UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-K

(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2004

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________  to ___________________

                        Commission File Number 001-09974

                               ENZO BIOCHEM, INC.
          -------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               New York                                          13-2866202
------------------------------------------                       ----------
     (State or other jurisdiction                             (I.R.S. Employer
   of incorporation or organization)                         Identification No.)

         60 Executive Boulevard,
         Farmingdale, New York                                     11735
------------------------------------------                        -------
 (Address of principal executive offices)                        (Zip Code)

                                 (631) 755-5500
                                 --------------
              (Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

(Title of Each Class)                (Name of Each Exchange on Which Registered)
Common Stock, $.01 par value         the New York Stock Exchange
----------------------------         ---------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      NONE

         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.

                                  [ ]

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Act).

                              Yes [X]      No [ ]

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity  was  last  sold  as of  January  31,  2004,  the  last  business  of the
registrant's  most recently  completed second fiscal quarter,  was approximately
$461,771,000.  As of October 7, 2004, the  Registrant  had 30,864,800  shares of
Common Stock outstanding.

                       Document Incorporated by Reference

         Portions  of  the  definitive   Proxy  Statement  to  be  delivered  to
shareholders  in connection  with the Annual Meeting of  Shareholders to be held
January 20, 2005 are incorporated by reference into Part III.

<PAGE>

                                     PART I

Item 1.  BUSINESS

OVERVIEW

         Enzo Biochem, Inc. (the "Company" or "Enzo") is a leading life sciences
and  biotechnology  company focused on harnessing  genetic  processes to develop
research tools,  diagnostics  and  therapeutics.  Enzo also provides  diagnostic
services  to the  medical  community.  Since  our  formation  in  1976,  we have
concentrated on developing  enabling  technologies for detecting and identifying
genes and for  modifying  gene  expression.  These  technologies  are  generally
applicable to the diagnosis of infectious  and other diseases and form the basis
for  a  portfolio  of  over  300  products   marketed  to  the   biomedical  and
pharmaceutical  research  markets.  We are further using these  technologies  as
platforms  for our  planned  entry  into the  clinical  diagnostics  market.  In
addition,  our work in gene analysis has led to the  development  of significant
therapeutic  product  candidates,  several of which are  currently  in  clinical
trials,  and several are in preclinical  studies.  In the course of our research
and  development  activities,  we have built  what we  believe is a  significant
patent position  (comprised of 42 issued U.S.  patents,  over 190 issued foreign
patents   and  various   pending   applications   worldwide)   around  our  core
technologies.

         The  business  activities  of the Company are  performed  by one of the
Company's  three wholly  owned  subsidiaries--Enzo  Life  Sciences,  Inc.,  Enzo
Therapeutics,  Inc., and Enzo Clinical  Labs,  Inc.  These  activities  are: (1)
research and  development,  manufacturing  and marketing of biomedical  research
products and tools  through Enzo Life Sciences and research and  development  of
therapeutic  products  through  Enzo  Therapeutics,  and (2) the  operation of a
clinical  reference  laboratory  through Enzo  Clinical  Labs.  For  information
relating  to the  Company's  business  segments,  see  Note 15 of the  Notes  to
Consolidated Financial Statements.

         The Company's  primary sources of revenue have  historically  been from
sales of  research  products  utilized  in life  science  research  and from the
clinical  laboratory  services  provided to the  healthcare  community.  For the
fiscal years ended July 31, 2004 and 2003,  respectively,  approximately 31% and
44% of the  Company's  operating  revenues  were derived from product  sales and
approximately  69% and 56%  were  derived  from  clinical  reference  laboratory
services.

MARKETS

         BACKGROUND

         DNA is the source of biological  information that governs the molecular
mechanisms  underlying  life. This information is stored in the linear sequences
of nucleotides  that comprise DNA. The sequence of the human genome,  comprising
over 30,000 genes, has been  identified.  The challenge for the next decade will
be  the  determination  of  the  function  and  relevance  of  each  gene.  This
information will facilitate the  understanding of biological  mechanisms and how
variations  and mutations in such  mechanisms  result in disease,  enabling more
rapid and accurate  detection of specific  diseases and the  development  of new
therapeutics to treat them.

         TOOLS FOR BIOMEDICAL AND PHARMACEUTICAL RESEARCH

         There  is  an  increasing  demand  by  biomedical  and   pharmaceutical
researchers  for tools that both  facilitate  and  accelerate  the generation of
biological  information.  In response to this demand,  a variety of formats,  or
tools, have been developed that allow  researchers to study biological  pathways
and to identify  mutations in gene sequences and  variations in gene  expression
levels that can lead to disease. These tools include DNA sequencing instruments,
microarrays,  biochips, microspheres, and microfluidic chips. Common among these
formats is the need for reagents that allow the  identification,  quantification
and characterization of specific genes or nucleic acid sequences.

         We believe this market will grow as a result of:

o        research spending by academic,  government and private organizations to
         determine  the function and  clinical  relevance of the gene  sequences
         identified by the Human Genome Project;

o        development of commercial  applications  based on  information  derived
         from this research; and

o        ongoing  advancements  in tools  that  accelerate  these  research  and
         development activities.

                                       2
<PAGE>

CLINICAL DIAGNOSTICS

         The clinical diagnostics market currently has been reported by industry
sources to be greater  than $20  billion.  It is  comprised  of a broad range of
tests such as clinical chemistry,  microbiology,  immunoassay, blood banking and
cancer screening. Many of these tests employ traditional  technologies,  such as
immunoassays  and cell  culture  technologies,  for the  detection  of diseases.
Immunoassays  are based on the use of  antibodies  directed  against a  specific
target, or antigen,  to detect that antigen in a patient sample.  Cell culturing
techniques involve the growth, isolation and visual detection of the presence of
microorganisms.

         There are several drawbacks to these technologies.  Immunoassays do not
allow for early  detection of diseases  because they require  minimum  levels of
antigens to be produced by the microorganism for detection. These levels vary by
microorganism, and the delay involved could be several days or several years, as
seen in HIV/AIDS.  Cell cultures are slow,  labor  intensive and not amenable to
all  microorganisms.  For example,  gonorrhea  and  chlamydia  are  difficult to
culture.

         Gene-based   diagnostics   have  many   advantages   over   traditional
technologies.  Since  gene-based  diagnostics  focus  on the  identification  of
diseases at the gene level, they can identify the presence of the disease at its
earliest stage of  manifestation  in the body.  These tests provide results more
rapidly,  are applicable to a broad spectrum of microorganisms and can easily be
automated in a multiplex platform.

         Several  advances  in  technology  are  accelerating  the  adoption  of
gene-based  diagnostics in clinical  laboratories.  These advances  include high
throughput automated formats that minimize labor costs,  non-radioactive  probes
and  reagents  that are safe to  handle,  and  amplification  technologies  that
improve the sensitivity of such diagnostics.

         According to  recognized  industry  sources,  the market for  molecular
diagnostic  tools,  assays and other  products was  estimated at $1.9 billion in
2002,  and is forecast  to grow to at least to $3.1  billion in 2005 as a result
of:

o        rising number of diagnostic  tests being developed from  discoveries in
         genome research;

o        advances in formats and other technologies that automate and accelerate
         gene-based diagnostic testing;

o        growing  emphasis by the health care  industry on early  diagnosis  and
         treatment of disease; and

o        application of gene-based  diagnostics  as tools to match  therapies to
         specific patient genetics commonly referred to as pharmacogenomics.

THERAPEUTICS

         Most diseases are the  consequence  of the expression of foreign genes,
such as those residing in viruses and pathogenic  organisms,  or the abnormal or
unregulated  expression  of the  body's  own genes.  In other  cases,  it is the
failure to express a gene that causes the disease.  Recent  advancements in gene
analysis have provided the information and tools necessary to develop drugs that
intervene  in the  disease  process at the gene level.  For a broad  spectrum of
diseases,  this approach can be more precise and effective  than  intervening in
the downstream  molecular processes of the disease.  Therapies targeting genetic
processes are called gene  medicines.  There are two  fundamental  approaches to
gene medicines, synthetic and genetic.

         Synthetic  gene  medicine  involves  the  administration  of  synthetic
nucleic acid  sequences  called  "oligos" that are designed to bind to, and thus
deactivate,  RNA produced by a gene.  To date,  this  approach has  demonstrated
limited  success.  Since a single cell may contain  thousands of strands of RNA,
large  amounts of oligos are  necessary to shut down the  production of unwanted
proteins.  Also,  since oligos are  synthetic,  they are quickly  metabolized or
eliminated  by the  body.  As a  result,  large  quantities  of  oligos  must be
delivered in multiple treatments, which can be both toxic to the body as well as
costly.

         Genetic medicine or gene therapies involve the insertion of a gene into
a cell. The inserted gene  biologically  manufactures  the therapy on an ongoing
basis.  This gene may be inserted to enable a beneficial  effect or to disable a
pathological mechanism within the cell. For example, the gene may be inserted to
replace a  missing  or  malfunctioning  gene  responsible  for  synthesizing  an
essential protein. On the other hand, a gene coding for a molecule to deactivate
either  an  overactive  gene or a gene  producing  an  unwanted  protein  may be
inserted.  As a permanent  addition  to the  cellular  DNA,  the  inserted  gene
produces RNA and/or proteins where needed.

                                       3
<PAGE>

         A major  challenge in designing  gene  therapy  medicines  has been the
efficient and safe  delivery of the gene to the  appropriate  target cell.  Gene
delivery is often  accomplished  using a delivery  vehicle known as a vector.  A
critical  quality  of the vector is its  ability to bind to the target  cell and
effectively  deliver, or transduce,  the gene into the cell. It is also critical
that the DNA of the vector not produce  proteins or antigens that can trigger an
adverse immune response.

STRATEGY

         Our  objective is to be A leading  developer and provider of medicines,
as well as a leading developer and provider of the tools and diagnostics used to
study and detect disease at the molecular level.  There can be no assurance that
our objective will be met. Key elements of our strategy include:

         APPLY OUR INNOVATIVE TECHNOLOGY TO THE INFECTIOUS DISEASE MARKET

         Our  core   technologies   have  broad   diagnostic   and   therapeutic
applications.  We have initially  focused our efforts on the infectious  disease
market.  Infectious  diseases are among the largest  contributors  to healthcare
costs  worldwide.  Generally,  there are no long-term  effective  treatments for
viral  pathogens as there are for bacterial  pathogens.  We have developed novel
technologies we believe can serve as enabling platforms for developing medicines
that genetically  target and inhibit viral functions,  as well as medicines that
regulate the immune response.  In addition to such therapeutic products, we have
capitalized   on  our  nucleic  acid  labeling,   amplification   and  detection
technologies to develop diagnostic and monitoring tests for infectious agents.

         MAXIMIZE  OUR  RESOURCES BY  COLLABORATING  WITH OTHERS IN RESEARCH AND
         COMMERCIALIZATION ACTIVITIES

         We enter into research  collaborations  with leading academic and other
research  centers to augment our core  expertise on specific  programs.  We have
research  collaborations  with, among others,  Hadassah  University  Hospital in
Jerusalem,  Israel regarding immune regulation and Cornell University  regarding
the application of our genetic  antisense  technology to HIV. During the current
fiscal year Enzo,  through Enzo  Therapeutics,  entered into two agreements with
the  University of Connecticut  Health Center at Farmington,  CT, to license and
cooperatively  develop novel therapeutics for the stimulation and enhancement of
bone  formation.  The products  emanating  from this  technology  could  provide
therapy  for bone  disorders,  including  bone loss,  fractures,  abnormalities,
diseases,  and other  applications.  We also entered into a licensing  agreement
with Thomas Jefferson University,  Philadelphia, PA for certain patents relating
to the development of products within our therapeutic program.

         Similarly,  we  seek to  fully  exploit  the  commercial  value  of our
technology by partnering with for-profit enterprises in areas in order to act on
opportunities  that  can  be  accretive  to  our  efforts  in  accelerating  our
development  program.  In line with this  strategy,  during the past fiscal year
Enzo  acquired  the assets of OraGen  Corporation,  Moorestown, New Jersey and a
privately  owned  biotechnology   company   specializing  in  immune  regulation
technologies.  This  acquisition is expected to broaden our  capabilities in the
area of immunological regulation, particularly as it relates to the treatment of
infectious diseases.

         APPLY OUR  BIOMEDICAL  RESEARCH  PRODUCTS TO THE  CLINICAL  DIAGNOSTICS
         MARKET

         We intend to apply our  gene-based  tests to the  clinical  diagnostics
market. We currently offer over 25 gene-based tests for the research market, for
the identification of such viruses as human papillomavirus, cytomegalovirus, and
Epstein-Barr  virus.  We also  have  an  extensive  library  of  probes  for the
detection of various diseases.  We have developed a standardized  testing format
that permits multiple  diagnoses to be performed on the same specimen and are in
discussions with third parties to develop instrumentation for this purpose.

         LEVERAGE  MARKETING  AND  DISTRIBUTION  INFRASTRUCTURE  OF LEADING LIFE
         SCIENCES COMPANIES

         During  fiscal  2004,  Enzo Life  Sciences  continued  to  implement an
aggressive  marketing  program  designed to more directly service its end users,
while  simultaneously  positioning the Company for product line  expansion.  The
program  involves  continued  increases  in the  direct  field  sales  force,  a
comprehensive  advertising campaign,  increased attendance at top industry trade
meetings,  and  publications  in  leading  scientific  journals,  as well as the
development of a new  interactive  web site. In addition to our direct sales, we
distribute  our research  products  through  leading  producers of gene analysis
formats and other life sciences  companies.  By partnering  with these  industry
leaders,  we are able to leverage their  established  marketing and distribution
infrastructure  to expand the  market  for our  products.  During  fiscal  2004,
distribution  agreements  were in effect with,  among others,  Roche  Diagnostic
Systems,  Amersham  PLC,  Perkin-Elmer  Life Sciences and  Affymetrix,  Inc. The
Company gave notice on October 28, 2003 that it was  terminating  its  agreement
with Affymetrix  effective November 12, 2003. The Company received notice in the
first quarter of 2004 that Amersham PLC was  terminating  its agreement with the
Company. See Item 3. Legal Proceedings.

