnormalities and diseases of the gastrointestinal ("G.I.") tract. Based upon
sales, the Company believes that it is the leading worldwide producer of barium
sulfate contrast systems for use in G.I. tract X-ray examinations. Over
one-third of the Company's sales are to customers outside the U.S. Contrast
systems are used in X-ray, CT-scanning and other imaging examinations.

E-Z-EM contrast systems consist of specially developed powdered and
liquid barium sulfate formulations and disposable apparatus which together
function as contrast systems for X-ray examinations of the various parts of the
G.I. tract. The G.I. tract is commonly referred to as the digestive system and
consists of the esophagus, stomach, intestine (or small bowel) and colon. E-Z-EM
manufactures a broad spectrum of barium sulfate products for different uses in
G.I. tract examinations. Each E-Z-EM barium sulfate formulation is tailored to
that portion of the G.I. tract to be examined, and to the procedures employed by
radiologists in each examination.

The Company's sales of contrast systems were virtually flat during 1995
as compared to 1994, as price increases and increases in sales in international
markets offset lower domestic sales demand.

The Company also competes in areas related and complementary to its
basic contrast systems business, categorized as non-contrast systems.
Non-contrast systems include: Interventional radiology products, custom contract
pharmaceuticals, gastrointestinal cleansing laxatives, X-ray protection
equipment, and immunoassay tests. See "Narrative Description of Business".

The Company manufactures and markets, through Surgical Dynamics Inc., a
51%-owned subsidiary organized in Delaware in 1986, a percutaneous surgery
device, known as NucleotomeTM, and other surgical devices and accessories used
in spinal surgery. The Nucleotome device allows for removal of herniated disk
material from the spinal column through an incision of less than one-tenth of an
inch in a procedure known as percutaneous diskectomy. Although this procedure is
not appropriate for all back surgery candidates, it has the potential in certain

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instances to replace alternative procedures such as laminectomy, which is a more
invasive procedure than percutaneous diskectomy, and chemonucleolysis.

During 1995, Surgical Dynamics product sales increased 7%, due
primarily to the introduction of the Nucleotome EndoFlexTM (the "EndoFlex"), a
device used in endoscopic lumbar discectomy. The EndoFlex provides maneuverable
flexible cutting, endoscopic visualization, and safe effective removal of disk
material through a single 4.5 mm incision.

Unless the context requires otherwise, all references herein to a
particular year are references to the Company's fiscal year.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company is engaged in the manufacture and distribution of a wide
variety of products that are classified into two industry segments: Diagnostic
products and surgical products. Diagnostic products include both contrast
systems, consisting of barium sulfate formulations and related apparatus used in
X-ray, CT-scanning and other imaging examinations, and non-contrast systems,
including interventional radiology products, custom contract pharmaceuticals,
gastrointestinal cleansing laxatives, X-ray protection equipment, and
immunoassay tests. Surgical products include the Nucleotome device and other
surgical devices and accessories used in spinal surgery.

The sales and operating profit (loss) of each industry segment and the
identifiable assets, depreciation and amortization, and capital expenditures
attributable to each industry segment are set forth in Note L to the
Consolidated Financial Statements included herein.

DIAGNOSTIC PRODUCTS

Diagnostic products include both contrast systems, consisting of barium
sulfate formulations and related apparatus used in X-ray, CT-scanning and other
imaging examinations, and non-contrast systems, including interventional
radiology products, custom contract pharmaceuticals, gastrointestinal cleansing
laxatives, X-ray protection equipment, and immunoassay tests. Diagnostic
products accounted for 91% of sales in 1995, as compared to 91% in 1994 and 90%
in 1993.

Contrast Systems

Contrast systems, using barium sulfate formulations as contrast media
together with disposable apparatus, have been E-Z-EM's principal business since
the Company's organization over 33 years ago. For over 75 years, barium sulfate
has been the contrast medium of choice for virtually all G.I. tract X-ray

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examinations. It has the longest history of use among all contrast media. Barium
sulfate is preferred among G.I. tract contrast media because it has a high
absorption coefficient of X-rays. In addition, it is inert, insoluble in water
and chemically stable. Barium sulfate for suspension is listed in the U.S.
Pharmacopeia. The use of properly formulated barium sulfate suspensions permits
the visualization of the entire G.I. tract.

The Company's contrast systems are designed for a variety of
radiological procedures. In single contrast procedures, a portion of the G.I.
tract is filled with barium sulfate to produce a diagnostic image of the tract's
contours. In double contrast procedures, gas or air is used to distend the G.I.
tract after coating with a high density barium sulfate suspension. This produces
a significantly clearer diagnostic image of the tract's surface than that
obtainable through the use of single contrast procedures. In computerized axial
tomography procedures, known as "CT-scanning", a specially formulated low
density barium sulfate product is used to visualize the G.I. tract and thus
significantly enhance the radiological procedure.

Contrast systems provide radiologists with a range of effective and
convenient powdered and liquid product formulations tailored to single contrast,
double contrast or CT-scanning procedures. Many of the Company's products are
functionally packaged in disposable dispensing containers. The Company believes
that it currently has the broadest barium sulfate product line of any worldwide
manufacturer and is continuing to develop additional formulations for modern
X-ray techniques. E-Z-EM also sells accessory apparatus for use in contrast
system procedures, including empty enema administration kits and components.
Contrast systems accounted for 68% of sales in 1995, as compared to 70% of sales
in 1994 and 72% of sales in 1993.

Non-Contrast Systems

The Company's line of interventional radiology products include
specialty catheters, electromechanical pumps and syringes, needles and trays
used during a variety of diagnostic and therapeutic procedures. The Company
markets a number of these product lines through its AngioDynamics division,
operating out of Glens Falls, New York. AngioDynamics markets the Pulse SprayTM
pulsed infusion system for infusion of therapeutic solutions into the peripheral
vasculature. One application of the Pulse Spray system is the infusion of
solutions for the

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treatment of clotted peripheral arteries and bypass grafts. Utilizing a
technique known as pulsed-spray thrombolysis, the Pulse Spray system can
forcefully inject small volumes of a highly concentrated clot-dissolving enzyme
directly into the thrombus. AngioDynamics also markets various catheter lines,
including the Soft-VuTM angiographic catheters, which offer a radiopaque feature
that allows the physician to visualize the smallest possible catheter during
angiographic examinations. Marketed under the E-Z-EM label is the PercuPumpTM
injection system, which is designed to inject contrast media into the vascular
system for visualization purposes during CT procedures. The PercuPump system is
comprised of an electromechanical pump and a disposable syringe. The
interventional radiology products grouping includes biopsy needles and trays,
such as specialty Amniocentesis, Arthrogram and Myelogram Trays.

Custom contract pharmaceutical and cosmetic products are manufactured
on a contract basis by the Company's Canadian subsidiary. Pharmaceutical
products include liquid vitamins and antacids, decongestants, cough medicines
and vaporizing ointments. Cosmetic products include tanning lotions and bath
powders.

The Company offers laxative products specially formulated to cleanse
the G.I. tract prior to X-ray and colonoscopic examinations. These products are
sold through the same distribution network as the Company's contrast systems.

The Company markets a line of X-ray protection equipment featuring
Adjust-A-WeightTM, a patented design concept which allows the wearer to adjust
the weight distribution of the protective apron to relieve fatigue. This product
line is sold through the same distribution network as the Company's contrast
systems.

The Company, through its wholly-owned subsidiary, Enteric Products,
Inc., markets immunoassay tests for use in the detection of Helicobacter pylori
("H. pylori"). The tests analyze a patient's serum sample using a patented
antigen licensed from Baylor College of Medicine. Two tests are currently
available, one for laboratory use, HM-CAPTM, and one for physicians' offices,
FlexSure HPTM.

In 1994, the National Institutes of Health concluded that most peptic
ulcer disease and chronic gastritis is directly linked to the bacterium H.
pylori, and the World Health Organization designated H. pylori a definite human
carcinogen because of its link to gastric cancer. The Company estimates these
diseases affect over 25 million people in the United States and over 50 million
people outside the U.S.

SmithKline Diagnostics, Inc. ("SKD"), a subsidiary of
Beckman Instruments, has exclusive rights to market the FlexSure
HP test in the United States and selected international markets
and received marketing clearance from the Food and Drug

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Administration in May 1994. The Company jointly developed the FlexSure HP test
with SKD and supplies the antigen used in the test. The Company sells the
antigen to SKD and receives a royalty based on the net sales of this test.
During 1995, the Company began marketing the FlexSure HP test in Korea,
Switzerland and the Netherlands.

The Company markets the HM-CAP test through distributors in the United
States and internationally. In July 1995, the Company signed an agreement with
Sigma Diagnostics, a unit of Sigma Chemical Co., for non-exclusive distribution
of the HM-CAP test under private label in the United States and selected
international markets. In September 1993, the Company signed an exclusive
distribution agreement with Kyowa Medex Co., Ltd. to market and sell the HM-CAP
test in Japan. The Company is currently seeking other distributors in the United
States and international markets. Sales of H. pylori test-related products
aggregated $476,000 in 1995.

Sales to Picker International, Inc., which is a distributor of the
Company's diagnostic products, were 14%, 14% and 15% of total sales during 1995,
1994 and 1993, respectively.

SURGICAL PRODUCTS

The Company manufactures and markets a percutaneous surgery device,
known as NucleotomeTM, and other surgical devices and accessories used in spinal
surgery, through Surgical Dynamics Inc., a 51%-owned subsidiary organized in
Delaware in 1986. The Nucleotome device allows for removal of herniated disk
material from the spinal column through an incision of less than one-tenth of an
inch in a procedure known as percutaneous diskectomy. Although this procedure is
not appropriate for all back surgery candidates, it has the potential in certain
instances to replace alternative procedures such as laminectomy, which is a more
invasive procedure than percutaneous diskectomy, and chemonucleolysis. As a
percentage of total sales, surgical products accounted for 9% in 1995, as
compared to 9% in 1994 and 10% in 1993.

The Nucleotome device is designed to remove nucleus pulposus
("nucleus") from the intervertebral disk space in the lumbar spine. When the
nucleus herniates or bulges, pressure on the nerves in the spinal canal can
cause back pain and sciatica. Removing all or a portion of the nucleus reduces
the herniation and the attendant discomfort. The Nucleotome device is comprised
of two components: A reusable console and a disposable probe.

The Nucleotome procedure represents a relatively non-invasive approach
to disk surgery. A puncture wound is made in the back under local anesthetic and
the Nucleotome disposable cutting probe, which is approximately one-tenth of an
inch in diameter, is inserted into the disk space using fluoroscope guidance.
The probe simultaneously cuts, aspirates and removes

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the nucleus. Although the procedure may require hospitalization, it can be
performed on an outpatient basis.

The Company markets other surgical products, primarily the Ray Threaded
Fusion Cage, a device used during a surgical procedure known as spinal fusion.

MARKETING

The Company believes that the success of its barium sulfate products is
primarily due to its ability to create contrast systems with specific,
sophisticated barium formulations for varying radiological needs. E-Z-EM
continues to develop new barium sulfate products, including products for
CT-scanning and MRI (Magnetic Resonance Imaging) procedures.

E-Z-EM's contrast systems, laxatives, syringes, X-ray protection
equipment and certain interventional radiology products, such as biopsy needles
and trays, are marketed to radiologists and hospitals in the United States
through about 300 distributors, supported by 37 E-Z-EM sales people, many of
whom have had technical training as X-ray technicians. The Company also
advertises in medical journals and displays at most national and international
radiology conventions.

Certain non-contrast systems products, such as the Pulse Spray pulsed
infusion system and the Soft-Vu angiographic catheter line, due to the highly
technical nature of these products, are sold on a direct consumer basis. Product
lines marketed through the Company's AngioDynamics division are supported by 16
dedicated sales people.

Outside the United States, the Company's contrast systems are also
marketed through distributors, except the Company markets directly through
wholly-owned subsidiaries in Canada, Japan, the United Kingdom and Holland.
Significant sales are made in Canada, Japan, the United Kingdom, Holland, Italy,
Austria, Australia, Germany and Sweden. Foreign distributors are generally
granted exclusive distribution rights and hold governmental product
registrations in their names, although new registrations are currently being
filed in the Company's name.

The Company's surgical products are marketed to orthopedic surgeons and
neurosurgeons principally in North America, Europe, the Pacific Rim and Latin
America. Domestic sales are supported by 17 direct sales employees, while the
international marketing effort is conducted through distributors. Foreign
distributors are generally granted exclusive distribution rights on a country by
country basis.

COMPETITION

Based upon sales, E-Z-EM contrast systems are the most
widely used diagnostic imaging products of their kind in the
United States, Canada and certain European countries. However,

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the Company faces competition domestically from Lafayette Pharmaceuticals,
Incorporated, Smith & Nephew, Inc., as well as from small U.S. competitors, and
it also faces competition outside of the U.S. The Company competes primarily on
the basis of product quality, customer service, the availability of a full line
of barium sulfate formulations tailored to user needs, and price.

Radiological procedures for which the Company supplies products
complement, as well as compete with, endoscopic procedures such as colonoscopy
and endoscopy. Such examinations involve visual inspection of the G.I. tract
through the use of a flexible fiber optic instrument inserted into the patient
by a gastroenterologist. The use of gastroenterology procedures has been growing
in both upper and lower G.I. examinations as patients have been increasingly
referred to gastroenterologists rather than radiologists. Also, the availability
of drugs which successfully treat ulcers and other gastrointestinal disorders
has tended to reduce the need for upper G.I. tract examinations.

The major non-contrast systems' market that the Company competes in is
in the interventional radiology market, which is highly competitive. No single
company, domestic or foreign, competes with the Company across all of its
interventional radiology product lines. In electromechanical pumps and syringes,
the Company's main competitors are Medrad, Inc. and Liebel-Flarsheim Company,
Inc. In specialty catheters, needles and trays, the Company competes with Cook,
Inc., the Meditech Division of Boston Scientific, Inc., Mallinckrodt, Inc.,
United States Catheter, Inc. (USCI), Universal Medical, Inc. (UMI) and various
other competitors. The Company also encounters competition in the marketing of
its other non-contrast systems products.

The Company competes in the surgical products segment with Smith &
Nephew, Inc., Sofamor/Danek and others who market percutaneous diskectomy
devices and hand held surgical instruments. The Company's Nucleotome product
also competes against alternative procedures, which include laminectomy and
chemonucleolysis. Laminectomy is a procedure whereby the nucleus is surgically
removed through an incision in the back musculature, and is performed while the
patient is under general anesthesia. Chemonucleolysis is a procedure that
chemically dissolves the nucleus.

RESEARCH AND DEVELOPMENT

In addition to its technical staff, consisting of a Medical Director
and 46 employees, the Company has consulting arrangements with various
physicians who assist E-Z-EM through their independent research and product
development. Research and development expenditures totalled $6,790,000, or 7% of
sales, in 1995, as compared to $7,470,000, or 8% of sales, in 1994 and
$6,978,000, or 7% of sales, in 1993, reflecting the Company's commitment to
expansion of its product lines through research and

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development. Expenditures related to interventional radiology projects totalled
$4,161,000, $3,521,000 and $3,592,000 in 1995, 1994 and 1993, respectively.
Expenditures related to immunological projects totalled $666,000, $1,789,000 and
$1,576,000 in 1995, 1994 and 1993, respectively.

RAW MATERIALS AND SUPPLIES

Most of the barium sulfate for contrast systems is supplied by a number
of European and United States manufacturers, with a minor portion being supplied
by the Company's wholly-owned Canadian subsidiary, E-Z-EM Canada Inc. ("E-Z-EM
Canada"), which operates a barium sulfate mine and processing facility in Nova
Scotia and whose reserves are anticipated to last a minimum of three years. The
Company believes that these sources should be adequate for its foreseeable
needs.

PATENTS AND TRADEMARKS

Although several of the Company's products and processes are patented
and the Company considers its trademarks to be a valuable marketing tool, the
Company does not consider any single patent, group of patents, or trademarks to
be materially important to its business. E-Z-EM and AngioDynamics are examples
of the Company's registered trademarks in the United States.

REGULATION

E-Z-EM products are registered with the FDA and with similar regulatory
agencies in foreign countries where they are sold. The Company believes it is in
compliance in all material respects with applicable regulations of these
agencies.

The Company's products used in diagnostic procedures are covered by
Medicare, Medicaid and private healthcare insurers, subject to patient
eligibility. Changes in the reimbursement policies and procedures of such
insurers may affect the frequency with which such procedures are performed.

The Company operates 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 exists with respect to the Company. Further, it
has not been alleged that the Company contributed to the contamination and it is
the Company's belief that it has not done so.

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EMPLOYEES

The Company employs 1,020 persons, 232 of whom are covered by various
collective bargaining agreements. Collective bargaining agreements covering 146
and 81 employees expire in 1997 and December 1995, respectively. The Company
considers employee relations to be satisfactory.

(d) FINANCIAL INFORMATION REGARDING FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES

The Company currently derives about 38% of its sales from customers
outside the United States. Operating profit margins on export sales are somewhat
lower than domestic sales margins. The Company's 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 Canadian customers, which are
made by E-Z-EM Canada, are billed in local currency. Third party export sales
from Canada are billed in Canadian dollars. Third party sales to Japanese
customers, which are made by the Company's Japanese subsidiary, are also billed
in local currency.

The Company employs 265 persons involved in the developing,
manufacturing and marketing of products internationally. The Company's product
lines are marketed through approximately 180 foreign distributors to 80
countries outside of the United States.

The sales and operating profit (loss) of each geographic area and the
identifiable assets attributable to each geographic area as well as export sales
from domestic operations are set forth in Note L to the Consolidated Financial
Statements included herein.

ITEM 2. PROPERTIES

The Company's principal manufacturing facilities and executive offices
are located in Westbury, New York. They consist of five buildings, one of which
is owned by the Company, containing an aggregate of 203,800 square feet used for
manufacturing, warehousing and administration. One of the Westbury facilities is
leased to the Company by various lessors, including certain related parties. See
"Certain Relationships and Related Transactions". The Company also occupies
manufacturing and warehousing facilities located in Glens Falls, New York
consisting of two buildings, one of which is owned by the Company, containing an
aggregate of 29,312 square feet. E-Z-EM Caribe owns a 38,600 square foot plant
in San Lorenzo, Puerto Rico which fabricates enema tips and heat sealed
products. E-Z-EM Canada leases a 29,120 square foot building in Debert, Nova
Scotia and both owns and leases land encompassing its barium sulfate mining
operation. E-Z-EM Canada also owns a 64,050 square foot manufacturing and
warehousing facility located in Montreal, Canada. Surgical Dynamics, which
fabricates all

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surgical products, leases a 16,000 square foot facility in Concord, California.

ITEM 3. LEGAL PROCEEDINGS

The Company is presently a defendant in a product liability action.
This suit claims damages based upon alleged injuries resulting from the use of
one of the Company's products. The action is in its early stages and while the
Company is actively defending against the claim, it is unable to predict its
outcome. It should be noted that in this action the Company is one among several
defendants and, as such, the Company's liability, if any, is not quantifiable at
this time. The Company does not believe that the ultimate outcome in this action
will have a material adverse effect on the consolidated financial statements.

The Company was the defendant in a product liability action
with respect to an alleged adverse reaction to one of its
products. Such action was settled in October 1994. The
settlement was covered by insurance.

The Company has been sued by Olympia Holding Corporation p/k/a P-I-E
Nationwide, Inc. for $443,830. The suit, filed on October 5, 1992, is presently
pending in the United States Bankruptcy Court for the Middle District of
Florida. The case is in its preliminary stages. The Company is being represented
in this action by a law firm which is also representing numerous other
defendants being sued by the same plaintiff on the same grounds - recovery for
alleged undercharges for freight carriage. It is not possible, at this stage, to
determine what, if any, liability exists with respect to the Company in this
matter. The Company will vigorously defend against this action; it has been
informed by legal counsel that there exist numerous valid defenses to this case.

The Company is presently involved in various other claims, legal
actions and complaints arising in the ordinary course of business. The Company
believes such matters are without merit, or involve such amounts that
unfavorable disposition would not have a material adverse effect on the
Company's financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Effective July 24, 1995, E-Z-EM, Inc. Class A and Class B Common Stock
began trading on the American Stock Exchange under the symbols "EZMA" and
"EZMB", respectively. Previously, the Company's Class A and Class B Common Stock
was traded in the over-the-counter market and was quoted on the Nasdaq Stock
Market's National Market under the symbols "EZEMA" and "EZEMB", respectively.
The following table sets forth, for the periods indicated, the high and low sale
prices for the Class A and Class B Common Stock as reported by the National
Association of Security Dealers, Inc.
<TABLE>
<CAPTION>

Class A Class B
------------------------------ ------------------------------

High Low High Low
-------------- -------------- -------------- -----------

Fifty-three weeks ended June 3, 1995

First Quarter.............................................. $6.00 $4.50 $6.25 $4.00
Second Quarter............................................. 5.75 4.25 5.50 3.88
Third Quarter.............................................. 4.75 4.00 5.00 3.75
Fourth Quarter............................................. 5.00 3.25 4.88 3.63

Fifty-two weeks ended May 28, 1994

First Quarter.............................................. $6.75 $5.50 $6.50 $4.75
Second Quarter............................................. 7.50 4.50 7.00 4.25
Third Quarter.............................................. 6.25 4.50 5.50 4.25
Fourth Quarter............................................. 5.25 4.50 5.00 4.00

</TABLE>

As of August 2, 1995 there were approximately 323 and 369 record
holders of Registrant's Class A and Class B Common Stock, respectively.

In order to preserve cash reserves, the Company issued 3% stock
dividends in lieu of cash dividends during the third quarters of fiscal 1993,
1994 and 1995. Future cash or stock dividends are subject to the Board of
Directors' review of operations and financial and other conditions then
prevailing.

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ITEM 6. SELECTED FINANCIAL DATA

Fifty-three
weeks ended Fifty-two weeks ended
----------- ---------------------------------
June 3, May 28, May 29, May 30, June 1,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands, except per share data)

Income statement data:
Net sales (2)........... $97,597 $94,123 $93,417 $88,467 $75,241
Gross profit............ 42,311 39,204 41,349 39,676 31,314
Operating profit (loss)
(3)................... 1,357 715 890 4,354 (612)
Earnings before income
taxes and minority
share of subsidiary's
operations............ 2,048 1,068 2,256 5,406 471
Net earnings............ 1,630 277 1,679 4,610 392
Earnings per common
share
Primary and fully
diluted (1)....... .18 .03 .19 .52 .04
Cash dividends declared
per common share...... $ .00 $ .00 $ .10 $ .20 $ .20
Weighted average common
shares
Primary and fully
diluted (1)....... 8,818 8,817 8,811 8,785 8,774

June 3, May 28, May 29, May 30, June 1,
1995 1994 1993 1992 1991
------ ------ ------ ------ -------
(in thousands)

Balance sheet data:
Working capital......... $33,254 $33,088 $36,283 $35,328 $29,228
Cash, certificates of
deposit and short-
term debt and equity
securities............ 4,447 7,336 8,359 12,132 10,187
Total assets............ 76,095 71,531 73,252 74,417 70,433
Long-term debt, less
current maturities.... 1,114 586 2,900 654 822
Stockholders' equity.... 57,890 54,269 55,001 54,900 51,918

---------------

(1) Retroactively restated to reflect the total shares issued after the 3%
stock dividends described in Note J to the Consolidated Financial
Statements included herein.

(2) Sales of Lafayette products for the period June 2, 1991 through
November 27, 1991 of approximately $3,505,000 and for the fifty-two
weeks ended June 1, 1991 of approximately $6,112,000 have been excluded
from net sales and reclassified to disposal of assets, which is
included in operating profit (loss) in the consolidated statements of
earnings.

(3) On November 27, 1991, the Company divested the assets of its Lafayette
division to Lafayette Pharmaceuticals, Incorporated pursuant to an
Asset Purchase Agreement dated June 27, 1991 (the "Agreement"). The
aggregate sales price

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was approximately $5,413,000. The Lafayette division was purchased by
the Company in December 1988 from Lafayette Pharmacal, Inc. The
Agreement was approved by the Federal Trade Commission ("FTC") on
November 14, 1991, pursuant to the FTC's order of June 12, 1990 which
required the Company to divest the assets it had purchased from
Lafayette Pharmacal, Inc. At June 2, 1990, the Company had established
a reserve, before tax, of $8,627,000 which approximated the anticipated
loss on divestiture and related expenses. The Company recorded a
pre-tax gain of $953,000 during 1992 representing the difference
between the actual sales price and expenses pertaining to the
divestiture compared with the amounts previously estimated. Such gain
is included in operating profit in the consolidated statement of
earnings for 1992.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The Company's fiscal year ended June 3, 1995 represents fifty-three
weeks and the fiscal years ended May 28, 1994 and May 29, 1993 represent
fifty-two weeks.

RESULTS OF OPERATIONS

SEGMENT OVERVIEW

The Company operates in two industry segments: Diagnostic products and
surgical products.

The diagnostic products industry segment accounted for 91% of sales in
1995, as compared to 91% in 1994 and 90% in 1993. This segment includes both
contrast systems, consisting of barium sulfate formulations and related
apparatus used in X-ray, CT-scanning and other imaging examinations, and
non-contrast systems, which includes interventional radiology products, custom
contract pharmaceuticals, gastrointestinal cleansing laxatives, X-ray protection
equipment, and immunoassay tests. Contrast systems, which constitute the
Company's core business and the majority of the diagnostic products segment,
accounted for 68% of sales in 1995, as compared to 70% in 1994 and 72% in 1993.
Non-contrast system sales accounted for 23% of sales in 1995, as compared to 21%
in 1994 and 18% in 1993.

Diagnostic segment results for 1995 were positively impacted by
increased sales demand and improved gross margins, partially offset by increased
domestic and international selling and administrative expenses.