                                       4
<PAGE>

         Research product revenue from Affymetrix represented approximately 0 %,
22%  and 23% of the  consolidated  revenues  in  fiscal  2004,  2003  and  2002,
respectively,  under a non-exclusive distribution and supply agreement. Research
product revenue from this major distributor  accounted for approximately 0 % and
50% of the Company's  total  research  product  revenue in fiscal 2004 and 2003,
respectively.  At  July  31,  2004  and  2003,  of the  Company's  net  accounts
receivable  no monies were included  from this one major  distributor.  Research
product  revenue from Amersham  represented  approximately  0%, 1% and 1% of the
consolidated  revenues  in fiscal  2004,  2003 and 2002,  respectively,  under a
non-exclusive  distribution and supply agreement.  At July 31, 2004 and 2003, 0%
and 2%, respectively, of the Company's net accounts receivable relate to amounts
due  from  this   distributor.   Research  product  revenue  from   Perkin-Elmer
represented  approximately 8%, 4% and 6% of the consolidated  revenues in fiscal
2004, 2003 and 2002, respectively, under a non-exclusive distribution and supply
agreement. At July 31, 2004 and 2003, 5% and 3%, respectively,  of the Company's
net accounts  receivable relate to amounts due from this  distributor.  Research
product  revenue  from  Roche  represented  approximately  8%,  6% and 5% of the
consolidated  revenues  in fiscal  2004,  2003 and 2002,  respectively,  under a
non-exclusive  distribution and supply agreement.  At July 31, 2004 and 2003, 0%
and 6% respectively of the Company's net accounts  receivable  relate to amounts
due from the this  distributor.  At July 31,  2004,  the Company had written off
$1.8  million  against the amount due from this  distributor.  See Item 3. Legal
Proceedings.

         EXPANDING AND PROTECTING OUR INTELLECTUAL PROPERTY ESTATE

         Since our  inception,  we have  followed a  strategy  to create a broad
encompassing  patent  position in the life sciences and  therapeutics  areas. We
have made obtaining  patent  protection a central  strategic  policy,  both with
respect  to our  proprietary  platform  technologies  and  products,  as well as
broadly in the areas of our research activities.

CORE TECHNOLOGIES

         We have  developed  a  portfolio  of  proprietary  technologies  with a
variety of research, diagnostic and therapeutic applications.

         GENE ANALYSIS TECHNOLOGY

         All  gene-based  testing is premised on the knowledge  that DNA forms a
double helix comprised of two complementary  strands that match and bind to each
other.  If a  complementary  piece of DNA (a probe) is introduced  into a sample
containing  its matching  DNA, it will bind to, or  hybridize,  to form a double
helix with that DNA. Gene-based testing is carried out by:

o        amplification  of the target DNA  sequence (a process that is essential
         for the detection of very small amounts of nucleic acid);

o        labeling  the probe with a marker that  generates a  detectable  signal
         upon hybridization;

o        addition of the probe to the sample containing the DNA; and

o        binding or  hybridization  of the probe to the target DNA sequence,  if
         present, to generate a detectable signal.

         We have developed a broad technology base for the labeling,  detection,
amplification  and formatting of nucleic acids for gene analysis.  We believe we
have a significant proprietary position in these fields.

         NON-RADIOACTIVE  LABELING AND  DETECTION.  Traditionally,  nucleic acid
probes were labeled with radioactive  isotopes.  However,  radioactively labeled
probes have a number of shortcomings.  They are unstable and consequently have a
limited shelf life.  They are  potentially  hazardous,  resulting in restrictive
licensing requirements and safety precautions for preparation, use and disposal.
Finally,  radioactive  components are expensive.  Our  technologies  permit gene
analysis without the problems  associated with radioactively  labeled probes and
are adaptable to a wide variety of formats.

         FORMATS.  There are  various  processes,  or  formats,  for  performing
probe-based  tests.  In certain  formats,  the probe is  introduced  to a target
sample  affixed  to a solid  matrix;  in others the probe is  combined  with the
sample in solution  (homogeneous  assay).  Solid matrix assays include:  IN SITU
assays in which the probe reaction  takes place directly on a microscope  slide;
dot blot assays in which the target DNA is fixed to a membrane;  and  microplate
and  microarray  assays  in which the DNA is fixed on a solid  surface,  and the
reaction can be quantified by instrumentation.

         AMPLIFICATION.  In the early  stages of  infection,  a pathogen  may be
present in very small amounts and consequently may be difficult to detect. Using
DNA  amplification,  samples  can be  treated  to cause a  pathogen's  DNA to be
replicated,  or amplified, to detectable levels. We have developed a proprietary
amplification  process for  multicopy  production  of nucleic  acid,  as well as

                                       5
<PAGE>

proprietary  techniques  for  amplifying  the  signals  of our probes to further
improve sensitivity.  Our amplification technologies are particularly useful for
the early  detection  of very  small  amounts  of target  DNA and,  unlike  PCR,
(currently  the most commonly used method of  amplification,)  we have developed
isothermal   amplification   procedures   that  can  be  performed  at  constant
temperatures  and thus do not require  expensive  heating and cooling systems or
specialized heat-resistant enzymes.

         THERAPEUTIC TECHNOLOGY PLATFORMS

         We have  developed  proprietary  technologies  in the areas of  genetic
antisense  (antisense RNA) and immune regulation that we are using as a platform
for a portfolio of novel therapeutics.

         GENE  REGULATION  TECHNOLOGY.  We are pursuing a novel approach to gene
regulation known as genetic antisense or antisense RNA. Our technology  involves
the introduction into cellular DNA of a gene that codes for an RNA molecule that
binds to, and thus deactivates,  RNA produced by a specific gene. To deliver our
antisense  gene  to the  target  cell,  we  have  developed  proprietary  vector
technology. Our vector technology has the following three strengths:

         oEFFICIENT  TRANSDUCTION.  A  principal  problem  to date of most  gene
therapy programs has been inefficient transduction,  or an unacceptably low rate
of  delivery  of  operating   genes  to  the  target  cells.  We  have  achieved
transduction   rates   significantly   higher  than  those   reported  by  other
researchers.

         oIMMUNOLOGICALLY  "QUIET." Transduced cells often produce non-essential
proteins that trigger an immune response,  causing such cells to be cleared from
the body before they can produce a therapeutic effect. Cells transduced with our
Stealth Vectors(TM) have not expressed extraneous proteins.

         o"SMART"  VECTORS.  We  incorporate  into the  surface  of our  vectors
proteins that have an affinity for the surface of the cell types  intended to be
transduced.  By including this targeting mechanism, we create in essence "smart"
vectors  that  preferentially   transduce  the  intended  cell  type.  This  may
ultimately permit us to develop a genetic antisense product that is administered
directly to the patient.

         We believe that our vector  technology has broad  applicability  in the
field of gene  medicine.  This can be attributed to the following  properties of
our  construct:

o        the viral promoters are inactivated;

o        insertional gene activation is prevented - a major safety factor;

o        chromosomal integration;

o        nuclear localization

         IMMUNE REGULATION.

         oORAL IMMUNE REGULATION. We have developed a novel therapeutic approach
based on immune regulation. Our immune regulation technology seeks to control an
individual's  immune response to a specific antigen in the body. An antigen is a
substance  that the body perceives is foreign and,  consequently,  against which
the body mounts an immune  response.  We are  developing our technology to treat
immune-mediated  diseases,  infectious  diseases and complications  arising from
transplantation.  Our technology  utilizes oral administration of known proteins
to  regulate  the  subject's  immune  response  against  the  antigen.  Specific
formulations of the protein are administered  orally to the patient according to
precise dosing protocols.

         We have filed patent applications relating to this technology,  as well
as to our  therapeutics  and protocols under  development,  relating to areas of
infectious    diseases   and   immunological    adjustments   and   enhancements
characteristic  of this  reaction.  We are  applying  our  expertise  in  immune
regulation to develop proprietary therapeutics for the treatment of a variety of
diseases,  including HIV-1 infection, chronic active hepatitis caused by HBV and
HCV  infection,  graft  versus host  disease  and  inflammatory  bowel  disease,
including Crohn's Disease and ulcerative colitis.

         oIMMUNE  POTENTIATION.  We have developed a new immunomodulator  agent,
EGS21, a  beta-D-glucosylceramide  (GC) compound, as a potential therapeutic for
treating  immune  mediated  diseases.  GC is a glycolipid that has been shown by
Enzo  scientists and  collaborators  to modulate  specific  immune  responses by
acting on  certain  immune  regulatory  cells,  and  therefore  is an  important
candidate drug in the treatment of various  immune  mediated  diseases,  such as
Crohn's disease, hepatitis B, hepatitis C, non-alcoholic  steatohepatitis (NASH)
or fatty  liver  and HIV.  We  believe  that GC could be  utilized  either  as a
separate  therapeutic or as an adjunct or  combination  treatment with our other
platforms for the management of immune mediated disorders.

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<PAGE>

         SMALL MOLECULE DEVELOPMENT

         Enzo's  newest   therapeutic   platform  involves  the  development  as
pharmaceutical  agents,  of protein factors or associated  peptides,  as well as
small molecules that interfere with  protein-protein  interactions.  It has been
shown  recently  that bone  density  is  dependent  on a  homeostatic  mechanism
requiring the  interaction  of several  protein  factors.  The  interference  of
factor-factor  interactions by small molecules can lead to significant increases
in bone mass. Enzo is developing these  observations to yield new pharmaceutical
products for the management of osteoporosis and certain periodontal disorders.

PRODUCTS AND SERVICES

         We are applying our core technologies to develop novel  therapeutics as
well as research tools for the life sciences and clinical  diagnostics  markets.
In addition,  we provide  clinical  laboratory  services to physicians and other
health care providers in the greater New York area.

         RESEARCH AND DIAGNOSTIC PRODUCTS

         We are a leading  developer  and marketer of novel  research  tools for
gene analysis. We manufacture over 300 products that may be sold individually or
combined in a kit to meet the specific needs of the researcher.  We market these
products to biomedical and  pharmaceutical  firms worldwide.  We have summarized
our products into the following major categories:

         PRE-FORMATTED IN SITU KITS. Our  pre-formatted IN SITU kits include all
of the components  necessary to identify or detect a gene in a cell or tissue on
a glass slide. These components include specific labeled non-radioactive nucleic
acid probes on a glass slide,  signaling  reagents and buffers.  We offer probes
that will detect a variety of infectious  agents,  such as human  papillomavirus
(HPV), HBV,  cytomegalovirus (CMV) and chlamydia. We market these kits under the
PATHOGENE(R) brand name. These kits target the pathology market.

         MEMBRANE  KITS.  Our  membrane  kits  include all of the  reagents  and
buffers necessary to perform a gene analysis on a membrane.  The researcher will
supply the probe required for their  individual  needs.  Membrane  technology is
broadly  used  in life  sciences  research.  We  market  these  kits  under  the
MAXSENSE(R) brand name.

         LABELED  PROBES.  We have developed a line of  non-radioactive  nucleic
acid probes that have been  chemically-labeled  to allow detection of infectious
agents.  We offer  labeled  probes  that can detect  such  infectious  agents as
adenovirus,   HBV,   cytomegalovirus  (CMV),  herpes  simplex  virus  (HSV)  and
chlamydia,  as  well  as  certain  oncogenes.   These  probes  can  be  used  in
hybridization and detection assays in the format chosen by the researcher. These
probes  are  broadly  sold  into the life  sciences  research  market  under the
BIOPROBE(R) brand name.

         LABELING AND SIGNALING REAGENTS. We have developed an extensive line of
nucleic acid labeling and detections  reagent and kits that are designed for the
life sciences research market. The products are used by scientists to detect and
identify genes in certain specific formats. Our line of kits for the labeling of
nucleic acids for the study of specific gene  expression  are marketed under the
BIOARRAY(R) brand name. This product line also includes a new kit for amplifying
small quantities of genetic material as well as our new GENEBEAM(TM)  system for
gene detection and identification.

         THERAPEUTIC DEVELOPMENT PROGRAMS

         We  have  a  number  of  therapeutic  products  in  various  stages  of
development  that are based on our  proprietary  genetic  antisense  and  immune
regulation technologies. Our therapeutic programs are described below.

         HUMAN IMMUNODEFICIENCY  VIRUS (HIV-1). We are developing  complementary
HIV-1  therapeutics  utilizing both our genetic  antisense and immune regulation
technologies.

         HIV-1  is a human  pathogenic  virus.  After  infection  it runs a slow
course  in  which  certain  of the  cells  in the  immune  system  (CD4+  cells)
progressively  disappear  from the body.  This  results  in a state in which the
infected  person  can no longer  mount an immune  response.  This loss of immune
responsiveness  is the  cause  of the  complex  of  diseases  known  as AIDS and
ultimately of death.

         According to the World Health  Organization,  there were 35-42  million
individuals  worldwide  living  with HIV  infection  during  2003.  There were 5
million new  infections  and 3 million deaths from HIV during that same year. At
present,  two classes of products have received FDA marketing approval for HIV-1
infection: reverse transcriptase inhibitors and protease inhibitors. These

                                       7
<PAGE>

drugs  are  typically  used in  combination  and may  require  more than a dozen
tablets to be taken at specific  times each day.  The cost for  treatment of HIV
infected  individuals,  once the disease has progressed to AIDS, is estimated to
exceed $38,000 per person annually.

         While combination therapy slows the progression of disease, it is not a
cure.  HIV's rapid rate of mutation  results in the development of viral strains
that no longer respond to these  medications.  This problem is often exacerbated
by  interruptions  in  dosing,  as  non-compliance  is  common  in  patients  on
combination  therapies.   Moreover,   currently  approved  drugs  produce  toxic
side-effects  in many  patients,  affecting  a variety  of organs  and  tissues,
including  the  peripheral  nervous  system and  gastrointestinal  tract,  which
side-effects  also  often  result  in  patients  interrupting  or  discontinuing
therapy.

         HGTV43(TM)  GENE  MEDICINE.   Enzo's  proprietary   Stealth  Vector(TM)
HGTV43(TM)  gene  construct  is  the  vehicle  designed  to  carry  and  deliver
anti-HIV-1  antisense RNA genes directed against the genes responsible for viral
replication. HGTV43 is designed to deliver the antisense genes to targeted blood
cells of subjects infected with HIV-1. These genes are incorporated into the DNA
of the blood cells,  and  subsequent  production  of the  antisense RNA prevents
replication of the virus, providing resistance to the virus.

         Preclinical  IN  VITRO  studies,  performed  in  conjunction  with  our
academic  collaborators,  demonstrated resistance to HIV-1 in human immune cells
into which the antisense genes had been inserted.  Our Phase I clinical trial of
the HIV-1 gene  medicine is in the follow up phase.  In this study,  white blood
cell precursors,  known as stem cells,  were collected from the subjects.  These
stem  cells  were then  treated EX VIVO with our  Stealth  Vector(R)  HGTV43(TM)
transducing vector and infused into the subject. Results of the trial have shown
that all subjects  tolerated  the procedure  and that  anti-HIV-1  antisense RNA
continued to be expressed in the subjects'  circulating  white blood cells,  the
longest running subject at 54 months to date.

         o        all subjects tolerated the procedure;

         o        anti HIV-1  antisense RNA was detected in the  circulation  of
                  subjects, the longest at 54 months to date;

         o        purified  CD4+ cells from all  evaluable  subjects were tested
                  for the presence of anti HIV-1  antisense  RNA and these cells
                  contained the antisense RNA;

         o        CD34+ cells from the bone marrow of all  subjects  were tested
                  for the presence of anti HIV-1  antisense RNA between 6 months
                  and 20 months  after  infusion and these cells  contained  the
                  antisense RNA.

         Based on these Phase I trial results  demonstrating  long-term survival
and functioning of antisense RNA in white blood cells,  including CD4+ cells, we
are preparing  for the next phase of the study in which we will test  strategies
to increase the percentage of CD4+ cells that contain the  anti-HIV-1  antisense
genes.

         One arm of the next phase of  clinical  trials to be  conducted  at New
York Presbyterian Hospital-Cornell Medical Center was initiated early this year.
Enzo's  protocol for this phase of the study was  successfully  presented to and
approved by the National Institutes of Health Recombinant DNA Advisory Committee
(RAC) and Cornell's  Institutional  Review Board  ("IRB".) The Cornell site will
focus on a strategy to increase the percentage of engineered CD4+ cells by using
a combination  of radiation  and immune  conditioning.  We anticipate  beginning
expanded studies of the trial at additional sites.

         IMMUNE REGULATION PRODUCT.  We are developing a complementary  approach
to treat HIV infection and the related  autoimmune aspect of the disease.  It is
suggested that this autoimmune  aspect may lead to depletion of CD4+ cells. This
therapeutic  approach  utilizes our immune  regulation  technology to adjust and
enhance the body's immune response to the virus.  This treatment,  consisting of
oral  administration  of an HIV protein,  is designed to reduce or eliminate the
autoimmune  aspect of HIV  infection.  In addition,  it enhances  the  antiviral
immune response, which may increase the population of CD4+ cells in the patient.
This program is currently in pre-clinical development.

         HEPATITIS B VIRUS (HBV). We are developing HBV  therapeutics  utilizing
our proprietary immune regulation technology.

         HBV is a viral  pathogen that can lead to a condition in which the body
destroys  its own liver cells  through an immune  response.  This  condition  is
commonly  referred  to as  chronic  active  hepatitis.  According  to the latest
figures  published by the World  Health  Organization,  approximately  2 billion
people are  infected by HBV, of whom an  estimated  350 million are  chronically
infected and therefore at risk of death from liver disease.

         Chronic  active  hepatitis is  generally  treated  with  interferon  or
lamivudine.  Both of these drugs,  however,  are toxic, and many patients cannot
tolerate  their side  effects.  These  treatments  have a limited  success  rate
(5-15%).

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<PAGE>

         EHT899 IMMUNE REGULATION PRODUCT.  EHT899 is a proprietary  formulation
of an HBV viral protein  designed to eliminate the  undesirable  immune response
elicited by the HBV infection.  It also apparently  enhances a secondary  immune
response to clear the viral  infection,  resulting  in reduction in liver damage
and decrease in viral load.

         In a clinical  trial,  conducted  at the Liver Unit of  Hadassah-Hebrew
University  Medical Center,  in Jerusalem,  Israel,  a formulation of EHT899 was
administered  orally to a total of 42 subjects  with chronic  active  hepatitis.
Subjects  received the medication  three times a week for 20 - 30 weeks and were
followed for an additional 20 weeks. Results of the trial have shown that:

    o    the drug was well tolerated in all subjects;

    o    46% of subjects  showed a decrease in HBV viral load and improvement in
         liver function tests;

    o    33% of subjects showed a decrease in inflammation seen on liver biopsy;

         Based on these  results,  the  Company  is going  forward  to bring the
manufacturing  in house preparing to begin a multi-center  Phase II random-label
double blind clinical study.

         Preclinical  animal studies with EHT899 showed that this medication was
able to achieve complete  suppression of  HBV-associated  human liver cancer and
significantly  reduced  mortality in  laboratory  mice.  These  studies may have
significant  potential  application  for treatment of liver and other cancers in
humans.

         HEPATITIS C VIRUS (HCV).

         EHC18 IMMUNE REGULATION  PRODUCT.  We are using our proprietary  immune
regulation  technology in the  development  of a treatment for HCV. This disease
affects approximately 170 million people worldwide, including 3.9 million in the
U.S., of which  approximately  69%, or 2.7 million,  are  chronically  infected,
according to the National Center for Infectious  Diseases.  Approximately 30,000
new infections  are recorded each year in the U.S. About 85% of people  infected
with HCV are  reported  to  develop  chronic  hepatitis,  and about 20%  develop
cirrhosis,  an  incurable  disease,  with  approximately  half  of  these  cases
progressing to end-stage  liver  disease,  including  liver cancer.  It has been
predicted  that  HCV-related  deaths in the U.S. may soon overtake the number of
AIDS-related deaths in the U.S.

         The Phase I clinical trial conducted by physicians at the Liver Unit of
Hadassah  University  Medical  Center in  Jerusalem,  Israel  has met its safety
endpoints. Enzo is currently looking to the next level of study.

         EGS21  IMMUNE  POTENTIATION  PRODUCT.  EGS21,  our immune  potentiation
product was tested for safety in a Phase I study in healthy human  volunteers at
the  Hadassah-Hebrew  University  Medical Center.  All subjects were followed by
complete blood analysis and standard blood  chemistries.  All laboratory results
were within normal limits and no treatment-related  adverse events were observed
during the treatment period or during the follow-up  period. We are currently in
the  regulatory  process at Hadassah  Hospital  for approval to begin a clinical
study to test EGS21 for treatment of HCV infection.

         NON-ALCOHOLIC STATOHEPATITIS (NASH)

         Enzo  is  evaluating  the  use of  EGS21  as a  potential  product  for
treatment of fatty liver or non alcoholic  steatohepatitis  (NASH). Fatty liver,
often associated with a metabolic  syndrome defined by  hyperlipidemia,  insulin
resistance and obesity,  can be  demonstrated  by imaging  studies in 25% of the
general population. Recent studies have suggested an immunologic basis for NASH.
This condition is presently  considered to be a risk factor for the  development
of non-alcoholic  steatohepatitis  (NASH),  one of the top three causes of liver
disease  in the  USA  and a form  of  chronic  hepatitis  that  is  increasingly
recognized as a predisposing  condition for the development of liver  cirrhosis.
NASH  is  present  in 20%  of  obese  individuals  and in  2.5%  of the  general
population.  Using experimental animal model systems, we showed that EGS21 had a
beneficial  effect  on NASH  and its  associated  metabolic  syndrome  in  these
experimental animals.

         INFLAMMATORY  BOWEL  DISEASES.  We are applying  our immune  regulation
technology to treat  inflammatory  bowel  disease  (IBD),  including  ulcerative
colitis  and  Crohn's  Disease.  According  to the  Inflammatory  Bowel  Disease
Foundation,  approximately  one million persons in the United States suffer from
IBD.  Although the cause of these disorders  remains  unknown,  various features
suggest immune system involvement in their pathogenesis.

                                       9
<PAGE>

         There is currently no effective  treatment  for these  diseases.  Human
subjects   are  managed   during   short-term   episodes   through  the  use  of
anti-inflammatory  medications, or immunosuppressants,  that provide symptomatic
relief over short  periods of time,  but do not provide a cure.  These drugs are
all  based  on  a  generalized  suppression  of  the  immune  response  and  are
non-specific.  As such, they have  considerable  side effects and cannot be used
for long periods of time because of their inherent toxicity.

         Enzo  recently  completed a Phase II randomized  double-blind  clinical
trial of ALEQUEL(TM) our innovative immune regulation  medicine for treatment of
Crohn's  Disease.  In this  study,  subjects  were  evaluated  using the Crohn's
Disease  Activity  Index  (CDAI),  a  standard  measure of the  severity  of the
disease,  with higher scores indicating more severe disease  activity.  The data
showed  that of the 58% of the  evaluable  subjects  who had  received  the drug
reached clinical remission (defined as a decrease to a CDAI of 150 or lower in 2
consecutive  visits during the study  period.) In  comparison,  29% of evaluable
subjects who had received the placebo reached clinical remission.  Enzo plans to
expand this study to broaden the diversity of the patient population.

         This current trial  followed a successful  open label Phase I study and
was based on successful  preclinical results achieved in an animal model system.
The  preclinical  study  results  showed  that  when  laboratory   animals  with
experimentally   induced   colitis   were  given   specific   proteins  by  oral
administration,  a remission of the condition was seen. The experimental animals
exhibited a marked amelioration of the symptoms, including significant reduction
in tissue inflammation,  as well as a decrease in the levels of gamma interferon
in the serum, both indicative of remission.

         GRAFT  VERSUS  HOST  DISEASE.  We are  applying  our immune  regulation
technology to treat graft versus host disease.  Graft versus Host Disease (GvHD)
is a major complication of bone marrow and stem cell transplantation  accounting
for many of the failures of these transplant  procedures.  GvHD is characterized
by an immune  response  mounted by the immune cells within the engrafted  tissue
against the recipient that leads to a wasting syndrome and  occasionally  death.
It is  estimated  that there are only 15,000 bone marrow  transplants  performed
annually  worldwide due, in part, to GvHD. It is assumed that the elimination of
GvHD would lead to a dramatic  rise in the number of these  procedures.  GvHD is
currently treated by  immunosuppressant  drugs,  which are toxic and only reduce
the extent of the wasting reaction.

         We  are  conducting   pre-clinical   and  animal  studies  at  Hadassah
University  Hospital.  The results of these studies have  demonstrated  that our
immune  regulation  technology  could be effective in treating GvHD.  Currently,
clinical studies are in development.

CLINICAL LABORATORY SERVICES

         We operate a regional  clinical  reference  laboratory that offers full
diagnostic  services to the greater New York and New Jersey  medical  community.
The  Company's  clinical  laboratory  testing is  utilized by  physicians  as an
essential  element  in the  delivery  of  healthcare  services.  Physicians  use
laboratory tests to assist in the detection, diagnoses,  evaluation,  monitoring
and  treatment of diseases and other  medical  conditions.  Clinical  laboratory
testing is generally  categorized  as clinical  testing and  anatomic  pathology
testing.  Clinical testing is performed on body fluids, such as blood and urine.
Anatomic  pathology  testing is performed on tissues and other samples,  such as
human cells.  Most clinical  laboratory tests are considered  routine and can be
performed by most commercial clinical  laboratories.  Tests that are not routine
and that require more  sophisticated  equipment and highly skilled personnel are
considered esoteric tests.

         The  Company  offers  a  comprehensive  menu of  routine  and  esoteric
clinical  laboratory  tests or procedures.  These tests are  frequently  used in
general  patient care by  physicians  to  establish  or support a diagnosis,  to
monitor  treatment  or  medication,  or  search  for  an  otherwise  undiagnosed
condition.

         We operate a clinical  reference  laboratory on  Farmingdale,  N.Y. and
eighteen  satellite  patient  service  centers in the  greater  New York and New
Jersey  area.  Patient  service  centers  collect the  specimens as requested by
physicians. The specimens are sent through our in-house logistics department our
main  laboratory  facility in Farmingdale,  N.Y. for testing.  We also operate a
STAT laboratory in Manhattan.  A "STAT" lab is a laboratory that has the ability
to perform  certain  routine tests  quickly and report  results to the physician
immediately.

         Patient specimens are delivered to our facilities accompanied by a test
requisition  form. These forms,  which are completed by the physician,  indicate
the tests to be performed and provide the necessary  billing  information.  Once
this  information is entered into the computer  system,  the tests are performed
and the results are entered  primarily  through a computer  interface or in some
instances,  manually.  Most  routine  testing  is  completed  by early  the next
morning,  and test results are reported to the  ordering  physician.  These test
results  are either  delivered  by the  Company's  Logistic  department  or some
physicians  have  computers  and or

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<PAGE>

local  printer  capabilities  to have  reports  printed  out  directly  in their
offices.  Physicians  who  request  that  they be  called  with a result  are so
notified.

         We  utilize  our  clinical   reference   laboratory   to  evaluate  and
demonstrate  the  benefits of our  internally  developed  gene-based  diagnostic
products.  In addition,  our laboratory is currently performing gene-based tests
in support of our HIV-1 clinical studies.

         Approximately  89% at July 31,  2004 and 83% at July 31,  2003,  of the
Company's net accounts  receivable relates to its clinical reference  laboratory
business, which operates in the New York Metropolitan area. The Company believes
that the  concentration  of credit risk with  respect to  clinical  laboratory's
accounts receivable is limited due to the diversity of the Company's client base
and to the various  numbers of insurance  carriers  and the numerous  individual
patient accounts. As is standard in the health care industry,  substantially all
of the Company's  clinical  laboratory's  accounts  receivable are with numerous
third party insurance  carriers and individual  patient accounts.  However,  the
Company provides  services to certain  patients  covered by various  third-party
payors,  including the Federal  Medicare  program.  Revenue,  net of contractual
allowances,  from direct billings under the Federal  Medicare program during the
years ended July 31, 2004,  2003 and 2002 were  approximately  19%, 11% and 10%,
respectively,  of the Company's total revenue. The clinical reference laboratory
industry is  characterized  by a significant  amount of  uncollectible  accounts
receivable  related to the  inability  to receive  accurate  and timely  billing
information   in  order  to  forward  it  on  to  the  third  party  payors  for
reimbursement,   and  the  inaccurate  information  received  from  the  covered
individual patients for unreimbursed unpaid amounts. The Company's provision for
uncollectible accounts receivable is within historical expectations.