Diagnostic segment results for 1994 were adversely impacted by the cost
of product recalls, which the Company began in March 1994, due to packaging and
formulation problems with its effervescent granules and colon cleansing
products. The Company recorded pre-tax charges in the aggregate amount of
$1,546,000 during 1994, with respect to such recalls.

Diagnostic segment results for 1994 were also adversely impacted by a
decline in sales of contrast systems in the

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<PAGE>

domestic market. The Company attributes the sales decline in 1994 to the turmoil
in the healthcare industry from proposed reform, which resulted in reduced
patient procedures, consequent purchasing cutbacks on the part of hospitals, and
a generalized slowdown in our customer's orders.

Diagnostic segment results for 1993 were adversely affected by a slight
decline in sales of contrast systems in the domestic market. The Company
attributes this principally to three factors: Turmoil in our industry from
proposed healthcare reform; an abnormally large sales backlog of products
shipped during the first quarter of 1992, which inflated that year's activity;
and increased competition from both direct competitors and alternative
diagnostic procedures.

The surgical products segment, comprised of the Nucleotome device and
other surgical devices and accessories used in spinal surgery, accounted for 9%
of sales in 1995, as compared to 9% in 1994 and 10% in 1993. Nucleotome, a
percutaneous surgery device that allows for removal of herniated disk material
from the spinal column through an incision of less than one-tenth of an inch, is
manufactured and marketed by Surgical Dynamics Inc., a 51%-owned subsidiary. The
procedure is known as percutaneous diskectomy. Although this procedure is not
appropriate for all back surgery candidates, it has the potential in certain
instances to replace alternative procedures, such as laminectomy, which is a
more invasive procedure than percutaneous diskectomy, and chemonucleolysis.
During 1992, several competitors began marketing percutaneous laser diskectomy
devices.

Surgical product sales increased 7% in 1995 and decreased 5% in 1994.
The 1995 increase was due primarily to the introduction of the Nucleotome
EndoFlexTM (the "EndoFlex"), a device used in endoscopic lumbar discectomy. The
EndoFlex provides maneuverable flexible cutting, endoscopic visualization, and
safe effective removal of disk material through a single 4.5 mm incision. In
1994, sales of the Nucleotome device declined due to the increased use of
alternative surgical procedures, principally laminectomy. Sales growth in other
surgical products, particularly the Ray Threaded Fusion Cage ("Ray TFCTM"),
partially offset the decline in Nucleotome sales. The Ray TFC device is used
during a surgical procedure known as spinal fusion. The Company needs regulatory
approval to market this product domestically but has already obtained clearance
in certain foreign countries and is actively marketing in these areas.

The surgical segment contributed losses of approximately $843,000 in
1995 to E-Z-EM's consolidated operations, as compared to losses of $102,000 in
1994 and $772,000 in 1993. Surgical results for 1995 were adversely affected by:
Increased operating expenses of $1,038,000, principally due to expanded selling
and marketing efforts in both the domestic and international

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<PAGE>

marketplace; inventory allowances of $197,000; and the reversal of deferred tax
benefits of $135,000, established in the prior year. Surgical results for 1993
were adversely affected by non-recurring relocation costs approximating
$800,000.

CONSOLIDATED RESULTS OF OPERATIONS

The Company reported net earnings of $1,630,000, or $.18 per share, for
1995, as compared to net earnings of $277,000, or $.03 per share, for 1994, and
net earnings of $1,679,000, or $.19 per share, for 1993.

Results for 1995 were positively impacted by increased sales demand in
both the diagnostic and surgical segments, coupled with improved gross margins
in the diagnostic segment, partially offset by increased domestic and
international selling and administrative expenses in both industry segments.

Results for 1994 were adversely impacted by the reserve for product
recalls of $1,546,000 and severance benefits accrued or paid to terminated
employees of $638,000. The reserve for product recalls is included in cost of
goods sold and selling and administrative expenses in the consolidated
statements of operations. Results for 1994 were also adversely impacted by
reduced manufacturing activity in the diagnostic segment, partially offset by
reduced operating expenses due to cost containment programs instituted in 1993.
The reduced level of manufacturing activity resulted from both high opening
inventory levels and lower than expected demand for contrast systems products
due to uncertainty surrounding the numerous healthcare reform proposals.

Sales increased 4%, or $3,474,000, in 1995, as compared to 1%, or
$706,000, in 1994. Sales in 1995 were favorably affected by increased
non-contrast systems sales of $2,548,000 and price increases, which accounted
for approximately 2% of sales in 1995. The increase in non-contrast systems
sales related almost entirely to the AngioDynamics division, which includes the
Pulse SprayTM pulsed infusion system and Soft-VuTM angiographic catheter line.
Sales in 1995 were adversely affected by lower demand domestically for the
Company's core contrast systems. Sales in 1994 were favorably affected by price
increases, which accounted for approximately 3% of sales in 1994, and increased
non-contrast systems sales of $2,577,000. Sales in 1994 were adversely affected
by lower demand for the Company's core contrast systems,

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<PAGE>

as a result of uncertainty surrounding the numerous healthcare reform proposals.

Sales in international markets, including direct exports from the
United States, increased 8%, or $2,777,000, in 1995 and 10%, or $3,189,000, in
1994. The 1995 increase was due primarily to increased sales of contrast systems
of $1,582,000, non-contrast systems of $1,043,000 and surgical products of
$152,000. The 1994 increase was due primarily to increased sales of: Contrast
systems of $1,178,000; non-contrast systems of $1,182,000, including $586,000
relating to custom contracts; and surgical products of $829,000.

Gross profit expressed as a percentage of sales was 43% in 1995, as
compared to 42% in 1994 and 44% in 1993. Gross profit in 1995 was adversely
affected by increased provisions for inventory adjustments, partially offset by
sales price increases. The lower gross profit percentage in 1994 was due
primarily to the reserve for product recalls of $1,420,000, reduced
manufacturing activity in the diagnostic segment, and severance benefits paid to
terminated employees of $262,000.

Selling and administrative ("S&A") expenses were $34,164,000 in 1995,
$31,019,000 in 1994 and $33,481,000 in 1993. The increase in 1995 versus 1994 of
$3,145,000, or 10%, was due primarily to: Expanded diagnostic S&A efforts in
both the domestic and international marketplace of $2,045,000; increased
surgical S&A efforts of $899,000; and a reversal of product liability claim
reserves of $201,000 in 1994. The improvement in 1994 versus 1993 of $2,462,000,
or 7%, was due primarily to: Cost containment programs instituted in 1993, which
reduced 1994 surgical and diagnostic S&A expenses by $540,000 and $482,000,
respectively; surgical's 1993 non-recurring relocation charges of approximately
$800,000; and a reduction of product liability claim reserves of $657,000.

Research and development ("R&D") expenditures in 1995 totalled
$6,790,000, or 7% of sales, as compared to $7,470,000, or 8% of sales, in 1994
and $6,978,000, or 7% of sales, in 1993. The decline in 1995 versus 1994 was due
primarily to reduced spending of $1,123,000 relating to the commercialization of
H. pylori test-related products. Increased spending in the fields of
interventional radiology of $640,000 and spinal surgery of $139,000, was
partially offset by reduced contrast system spending of $386,000, primarily due
to staff reductions. The increased spending in 1994 versus 1993 primarily
related to severance benefits paid to terminated employees of $320,000 and
increased spending related to diagnostic tests for detecting and monitoring H.
pylori. Of the R&D expenditures in 1995, approximately 61% relate to
interventional radiology projects, 11% to contrast systems, 11% to spinal
surgery projects, 10% to immunological projects and 7% to other projects. R&D

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<PAGE>

expenditures are expected to continue at approximately current levels. In
addition to its in-house technical staff, the Company is presently sponsoring
various independent R&D projects and is committed to continued expansion of its
product lines through R&D.

Other income, net of other expenses, totalled $691,000 in 1995,
$353,000 in 1994 and $1,366,000 in 1993. The improvement in other income in 1995
versus 1994 was primarily due to the discounting effect of an interest free
loan, which the Company repaid during 1995. Improvements in currency exchange
gains and losses incurred by foreign subsidiaries totalling $132,000 and
increased licensing income of $55,000 also contributed to the increase in other
income in 1995. The decline in other income in 1994 versus 1993 was primarily
due to decreased gains on the sale of stock, primarily from long-term
investments, of $1,079,000, and reduced interest income of $178,000, partially
offset by reduced currency exchange losses incurred by foreign subsidiaries of
$162,000 and increased other income of $94,000.

Note E to the Consolidated Financial Statements included herein details
the major elements affecting income taxes for 1995, 1994 and 1993. In 1995, 1994
and 1993, the Company's high effective tax rates of 60%, 83% and 58% differed
from the Federal statutory tax rate of 34% due primarily to the fact that the
Company did not provide for the tax benefit on losses incurred in certain
jurisdictions, since it is more likely than not that such benefits will not be
realized, and were partially offset by earnings of the Puerto Rican subsidiary,
which are subject to favorable United States tax treatment. The reversal of
deferred tax benefits, established by a subsidiary in the prior year, also
contributed to the Company's high effective tax rate in 1995. These tax benefits
were reversed since it is more likely than not that such benefits will not be
realized.

The Company reports 100% of the revenues and expenses related to its
51%-owned subsidiary, Surgical Dynamics, the manufacturer and marketer of the
Nucleotome, but only 51% of its net earnings (loss). The variation in each
reported year between earnings before minority share of subsidiary's operations
and net earnings is caused by the elimination of the 49% minority interest in
Surgical Dynamics.

During the fourth quarter of 1994, the Company made certain inventory
adjustments with respect to the absorption of overhead costs, which served to
increase pre-tax earnings by approximately $628,000.

LIQUIDITY AND CAPITAL RESOURCES

During 1995, capital expenditures, primarily related to the acquisition
of the previously leased Canadian facility, increased

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<PAGE>

inventory levels and repayments of debt were funded primarily by cash provided
by operations and cash reserves. During 1994, operating and capital requirements
were funded by cash provided by operations. During 1993, increased inventory
levels, capital expenditures and dividend payments were funded by cash reserves
and cash provided by operations. In the past, the Company's policy has been to
fund capital requirements without incurring significant debt. At June 3, 1995,
debt declined to $2,343,000 from $3,670,000 at May 28, 1994 and from a
previously reported high of $6,219,000 at February 27, 1993. The Company has
available $5,226,000 under various bank lines of credit of which $150,000 was
outstanding at June 3, 1995.

From 1991 through the second quarter of 1993, the Company paid
quarterly cash dividends of $.05 per common share. In order to preserve cash
reserves, the Company issued 3% stock dividends in lieu of cash dividends during
the third quarters of 1993, 1994 and 1995.

Presently, the Company is continuing to look for both new and
complementary lines of business for expansion in order to ensure its continued
growth.

At June 3, 1995, approximately 59% of the Company's assets consist of
inventories, accounts receivable, cash and cash equivalents, and debt and equity
securities. Inventories have increased at a greater rate than sales as a result
of broadened product lines. The current ratio is 3.39 to 1, with net working
capital of $33,254,000 at June 3, 1995, as compared to the current ratio of 3.51
to 1, with net working capital of $33,088,000 at May 28, 1994.

Net capital expenditures, primarily for a facility acquisition and
machinery and equipment, were $4,812,000 in 1995, as compared to $2,175,000 in
1994 and $3,933,000 in 1993. Of the 1995 expenditure, approximately $2,817,000
relates to the purchase of the land and building housing the manufacturing
facilities of the Company's Canadian subsidiary. Of the 1993 expenditure,
approximately $607,000 relates to improvements and $389,000 relates to equipment
for a warehousing and office facility in Westbury, New York. Approximately
$499,000 of the 1993 expenditure relates to the acquisition, and related
improvements, of a manufacturing facility for the Company's AngioDynamics
division. No material increase in the aggregate level of capital expenditures is
currently contemplated for 1996.

Subsequent to the end of fiscal 1995, the Company entered into a
license agreement to distribute a certain product with commitments which could
aggregate $750,000 over the next two to three fiscal years.

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<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required by Part II, Item 8
are included in Part IV of this form as indexed at Item 14 (a) 1.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the
Company's officers and directors.