         Billing  for  laboratory  services  is  complicated.  Depending  on the
billing  arrangement and applicable  law, we must bill various  payers,  such as
patients,  insurance companies,  Medicare and employer groups, all of which have
different  requirements.  Auditing  for  compliance  with  applicable  laws  and
regulations as well as, internal compliance policies and procedures adds further
complexity to the billing process. We depend on healthcare  providers to provide
billing  information  to us. When this  information  is missing or the incorrect
billing  information  is provided on our  requisitions  we perform the tests and
attempt to obtain any missing  information  and correct the billing  information
received from the  healthcare  provider.  This slows the  invoicing  process and
generally  increases the aging of our accounts  receivable.  Additional  factors
complicating the billing process include:

             o    pricing   differences   between  our  fee  schedules  and  the
                  reimbursement rates of the payers;

             o    disputes  with  payers as to which  party is  responsible  for
                  payment; and

             o    disparity  in  coverage  and  information  requirements  among
                  various payers.

         We incur significant  additional costs as a result of our participation
in Medicare,  as billing and  reimbursement for clinical  laboratory  testing is
subject  to  considerable  and  complex  federal  and state  regulations.  These
additional  costs include those related to: (1) complexity  added to our billing
processes;  (2)  training and  education of our  employees  and  customers;  (3)
compliance  and legal  costs;  and (4) costs  related to,  among other  factors,
medical  necessity  denials and  advance  beneficiary  notices.  The Centers for
Medicare  & Medicaid  Services,  or CMS  (formerly  the  Health  Care  Financing
Administration),   establishes   procedures  and   continuously   evaluates  and
implements changes in the reimbursement process.

RESEARCH & DEVELOPMENT

         Our  principal  research and  development  efforts are directed  toward
expanding  our research and  diagnostic  product  lines,  as well as  developing
innovative  new  therapeutic  products  to  meet  unmet  market  needs.  We have
developed our core research  expertise in genomics through 25 years of dedicated
focus in this area.  We  conduct  our  research  and other  product  development
efforts through internal research and collaborative relationships. In the fiscal
years  ended  July 31,  2004,  2003 and  2002,  the  Company  incurred  costs of
$8,078,000,   $8,311,000  and   $6,179,000,   respectively,   for  research  and
development activities.

INTERNAL RESEARCH PROGRAMS

         A staff  of 33  professionals  and  scientists  performs  our  internal
research and  development  activities,  centered in  Farmingdale,  New York. Our
product development  programs incorporate various scientific areas of expertise,
including   recombinant  DNA,  monoclonal  antibody   development,   enzymology,
microbiology,   biochemistry,   molecular  biology,   organic   chemistry,   and
fermentation.  In addition, we continuously review in-licensing opportunities in
connection with new technology.

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EXTERNAL RESEARCH COLLABORATIONS

         We have  and  continue  to  explore  collaborative  relationships  with
prominent companies and leading-edge  research institutions in order to maximize
the  application of our  technology in areas where we believe such  relationship
will benefit the development of our technology.

SALES AND MARKETING

         Our sales and  marketing  strategy is to sell our products  through two
distinct  channels:  (i) direct sales to end-users;  and (ii) supply  agreements
with manufacturers and distributors.  We market the clinical laboratory services
to our customers  through our direct sales force,  customer  service and patient
service representatives.

         We focus  our sales  efforts  on  obtaining  and  retaining  profitable
accounts.  We also have an active  account  management  process to evaluate  the
profitability of all of our accounts.  Where appropriate,  we change the service
levels and terminate accounts that are not profitable.

DIRECT SALES AND MARKETING EFFORT

         We  internally  market our products  through our  catalogue  and direct
field  sales and a  professional  sales  management  team as well as through our
e-commerce   web  site.  Our  worldwide   marketing   efforts  also  consist  of
advertisements  in major scientific  journals,  direct mailings to researchers',
presentations at scientific seminars and exhibitions at scientific meetings.

SUPPLY AND DISTRIBUTION ARRANGEMENTS

         We  also   distribute  our  products   through  leading  life  sciences
companies.  These  companies  include  manufacturers  of  instruments  for  gene
analysis,  where our reagents are critical for the  identification and detection
of genes and nucleic acid sequences. Through these arrangements,  we are able to
leverage the  established  marketing and  distribution  infrastructure  of these
companies. During fiscal 2004, we have distribution agreements with Perkin-Elmer
Life Sciences & Roche  Diagnostics  Systems,  among other  companies.  Enzo Life
Sciences is focusing on a strategic initiative to expand its direct sales to the
end user. See Item 3. Legal Proceedings.

COMPETITION

         We compete with other life science and biotechnology companies, as well
as pharmaceutical,  chemical and other companies. Competition in our industry is
intense and is expected to  increase.  Many of these  companies  are  performing
research in the same areas as we are. Some of these  competitors are larger than
we are and have more  significant  financial  resources  than we do. The primary
competitive  factors in our  industry  are the ability to create  scientifically
advanced technology, successfully develop and commercialize products on a timely
basis,  establish  and  maintain  intellectual  property  rights and attract and
retain a breadth and depth of human resources.

         Our  clinical  laboratory  services  business  competes  with  numerous
national  and  local  entities,  some of which are  larger  than we are and have
greater financial resources than we do. Our laboratory competes primarily on the
basis of the  quality  and  specialized  nature of its  testing,  reporting  and
information  services,  its reputation in the medical community,  the pricing of
its services,  its reliability and speed in performing diagnostic tests, and its
ability to employ qualified laboratory personnel.

INTELLECTUAL PROPERTY

         We consider our  intellectual  property program to be a key asset and a
major  strategic  component to the execution of our business  strategy.  A broad
portfolio of issued  patents and pending patent  applications  supports our core
technology  platforms.  Our  policy is to seek  patent  protection  for our core
technology platforms,  as well as for ancillary  technologies that support these
platforms and provide a competitive advantage.

         At the end of fiscal  2004 we owned or  licensed  42 U.S.  and over 190
foreign patents relating to products,  methods and procedures resulting from our
internal or sponsored  research  projects.  Patents  relating to the BioProbe(R)
nucleic acid probe  system have issued in the U.S.  and Europe.  There can be no
assurance;  however, that patents will be issued on pending applications or that
any issued  patents will have  commercial  benefit.  We do not intend to rely on
patent  protection as the sole basis for protecting our proprietary  technology.
We also rely on our trade secrets and continuing  technological  innovation.  We
require each of our employees

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to sign a confidentiality  agreement that prohibits the employee from disclosing
any  confidential  information  about  us,  including  our  technology  or trade
secrets.

         In  some  instances,   we  may  enter  into  royalty   agreements  with
collaborating  research parties in consideration for the commercial use by us of
the developments of their joint research.  In other instances the  collaborating
party might  obtain a patent,  but we receive  the  license to use the  patented
subject matter.  In such cases, we will seek to secure  exclusive  licenses.  In
other  instances,  we might have an  obligation  to pay royalties to, or reach a
royalty  arrangement  with,  a  third  party  in  consideration  of  our  use of
developments of such third party. We have an exclusive  licensing agreement with
Yale  University for the technology  used in nucleic acid probe  products.  That
agreement  covers licensed patents owned by Yale and licensed to us for the life
of the patents,  which expire not earlier than 2004. The Research  Foundation of
the  State  University  of New York has  granted  us the  exclusive  rights to a
genetic   engineering   technology   using   antisense   nucleic   acid  control
methodologies.

REGULATION OF PHARMACEUTICAL PRODUCTS

         New drugs and biological drug products are subject to regulation  under
the Federal  Food,  Drug and  Cosmetic  Act,  and  biological  products are also
regulated  under the  Public  Health  Service  Act.  We  believe  that  products
developed  by us or our  collaborators  will be regulated  either as  biological
products or as new drugs.  Both statutes and the regulations  promulgated  there
under  govern,  among  other  things,  the  testing,  licensing,  manufacturing,
marketing, distributing,  safety, and efficacy requirements,  labeling, storage,
exporting, record keeping, advertising and other promotional practices involving
biologics  or new drugs,  as the case may be. FDA  review or  approval  or other
clearances must be obtained before clinical  testing,  and before  manufacturing
and  marketing,  of biologics and drugs.  At the FDA, the Center for  Biological
Evaluation and Research ("CBER") is responsible for the regulation of biological
drugs and the Center for Drug  Evaluation  and Research  ("CDER") is responsible
for the regulation of  non-biological  drugs.  Biological drugs are licensed and
other drugs are approved before commercialization.

         Any gene  medicine  products  that we develop will  require  regulatory
review before  clinical  trials,  and additional  regulatory  clearances  before
commercialization.  New human  gene  medicine  products,  as  therapeutics,  are
subject to regulation by the FDA and comparable agencies in other countries. The
precise regulatory  requirements with which we will have to comply are uncertain
at this time because of the novelty of the human gene therapies  currently under
development.  The FDA on a case-by-case  basis currently  reviews each protocol.
The FDA has published  "Points to Consider"  guidance  documents with respect to
the development of gene medicine  protocols.  The National  Institutes of Health
("NIH") is also  involved in the  oversight  of gene  therapies  and the FDA has
required compliance with certain NIH requirements.

         Obtaining   FDA   approval   has   historically   been  a  costly   and
time-consuming process.  Generally, to gain FDA approval, a developer first must
conduct  pre-clinical  studies in the laboratory  evaluating  product chemistry,
formulation and stability and, if appropriate,  in animal model systems, to gain
preliminary  information on safety and efficacy.  Pre-clinical safety tests must
be conducted by  laboratories  that comply with FDA  regulations  governing Good
Laboratory   Practices.   The  results  of  those  studies  are  submitted  with
information  characterizing  the  product  and  its  manufacturing  process  and
controls as a part of an investigational new drug ("IND") application, which the
FDA must  review  and  declare  effective  before  human  clinical  trials of an
investigational  drug  can  start.  The  IND  application  includes  a  detailed
description of the clinical investigations to be undertaken in addition to other
pertinent information about the product,  including descriptions of any previous
human experience and the company's future plans for studying the drug.

         In order to commercialize any products, we (as the sponsor) file an IND
and will be responsible  for  initiating and overseeing the clinical  studies to
demonstrate the safety and efficacy  necessary to obtain FDA marketing  approval
of any such  products.  For INDs that we sponsor,  we will be required to select
qualified   clinical  sites   (usually   physicians   affiliated   with  medical
institutions) to supervise the  administration of the products,  and ensure that
the   investigations   are  conducted  and  monitored  in  accordance  with  FDA
regulations and the general  investigational plan and protocols contained in the
IND. Each  clinical  study is reviewed and approved by an  Institutional  Review
Board (IRB). The IRB will consider,  among other things, ethical factors and the
safety of human  subjects.  Clinical  trials  are  normally  conducted  in three
phases,  although the phases might overlap. Phase I trials,  concerned primarily
with the safety and tolerance of the drug, and its  pharmacokinetics  (or how it
behaves in the body  including its absorption  and  distribution)  involve fewer
than 100 subjects.  Phase II trials normally  involve a few hundred patients and
are designed  primarily to demonstrate  preliminary  effectiveness  and the most
suitable  dose or  exposure  level for  treating  or  diagnosing  the disease or
condition for which the drug is intended,  although  short-term side effects and
risks in people whose health is impaired may also be examined.  Phase III trials
are expanded,  adequate and well-controlled  clinical trials with larger numbers
of patients and are  intended to gather the  additional  information  for proper
dosage and  labeling of the drug.  Clinical  trials  generally  take two to five
years, but the period may vary. Certain  regulations  promulgated by the FDA may
shorten the time periods and reduce the number of patients required to be tested
in  the  case  of  certain  life-threatening   diseases,  which  lack  available
alternative treatments.

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<PAGE>

         The FDA  receives  reports on the  progress  of each phase of  clinical
testing,  and it may require the  modification,  suspension  or  termination  of
clinical  trials if an  unwarranted  risk is presented  to patients.  Human gene
medicine products are a new category of therapeutics.  There can be no assurance
regarding the length of the clinical  trial period,  the number of patients that
the FDA will require to be enrolled in the clinical trials in order to establish
the safety,  purity and  potency of human gene  medicine  products,  or that the
clinical  and other  data  generated  will be  acceptable  to the FDA to support
marketing approval.

         After  completion  of clinical  trials of a new product,  FDA marketing
approval must be obtained  before the product can be sold in the United  States.
If the product is regulated as a new biologic,  CBER requires the submission and
approval of a Biologics License Application (BLA) before commercial marketing of
the biologic product. If the product is classified as a new drug, we must file a
New Drug Application  ("NDA") with CDER and receive  approval before  commercial
marketing  of  the  drug.  The  NDA or  BLA  must  include  results  of  product
development,  pre-clinical studies and clinical trials. The testing and approval
processes require substantial time and effort and there can be no assurance that
any approval  will be granted on a timely  basis,  if at all. The median time to
obtain new product  approvals after  submission to the FDA is  approximately  12
months.  If  questions  arise during the FDA review  process,  approval can take
longer. Before completing its review, the FDA may seek guidance from an Advisory
Committee of outside experts at a public or closed meeting.  While the advice of
these   committees   is  not  binding  on  the  FDA,   it  is  often   followed.
Notwithstanding the submission of relevant data, the FDA might ultimately decide
that the NDA or BLA does not satisfy its  regulatory  criteria for approval and,
thus,  reject  the  application,  refuse to approve  it, or  require  additional
clinical,  preclinical or chemistry studies.  Even after FDA regulatory approval
or licensure, a marketed drug product is subject to continual review by the FDA.
In addition,  if previously unknown problems are discovered or we fail to comply
with  the  applicable  regulatory  requirements,  we might  be  restricted  from
marketing  a product,  we might be required  to  withdraw  the product  from the
market, and we might possibly become subject to seizures, injunctions, voluntary
recalls,  or civil,  monetary or criminal  sanctions.  In addition,  the FDA may
condition marketing approval on the conduct of specific  post-marketing  studies
to further evaluate safety and effectiveness.