NAME AGE POSITIONS

Howard S. Stern(1)(4)............ 64 Chairman of the Board, Director
Daniel R. Martin(1).............. 58 President, Chief Executive Officer,
Director
Phillip H. Meyers, M.D.(1)(3).... 62 Senior Vice President - Strategic
Scientific Opportunities, Director
George P. Carden................. 66 Senior Vice President and General
Manager - Imaging Products Division
Arthur L. Zimmet................. 59 Senior Vice President - Special
Projects
Sandra D. Baron.................. 43 Vice President - Human Resources
Craig A. Burk.................... 42 Vice President - Manufacturing
Joseph A. Cacchioli.............. 39 Vice President - Controller
Dennis J. Curtin (5)............. 48 Vice President - Finance
Judith E. Hatch.................. 54 Vice President - National Accounts
Kay N. Hatch..................... 63 Vice President - Protection Products
Eamonn P. Hobbs.................. 42 Vice President - AngioDynamics
Division
Joseph J. Palma.................. 53 Vice President - Sales
Archie B. Williams............... 44 Vice President - Imaging Products
Management
Terry S. Zisowitz................ 48 Vice President - Legal and Regulatory
Affairs
Andrew A. Zwarun................. 52 Vice President - MRI
Michael A. Davis, M.D............ 54 Medical Director, Director
Paul S. Echenberg (1)............ 51 Chairman of the Board of E-Z-EM Canada
Inc., Director
James L. Katz CPA, JD (1)(2)(5).. 59 Director
Donald A. Meyer (3)(4)........... 61 Director
Irwin H. Nadel (2)(5)............ 75 Director
Robert M. Topol (1)(2)(3)(5)..... 70 Director
W. Philip Van Kirk............... 75 Secretary

---------------

(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
(4) Member of Compensation Committee
(5) Member of Finance Committee

Directors are elected for a three year term and each holds office until
his successor is elected and qualified. Officers are elected annually and serve
at the pleasure of the Board of Directors.

Mr. Stern, co-founder of E-Z-EM, has served as Chairman of the Board
and Director of the Company since its formation in 1962. Prior to 1994, Mr.
Stern also served as Chief Executive Officer, and prior to 1990, he served as
President of the Company since its formation.

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<PAGE>

Mr. Martin has served as President, Chief Executive Officer and
Director since 1994, and previously served as President, Chief Operating Officer
and Director from 1990 to 1993.

Dr. Meyers, co-founder of E-Z-EM, has served as Senior Vice President -
Strategic Scientific Opportunities and Director since 1994, and previously
served as the Medical Director, Senior Vice President and Director of the
Company since its formation in 1962. From 1955 until his retirement in December
1994, Dr. Meyers was a radiologist whose medical practice was limited to X-ray
diagnosis and ultrasonography.

Mr. Carden has served as Senior Vice President and General
Manager - Imaging Products Division since 1994, and previously
served as Senior Vice President - International Operations from
1983 to 1993. Mr. Carden has been an employee of the Company
since 1970.

Mr. Zimmet has served as Senior Vice President - Special
Projects since 1988, and has been an employee of the Company
since 1982.

Ms. Baron has served as Vice President - Human Resources
since January 1995, and has been an employee of the Company since
1985.

Mr. Burk has served as Vice President - Manufacturing since
1987.

Mr. Cacchioli has served as Vice President - Controller
since 1988, and has been an employee of the Company since 1984.

Mr. Curtin has served as Vice President - Finance since
1985, and has been an employee of the Company since 1983.

Ms. Hatch has served as Vice President - National Accounts
since 1993, and has been an employee of the Company since 1986.

Mr. Hatch has served as Vice President - Protection Products since
February 1995, and previously served as Vice President Protection and CT
Products from 1994 to February 1995 and Vice President - Marketing from 1989 to
1993.

Mr. Hobbs has served as Vice President - AngioDynamics
Division since 1991, and has been an employee of the Company
since 1988.

Mr. Palma has served as Vice President - Sales since January
1995, and has been an employee of the Company since 1994. Prior
to joining the Company, Mr. Palma served as Director of Sales for
the Imaging Division of Berlex Laboratories (pharmaceutical
products) since 1989.

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<PAGE>

Mr. Williams has served as Vice President - Imaging Products
Management since 1993, and has been an employee of the Company
since 1980.

Ms. Zisowitz has served as Vice President - Legal and
Regulatory Affairs since March 1995, and previously served as
Vice President - Legal Affairs from 1990 to March 1995. Ms.
Zisowitz has been an employee of the Company since 1989.

Mr. Zwarun has served as Vice President - MRI since 1992, and
previously served as Vice President - Quality Assurance from 1987 to 1992.

Dr. Davis has served as Medical Director and Director of the Company
since July 1995, and previously served as Medical Director from 1994 to July
1995 and as Associate Medical Director from 1988 to 1993. He has been Professor
of Radiology and Nuclear Medicine and Director of the Division of Radiologic
Research, University of Massachusetts Medical Center since 1980.

Mr. Echenberg has been a director of the Company since 1987 and has
served as Chairman of the Board of E-Z-EM Canada Inc., a wholly-owned subsidiary
of the Company, since 1994. He is a founder and has been a general partner and
director of Eckvest Equity Inc. (personal investment and consulting services)
since 1989. He was also a founder and had been a senior partner of BDE Capital
Partners (investment banking partnership) from 1992 to 1994. He is also a
director of Lallemand Inc., ISG Technologies, Inc., LDI Research Co., Inc., LDI
Marketing Co., Inc., Canstar Sports Inc., Benvest Capital Inc. and Colliers
MacAuley Nicholl. The Company has an investment in ISG Technologies, Inc.

Mr. Katz has been a director of the Company since 1983. He is the
founder and has been a principal of CKR Group, Ltd. (investment banking) since
its organization in August 1995. Previously, he had been the co-owner and
President of Ever Ready Thermometer Co., Inc. from its acquisition in 1985 until
its sale in November 1994. From 1971 until 1980 and from 1983 until 1985, he
held various executive positions with Baxter International and subsidiaries of
Baxter International, including that of Chief Financial Officer of Baxter. He is
also a director of Intec, Inc. and Binax.

Mr. Meyer has been a director of the Company since 1968. He
has been the Executive Director of the Western States Arts
Federation, Santa Fe, New Mexico, which provides and develops
regional arts programs, since 1990.

Mr. Nadel has been a director of the Company since 1972. He is a
Certified Public Accountant, member of both the New York Bar and the Connecticut
Bar and has been a principal of Irwin H. Nadel & Company, Fairfield,
Connecticut, since 1960, which provides management consulting services to the
Company as Trustee of its 401(k) Plan.

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<PAGE>

Mr. Topol has been a director of the Company since 1982. Prior to his
retirement in 1994, he served as an Executive Vice President of Smith Barney,
Inc. (financial services) for more than five years. He is also a director of
First American Health Concepts, Fund for the Aging, City Meals on Wheels,
American Health Foundation, State University of New York - Purchase and Group
One Ltd.

Mr. Van Kirk has served as Secretary of the Company since 1985. He is
counsel in the law firm of Meighan & Necarsulmer, Mamaroneck, New York, which
has provided legal services to the Company.

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<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation
for services, in all capacities for 1995, 1994 and 1993, of those persons who
were, at the end of 1995, Chief Executive Officer ("CEO") (Daniel R. Martin) and
each of the four most highly compensated executive officers of the Company other
than the CEO (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------- ---------------------------
Awards Payouts
------------------- -------
Other
Annual Restricted All Other
Name and Compensa- Stock LTIP Compensa-
Principal Fiscal Salary Bonus tion (1) Awards Options Payouts tion (2)
Position Year ($) ($) ($) ($) # ($) ($)
-------- ------ ------ ----- --------- --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Howard S. Stern,..... 1995 $250,000 None None None 70,000 None $11,712
Chairman of the Board 1994 250,000 None None None None None 9,627
1993 250,000 None None None None None 7,712

Daniel R. Martin,.... 1995 $200,000 None None None 110,000 None $ 8,453
President and Chief 1994 200,000 None None None None None 9,150
Executive Officer 1993 200,000 None None None 30,000 None 10,347

George P. Carden,.... 1995 $186,300 $25,000 None None 29,000 None $ 7,330
Senior Vice President 1994 172,125 None None None None None 7,853
1993 162,000 13,446 None None 6,000 None 7,764

Arthur L. Zimmet,.... 1995 $153,000 $10,000 None None 38,000 None $ 7,466
Senior Vice President 1994 153,000 None None None None None 8,094
1993 153,000 12,852 None None 7,000 None 7,954

Dennis J. Curtin,.... 1995 $144,000 $25,000 None None 38,000 None $ 7,027
Vice President 1994 144,000 None None None None None 7,660
1993 144,000 12,960 None None 7,000 None 7,613
</TABLE>

---------------

(1) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the Named Executive Officers
for 1995, 1994 and 1993 did not exceed the lesser of 10% of such
officer's total annual salary and bonus for 1995, 1994 or 1993 or
$50,000; such amounts are, therefore, not reflected in the table.

(2) For 1995, 1994 and 1993, represents for each of the Named Executive
Officers the amounts contributed by the Company under the
Profit-Sharing Plan and, as matching contributions, under the companion
401(k) Plan.

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<PAGE>

Option Grants Table

The following table sets forth certain information concerning stock
option grants made during 1995 to the Named Executive Officers. These grants are
also reflected in the Summary Compensation Table. All of the options granted
during 1995 have an exercise price equal to the fair market value of the
Company's Class B Common Stock on the date of grant, and expire in ten years. 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 the Company's future performance. The Company
did not grant any stock appreciation rights during 1995.

<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
--------------------------------------------------------------- ------------------------------------
5% 10%
----------------- -----------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Stock Potential Stock Potential
Granted in Fiscal Price Expiration Price Value Price Value
Name (#) (1) Year 1995 ($/Sh) Date ($/Sh) $ ($/Sh) $
---- ---------- ---------- -------- ---------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Howard S. Stern... 70,000 (2) 7.6% $4.75 7/26/04 $7.74 $209,300 $12.32 $529,900

Daniel R. Martin.. 110,000 (2) 12.0% $4.75 7/26/04 $7.74 $328,900 $12.32 $832,700

George P. Carden.. 29,000 (2) 3.2% $4.75 7/26/04 $7.74 $86,710 $12.32 $219,530

Arthur L. Zimmet.. 38,000 (2) 4.1% $4.75 7/26/04 $7.74 $113,620 $12.32 $287,660

Dennis J. Curtin.. 28,000 (2) 3.0% $4.75 7/26/04 $7.74 $83,720 $12.32 $211,960
10,000 (3) 1.1% $4.00 5/14/05 $6.52 $25,200 $10.37 $ 63,700
</TABLE>

---------------

(1) Options are exercisable in Class B Common Stock.

(2) Options are exercisable 50% on July 27, 1995 and 50% on July 27, 1996.

(3) Options are exercisable on May 15, 1996.

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<PAGE>

Aggregated Option Exercises and Fiscal Year-End Option Value Table

The following table sets forth certain information concerning all
exercises of stock options during 1995 by the Named Executive Officers and the
fiscal year-end value of unexercised stock options on an aggregated basis:

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
June 3, 1995 June 3, 1995
(#) ($) (1)
------------- --------------

Shares Value Exercisable/ Exercisable/
Acquired on Realized Unexercisable Unexercisable
Name Exercise (#) ($) (2) (2)
---- ------------ -------- ------------- --------------

Howard S. Stern... None None 35,000/ None/
35,000 None

Daniel R. Martin.. None None 115,000/ None/
55,000 None

George P. Carden.. None None 20,500/ None/
14,500 None

Arthur L. Zimmet.. None None 26,000/ None/
19,000 None

Dennis J. Curtin.. None None 21,000/ None/
24,000 $2,500

---------------

(1) Options are "in-the-money" if on June 3, 1995, the market price of the
stock exceeded the exercise price of such options. The value of such
options is calculated by determining the difference between the
aggregate market price of the stock covered by the options on June 3,
1995 and the aggregate exercise price of such options.

(2) Options granted prior to the Company's recapitalization on October 26,
1992 (see Note J to the Consolidated Financial Statements included
herein) are exercisable one-half in Class A Common Stock and one-half
in Class B Common Stock. Options granted after the recapitalization are
exercisable in Class B Common Stock.

Compensation of Directors

Directors, who are not employees of the Company, are entitled to
directors fees of $15,000 annually. Directors, who serve on committees of the
Company and who are not employees or consultants of the Company, are entitled to
a fee of $500 for each committee meeting attended, except that the chairman of
the committee is entitled to a fee of $1,000 for each committee meeting
attended.

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<PAGE>

Employment Contract

During 1994, the Company entered into an employment contract with
Howard S. Stern. This employment contract is for an initial term of
five years and is to be automatically extended for an additional three
years if certain contingencies are met. Mr. Stern's compensation,
pursuant to his employment contract, for 1995 was $250,000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth information, as of August 2, 1995, as to
the beneficial ownership of the Company's voting Class A Common Stock by each
person known by the Company to own beneficially more than 5% of the Company's
voting Class A Common Stock:

Name and Address of Shares (1) Percent of
Beneficial Owner Beneficially Owned Class
-------------------- ------------------ ----------

Howard S. Stern,................ 956,412 23.6
Chairman of the Board,
Director
717 Main Street
Westbury, NY 11590

Betty S. Meyers................. 928,806 22.9
Phillip H. Meyers, M.D.,
Senior Vice President,
Director
401 Emerald Street
New Orleans, LA 70124

Irwin H. Nadel,................. 309,585 (2) 7.6
Director
35 Quail Run Circle
Fairfield, CT 06430

Wellington Management Company,.. 219,258 5.4
75 State Street
Boston, MA 02109

The following table sets forth information, as of August 2, 1995, as to
the beneficial ownership of the Company's voting Class A and non-voting Class B
Common Stock, by (i) each of the Company's directors, (ii) each of the Company's
Named Executive Officers, and (iii) all directors and executive officers of the
Company as a group:

Class A Class B
------------------ ------------------
Shares Percent Shares Percent
Name of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class Owned (3) Class
---------------- ------------ ------- ------------ ------

Howard S. Stern,........... 956,412 23.6 1,133,985 21.7
Chairman of the Board,
Director

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<PAGE>

Class A Class B
--------------------- ---------------------
Shares Percent Shares Percent
Name of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class Owned (3) Class
---------------- ------------ ------- ------------ ------

Phillip H. Meyers, M.D.,... 928,806 22.9 1,110,099 21.3
Senior Vice President,
Director

Irwin H. Nadel,............ 309,585 (2) 7.6 334,354 (2) 6.4
Director

Daniel R. Martin,.......... 22,000 * 108,297 2.1
President, Chief Executive
Officer, Director

Arthur L. Zimmet,.......... 28,750 * 60,079 1.2
Senior Vice President

Robert M. Topol,........... 26,000 * 27,588 *
Director

Donald A. Meyer,........... 20,179 * 27,455 *
Director

George P. Carden,.......... 6,725 * 28,339 *
Senior Vice President and
General Manager

James L. Katz,............. 3,025 * 21,118 *
Director

Dennis J. Curtin,.......... 1,802 * 23,130 *
Vice President

Paul S. Echenberg,......... 3,000 * 20,091 *
Chairman of the Board of
E-Z-EM Canada Inc., Director

Michael A. Davis, M.D.,.... None * 18,750 *
Medical Director, Director

All directors and executive
officers as a group (22
persons)................. 2,307,316 (2) 56.8 3,058,718 (2) 58.6

---------------

* Does not exceed 1%.

(1) Includes Class A Common Stock shares issuable upon exercise of options
currently exercisable or exercisable within 60 days from August 2, 1995
as follows: Irwin H. Nadel (2,500), Daniel R. Martin (15,000), Robert
M. Topol (2,500), Donald A. Meyer (2,500), James L. Katz (2,500) and
Paul S. Echenberg (2,500).

(2) The Class A and Class B Common Stock include 282,585 shares and 300,811
shares, respectively, held as Trustee under the Trusts for the benefit
of Seth Frederick Stern and Rachel Beth Stern, and as to which the
Trustee disclaims beneficial ownership, even

-30-

<PAGE>

though the Trustee has the power to vote and dispose of such
shares.

(3) Includes Class B Common Stock shares issuable upon exercise of
options currently exercisable or exercisable within 60 days from
August 2, 1995 as follows: Howard S. Stern (35,000), Phillip H.
Meyers, M.D. (15,000), Irwin H. Nadel (4,500), Daniel R. Martin
(100,000), Arthur L. Zimmet(26,000), Robert M. Topol (4,500),
Donald A. Meyer (4,500), George P. Carden (20,500), James L. Katz
(19,500), Dennis J. Curtin (21,000), Paul S. Echenberg (19,500)
and Michael A. Davis, M.D. (18,750).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A major facility of the Company located in Westbury, New York is owned
27% by Howard S. Stern, 25% by Phillip H. Meyers, M.D., 5% by other employees of
the Company and 43% by unrelated parties, which includes a 25% owner who manages
the property. Aggregate rentals, including real estate tax payments, were
$144,142 during 1995. The lease term expires in June 1996.

The Company has engaged James L. Katz, a director of the Company, for
consulting services. Fees for such services, including fees relating to
attendance at directors' meetings, were approximately $99,000 during 1995.

The Company has engaged Paul S. Echenberg, a director of the Company,
both as a consultant and employee. Fees for such services, including fees
relating to attendance at directors' meetings, were approximately $165,000
during 1995. The Company has an investment in an entity in which Mr. Echenberg
serves as a director.

The Company has engaged Michael A. Davis, M.D., a recently appointed
director of the Company, for consulting services. Fees for such services were
approximately $97,000 during 1995.

-31-

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K

Page

(a) 1. FINANCIAL STATEMENTS

The 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 Certified Public Accountants 35

Consolidated balance sheets - June 3, 1995 and
May 28, 1994 37

Consolidated statements of earnings - fifty-three weeks
ended June 3, 1995 and fifty-two weeks ended
May 28, 1994 and May 29, 1993 39

Consolidated statements of stockholders' equity - fifty-
three weeks ended June 3, 1995 and fifty-two weeks
ended May 28, 1994 and May 29, 1993 40

Consolidated statements of cash flows - fifty-three weeks
ended June 3, 1995 and fifty-two weeks ended
May 28, 1994 and May 29, 1993 41

Notes to consolidated financial statements 43

(a) 2. FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statement schedule is included in
Part IV of this report:

Schedule II - Valuation and qualifying accounts 64

All 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. EXHIBITS

3(i) Certificate of amendment to restated certificate
of incorporation (a)

3(ii) Amended Bylaws (b)

10 1983 Employees Stock Option Plan (a)

10 1984 Directors and Consultants Stock Option Plan (a)

10 Income Deferral Program (a)

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<PAGE>

11 Statement re computation of per share earnings 65

13 Annual report to security holders (c)

21 Subsidiaries of the Registrant 66

22 Proxy statement to security holders (c)

23 Consent of Independent Certified Public Accountants 67

27 Financial Data Schedule 68

99 Report of Independent Certified Public Accountants
Other than Principal Accountants 69
---------------

(a) Incorporated by reference to Exhibit 3 of Registrant's annual
report filed on Form 10-K for the fiscal year ended May 29,
1993

(b) Incorporated by reference to Exhibit 3 of Registrant's
annual report filed on Form 10-K for the fiscal year ended
May 28, 1994

(b) 1. REPORTS ON FORM 8-K

No reports on Form 8-K were filed for the fourth quarter ended June 3,
1995.

Schedules other than those shown above are not submitted as the subject
matter thereof is either not required or is not present in amounts sufficient to
require submission in accordance with the instructions in Regulation S-X or the
information required is included in the Notes to Consolidated Financial
Statements.

-33-

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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 24, 1995 /s/ Howard S. Stern
---------------- -------------------------------
Howard S. Stern, Chairman of
the Board, Director

Pursuant 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 24, 1995 /s/ Howard S. Stern
--------------- --------------------------------------------
Howard S. Stern, Chairman of the Board,
Director

Date August 24, 1995 /s/ Daniel R. Martin
--------------- --------------------------------------------
Daniel R. Martin, President, Chief
Executive Officer, Director

Date August 24, 1995 /s/ Phillip H. Meyers
--------------- --------------------------------------------
Phillip H. Meyers, Senior Vice President
- Strategic Scientific Opportunities,
Director

Date August 24, 1995 /s/ Dennis J. Curtin
--------------- --------------------------------------------
Dennis J. Curtin, Vice President -
Finance (Chief Accounting and Financial
Officer)

Date August 23, 1995 /s/ Michael A. Davis
--------------- --------------------------------------------
Michael A. Davis, Director

Date August 24, 1995 /s/ Paul S. Echenberg
--------------- --------------------------------------------
Paul S. Echenberg, Director

Date August 24, 1995 /s/ James L. Katz
--------------- --------------------------------------------
James L. Katz, Director

Date August 21, 1995 /s/ Donald A. Meyer
--------------- --------------------------------------------
Donald A. Meyer, Director

Date August 21, 1995 /s/ Irwin H. Nadel
--------------- --------------------------------------------
Irwin H. Nadel, Director

Date August 23, 1995 /s/ Robert M. Topol
--------------- --------------------------------------------
Robert M. Topol, Director

-34-

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
E-Z-EM, Inc.

We have audited the accompanying consolidated balance sheets of E-Z-EM, Inc. and
Subsidiaries as of June 3, 1995 and May 28, 1994, and the related consolidated
statements of earnings, stockholders' equity and cash flows for the fifty-three
weeks ended June 3, 1995 and the fifty-two weeks ended May 28, 1994 and May 29,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
certain subsidiaries, which statements reflect total assets constituting
approximately 20% in 1995 and 29% in 1994 and net sales constituting
approximately 13% in 1995 and 22% in 1994 and 1993 of the related consolidated
totals. Those statements were audited by other auditors, whose reports thereon
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for these subsidiaries, is based solely upon the reports of the other
auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 and the reports of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, 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 June
3, 1995 and May 28, 1994, and the consolidated results of their operations and
their consolidated cash flows for the fifty-three weeks ended June 3, 1995 and
the fifty-two weeks ended May 28, 1994 and May 29, 1993, in conformity with
generally accepted accounting principles.

As discussed in Note I to the financial statements, the accompanying
consolidated financial statements include an estimated liability with respect to
the early termination of a lease agreement. The management of Surgical Dynamics
Inc., the Company's 51%-owned subsidiary, is in negotiations to resolve such
matter. However, the final resolution of actual settlement amounts is dependent
upon future events of which the outcome is not fully determinable at the present
time.

-35-

<PAGE>

We have also audited the financial statement schedule listed in the Index at
Item 14(a)(2). In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.

GRANT THORNTON LLP
Certified Public Accountants

Melville, New York
July 25, 1995

-36-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 3, May 28,
ASSETS 1995 1994
------- --------
(in thousands)

CURRENT ASSETS
Cash and cash equivalents $ 3,962 $ 6,851
Debt and equity securities 485 485
Accounts receivable, principally trade,
net of allowance for doubtful
accounts of $465,000 in 1995 and
$406,000 in 1994 17,354 17,587
Inventories 22,752 18,919
Other current assets 2,602 2,432
------ ------

Total current assets 47,155 46,274

PROPERTY, PLANT AND EQUIPMENT - AT COST,
less accumulated depreciation and
amortization 20,864 18,572

COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, less accumulated
amortization of $354,000 in 1995 and
$262,000 in 1994 633 679

INTANGIBLE ASSETS, less accumulated
amortization of $492,000 in 1995 and
$403,000 in 1994 463 467

DEBT AND EQUITY SECURITIES 4,352 3,264

OTHER ASSETS 2,628 2,275
------ ------

$76,095 $71,531
======= =======

The accompanying notes are an integral part of these statements.

-37-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 3, May 28,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------- -------
(in thousands)

CURRENT LIABILITIES
Notes payable $ 1,021 $ 777
Current maturities of long-term debt 208 2,307
Accounts payable 6,713 4,394
Accrued liabilities 5,559 5,246
Accrued income taxes 400 462
------ ------

Total current liabilities 13,901 13,186

LONG-TERM DEBT, less current maturities 1,114 586

OTHER NONCURRENT LIABILITIES 1,805 1,553

MINORITY INTEREST IN SUBSIDIARY 1,385 1,937

COMMITMENTS AND CONTINGENCIES ------ ------

Total liabilities 18,205 17,262
------ ------

STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per share -
authorized, 1,000,000 shares; issued, none - -
Common stock
Class A (voting), par value $.10 per
share - authorized, 12,000,000 shares;
issued and outstanding, 4,032,532
shares in 1995 and 1994 403 403
Class B (non-voting), par value $.10 per
share - authorized, 6,000,000 shares;
issued and outstanding, 4,785,462
shares in 1995 and 4,528,680 shares
in 1994 479 453
Additional paid-in capital 11,570 10,505
Retained earnings 44,953 44,414
Unrealized holding gain on debt and equity
securities 1,786
Cumulative translation adjustments (1,301) (1,506)
----- -----

Total stockholders' equity 57,890 54,269
------ ------

$76,095 $71,531
====== ======

The accompanying notes are an integral part of these statements.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF EARNINGS

Fifty-three Fifty-two
weeks ended weeks ended
----------- -------------------
June 3, May 28, May 29,
1995 1994 1993
------- ------- -------
(in thousands, except per share data)

Net sales $97,597 $94,123 $93,417

Cost of goods sold 55,286 54,919 52,068
------ ------ ------
Gross profit 42,311 39,204 41,349
------ ------ ------
Operating expenses
Selling and administrative 34,164 31,019 33,481
Research and development 6,790 7,470 6,978
------ ------ ------
Total operating expenses 40,954 38,489 40,459
------ ------ ------

Operating profit 1,357 715 890

Other income (expense)
Interest income 556 475 653
Interest expense (322) (407) (412)
Other, net 457 285 1,125
----- ----- -----

Earnings before income taxes
and minority share of
subsidiary's operations 2,048 1,068 2,256

Income tax provision 1,228 888 1,319
----- ----- -----

Earnings before minority share
of subsidiary's operations 820 180 937

Minority share of subsidiary's
operations 810 97 742
----- ----- -----

NET EARNINGS $ 1,630 $ 277 $ 1,679
===== ====== ======

Earnings per common share
Primary and fully diluted $ .18 $ .03 $ .19
===== ===== ======

The accompanying notes are an integral part of these statements.