         For  commercialization  of our biological or other drug  products,  the
manufacturing  processes  described  in our NDA or BLA must receive FDA approval
and the  manufacturing  facility must  successfully  pass an inspection prior to
approval or  licensure  of the product  for sale within the United  States.  The
pre-approval  inspection  assesses whether,  for example,  the facility complies
with the FDA's current good manufacturing  practices (cGMP)  regulations.  These
regulations elaborate testing, control, documentation, personnel, record keeping
and other quality  assurance  procedure  requirements that must be met. Once the
FDA approves  our  biological  or other drug  products  for  marketing,  we must
continue  to comply with the cGMP  regulations.  The FDA  periodically  inspects
biological and other drug  manufacturing  facilities to ensure  compliance  with
applicable  cGMP  requirements.   Failure  to  comply  with  the  statutory  and
regulatory   requirements   subjects  the  manufacturer  to  possible  legal  or
regulatory  action,  such as suspension of manufacturing,  seizure of product or
voluntary recall of a product.

         If a developer  obtains  designations by the FDA of a biologic or other
drug as an "orphan" for a particular  use, the developer may request grants from
the federal  government  to defray the costs of  qualified  testing  expenses in
connection  with the  development  of such  drug.  Orphan  drug  designation  is
possible for drugs for rare  diseases,  including many genetic  diseases,  which
means  the drug is for a disease  that has a  prevalence  of less  than  200,000
patients in the United States.  The first  applicant who receives an orphan drug
designation  and who obtains  approval of a marketing  application for such drug
acquires the exclusive  marketing  rights to that drug for that use for a period
of seven  years  unless  the  subsequent  drug  can be  shown  to be  clinically
superior.  Accordingly, no other company would be allowed to market an identical
orphan drug with the same active  ingredient for the use approved by the FDA for
seven years after the approval.

REGULATION OF DIAGNOSTICS

         The diagnostic  products that are developed by our  collaborators or us
are likely to be  regulated by the FDA as medical  devices.  Unless an exemption
applies,  medical  devices must receive either "510(k)  clearance" or pre-market
approval  ("PMA") from the FDA before  marketing them in the United States.  The
FDA's 510(k) clearance process usually takes from four to 12 months,  but it can
last longer. The process of obtaining PMA approval is much more costly,  lengthy
and  uncertain.  It generally  takes from one to three years or even longer.  We
cannot be sure that 510(k)  clearance or PMA approval  will ever be obtained for
any product we propose to market.

         The FDA  decides  whether  a device  must  undergo  either  the  510(k)
clearance or PMA approval process based upon statutory criteria.  These criteria
include  the level of risk that the  agency  perceives  is  associated  with the
device and a  determination  whether  the  product  is a type of device  that is
similar to devices that are already  legally  marketed.  Devices  deemed to pose
relatively  less risk are placed in either  class I or II,  which  requires  the
manufacturer to submit a premarket  notification  requesting  510(k)  clearance,
unless an exemption applies.  The pre-market  notification must demonstrate that
the proposed device is "substantially  equivalent" in

                                       14
<PAGE>

intended use and in safety and  effectiveness to a legally  marketed  "predicate
device" that is either in class I, class II, or is a  "pre-amendment"  class III
device (i.e., one that was in commercial  distribution  before May 28, 1976) for
which the FDA has not yet called for submission of a PMA application.

         After a device receives 510(k)  clearance,  any modification that could
significantly  affect its safety or  effectiveness,  or that would  constitute a
major  change in its  intended  use,  requires a new 510(k)  clearance  or could
require  a PMA  approval.  The FDA  requires  each  manufacturer  to  make  this
determination  in the first instance,  but the FDA can review any such decision.
If the FDA  disagrees  with a  manufacturer's  decision not to seek a new 510(k)
clearance,  the agency may retroactively require the manufacturer to seek 510(k)
clearance or PMA approval.  The FDA also can require the  manufacturer  to cease
marketing  and/or  recall the  modified  device  until  510(k)  clearance or PMA
approval is obtained.

         Devices  deemed  by  the  FDA  to  pose  the  greatest  risk,  such  as
life-sustaining,   life-supporting  or  implantable   devices,   or  deemed  not
substantially  equivalent  to a legally  marketed  class I or class II predicate
device,  or to a  preamendment  class III  device  for which  PMAs have not been
called,  are placed in class III.  Such  devices are required to undergo the PMA
approval  process  in  which  the   manufacturer   must  prove  the  safety  and
effectiveness  of the device to the FDA's  satisfaction.  A PMA application must
provide extensive preclinical and clinical trial data and also information about
the device and its  components  regarding,  among other things,  device  design,
manufacturing and labeling. After approval of a PMA, a new PMA or PMA supplement
is required in the event of a modification  to the device,  it's labeling or its
manufacturing process.

         Although  clinical  investigations  of most  devices are subject to the
investigational device exemption ("IDE") requirements,  clinical  investigations
of in vitro  diagnostic  ("IVDs")  tests are exempt  from the IDE  requirements,
including the need to obtain the FDA's prior  approval,  provided the testing is
noninvasive,  does not require an invasive  sampling  procedure  that presents a
significant risk, does not introduce energy into the subject, and is not used as
a diagnostic  procedure without  confirmation by another  medically  established
test or  procedure.  In addition,  the IVD must be labeled for Research Use Only
(RUO) or  Investigational  Use Only (IUO),  and  distribution  controls  must be
established to assure that IVDs  distributed for research or  investigation  are
used  only  for  those  purposes.  The FDA  expressed  its  intent  to  exercise
heightened   enforcement  with  respect  to  IUO  and  RUO  devices   improperly
commercialized prior to receipt of FDA clearance or approval.

         We have developed  products that we currently  distribute in the United
States on a RUO basis.  There can be no assurance  that the FDA would agree that
our distribution of these products meets the requirements for RUO  distribution.
Furthermore,  failure of us or recipients of our RUO products to comply with the
regulatory  limitations on the distribution and use of such devices could result
in enforcement  action by the FDA,  including the imposition of  restrictions on
our distribution of these products.

         Any devices that we manufacture or distribute will be subject to a host
of regulatory  requirements,  including  the Quality  System  Regulation  (which
requires   manufacturers  to  follow   elaborate   design,   testing,   control,
documentation  and other  quality  assurance  procedures),  the  Medical  Device
Reporting  regulation  (which  requires  that  manufacturers  report  to the FDA
certain types of adverse events involving their products), labeling regulations,
and the FDA's general  prohibition  against promoting products for unapproved or
"off  label"  uses.  Class II devices  also can have  special  controls  such as
performance  standards,  post market surveillance,  patient registries,  and FDA
guidelines  that do not  apply  to class I  devices.  Unanticipated  changes  in
existing regulatory  requirements or adoption of new requirements could hurt our
business, financial condition and results of operations.

         We are  subject to  inspection  and market  surveillance  by the FDA to
determine compliance with regulatory requirements. If the FDA finds that we have
failed to comply,  the  agency  can  institute  a wide  variety  of  enforcement
actions,  ranging from a public warning letter to more severe  sanctions such as
fines,  injunction,  civil  penalties,  recall or seizure of our  products,  the
issuance  of  public  notices  or  warnings,  operating  restrictions,   partial
suspension or total shutdown of  production,  refusal of our requests for 510(k)
clearance or PMA approval of new products, withdrawal of 510(k) clearance or PMA
approvals already granted, and criminal prosecution.

         The FDA also has the authority to request repair, replacement or refund
of the cost of any medical device manufactured or distributed by us. Our failure
to comply with applicable  requirements could lead to an enforcement action that
may have an adverse effect on our financial condition and results of operations.

         Unanticipated changes in existing regulatory requirements,  our failure
to comply with such  requirements or adoption of new  requirements  could have a
material adverse effect on us.

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<PAGE>

         We  have   employees  to  expedite  the   preparation   and  filing  of
documentation  necessary for FDA clearances and approvals,  patent issuances and
licensing agreements.

         We cannot assure you that future clinical diagnostic products developed
by us or our collaborators  will not be required to be reviewed by FDA under the
more expensive and time consuming pre-market approval process.

         CLINICAL LABORATORY REGULATIONS

         The clinical  laboratory industry is subject to significant federal and
state  regulation,  including  inspections and audits by governmental  agencies.
Governmental  authorities  may impose fines or criminal  penalties or take other
actions  to  enforce  laws  and  regulations,   including  revoking  a  clinical
laboratory's federal  certification to operate a clinical laboratory  operation.
Changes in regulation may increase the costs of performing  clinical  laboratory
tests, increase the administrative requirements of claims or decrease the amount
of reimbursement. Our Clinical Laboratory and (where applicable) patient service
centers  are  licensed  and  accredited  by the  appropriate  federal  and state
agencies.  CLIA  (The  Clinical  Laboratory  Improvement  Act of  1967,  and the
Clinical  Laboratory  Improvement  Amendments of 1988)  regulates  virtually all
clinical  laboratories  by  requiring  that  they be  certified  by the  federal
government   and  comply  with  various   operational,   personnel  and  quality
requirements  intended to ensure that their clinical laboratory testing services
are  accurate,  reliable and timely.  CLIA does not preempt  state laws that are
more stringent  than federal laws.  Many clinical  laboratories  must meet other
governmental  standards,   undergo  proficiency  testing,  and  are  subject  to
inspection.  Clinical  laboratory  certificates or licenses are also required by
various state and local laws.

         CLIA  places  all  tests  into one of three  categories  of  complexity
(waived,  moderate  complexity  and high  complexity)  and  establishes  varying
requirements  depending upon the complexity  category of the test  performed.  A
laboratory  that  performs  high  complexity  tests  must  meet  more  stringent
requirements  than a laboratory  that performs only moderate  complexity  tests,
while those that perform only waived tests may apply for a certificate of waiver
from most of the  requirements  of CLIA.  Our  facility is  certified to perform
highly  complex  tests.  In general,  the Secretary of Health and Human Services
("HHS")  regulations   require   laboratories  that  perform  high  or  moderate
complexity tests to implement  systems that ensure the accurate  performance and
reporting  of test  results,  establish  quality  control and quality  assurance
systems  ensure hiring of personnel  that meet  specified  standards,  engage in
proficiency testing by approved agencies and undergo biennial inspections.

         Clinical  laboratories  also  are  subject  to state  regulation.  CLIA
provides that a state may adopt  different or more  stringent  regulations  than
Federal  law,  and  permits  states  to apply  for  exemption  from  CLIA if HHS
determines that the state's laboratory laws are equivalent to, or more stringent
than,  CLIA. The State of New York's  clinical  laboratory  regulations  contain
provisions  that are more  stringent than Federal law, and New York has received
exemption from CLIA.  Therefore,  as long as New York maintains its  CLIA-exempt
status,  laboratories in New York, including our laboratory, are regulated under
New York law rather than CLIA.  Our  laboratory  is licensed in New York and has
continuing programs to ensure that its operations meet all applicable regulatory
requirements.

         The  sanction  for  failure  to comply  with these  regulations  may be
suspension,  revocation,  or  limitation  of  a  laboratory's  CLIA  certificate
necessary to conduct  business,  significant fines and criminal  penalties.  The
loss of, or adverse  action  against,  a license,  the  imposition of a fine, or
future changes in Federal,  state and local  laboratory laws and regulations (or
in the  interpretation  of current laws and  regulations)  could have a material
adverse effect on our business.

         CLINICAL LABORATORY REIMBURSEMENT

         Billing and reimbursement for clinical laboratory testing is subject to
significant and complex federal and state  regulation.  Penalties for violations
of laws relating to billing  federal  healthcare  programs and for violations of
federal  fraud and abuse laws  include:  (1)  exclusion  from  participation  in
Medicare/Medicaid programs; (2) asset forfeitures;  (3) civil and criminal fines
and  penalties;  and  (4)  the  loss  of  various  licenses,   certificates  and
authorizations  necessary  to  operate  some or all of a  clinical  laboratory's
business. The Company is not aware of any material violations.

         The health care industry has been undergoing significant change because
third-party  payors, such as Medicare (serving primarily patients 65 and older),
Medicaid serving primarily indigent patients,  health maintenance  organizations
and  commercial  insurers,  have  increased  their  efforts to control the cost,
utilization  and  delivery  of health care  services.  To address the problem of
increasing  health care costs,  legislation has been proposed or enacted at both
the Federal and state  levels to  regulate  health care  delivery in general and
clinical  laboratories in particular.  Additional health care reform efforts are
likely to be proposed in the future.  In particular,  we believe that reductions
in reimbursement for Medicare services will continue to be implemented from time
to time.  Reductions in the  reimbursement  rates of other  third-party  payors,
commercial insurer and health  maintenance  organizations are likely

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<PAGE>

to occur as well.  We cannot  predict the effect that  health  care  reform,  if
enacted,  would have on our  business,  and there can be no assurance  that such
reforms,  if enacted,  would not have a material  adverse effect on our business
and operations.

         Containment of health care costs, including  reimbursement for clinical
laboratory services, has been a focus of ongoing governmental activity. In 1984,
Congress established the Medicare fee schedule for clinical laboratory services,
which is applicable to patients  covered under Part B of the Medicare program as
well as patients receiving  Medicaid.  Clinical  laboratories must bill Medicare
directly  for the  services  provided  to  Medicare  beneficiaries  and may only
collect the amounts permitted under this fee schedule. Reimbursement to clinical
laboratories  under the Medicare Fee Schedule has been steadily  declining since
its  inception.  Furthermore,  and Medicare have mandated use of the  Physicians
Current Procedural  Terminology  ("CPT") for coding of laboratory services which
has altered the way we bill these  programs  for some of our  services,  thereby
reducing the reimbursement that we receive.

         In March 1996, HCFA (now, the Center for Medicare and Medicaid Services
or CMS) implemented changes in the policies used to administer Medicare payments
to clinical  laboratories  for the most  frequently  performed  automated  blood
chemistry  profiles.  Among other things,  the changes  established a consistent
standard nationwide for the content of the automated chemistry profiles. Another
change  requires  laboratories  performing  certain  automated  blood  chemistry
profiles to obtain and provide  documentation of the medical  necessity of tests
included in the profiles for each Medicare beneficiary. Reimbursements have been
reduced as a result of this change.  Because a significant  portion of our costs
is fixed,  these  Medicare  reimbursement  reductions  and changes have a direct
adverse effect on our net earnings and cash flows.

         Future  changes  in  federal,  state and local  regulations  (or in the
interpretation of current regulations) affecting governmental  reimbursement for
clinical  laboratory  testing  could  have  a  material  adverse  effect  on our
business. We cannot predict,  however, whether and what type of legislation will
be enacted into law. In addition,  reimbursement disapprovals by the third party
payors, commercial insures and health maintenance  organizations,  reductions or
delays in the establishment of reimbursement  rates, and carrier  limitations on
the insurance  coverage of the Company's services or the use of the Company as a
service provider could have a negative effect on the Company's future revenues.

         ANTI FRAUD AND ABUSE LAWS

         Existing Federal laws governing  Medicare,  as well as state laws, also
regulate  certain  aspects of the  relationship  between  healthcare  providers,
including  clinical  laboratories and their referral sources such as physicians,
hospitals  and other  laboratories.  One  provision of these laws,  known as the
"Anti-Kickback Law," contains extremely broad  proscriptions.  Violation of this
provision  may  result in  criminal  penalties,  exclusion  from  Medicare,  and
significant  civil monetary  penalties.  Under another Federal law, known as the
"Stark" law or "self-referral prohibition," physicians who have an investment or
compensation relationship with an entity furnishing clinical laboratory services
(including  anatomic pathology and clinical chemistry services) may not, subject
to certain  exceptions,  refer clinical laboratory testing for Medicare patients
to that entity. Similarly, laboratories may not bill Medicare or Medicaid or any
other party for services furnished pursuant to a prohibited referral.  Violation
of these  provisions  may result in  disallowance  of Medicare  for the affected
testing  services,  as well as the imposition of civil monetary  penalties.  New
York State also has laws similar to the Federal Stark and Anti-Kickback laws.

         The  Federal  Stark  laws,  and New York  State law,  have also  placed
restrictions  on the supplies and other items that  laboratories  may provide to
their clients.  These laws specify that  laboratories  may only provide  clients
with  items or  devices  that are used  solely to  collect,  transport  or store
specimens for the laboratory or to communicate  results or tests.  Items such as
biopsy needles,  snares and reusable  needles are  specifically  prohibited from
being  supplied  by  laboratories  to their  clients.  These  laws  represent  a
significant  deviation from practices that  previously  occurred  throughout the
industry.  The Company has put in place  procedures  to ensure  compliance  with
these laws and  restrictions  and believes that it is in  compliance  with these
laws.

         In  February  1997,  the OIG  released  a  model  compliance  plan  for
laboratories.  One key aspect of the model compliance plan is an emphasis on the
responsibilities  of laboratories to notify physicians that Medicare covers only
medically  necessary services.  These  requirements,  and their likely effect on
physician test ordering  habits,  focus on chemistry tests,  especially  routine
tests,  rather than on anatomic pathology  services or the non-automated  tests,
which make up the majority of the  Company's  business  measured in terms of net
revenues.  Nevertheless,  they potentially could affect physicians test ordering
habits  more  broadly.  The  Company  is unable to predict  whether,  or to what
extent,  these  developments  may  have  an  impact  or the  utilization  of the
Company's services.

         The Company seeks to structure its  arrangements  with  physicians  and
other  customers to be in  compliance  with the  anti-kickback,  Stark and state
laws, and to keep up-to-date on  developments  concerning  their  application by
various means,  including consultation with legal counsel. In addition, in order
to address these various  Federal and state laws,  the Company has developed its

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own  Corporate  Compliance  Program  based  upon the  OIG'  model  program.  The
Company's  Program  focuses  on  establishing  clear  standards,   training  and
monitoring of the Company's billing and coding practices.  Furthermore,  as part
of this Program, the Company's Corporate Compliance Committee meets on a regular
basis  to  review  various  operations  and  relationships  as well as to  adopt
policies addressing these issues.

         However,  the Company is unable to predict how the laws described above
will  be  applied  in the  future,  and no  assurances  can be  given  that  its
arrangements or processes will not become subject to scrutiny under these laws.

         CONFIDENTIALITY OF HEALTH INFORMATION

         The  Health  Insurance  Portability  and  Accountability  Act  of  1996
("HIPAA")   was  signed   into  law  on  August  21,   1996,   and  it  includes
"administrative   simplification"  provisions  designed  to  standardize  common
electronic  transactions  in health care and to protect the security and privacy
of health  information.  Congress' purpose in promulgating HIPAA was to increase
the efficiency of health care transactions  while, at the same time,  protecting
the confidentiality of patient information.  Final regulations have been adopted
for  electronic  transaction,  privacy and security  standards.  Further,  final
regulations  adopting a national  employer  identifier  to be used in electronic
health care transactions  have been finalized.  These provisions have very broad
applicability  and they  specifically  apply to  health  care  providers,  which
include physicians and clinical laboratories.

         The electronic  transaction standards regulations create guidelines for
certain  common  health  care  transactions.   With  certain  exceptions,  these
standards require that when we conduct certain transactions  electronically with
another provider, clearinghouse or health plan we must comply with the standards
set forth in the regulations.  The regulations  establish  standard data content
and format for  submitting  electronic  claims and other  administrative  health
transactions.  All  health  care  providers  will be able to use the  electronic
format to bill for their  services  and all health plans and  providers  will be
required to accept standard electronic claims,  referrals,  authorizations,  and
other  transactions.  The  Company  believes  it is  in  compliance  with  these
standards.  Despite  the initial  costs,  the use of uniform  standards  for all
electronic  transactions  could lead to greater  efficiency in processing claims
and in handling health care information.

         The privacy  regulations,  which went into effect in April 2003, create
specific requirements for the use and disclosure of protected health information
("PHI").  We are required to maintain  numerous policies and procedures in order
to comply with these requirements.  Furthermore,  we need to continuously ensure
that there  mechanisms to safeguard the PHI,  which is used or maintained in any
format  (E.G.,  oral,  written,  or  electronic).  Failure to comply  with these
requirements can result in criminal and civil penalties.

         The security regulations, which were finalized on February 20, 2003 and
go into  effect in April 20,  2005,  require us to ensure  the  confidentiality,
integrity  and  availability  of all  electronic  protected  health  information
("EPHI")  that  we  create,  receive,   maintain,  or  transmit.  We  have  some
flexibility to fashion our own security measures to accomplish these goals, but,
in general, the starting point is to determine what security measures we need to
take.  The  security  regulations  strongly  emphasize  that we must  conduct an
accurate and thorough  assessment of the potential risks and  vulnerabilities of
the  confidentiality,  integrity and  availability of our EPHI and then document
our  response  to  the  various  security  regulations  on  the  basis  of  that
assessment.  We  will  also  be  required  to  create  additional  policies  and
procedures in order to comply with these requirements.

         Complying with the electronic  transaction,  privacy and security rules
will require  significant  effort and expense for  virtually  all entities  that
conduct  health  care  transactions  electronically  and handle  patient  health
information.  We have already  implemented almost all of the requirements of the
privacy and electronic transactions standards and will now focus on the security
regulations;  however,  at this  time,  because  we have not yet  completed  the
required  security risk assessment,  we are unable to estimate the total cost or
impact of the regulations.

         INFECTIOUS WASTES AND RADIOACTIVE MATERIALS

         We are subject to licensing and  regulation  under  federal,  state and
local  laws  relating  to  the  handling  and  disposal  of  medical  specimens,
infectious  and hazardous  waste and  radioactive  materials,  as well as to the
safety and health of laboratory employees.  All our laboratories are required to
operate in accordance  with  applicable  federal and state laws and  regulations
relating to biohazard  disposal of all  facilities  specimens and we use outside
vendors to dispose  such  specimens.  Although we believe  that we comply in all
material respects with such federal, state and local laws, our failure to comply
with  those laws  could  subject us to denial of the right to conduct  business,
fines, criminal penalties and/or other enforcement actions.

                                       18
<PAGE>

         OCCUPATIONAL SAFETY

         In addition to its comprehensive regulation of safety in the workplace,
the  Federal  Occupational  Safety  and  Health   Administration   ("OSHA")  has
established extensive  requirements relating to workplace safety for health care
employers,  including  clinical  laboratories,  whose  workers may be exposed to
blood-borne  pathogens such as HIV and the hepatitis B virus. These regulations,
among other things,  require work  practice  controls,  protective  clothing and
equipment, training, medical follow-up, vaccinations and other measures designed
to minimize exposure to, and transmission of, blood-borne pathogens. The Federal
Drug Enforcement  Administration  regulates the use of controlled  substances in
testing  for drugs of abuse.  We are also  subject  to OSHA's  requirement  that
employers  using  hazardous  chemicals  communicate  the  properties and hazards
presented  by those  chemicals  to their  employees.  We believe  that we are in
material  compliance  with these OSHA  requirements.  Our failure to comply with
those  regulations and  requirements  could subject us to tort liability,  civil
fines, criminal penalties and/or other enforcement actions.

         OTHER REGULATION

         Our  business is and will  continue to be subject to  regulation  under
various state and federal  environmental,  safety and health laws, including the
Occupational Safety and Health Act, the Resource  Conservation and Recovery Act,
and the  Atomic  Energy  Act or their  state law  analogs.  These and other laws
govern our use,  handling  and  disposal  of various  biological,  chemical  and
radioactive  substances  used in our  operations  and  wastes  generated  by our
operations.  We are required to possess licenses under, or are otherwise subject
to federal and state  regulations  pertaining  to, the  handling and disposal of
medical specimens, infectious and hazardous waste and radioactive materials.

         We  believe  that  we  are  in  material   compliance  with  applicable
environmental,  safety and health laws and that our  continual  compliance  with
these laws will not have a material  adverse effect on our business.  All of our
laboratories  are operated in accordance with applicable  federal and state laws
and  regulations  relating  to  hazardous  substances  and  wastes,  and  we use
qualified  third-party  vendors  to dispose of  biological  specimens  and other
hazardous  wastes.  Although we believe that we comply in all material  respects
with such federal,  state and local laws,  our failure to comply with those laws
could  subject  us to denial  of the right to  conduct  business,  civil  fines,
criminal penalties and/or other enforcement actions. Environmental contamination
resulting  from spills or  disposal of  hazardous  substances  generated  by our
operations,  even if caused by a third-party contractor or occurring at a remote
location could result in material liability.

MANUFACTURING AND FACILITIES

         We  manufacture  the majority of our products  internally.  Most of our
production and clinical  laboratory  operations  take place at our 43,000 square
feet  facilities  in  Farmingdale,  New York.  We have a  completely  integrated
manufacturing facility, with special handling facilities and clean rooms.

         We also contract with qualified third-party  contractors to manufacture
our products in cases where we deem it appropriate,  for example, when it is not
cost-effective  to produce a product  ourselves or where we seek to leverage the
expertise of another manufacturer in a certain area.

EMPLOYEES

         As of July  31,  2004,  we  employed  238  full-time  and 24  part-time
employees. Of the full-time employees, 33 were engaged in research, development,
manufacturing, administrative support and marketing of research products and 189
at the clinical  reference  laboratories.  Our scientific staff possesses a wide
range of experience and expertise in the areas of recombinant  DNA, nucleic acid
chemistry,  molecular biology and immunology.  We believe that the relationships
we have established with our employees are good.

INFORMATION SYSTEMS

         Information  systems are used  extensively  in virtually all aspects of
our  business,   including  laboratory  testing,   billing,   customer  service,
logistics,  and management of medical data. Our success depends, in part, on the
continued and  uninterrupted  performance of our information  technology,  or IT
systems.  Computer  systems are  vulnerable to damage from a variety of sources,
including  telecommunications  or  network  failures,  malicious  human acts and
natural  disasters.  Moreover,  despite network security  measures,  some of our
servers are potentially vulnerable to physical or electronic break-ins, computer
viruses and similar disruptive problems. Despite the precautionary measures that
we have  taken to  prevent  unanticipated  problems  that  could  affect  our IT
systems,

                                       19
<PAGE>

sustained or repeated system failures that interrupt our ability to process test
orders, deliver test results or perform tests in a timely manner could adversely
affect our reputation and result in a loss of customers and net revenues.

QUALITY ASSURANCE

         We consider the quality of our clinical  reference  laboratory tests to
be of critical  importance,  and,  therefore,  we  established  a  comprehensive
quality  assurance  program  designed  to help assure  accurate  and timely test
results.  In addition to the compulsory  external  inspections  and  proficiency
programs  demanded by the Medicare  program and other regulatory  agencies,  our
clinical  laboratory  has in place  systems to  emphasize  and  monitor  quality
assurance.

         In  addition  to  our  own  internal  quality  control  programs,   our
laboratory  participates  in numerous  externally  administered,  blind  quality
surveillance  programs,  including on-site evaluation by the College of American
Pathologies  ("CAP")  proficiency  testing program and the New York State survey
program.  The blind programs  supplement all other quality assurance  procedures
and give our  management  the  opportunity  to review our  technical and service
performance from the client's perspective.

         The CAP accreditation  program involves both on-site inspections of our
laboratory and  participation in the CAP's  proficiency  testing program for all
categories  in which our  laboratory  is  accredited  by the CAP.  The CAP is an
independent nongovernmental organization of board certified pathologists,  which
offers an accreditation program to which laboratories can voluntarily subscribe.
A  laboratory's  receipt of  accreditation  by the CAP  satisfies  the  Medicare
requirement for participation in proficiency testing programs administered by an
external  source.  Our  clinical  laboratory   facilities  are  accredited  with
distinction, by the CAP.