-39-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Fifty-three weeks ended June 3, 1995, fifty-two
weeks ended May 28, 1994 and May 29, 1993
(in thousands, except share data)
<TABLE>
<CAPTION>
Unrealized
Class A Class B holding gain
common stock common stock Additional Treasury on debt Cumulative
-------------- ------------ paid-in Retained stock and equity translation
Shares Amount Shares Amount capital earnings Shares Amount securities adjustments Total
--------- ------ ------- ------ ---------- -------- ------ ------ ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Balance at May 30, 1992 8,148,590 $815 - $ - $ 7,663 $46,099 88,107 $ (9) $ - $ 332 $54,900

Issuance of stock 4,680 970 39 39
Retirement of treasury stock (88,107) (9) (88,107) 9
One-for-two reverse common
stock split (4,032,630) (403) 403
One-for-one Class B common
stock dividend 4,032,533 403 (403)
3% common stock dividend 241,672 25 1,546 (1,573) (2)
Net earnings 1,679 1,679
Cash dividends ($.10 per
common share) (806) (806)
Foreign currency translation
adjustments (809) (809)
--------- --- --------- --- ------ ------ ------- --- ----- ------ -------

Balance at May 29, 1993 4,032,533 403 4,275,175 428 9,248 45,399 - - - (477) 55,001

Issuance of stock (1) 4,479 22 22
3% common stock dividend 249,026 25 1,235 (1,262) (2)
Net earnings 277 277
Foreign currency translation
adjustments (1,029) (1,029)
--------- --- --------- --- ------ ------ ------- --- ----- ------ -------
Balance at May 28, 1994 4,032,532 403 4,528,680 453 10,505 44,414 - - - (1,506) 54,269

Unrealized holding gain on
debt and equity securities
at May 29, 1994 3,531 3,531
Issuance of stock 270 1 1
3% common stock dividend 256,512 26 1,064 (1,091) (1)
Net earnings 1,630 1,630
Unrealized holding loss on
debt and equity securities (1,745) (1,745)
Foreign currency translation
adjustments 205 205
--------- --- --------- --- ------ ------ ------- --- ----- ------ -------
Balance at June 3, 1995 4,032,532 $403 4,785,462 $479 $11,570 $44,953 - $ - $1,786 $(1,301) $57,890
========= === ========= === ====== ====== ======= === ===== ===== ======
</TABLE>

The accompanying notes are an integral part of these statements.

-40-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fifty-three Fifty-two
weeks ended weeks ended
----------- -------------------
June 3, May 28, May 29,
1995 1994 1993
------- ------- -------
(in thousands)

Cash flows from operating activities:
Net earnings $1,630 $ 277 $1,679
Adjustments to reconcile net
earnings to net cash provided by
operating activities
Depreciation and amortization 2,800 2,728 2,583
Gain on sale of investments (24) (1,102)
Minority share of subsidiary's
operations (810) (97) (742)
Deferred income taxes 282 (61) 188
Disposal of assets 168
Changes in operating assets
and liabilities
Accounts receivable 233 (1,077) 541
Inventories (3,833) 1,637 (4,089)
Other current assets (305) 372 1,796
Other assets 128 (116) (68)
Accounts payable 2,319 616 (2,043)
Accrued liabilities 312 (960) 1,439
Accrued income taxes (107) (309) 122
Other noncurrent liabilities 190 36 68
----- ----- -----

Net cash provided by
operating activities 2,839 3,022 540
----- ----- -----

Cash flows from investing activities:
Additions to property, plant and
equipment, net (4,812) (2,175) (3,933)
(Increase) decrease in debt and
equity securities (25) 57 5,419
Decrease in certificates of deposit 1,000
----- ----- -----

Net cash (used in) provided by
investing activities (4,837) (2,118) 2,486
----- ----- -----

The accompanying notes are an integral part of these statements.

-41-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Fifty-three Fifty-two
weeks ended weeks ended
----------- -------------------
June 3, May 28, May 29,
1995 1994 1993
------- ------- -------
(in thousands)

Cash flows from financing activities:
Repayments of debt $(3,374) $(1,254) $(3,559)
Proceeds from issuance of debt 1,686 892 3,616
Proceeds from issuance of loan
by minority shareholder 258
Dividends paid (1,209)
Issuance of stock in connection with
the stock purchase plan and other 1 22 39
----- ----- -----

Net cash used in financing
activities (1,429) (340) (1,113)
----- --- -----

Effect of exchange rate changes on
cash and cash equivalents 538 (767) (504)
----- ----- -----

(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,889) (203) 1,409

Cash and cash equivalents
Beginning of year 6,851 7,054 5,645
----- ----- -----

End of year $3,962 $6,851 $7,054
====== ====== ======

Supplemental disclosures of cash
flow information:
Cash paid (refunded) during the
year for:
Interest $ 201 $ 360 $ 392
====== ====== ======

Income taxes (net of $449,000,
$263,000 and $1,157,000 in
refunds in 1995, 1994 and
1993, respectively) $ 674 $1,050 $ (54)
====== ====== ======

The accompanying notes are an integral part of these statements.

-42-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 3, 1995, May 28, 1994 and May 29, 1993

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 generally accepted
accounting principles and have been applied consistently in all material
respects.

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of E-Z-EM, Inc.
and all 100%-owned subsidiaries, as well as the accounts of Surgical
Dynamics Inc., a 51%-owned subsidiary (the "Company"). The Company is
primarily engaged in developing, manufacturing and marketing diagnostic
imaging products designed to assist radiologists in the detection of
physical abnormalities and diseases of the gastrointestinal tract.

Operations outside the United States 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 manufacturing
products located in Puerto Rico; a subsidiary manufacturing and marketing
products located in Japan; a subsidiary promoting and distributing
products located in Holland; and a subsidiary promoting and distributing
products located in the United Kingdom.

FISCAL YEAR

The Company reports on a fiscal year which concludes on the Saturday
nearest to May 31. Fiscal year 1995 ended on June 3, 1995 for a reporting
period of fifty-three weeks and fiscal years 1994 and 1993 ended on May
28, 1994 and May 29, 1993, respectively, for reporting periods of
fifty-two weeks.

CASH AND CASH EQUIVALENTS

The 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 certificates of deposit and Eurodollar investments
of $1,133,000 and $5,270,000 at June 3, 1995 and May 28, 1994,
respectively. Foreign denominated cash and cash equivalents aggregated
$1,695,000 and $3,911,000 at June 3, 1995 and May 28, 1994, respectively.

-43-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

DEBT AND EQUITY SECURITIES

Effective in fiscal 1995, the Company has adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("SFAS 115"). In accordance with the provisions of
SFAS 115, this Statement has not been applied retroactively to prior
years' financial statements.

Pursuant to SFAS 115, debt and equity securities are to be classified in
three categories and accounted for as follows: Debt securities that the
Company has the positive intent and ability to hold to maturity are
classified as "held-to-maturity securities" and reported at amortized
cost; debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with unrealized gains and losses
included in operations; and debt and equity securities not classified as
either held-to-maturity securities or trading 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
separate component of stockholders' equity, net of the related tax
effects. Cost is determined using the specific identification method.

INVENTORIES

Inventories are stated at the lower of cost (on the first-in, first-out
method) or market. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value.

PROPERTY, PLANT AND EQUIPMENT

Property, 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 $2,649,000,
$2,586,000 and $2,437,000 in 1995, 1994 and 1993, respectively.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED

The excess cost is being amortized on a straight-line basis over 5 and 40
year periods. On an ongoing basis, management reviews the valuation and
amortization of this asset to determine possible impairment by comparing
the carrying value to the undiscounted future cash flows of the related
asset. Amortization was $70,000, $65,000 and $70,000 in 1995, 1994 and
1993, respectively.

INTANGIBLE ASSETS

Intangible assets are being amortized on a straight-line basis over the
estimated useful lives of the respective assets ranging from five to
fifteen and one-half years. Amortization was $81,000, $77,000 and $76,000
in 1995, 1994 and 1993, respectively.

INCOME TAXES

Effective at the beginning of fiscal 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). This change did not have a significant impact on the
Company's consolidated financial statements. In accordance with the
provisions of SFAS 109, deferred 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 TRANSLATION

In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," the Company has determined that the
functional currency for each of its foreign subsidiaries is the local
currency. This assessment considers that the 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 separate component
of stockholders' equity.

-45-

<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

EARNINGS PER COMMON SHARE

Primary and fully diluted earnings per common share are computed on the
basis of the weighted average number of common shares outstanding plus the
common stock equivalents which would arise from the exercise of stock
options, if the latter causes dilution in earnings per common share in
excess of 3%. Common stock equivalents are excluded from both the primary
and fully diluted calculations for 1995, 1994 and 1993, since their
inclusion would not be materially dilutive.

The weighted average number of common shares on both a primary and fully
diluted basis was 8,817,785, 8,816,837 and 8,811,342 in 1995, 1994 and
1993, respectively. The weighted average number of common shares
outstanding and the per share amounts for all periods presented have been
retroactively restated to reflect the total shares issued after the 3%
stock dividends described in Note J.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year amounts to
conform to the 1995 presentation.

NOTE B - DEBT AND EQUITY SECURITIES

Debt and equity securities at June 3, 1995 consist of the following:

Unrealized
Amortized Fair Holding
Cost Value Gain (Loss)
--------- ----- -----------
(in thousands)
Current

Held-to-maturity securities
(carried on the balance sheet
at amortized cost)
Debt securities $ 75 $ 75
----- -----

Available-for-sale securities
(carried on the balance sheet
at fair value)
Equity securities 398 357 $ (31)
Other 53 53
----- ----- ------

451 410 (31)
----- ----- -----

$ 526 $ 485 $ (31)
===== ===== =====

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE B - DEBT AND EQUITY SECURITIES (continued)

Unrealized
Amortized Fair Holding
Cost Value Gain (Loss)
--------- ----- -----------
(in thousands)
Noncurrent

Held-to-maturity securities
(carried on the balance sheet
at amortized cost)
Debt securities with
maturities after one year
through five years $1,593 $1,605
----- -----

Available-for-sale securities
(carried on the balance sheet
at fair value)
Equity securities 1,670 2,758 $1,088
Other 1 1
----- ----- ------

1,671 2,759 1,088
----- ----- -----

$3,264 $4,364 $1,088
===== ===== =====

At May 28, 1994, other marketable investments (now classified as debt and
equity securities), which consisted primarily of adjustable rate preferred
stock and state municipal bonds, were carried at the lower of aggregate
cost or market value. The cost and market value of other marketable
investments at May 28, 1994 were $494,000 and $485,000, respectively.

At May 28, 1994, noncurrent marketable investments (now classified as debt
and equity securities), which consisted primarily of municipal bonds and
equity securities, were also carried at the lower of aggregate cost or
market value. The cost and market value of noncurrent marketable
investments at May 28, 1994 were $3,264,000 and $6,670,000, respectively.
$5,048,000 of such market value related to the Company's investment in ISG
Technologies, Inc.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE C - INVENTORIES

Inventories consist of the following:

June 3, May 28,
1995 1994
------- -------
(in thousands)

Finished goods $11,856 $ 8,927
Work in process 2,214 1,704
Raw materials 8,682 8,288
------ ------

$22,752 $18,919
======= =======

NOTE D - PROPERTY, PLANT AND EQUIPMENT, AT COST

Property, plant and equipment are summarized as follows:

Estimated
Useful June 3, May 28,
Lives 1995 1994
--------- ------- -------
(in thousands)

Building and building
improvements 10 to 39 years $11,176 $ 7,229
Machinery and equipment 2 to 10 years 23,897 21,979
Leasehold improvements Term of lease 1,816 3,397
------ ------

36,889 32,605
Less accumulated depreciation
and amortization 19,709 17,175
------ ------

17,180 15,430
Land 3,684 3,142
------ ------

$20,864 $18,572
======= =======

In July 1994, the Company's Canadian subsidiary purchased the land and
building housing its manufacturing facilities for approximately
$2,817,000.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE E - INCOME TAXES

Income tax expense (benefit) analyzed by category and by income statement
classification is summarized as follows:

1995 1994 1993
------ ------ ------
(in thousands)
Current
Federal $ 3 $ (126) $ (150)
State and local 66 60 46
Foreign 877 1,015 1,235
----- ----- -----

Subtotal 946 949 1,131

Deferred 282 (61) 188
----- ----- -----

Total $1,228 $ 888 $1,319
===== ===== =====

As discussed in Note A, the Company adopted SFAS 109 at the beginning of
fiscal 1993. Deferred income taxes for 1995, 1994 and 1993 reflect the
impact of temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws.

Temporary differences which give rise to deferred tax assets and liabilities
are summarized as follows:

June 3, May 28,
1995 1994
------- -------
(in thousands)
Deferred tax assets
Tax operating loss carryforwards $3,767 $2,911
Tax credit carryforwards 1,295 947
Difference between book and tax basis
in investment sold to Canadian
subsidiary 1,137 1,137
Capital loss carryforwards 453 431
Alternative minimum tax ("AMT")
credit carryforward 165 136
Expenses incurred not currently
deductible 1,455 1,239
Unrealized investment losses 877 3
Deferred compensation costs 487 410
Inventories 243 400
Other 67 119
----- -----

Gross deferred tax asset 9,946 7,733
----- -----

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE E - INCOME TAXES (continued)

June 3, May 28,
1995 1994
------- -------
(in thousands)
Deferred tax liabilities
Excess tax over book depreciation $ 914 $ 813
Tax on unremitted profits of Puerto
Rican subsidiary 145 202
Unrealized investment gains 144
Other 109 221
----- -----

Gross deferred tax liability 1,312 1,236

Valuation allowance (7,861) (6,225)
----- -----

Net deferred tax asset $ 773 $ 272
===== =====

In 1994, the Company sold to its Canadian subsidiary warrants to purchase
396,396 shares of stock in ISG Technologies, Inc. This transaction
generated a capital gain for tax purposes of approximately $3,344,000,
utilizing a portion of the Company's capital loss carryforward and giving
rise to a temporary difference pertaining to the difference between the
financial statement and tax basis in this asset.