AVAILABLE INFORMATION

         We make available free of charge on or through our Internet website our
annual reports on Form 10-K,  quarterly reports on Form 10-Q, current reports on
Form 8-K,  and all  amendments  to those  reports,  if any,  filed or  furnished
pursuant to Section  13(a) or 15(d) of the  Securities  Exchange  Act of 1934 as
soon as  reasonably  practicable  after they are  electronically  filed with, or
furnished  to, the  Securities  and Exchange  Commission.  Our Internet  website
address  is  www.enzo.com  and  you  can  find  these  reports  under  "Investor
Information  - SEC  Filings."  The SEC also  maintains  an  Internet  site  that
contains  reports,  proxy and  information  statements,  and  other  information
regarding issuers that file  electronically  with the SEC, which may be accessed
at  http://www.sec.gov.  The public may read and copy any materials we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street,  NW, Washington,
DC 20549. To obtain  information on the operation of the Public  Reference Room,
you may call the SEC at 1-800-SEC-0330.

DIRECTORS AND EXECUTIVE OFFICERS

         The following sets forth certain  information  with regard to directors
and executive officers of the Company.

         Directors - The  following  sets forth  certain  information  regarding
directors  of the  Company  who  are  not  executive  officers  of the  Company.
Information  with  respect to  directors  of the Company who are also  executive
officers  of  the  Company  appears  below  under  the  sub  caption  "Executive
Officers." The Company has a classified  Board of Directors  consisting of three
classes.

         JOHN B. SIAS (age 77) has been a Director of the Company  since January
1982.  Mr. Sias had been  President  and Chief  Executive  Officer of  Chronicle
Publishing  Company from April 1993 to September  2000.  From January 1986 until
April 1993, Mr. Sias was President of ABC Network Division,  Capital Cities/ABC,
Inc.  From  1977  until  January  1986,  he was the  Executive  Vice  President,
President of the Publishing Division (which includes Fairchild  Publications) of
Capital Cities Communications, Inc.

         JOHN J.  DELUCCA  (age 61) has been a  Director  of the  Company  since
January 1982.  From 2003 to 2004,  Mr.  Delucca was Executive Vice President and
Chief Financial  Officer of REL Consulting Group. Mr. Delucca had been the Chief
Financial Officer & Executive Vice President,  Finance & Administration of Coty,
Inc.,  from January 1999 to January 2002.  From October 1993 until January 1999,
he was Senior Vice  President  and  Treasurer of RJR Nabisco,  Inc. From January
1992 until October 1993, he was managing director and Chief Financial Officer of
Hascoe  Associates,  Inc. From October 1, 1990 to January 1992, he was President
of The Lexington Group.  From September 1989 until September 1990, he was Senior
Vice  President-Finance  of the Trump Group. From May 1986 until August 1989, he
was senior Vice  President-Finance at International Controls Corp. From February
1985 until May 1986,  he was a Vice  President  and  Treasurer of Textron,  Inc.
Before that,  he was a Vice  President  and  Treasurer of the Avco  Corporation,
which was acquired by Textron.

                                       20
<PAGE>

         IRWIN C. GERSON  (age 74) has been a Director of the Company  since May
8, 2001.  From 1995 until  December  1998, Mr. Gerson served as Chairman of Lowe
McAdams  Healthcare and prior thereto had been,  since 1986,  Chairman and Chief
Executive  Officer  of  William  Douglas  McAdams,  Inc.,  one  of  the  largest
advertising  agencies in the U.S.  specializing in pharmaceutical  marketing and
communications  to healthcare  professionals.  In February 2000, he was inducted
into the Medical  Advertising Hall of Fame. Mr. Gerson has a Bachelor of Science
in Pharmacy from Fordham  University and an MBA from the NYU Graduate  School of
Business Administration.  He is a director of Andrx Corporation, a NASDAQ listed
company  which  specializes  in  proprietary  drug delivery  technologies.  From
1990-1999,  he was  Chairman of the Council of Overseers of the Arnold and Marie
Schwartz  College of Pharmacy and has served as a trustee of The Albany  College
of Pharmacy and Long Island University.

         MELVIN F. LAZAR,  CPA (age 65) has been a Director of the Company since
August 1, 2002. Mr. Lazar was a founding  partner of the public  accounting firm
of Lazar,  Levine & Felix (LLP) from 1969 until October 2002.  Mr. Lazar and his
firm  served the  business  and legal  communities  for over 30 years.  He is an
expert  on  the  topic  of  business   valuations  and  merger  and  acquisition
activities.  Mr. Lazar is a board member and chairman of the audit  committee of
Arbor Realty Trust,  Inc.  (ABR:NYSE).  Arbor is a real estate  investment trust
(REIT)  formed to invest in real  estate  related  bridge and  mezzanine  loans,
preferred equity  investments and other real estate related assets. Mr. Lazar is
a board  member and serves as the  Chairman of the Audit  Committee of privately
owned Active Media Services,  Inc., the largest  corporate barter company in the
nation. Mr. Lazar is also a board member and serves as the Chairman of the Audit
Committee  of Ceco  Environmental  Corp.,  which  is a  provider  of  innovative
solutions to industrial  ventilating and air quality problems. Mr. Lazar holds a
Bachelor of  Business  Administration  degree from The City  College of New York
(Baruch College).

         MARCUS A. CONANT,  M.D.  (age 68) was appointed to the board as of July
1, 2004. Dr. Conant, received his B.S. and M.D. degrees from Duke University. He
was an exchange student at Hammersmith  Hospital in London,  England and held an
Elective Fellowship in Biochemistry at the London Hospital.  Dr. Conant has been
the recipient of numerous awards, and has served as a member of or consultant to
a broad array of scientific societies and associations,  community organizations
and government committees and has authored or co-authored more than 70 published
papers.  Dr. Conant is a Clinical  Professor at the University of California San
Francisco  (UCSF) and has been on the faculty of UCSF since 1967.  He  currently
serves as Chairman of the Board of the Conant Foundation,  an HIV/AIDS education
and research  foundation based in San Francisco.  Dr. Conant served as principal
investigator  for Enzo's Phase I clinical  trial of its gene  medicine for HIV-1
infection.

         Executive  Officers  - The  following  table  sets  forth the names and
positions of all of the current executive officers of the Company:

<TABLE>
<CAPTION>
               NAME                                               POSITION
               ----                                               --------
         <S>                                     <C>
         Elazar Rabbani, Ph.D.                   Chief Executive Officer, Chairman of the Board of Directors
         Shahram K. Rabbani                      Chief Operating Officer, Secretary, Treasurer
         Barry W. Weiner                         President, Chief Financial Officer
         Dean Engelhardt, Ph.D.                  Executive Vice President
         Norman E. Kelker, Ph.D.                 Senior Vice President
         Herbert B. Bass                         Vice President of Finance
         Barbara E. Thalenfeld, Ph.D.            Vice President, Corporate Development
         David C. Goldberg                       Vice President, Business Development
</TABLE>

         DR. ELAZAR  RABBANI (age 60) Enzo  Biochem's  founder has served as the
Company's  Chairman of the Board of Directors and Chief Executive  Officer since
its inception in 1976. Dr. Rabbani has authored numerous scientific publications
in the field of molecular  biology,  in  particular,  nucleic acid  labeling and
detection.  He is also the lead  inventor  of many of the  company's  pioneering
patents covering a wide range of technologies and products. Dr. Rabbani received
his Bachelor of Arts degree from New York  University in Chemistry and his Ph.D.
in Biochemistry from Columbia University. He is a member of the American Society
for Microbiology.

         SHAHRAM  K.  RABBANI  (age  52)  Chief  Operating  Officer,  Treasurer,
Secretary  and  Director,  is a founder and has been with the Company  since its
inception. He is also President of Enzo Clinical Labs. Mr. Rabbani serves on the
New York State  Clinical  Laboratory  Association,  a  professional  board.  Mr.
Rabbani is a trustee of Adelphi  University  and serves as Chairman of its audit
committee.  He  received a Bachelor  of Arts Degree in  Chemistry  from  Adelphi
University, located in Long Island, New York.

         BARRY W.  WEINER  (age  54)  President,  Chief  Financial  Officer  and
Director,  is a founder of Enzo  Biochem,  Inc.  He has served as the  Company's
President  since  1996,  and  previously  held the  position of  Executive  Vice
President.  Before his employment with Enzo, he worked in several managerial and
marketing  positions at the Colgate Palmolive Company.  Mr. Weiner is a Director
of

                                       21
<PAGE>

the New York Biotechnology Association.  He received his Bachelor of Arts degree
in Economics from New York University and a Master of Business Administration in
Finance from Boston University.

         DR. DEAN  ENGELHARDT  (age 64) Executive  Vice  President has held this
position since July 2000. Since joining the Company in 1981, Dr.  Engelhardt has
held several other executive and scientific  positions  within Enzo Biochem.  In
addition,  Dr.  Engelhardt  has authored many papers in the area of nucleic acid
synthesis and protein  production and has been a featured  presenter at numerous
scientific  conferences  and  meetings.  He holds a Ph.D.  degree  in  Molecular
Genetics from Rockefeller University.

         DR.  NORMAN E.  KELKER  (age 65) Senior  Vice  President  has held this
position  since 1989.  Before this,  he was the  Company's  Vice  President  for
Scientific  Affairs.  Dr.  Kelker has authored  numerous  scientific  papers and
presentations in the biotechnology  field. He is a member of American Society of
Microbiology  and the American  Association of the  Advancement of Science.  Dr.
Kelker received his Ph.D. in Microbiology  and Public Health from Michigan State
University.

         HERBERT B. BASS (age 56) Vice  President of Finance for the Company and
is also Senior Vice  President of Enzo  Clinical  Labs.  Before his promotion in
1989 to Vice President of Finance,  Mr. Bass served as the Corporate  Controller
of the  Company.  Mr.  Bass has been with The Company  since 1986.  From 1977 to
1986, Mr. Bass held various positions at Danziger and Friedman, Certified Public
Accountants, the most recent of which was audit manager. For the preceding seven
(7) years, he held various  positions at Berenson & Berenson,  Certified  Public
Accountants.  Mr. Bass received a Bachelor of Business  Administration degree in
Accounting from Bernard M. Baruch College, in New York City.

         DR.  BARBARA  E.  THALENFELD  (age  64)  Vice  President  of  Corporate
Development  for Enzo Biochem and Vice  President  of Clinical  Affairs for Enzo
Therapeutics.  Dr. Thalenfeld has been employed with the Company since 1982. She
has authored  over 20  scientific  papers in the areas of molecular  biology and
genetics,  and  is a  member  of the  American  Society  of  Gene  Therapy,  the
Association  of  Clinical  Research  Professionals,  and  the  Drug  Development
Association.  Dr. Thalenfeld received her Ph.D. at the Institute of Microbiology
at Hebrew  University  in  Jerusalem,  Israel and a Master of Science  degree in
Molecular  Biology  from Yale  University.  She also  completed a Post  Doctoral
Fellowship in the Department of Biological Sciences at Columbia University.

         DAVID C. GOLDBERG (age 47) Vice President of Business  Development  for
Enzo Biochem and Senior Vice  President of Enzo  Clinical Labs has been employed
with the company since 1985.  He has held several  managerial  positions  within
Enzo Biochem.  Mr.  Goldberg also held  management and marketing  positions with
DuPont-NEN and Gallard  Schlesinger  Industries  before joining the Company.  He
received a Master of Science degree in Microbiology from Rutgers  University and
a Master of Business Administration in Finance from New York University.

         Dr.  Elazar  Rabbani and Shahram K.  Rabbani are  brothers and Barry W.
Weiner is their brother-in-law.

         FORWARD-LOOKING AND CAUTIONARY STATEMENTS

         This Annual Report contains "forward-looking  statements" as defined in
the Private Securities  Litigation Reform Act of 1995. All statements other than
statements of historical fact,  including,  without  limitation,  the statements
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations" are "forward-looking  statements." Forward-looking statements may
include the words  "believes,"  "expects,"  "plans,"  "intends,"  "anticipates,"
"continues"  or other similar  expressions.  These  statements  are based on the
Company's  current  expectations of future events and are subject to a number of
risks and  uncertainties  that may cause the Company's  actual results to differ
materially from those described in the forward-looking statements. Should one or
more  of  these  risks  or  uncertainties  materialize,   or  should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated,  estimated or projected.  These factors and uncertainties  include,
among others:

    (a)  Heightened   competition,   including  the   intensification  of  price
         competition.

    (b)  Impact of changes in payor mix,  including the shift from  traditional,
         fee-for-service medicine to managed-cost health care.

    (c)  Adverse actions by governmental or other third-party payors,  including
         unilateral reduction of fee schedules payable to the Company.

    (d)  The  impact  upon  the  Company's   collection   rates  or  general  or
         administrative   expenses   resulting  from  compliance  with  Medicare
         administrative   policies  including  specifically  the  HCFA's  recent
         requirement  that  laboratories   performing  certain  automated  blood
         chemistry  profiles  obtain and  provide  documentation  of the medical
         necessity  of  tests   included  in  the  profiles  for  each  Medicare
         beneficiary.

                                       22
<PAGE>

    (e)  Failure to obtain new customers, retain existing customers or reduction
         in tests ordered or specimens submitted by existing customers.

    (f)  Adverse results in significant litigation matters.

    (g)  Denial of certification  or licensure of any of the Company's  clinical
         laboratories  under CLIA, by Medicare programs or other Federal,  state
         or local agencies.

    (h)  Adverse  publicity and news coverage  about the Company or the clinical
         laboratory industry.

    (i)  Inability to carry out marketing and sales plans.

    (j)  Loss or retirement of key executives.

    (k)  Impact of potential patent infringement by others or the Company.

    (l)  Inability  to  obtain   patent   protection   or  secure  and  maintain
         proprietary positions on its technology.

    (m)  Dependence  on  new  technologies  for  our  product   development  and
         dependence on product candidates in early stages of development.

    (n)  Clinical trials for our products will be expensive and their outcome is
         uncertain.  We incur  substantial  expenses  that  might not  result in
         viable products.

    (o)  May need additional  capabilities in the future, if additional  capital
         is not available, we may need to curtail or cease operations.

    (p)  Fluctuations in quarterly  results resulting from uneven customer order
         flow.

         These and other risks and uncertainties are disclosed from time to time
in the Company's  filings with the  Securities and Exchange  Commission,  in the
Company's  press releases and in oral statements made by or with the approval of
authorized   personnel.   The  Company  assumes  no  obligation  to  update  any
forward-looking  statements as a result of new  information  or future events or
developments.