If not utilized, the tax operating and capital loss carryforwards will
expire in various amounts over the years 1996 through 2010. The tax credit
carryforwards will expire in various amounts over the years 1997 through
2010. The AMT credit can be carried forward indefinitely.

Deferred income taxes are provided for the expected Tollgate tax on the
undistributed earnings of the Company's Puerto Rico subsidiary, which are
expected to be distributed at some time in the future. Deferred income
taxes have not been provided on $1,008,000, representing the Company's
share in the undistributed earnings of its 51%-owned subsidiary, Surgical
Dynamics Inc. ("Surgical"), because of the intent to partially finance
expansion and operating requirements by reinvestment of these earnings.
Pursuant to the provisions of SFAS 109, the Company is required to record
deferred income taxes on the undistributed earnings of Surgical beginning
in 1994. However, Surgical had no earnings in 1995 and 1994.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE E - INCOME TAXES (continued)

At June 3, 1995, undistributed earnings of certain foreign subsidiaries
aggregated $13,465,000 which will not be subject to U.S. tax until
distributed as dividends. Since the earnings have been, or are intended to
be, indefinitely reinvested in foreign operations, no provision has been
made for any U.S. taxes that may be applicable. Furthermore, 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. It is not practical to estimate the amount of U.S. tax, if
any, that might be payable on the eventual remittance of 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 $1,270,000. Under the provisions of the Omnibus Budget
Reconciliation Act of 1993, undistributed earnings of foreign subsidiaries
may be taxable in certain situations for fiscal years beginning after
September 30, 1993.

Deferred tax assets and liabilities are included in the consolidated
balance sheets as follows:

June 3, May 28,
1995 1994
------- -------
(in thousands)

Current - Other assets $ 135
Current - Accrued income taxes $(220) (418)
Noncurrent - Other assets 993 630
Noncurrent - Other noncurrent liabilities (75)
--- ---

Net deferred tax asset $ 773 $ 272
=== ===

Earnings (loss) before income taxes and minority share of subsidiary's
operations for U.S. and international operations consist of the following:

1995 1994 1993
------ ------ ------
(in thousands)

United States $ (706) $(2,023) $ (886)
International 2,754 3,091 3,142
----- ----- -----
$2,048 $ 1,068 $2,256
===== ===== =====

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE E - INCOME TAXES (continued)

The Company's consolidated income tax provision has differed from the
amount which would be provided by applying the U.S. Federal statutory
income tax rate to the Company's earnings before income taxes and minority
share of subsidiary's operations for the following reasons:

1995 1994 1993
------ ------ -------
(in thousands)

Income tax provision $1,228 $ 888 $1,319
Effect of:
State income taxes, net of
Federal tax benefit (26) (20) (15)
Research and development credit 24 11 15
Earnings of the Puerto Rico
subsidiary, net of Puerto
Rico Corporate tax and
Tollgate tax 373 367 303
Earnings of the Foreign Sales
Corporation (10)
Tax-exempt portion of
investment income 7 13 48
Losses of entities generating
no current tax benefit (581) (1,080) (626)
Utilization of loss carry-
forwards by foreign entity 50
Adjustments of estimated
taxes (268)
Change in valuation allowance
with respect to a subsidiary (135) 108
Other (194) 26 1
----- ----- -----

Income tax provision at
statutory tax rate of 34% $ 696 $ 363 $ 767
===== ===== =====

The Company has an agreement with the Commonwealth of Puerto Rico pursuant
to which its operations in Puerto Rico are subject to a partial tax
exemption which expires January 23, 2007. Commonwealth taxes are currently
being provided on earnings of the subsidiary.

The U.S. Federal income tax returns of the Company through June 1, 1991
have been closed by the Internal Revenue Service.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE F - DEBT

Short-term debt consists of the following:

June 3, May 28,
1995 1994
------- -------
(in thousands)

Japanese bank
4.00% note (1) $ 607
5.25% note (1) $480
Bank, 10.75% line of credit (2) 150
Other financial institutions
6.37% note, unsecured 264
3.50% note, unsecured 297
----- ---

$1,021 $777
===== ===

Long-term debt consists of the following:

June 3, May 28,
1995 1994
------- -------
(in thousands)

Japanese bank loans, due February 1999
through March 2001, 1.90% to 4.10% (1) $1,277 $ 590
Bank term note, repaid in December 1994 2,000
Industrial development loans, repaid in
June 1994 264
Obligations under capital leases 45 39
----- -----

1,322 2,893
Less current maturities 208 2,307
----- -----

$1,114 $ 586
===== =====

(1) Collateralized by property, plant and equipment having a net carrying
value of $2,000,000 at June 3, 1995.

(2) Surgical has available $500,000 under this line of credit with a bank,
which is collateralized by accounts receivable and inventory and
expires July 31, 1995. Surgical is in the process of renegotiating such
line of credit.

The Company has available $4,000,000 under an unsecured line of credit
with a bank, which expires on November 30, 1995. At June 3, 1995, no
amounts were outstanding under this line of credit.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE F - DEBT (continued)

The Company's Canadian subsidiary has available a line of credit in the
amount of $725,900 (Canadian $1,000,000) with a bank, which expires on
December 31, 1995 and is collateralized by accounts receivable. At June
3, 1995, no amounts were outstanding under this line of credit.

During 1995 and 1994, the weighted average interest rates on short-term
debt were 5.48% and 4.77%, respectively.

NOTE G - ACCRUED LIABILITIES

Accrued liabilities consist of the following:

June 3, May 28,
1995 1994
------- -------
(in thousands)

Payroll and related expenses $3,341 $2,768
Accrued lease settlement (Note I) 600 600
Other 1,618 1,878
----- -----

$5,559 $5,246
====== ======

NOTE H - RETIREMENT PLANS

E-Z-EM, Inc. and certain domestic subsidiaries ("E-Z-EM") provide 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. These plans cover all
E-Z-EM employees not otherwise covered by collective bargaining
agreements. In 1995, 1994 and 1993, profit-sharing contributions were
$464,000, $457,000 and $400,000, respectively, and 401(k) matching
contributions were $292,000, $274,000 and $238,000, respectively.

Surgical Dynamics Inc. also provides pension benefits to eligible
employees through a Profit-Sharing Plan and a 401(k) Plan. In 1994 and
1993, profit-sharing contributions were $10,000 and $8,000, respectively.
There was no profit-sharing contribution in 1995. In 1995, 1994 and 1993,
401(k) matching contributions were $43,000, $60,000 and $51,000,
respectively.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE H - RETIREMENT PLANS (continued)

E-Z-EM Canada Inc., a wholly-owned subsidiary of the Company, also
provides pension benefits to eligible employees through a Defined
Contribution Plan. In 1995, 1994 and 1993, contributions were $53,000,
$88,000 and $60,000, respectively.

NOTE I - COMMITMENTS AND CONTINGENCIES

The Company is presently a defendant in a product liability action. This
suit claims damages based upon alleged injuries resulting from the use of
one of the Company's products. The action is in its early stages and while
the Company is actively defending against the claim, it is unable to
predict its outcome. It should be noted that in this action the Company is
one among several defendants and, as such, the Company's liability, if
any, is not quantifiable at this time. The Company does not believe that
the ultimate outcome in this action will have a material adverse effect on
the consolidated financial statements.

The Company was the defendant in a product liability action with respect
to an alleged adverse reaction to one of its products. Such action was
settled in October 1994. The settlement was covered by insurance.

During March 1994, the Company began recalling its effervescent granules
and colon cleansing products due to packaging and formulation problems,
which might have resulted in inconsistent product performance over time.
The recalls were initiated by the Company's desire to ensure complete
product efficacy, as patient safety issues were not involved. The Company
recorded a pre-tax provision in the aggregate amount of $1,546,000 during
1994, with respect to such recalls. During 1995, such recall was completed
and the Company reduced this provision by $156,000 based upon the actual
results of the recall. Such amounts are reflected in cost of goods sold in
the consolidated statements of earnings. These products currently account
for less than five percent of the Company's sales volume. Included in
accrued liabilities and inventory are reserves related to these recalls of
approximately $22,000 and $127,000, respectively, at June 3, 1995.

The Company has been sued by Olympia Holding Corporation p/k/a P-I-E
Nationwide, Inc. for $443,830. The suit, filed on October 5, 1992, is
presently pending in the United States Bankruptcy Court for the Middle
District of Florida. The case is in its preliminary stages. The Company is
being represented in this action by a law firm which is also representing
numerous other defendants being sued by the same plaintiff on the same
grounds recovery for alleged undercharges for freight carriage. It is not
possible, at this stage, to determine what, if any, liability exists with
respect to the Company in this matter. The Company

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE I - COMMITMENTS AND CONTINGENCIES (continued)

will vigorously defend against this action; it has been informed by legal
counsel that there exist numerous valid defenses to this case.

During 1993, Surgical's lease agreement on the Alameda, California office
and production facilities was prematurely terminated by Surgical. As of
the termination, the remaining future minimum lease payments totalled
approximately $3,146,000. Surgical's management is negotiating to settle
the lease commitment. In 1993, Surgical accrued $600,000 for the estimated
settlement of the lease commitment. The final resolution is dependent upon
future events, the outcome of which is not fully determinable at the
present time.

The Company leases several facilities from related parties. During 1995,
1994 and 1993, aggregate rental costs under all operating leases, which
primarily consist of facility rentals, were approximately $1,145,000,
$1,389,000 and $1,633,000, respectively, of which approximately $205,000,
$198,000 and $211,000, 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 June 3, 1995, are summarized as follows:

Total Related party
leases leases
------ --------------
(in thousands)

1996 $ 952 $142
1997 554 8
1998 434
1999 404
2000 419
Thereafter 2,971
----- ----

$5,734 $150
===== ===

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE I - COMMITMENTS AND CONTINGENCIES (continued)

The Company has employment contracts with certain key executives that
provide for an initial term of five years. Future annual commitments with
respect to these contracts at June 3, 1995, are summarized as follows:

(in thousands)

1996 $ 375
1997 375
1998 375
1999 187
-----

$1,312
======

NOTE J - COMMON STOCK

In August 1983, the Company adopted a 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 1,500,000 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. The 1983 Plan terminates in December 1995.

In August 1984, the Company adopted a second 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
300,000 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. The 1984 Plan terminates
in December 1995.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE J - COMMON STOCK (continued)

On June 3, 1995, options for 306,695 shares were exercisable at prices
ranging from $5.00 to $12.75 per share under the 1983 Plan and 57,250
shares were exercisable at prices ranging from $5.00 to $16.92 per share
under the 1984 Plan. On June 3, 1995, there remained 79,833 and 29,750
shares available for granting of options under the 1983 and 1984 Plans,
respectively.

The following schedules summarize the changes in stock options for the
three fiscal years ended June 3, 1995:

1983 Plan 1984 Plan
------------------------- -------------------------
Number of Option Price Number of Option Price
Shares Per Share Shares Per Share
--------- ------------ --------- ------------

Outstanding at
May 30, 1992 506,268 $5.92 to $12.75 117,750 $5.92 to $16.92
Granted 308,240 6.25 5,000 6.25
Cancelled (59,605) 5.92 to 12.75
-------------------------- ------------------------
Outstanding at
May 29, 1993 754,903 5.92 to 12.75 122,750 5.92 to 16.92
Granted 2,000 5.00 7,500 5.00
Cancelled (108,630) 5.92 to 12.75
-------------------------- ------------------------
Outstanding at
May 28, 1994 648,273 5.00 to 12.75 130,250 5.00 to 16.92
Granted 917,915 4.00 to 4.75 170,500 4.00 to 4.75
Cancelled (373,278) 4.75 to 12.75 (70,500) 5.92 to 16.75
-------------------------- ------------------------
Outstanding at
June 3, 1995 1,192,910 $4.00 to $12.75 230,250 $4.00 to $16.92
========================== ========================

On June 3, 1995, the weighted average exercise price for outstanding
options under the 1983 and 1984 Plans was $5.22 and $5.93 per share,
respectively.

Options granted prior to the Company's recapitalization on October 26,
1992 (described below) are exercisable one-half in Class A Common Stock
and one-half in Class B Common Stock. Options granted after the
recapitalization are exercisable in Class B Common Stock.

In August 1985, the Company adopted an Employee Stock Purchase Plan (the
"Employee Plan"). The Employee Plan provides for the purchase by employees
of Company 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 which terminates on
September 30, 1998. During 1995, employees purchased 270 shares, at prices
ranging from $3.40 to $4.46. Total proceeds received by the Company
approximated $1,000.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE J - COMMON STOCK (continued)

The Board of Directors of Surgical previously approved the adoption of the
1990 Stock Option and Stock Appreciation Rights Plan. As a result of this
plan, the Company's voting interest in Surgical will remain unchanged, but
its equity interest in Surgical may become diluted by as much as 5%.

On October 26, 1992, the Company's stockholders approved the adoption of
two amendments to the Certificate of Incorporation of the Company, which
were adopted by the Board of Directors (the "Board") on September 22,
1992. The amendments: (i) effected a one-for-two reverse stock split of
the Company's existing common stock, (ii) authorized a new voting Class A
Common Stock (the "Class A Stock") of the Company and a new non-voting
Class B Common Stock (the "Class B Stock") of the Company, (iii) increased
the authorized number of shares of common stock from 15,000,000 to
18,000,000, consisting of 12,000,000 shares of the Class A Stock and
6,000,000 shares of the Class B Stock, and (iv) reclassified each share of
existing common stock (after the reverse split) as one share of the Class
A Stock. On October 26, 1992, the Board declared a stock dividend of one
share of Class B Stock for each outstanding share of Class A Stock. The
Class A Stock and Class B Stock have substantially identical rights,
except that the Class A Stock has one vote per share on all matters on
which shareholders of the Company are entitled to vote and the Class B
Stock has no voting rights except as required by law. The Class B Stock
has certain features designed to reduce or eliminate the economic reasons
for the two classes of common stock to trade at materially different
market prices. One such feature is the ability of the Board, in its
discretion, to declare a cash dividend on the Class B Stock that is higher
(but not lower) than the dividend declared on the Class A Stock. Another
such feature is designed to enable the holders of Class B Stock to
participate in any premium paid in the future for a significant block of
the Class A Stock by a purchaser who has not acquired a proportionate
share of the Class B Stock. Earnings per common share in the consolidated
statements of earnings have been computed on the basis of the aggregate of
the two classes of common stock.

On January 20, 1993, the Board of Directors declared a 3% stock dividend
on shares of Class A and Class B Common Stock. The dividend, payable in
non-voting Class B Stock, was distributed on March 12, 1993 to
shareholders of record on February 26, 1993. On January 10, 1994, the
Board of Directors declared a 3% stock dividend on shares of Class A and
Class B Common Stock. The dividend, payable in non-voting Class B Stock,
was distributed on March 11, 1994 to shareholders of record on February
11, 1994. On January 24, 1995, the Board of Directors declared a 3% stock
dividend on shares of Class A and Class B Common Stock. The dividend,
payable in non-voting Class B Stock, was distributed on

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE J - COMMON STOCK (continued)

March 16, 1995 to shareholders of record on February 24, 1995. Earnings
per common share have been retroactively adjusted to reflect the stock
dividends.

NOTE K - OTHER RELATED PARTIES

A director provided consulting services to the Company during 1995, 1994
and 1993. Fees for such services, including fees relating to attendance at
directors' meetings, were approximately $99,000, $99,000 and $52,000
during 1995, 1994 and 1993, respectively.

Another director provided services, both as a consultant and employee, to
the Company during 1995, 1994 and 1993. Fees for such services, including
fees relating to attendance at directors' meetings, were approximately
$165,000, $88,000 and $66,000 during 1995, 1994 and 1993, respectively.

A recently appointed director provided consulting services to the Company
during 1995, 1994 and 1993. Fees for such services were approximately
$97,000, $96,000 and $96,000 during 1995, 1994 and 1993, respectively.

NOTE L - INDUSTRY SEGMENT AND GEOGRAPHIC AREA OPERATIONS

The Company is engaged in the manufacture and distribution of a wide
variety of products which are classified into two industry segments:
Diagnostic products and surgical products. Diagnostic products include
both contrast systems, consisting of barium sulfate formulations and
related apparatus used in X-ray, CT- scanning and other imaging
examinations, and non-contrast systems, including interventional radiology
products, custom contract pharmaceuticals, gastrointestinal cleansing
laxatives, X-ray protection equipment, and immunoassay tests. Surgical
products include the Nucleotome device and other surgical devices and
accessories. The Company's primary business activity is conducted with
radiologists and hospitals, located throughout the United States and
abroad, through numerous distributors. The 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 the tables below, operating profit (loss) includes total net sales less
operating expenses. Identifiable assets are those associated with industry
segment or geographic area operations, excluding loans to or investments
in another industry segment or

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE L - INDUSTRY SEGMENT AND GEOGRAPHIC AREA OPERATIONS (continued)

geographic area operation. Intersegment sales and
intergeographic sales are not material.

In 1995, 1994 and 1993, there was one customer to whom sales of diagnostic
products represented 14%, 14% and 15% of total sales, respectively.
Approximately 17% and 18% of accounts receivable pertained to this
customer at June 3, 1995 and May 28, 1994, respectively.

Industry Segments 1995 1994 1993
----------------- ------ ------ -----
(in thousands)
Net Sales
Diagnostic products $88,526 $85,645 $84,507
Surgical products 9,071 8,478 8,910
------ ------ ------

Total Net Sales $97,597 $94,123 $93,417
====== ====== ======

Operating Profit (Loss)
Diagnostic products $2,837 $1,200 $2,558
Surgical products (1,480) (485) (1,668)
----- ----- -----

Total Operating Profit $1,357 $ 715 $ 890
===== ===== =====

Identifiable Assets
Diagnostic products $71,317 $66,369 $67,738
Surgical products 5,033 5,162 5,514
Eliminations (255)
------ ------ ------

Total Identifiable Assets $76,095 $71,531 $73,252
====== ====== ======

Depreciation and Amortization
Diagnostic products $2,387 $2,336 $2,152
Surgical products 413 392 431
----- ----- -----

Total Depreciation and
Amortization $2,800 $2,728 $2,583
===== ===== =====

Capital Expenditures
Diagnostic products $4,548 $1,857 $3,659
Surgical products 264 318 274
----- ----- -----

Total Capital Expenditures $4,812 $2,175 $3,933
===== ===== =====

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE L - INDUSTRY SEGMENT AND GEOGRAPHIC AREA OPERATIONS (continued)

GEOGRAPHIC AREAS

The following geographic area data includes net sales, operating profit
(loss) generated by and assets employed in operations located in each
area:

1995 1994 (1) 1993 (1)
------ -------- --------
(in thousands)
Net Sales
United States operations $74,144 $71,900 $72,775
International operations:
Canada 14,100 14,301 14,140
Other 13,763 12,196 11,717
Eliminations (4,410) (4,274) (5,215)
------ ------ ------
Total Net Sales $97,597 $94,123 $93,417
====== ====== ======

Operating Profit (Loss)
United States operations $(1,362) $(2,571) $(2,525)
International operations:
Canada 2,350 3,143 2,839
Other 456 100 591
Eliminations (87) 43 (15)
----- ----- -----

Total Operating Profit $ 1,357 $ 715 $ 890
===== ===== =====

Identifiable Assets
United States operations $53,171 $54,300 $53,586
International operations:
Canada 15,816 12,621 14,532
Other 8,857 7,731 7,608
Eliminations (1,749) (3,121) (2,474)
------ ------ ------
Total Identifiable Assets $76,095 $71,531 $73,252
====== ====== ======

(1) Certain reclassifications have been made to the 1994 and 1993 amounts to
conform to the 1995 presentation.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 3, 1995, May 28, 1994 and May 29, 1993

NOTE L - INDUSTRY SEGMENT AND GEOGRAPHIC AREA OPERATIONS (continued)

The Company's domestic export sales by geographic area are summarized as
follows:

1995 1994 1993
------- ------ ------
(in thousands)

Europe $ 4,549 $3,667 $3,579
Other 6,079 5,717 4,070
------ ----- -----

$10,628 $9,384 $7,649
====== ===== =====

NOTE M - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Quarterly results of operations during 1995 and 1994 were as follows:

1995
-------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except per share data)

Net sales $23,902 $23,899 $21,961 $27,835
Gross profit 10,977 10,488 8,819 12,027
Net earnings (loss) 1,050 455 (1,077) 1,202
Earnings (loss) per common
share (1)(2) .12 .05 (.12) .14

1994
------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except per share data)

Net sales $21,667 $22,421 $22,633 $27,402
Gross profit 8,924 9,515 8,123 12,642
Net earnings (loss) (723) (222) (1,911) 3,133
Earnings (loss) per common
share (1) (.08) (.03) (.22) .36

(1) Earnings per common share have been retroactively restated to reflect
the total shares issued after the 3% stock dividends described in Note
J.

(2) The sum of the quarters does not equal the fiscal year due to
rounding.

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<PAGE>

E-Z-EM, Inc. and Subsidiaries

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
--------------------
(1) (2)
Balance Charged to Balance
at Charged to other at end
beginning costs and accounts- Deductions- of
Description of period expenses describe describe period
----------- --------- ---------- --------- ----------- --------

Fifty-two weeks
ended May 29, 1993

Allowance for
doubtful accounts.. $272 $119 $ 38 (a) $353
=== === === ===

Fifty-two weeks
ended May 28, 1994

Allowance for
doubtful accounts.. $353 $149 $ 96 (a) $406
=== === === ===

Fifty-three weeks
ended June 3, 1995

Allowance for
doubtful accounts.. $406 $ 91 $ 32 (a) $465
=== === === ===

(a) Amounts written off as uncollectible.

-64-

Exhibit 11

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

Fifty-three Fifty-two
weeks ended weeks ended
----------- -------------------
June 3, May 28, May 29,
1995 1994 1993
------- ------- -------
(in thousands,
except per share data)

Net earnings $1,630 $ 277 $1,679

Computation of weighted average
common shares

Weighted average common shares
outstanding 8,818 8,817 8,811

Incremental common shares for
full dilution of stock options
using applicable market price 10 32
----- ----- -----

Weighted average common shares
on a fully diluted basis 8,828 8,817 8,843
----- ----- -----

Fully diluted earnings per
common share $ .18 $ .03 $ .19
===== ===== =====

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SUBSIDIARIES OF THE REGISTRANT

The Registrant, E-Z-EM, Inc., is a Delaware corporation. The subsidiaries of
the Registrant included in the consolidated financial statements are as follows:

Incorporated
------------

E-Z-EM Belgium B.V.B.A. Belgium

E-Z-EM Canada Inc. Canada

E-Z-EM Caribe, Inc. Delaware

E-Z-EM International, Inc. Barbados

E-Z-EM Ltd. England

E-Z-EM Nederland B.V. Holland

E-Z-SUB, Inc. Delaware

Enteric Products, Inc. Delaware

Surgical Dynamics Inc. Delaware

Toho Kagaku Kenkyusho Co., Ltd. Japan

All subsidiaries of the Registrant are wholly-owned, with the exception
of Surgical Dynamics Inc., which is 51%-owned by E-Z-SUB, Inc.

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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in Registration
Statements No. 33-00184 and 33-43168 of E-Z-EM, Inc. on Form S-8 of
our report dated July 25, 1995, appearing in the Annual Report on Form
10-K of E-Z-EM, Inc. and Subsidiaries for the fifty-three weeks ended
June 3, 1995.

GRANT THORNTON LLP

Melville, New York
August 28, 1995

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<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Form 10-K for the fifty-three weeks ended June 3, 1995 and is
qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-03-1995
<PERIOD-END> JUN-03-1995
<CASH> 3,962
<SECURITIES> 485
<RECEIVABLES> 17,819
<ALLOWANCES> 465
<INVENTORY> 22,752
<CURRENT-ASSETS> 47,155
<PP&E> 40,573
<DEPRECIATION> 19,709
<TOTAL-ASSETS> 76,095
<CURRENT-LIABILITIES> 13,901
<BONDS> 1,114
<COMMON> 882
0
0
<OTHER-SE> 57,008
<TOTAL-LIABILITY-AND-EQUITY> 76,095
<SALES> 97,597
<TOTAL-REVENUES> 97,597
<CGS> 55,286
<TOTAL-COSTS> 55,286
<OTHER-EXPENSES> 40,954
<LOSS-PROVISION> 91
<INTEREST-EXPENSE> 322
<INCOME-PRETAX> 2,048
<INCOME-TAX> 1,228
<INCOME-CONTINUING> 1,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,630
<EPS-PRIMARY> .18
<EPS-DILUTED> .18

</TABLE>

AUDITORS' REPORT

To the shareholder of E-Z-EM Canada Inc.

We have audited the consolidated balance sheets of "E-Z-EM CANADA INC." and
subsidiary as of May 31, 1995 and 1994 and the consolidated statements of
earnings, retained earnings and changes in financial position for the years
ended May 31, 1995, 1994 and 1993. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of "E-Z-EM CANADA INC." and subsidiary
as of May 31, 1995 and 1994 and the results of their operations and the changes
in their financial position for the years ended May 31, 1995, 1994 and 1993 in
accordance with generally accepted accounting principles.

Jacques, Davis Lefaivre & Associes
Chartered Accountants

Montreal, July 7, 1995

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