Item 2.  PROPERTIES

The following are the principal facilities of the Company:

<TABLE>
<CAPTION>
Location             Principal               Approximate Floor    Approximate    Expiration
--------             Operations              Area (sq. ft.)       Annual         Date
                     ----------              --------------       Base Rent      ----
                                                                  ---------
<S>                  <C>                     <C>                  <C>            <C>
60 Executive Blvd    Corporate               43,000               $1,138,000     November 30, 2004
Farmingdale, N.Y.    headquarters,
                     clinical
                     laboratory,
                     research and
                     manufacturing
                     facilities (See note
                     6 of Notes to
                     Consolidated
                     Financial
                     Statements)
527 Madison Ave      Executive office        6,400                $367,000       December 31, 2008
New York, NY
</TABLE>

         We believe  that the current  facilities  are suitable and adequate for
the  Company's  current  operating  needs and the  production  capacity  in such
facilities is substantially being utilized.

                                       23
<PAGE>

Item 3.  LEGAL PROCEEDINGS

In June 1999, the Company filed suit in the United States District Court for the
Southern  District of New York against  Gen-Probe  Incorporated,  Chugai  Pharma
U.S.A., Inc., Chugai Pharmaceutical Co., Ltd., bioMerieux,  Inc., bioMerieux SA,
and Becton  Dickinson and Company,  charging them with  infringing the Company's
U.S. Patent  4,900,659,  which concerns probes for the detection of the bacteria
that causes  gonorrhea.  On January 26, 2001, the court granted the  defendants'
motion for summary  judgment that the Company's  patent is invalid.  On July 15,
2002,  the Court of Appeals for the Federal  Circuit  reversed  the  judgment of
invalidity and remanded the case to the district court for further  proceedings.
In March  2003,  settlements  were  reached  with  bioMerieux  and  Chugai;  the
settlements  did not have a material  monetary  impact on the  Company.  In July
2004,  the  district  court  again  granted  another  motion  by  the  remaining
defendants  (Gen-Probe  and Becton  Dickinson)  that all claims of the Company's
patent are invalid. The Company has filed an appeal of that judgment.  There can
be no assurance that the Company will be successful in the on-going proceedings.
However, even if the Company is not successful, management does not believe that
there will be a significant adverse monetary impact to the Company.

On March 6, 2002, the Company was named,  along with certain of its officers and
directors among others,  in a complaint  entitled Lawrence F. Glaser and Maureen
Glaser,  individually  and on behalf of  Kimberly,  Erin,  Hannah,  and Benjamin
Glasser v. Hyman Gross,  Barry Weiner,  Enzo Biochemical  Inc.,  Elazar Rabbani,
Shahram Rabbani, John Delucca, Dean Engelhardt,  Richard Keating, Doug Yates and
Docs 1-50, in the U.S. District Court for the Eastern District of Virginia.  The
complaint  was filed by an investor in the Company who has filed for  bankruptcy
protection and his family. The complaint alleged securities and common law fraud
and breach of fiduciary duty and seeks in excess of $150 million in damages.  On
August  22,  2002,  the  complaint  was  voluntarily  dismissed;  however  a new
substantially similar complaint was filed at the same time. On October 21, 2002,
the Company and the other  defendants  filed a motion to dismiss the  complaint,
and the plaintiffs responded by amending the complaint and dropping their claims
against  defendants Keating and Yates. On November 18, 2002, the Company and the
other defendants again moved to dismiss the Amended Complaint. On July 16, 2003,
the Court issued a Memorandum  Opinion  dismissing the Amended  Complaint in its
entirety with prejudice. Plaintiffs thereafter moved for reconsideration but the
Court  denied  the motion on  September  8, 2003.  The  plaintiffs  subsequently
appealed to the Fourth Circuit and that appeal is presently pending. The Company
does not believe that the complaint  has any merit and was correctly  dismissed,
and intends to continue to defend the complaint vigorously in any event.

In March 2002, Enzo Life Sciences, a subsidiary of the Company,  filed suit (the
"Litigation")  in the United States  District Court for the District of Delaware
against Digene Corp.,  charging it with infringing the Company's U.S. Patent No.
6,221,581,  (the "581  Patent")  which  concerns a novel  process for  detecting
nucleic acids of interest.  On May 31, 2002, Digene filed  counterclaims in that
suit  against  Enzo Life  Sciences  and the  Company,  including  business  tort
counterclaims relating to the `581 patent. On October 13, 2004, the Company, its
wholly owned  subsidiary  Enzo Life Sciences,  Inc.  ("Enzo Life  Sciences") and
Digene  Corporation  ("Digene")  entered into a Settlement and License Agreement
(the  "Agreement") and a Joint Stipulation and Order of Dismissal with Prejudice
(the  "Stipulation").  The  Agreement  provides  for  (i)  the  full  and  final
settlement of the  Litigation  and (ii) the grant to Digene of a  non-exclusive,
worldwide,  royalty-bearing  license  with  respect to such `581  Patent and the
remaining  patents in the '581 patents global family.  The '581 patent is set to
expire  on April 24,  2018.  Pursuant  to the  Agreement  Digene is  irrevocably
required to pay Enzo Life  Sciences an aggregate of $30.5  million of which Life
Sciences  received U.S. $16 million (the "First Payment") from Digene on October
14, 2004.  Digene will pay to Enzo U.S. $16.5 million (subject to the $2 million
credit discussed below)  ("Additional  Irrevocable  Payments");  $2.5 million of
which shall be paid by November  14, 2005 and $3.5  million per year by November
14 of each of 2006, 2007, 2008 and 2009. In addition, Digene shall pay Enzo Life
Sciences Running  Royalties on Net Sales of Licensed  Products.  Each Additional
Irrevocable  Payment is fully creditable by Digene against the Running Royalties
that are due under the Agreement. Digene at its discretion may credit $2 million
of the First Payment against either the payment required to be paid by Digene by
November  14, 2005 or the Running  Royalties  due Enzo Life  Sciences  under the
Agreement.  The  Stipulation  which will be filed with the Court by October  15,
2004 dismisses with prejudice all claims,  counterclaims and defenses brought or
raised by any party to the Litigation.

In October 2002,  the Company filed suit in the United States  District Court of
the Southern  District of New York against Amersham plc,  Amersham  Biosciences,
Perkin Elmer, Inc., Perkin Elmer Life Sciences, Inc., Sigma-Aldrich Corporation,
Sigma Chemical Company,  Inc.,  Molecular Probes,  Inc. and Orchid  Biosciences,
Inc. In January 2003,  the Company  amended its complaint to include  defendants
Sigma Aldrich Co. and Sigma  Aldrich,  Inc. The counts set forth in the suit are
for breach of contract; patent infringement; unfair competition under state law;
unfair  competition  under  federal law;  tortious  interference  with  business
relations;  and fraud in the inducement of contract.  The complaint alleges that
these counts arise out of the defendants' breach of  distributorship  agreements
with the Company concerning labeled nucleotide products and technology,  and the
defendants' infringement of patents covering the same. In April, 2003, the Court
directed that individual  complaints be filed separately against each defendant.
A number of the defendants have answered the individual  complaints and asserted
a variety of affirmative defenses and counterclaims. Fact discovery is currently

                                       24
<PAGE>

scheduled to close on May 6, 2005.  The Court will conduct a claim  construction
hearing on June 28,  2005.  There can be no  assurance  that the Company will be
successful in this litigation.  However,  even if the Company is not successful,
management  does not believe that there will be a significant  adverse  monetary
impact to the Company.

On October 28, 2003, the Company and Enzo Life  Sciences,  Inc., a subsidiary of
the  Company,  filed suit in the United  States  District  Court of the  Eastern
District  of New York  against  Affymetrix,  Inc.  The  Complaint  alleges  that
Affymetrix improperly transferred or distributed  substantial business assets of
the Company to third parties,  including  portions of the Company's  proprietary
technology, reagent systems, detection reagents and other intellectual property.
The  Complaint  also  charges  that  Affymetrix  failed to account  for  certain
shortfalls in sales of the Company's  products,  and that Affymetrix  improperly
induced   collaborators   and  customers  to  use  the  Company's   products  in
unauthorized  fields or otherwise in violation of the  agreement.  The Complaint
seeks full  compensation  from  Affymetrix  to the Company  for its  substantial
damages,  in addition to injunctive and  declaratory  relief to prohibit,  among
other things,  Affymetrix's  unauthorized use, development,  manufacture,  sale,
distribution  and  transfer  of  the  Company's  products,   technology,  and/or
intellectual   property,  as  well  as  to  prohibit  Affymetrix  from  inducing
collaborators,  joint venture partners, customers and other third parties to use
the  Company's  products  in  violation  of the terms of the  agreement  and the
Company's rights.  Subsequent to the filing of the Complaint against Affymetrix,
Inc. referenced above, on or about November 10, 2003, Affymetrix, Inc. filed its
own complaint against the Company and its subsidiary,  Enzo Life Sciences, Inc.,
in the United  States  District  Court for the  Southern  District  of New York,
seeking among other things,  declaratory  relief that Affymetrix,  Inc., has not
breached the parties'  agreement,  that it has not  infringed  certain of Enzo's
Patents,  and that  certain  of  Enzo's  patents  are  invalid.  The  Affymetrix
complaint  also seeks  damages for  alleged  breach of the  parties'  agreement,
unfair  competition,  and tortuous  interference,  as well as certain injunction
relief to prevent  alleged unfair  competition  and tortuous  interference.  The
Company does not believe that the  complaint has any merit and intends to defend
vigorously.  Affymetrix  also moved to  transfer  venue of Enzo's  action to the
Southern  District  of New York,  where  other  actions  commenced  by Enzo were
pending as well as Affymetrix's  subsequently filed action. On January 30, 2004,
Affymetrix's  motion  to  transfer  was  granted.   Accordingly,  the  Enzo  and
Affymetrix  actions are now both pending in the  Southern  District of New York.
Pleadings have not been completed and discovery has not commenced.

On June 2,  2004  Roche  Diagnostic  GmbH  and  Roche  Molecular  Systems,  Inc.
(collectively  "Roche")  filed suit in the U.S.  District  Court of the Southern
District of New York against Enzo  Biochem,  Inc. and Enzo Life  Sciences,  Inc.
(collectively  "Enzo").  The  complaint  was filed after Enzo  rejected  Roche's
latest cash offer to settle Enzo's  claims for,  INTER ALIA,  alleged  breach of
contract and  misappropriation of Enzo's assets. The complaint seeks declaratory
judgment (i) of patent invalidity with respect to Enzo's 4,994,373 patent,  (ii)
of no breach by Roche of its 1994  Distribution  and Supply  Agreement with Enzo
(the "1994  Agreement"),  (iii) that  non-payment  by Roche to Enzo for  certain
sales of Roche products does not constitute a breach of the 1994 Agreement,  and
(iv) that Enzo's claims of ownership to proprietary  inventions,  technology and
products  developed by Roche are without  basis.  In  addition,  the suit claims
tortious interference and unfair competition.  The Company does not believe that
the complaint  has merit and intends to  vigorously  respond to such action with
appropriate affirmative defenses and counterclaims.

On June  7,  2004,  the  Company  and its  wholly-owned  subsidiary,  Enzo  Life
Sciences,  Inc., filed suit in the United States District Court for the District
of Connecticut  against  Applera  Corporation  and its  wholly-owned  subsidiary
Tropix, Inc. The complaint alleges  infringement of six patents (relating to DNA
sequencing systems,  labelled nucleotide products,  and other technology).  Yale
University  is the owner of four of the patents and the Company is the exclusive
licensee.  Accordingly,  Yale is also a plaintiff in the lawsuit.  Yale and Enzo
are aligned in protecting the validity and  enforceability of the patents.  Enzo
Life  Sciences is the owner of the remaining  two patents.  The complaint  seeks
permanent   injunction  and  damages   (including   treble  damages  for  wilful
infringement).  Defendants  answered the complaint on July 29, 2004.  The answer
pleads  affirmative  defences  of  invalidity,  estoppel  and laches and asserts
counterclaims of non-infringement and invalidity. A trial date has not been set.
Discovery  commences on September 15, 2004.  There can be no assurance  that the
Company  will be  successful  in this  litigation.  Even if the  Company  is not
successful, management does not believe that there will be a significant adverse
monetary impact on the Company.

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

No matters were brought to a vote of the  Company's  stockholders  in the fourth
fiscal quarter ended July 31, 2004.

                                       25
<PAGE>

PART II

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

         The  common  stock of the  Company  is  traded  on the New  York  Stock
Exchange (Symbol:ENZ).  The following table sets forth the high and low price of
the Company's Common Stock for the periods indicated as reported on the New York
Stock Exchange.

                                                      High       Low
                                                      ----       ---
         2003 Fiscal Year (August 1, 2002
         to July 31, 2003):
                  1st Quarter                         $16.40     $11.64
                  2nd Quarter                         $15.86     $12.76
                  3rd Quarter                         $15.23     $11.50
                  4th Quarter                         $30.10     $14.78

         2004 Fiscal Year (August 1, 2003
         to July 31, 2004):
                  1st Quarter                         $22.45     $17.35
                  2nd Quarter                         $20.95     $15.85
                  3rd Quarter                         $19.88     $14.20
                  4th Quarter                         $15.69     $12.57

         As of October 7, 2004,  the  Company  had  approximately  1,171  record
holders of its Common Stock.

         The  Company  has not paid a cash  dividend  on its  Common  Stock  and
intends to continue to follow a policy of retaining  future  earnings to finance
its operations. Accordingly, the Company does not anticipate the payment of cash
dividends  to holders of Common  Stock in the  foreseeable  future.  The Company
declared a 5% stock  dividend on October 5, 2004  payable  November  15, 2004 to
shareholders  of record as of October 25, 2004. The Company  declared a 5% stock
dividend on June 10, 2003 payable July 14, 2003 to  shareholders of record as of
June 30,  2003.  The  Company  declared a 5% stock  dividend on January 23, 2002
payable  February 27, 2002 to shareholders of record as of February 2, 2002. The
per share data has been  adjusted  retroactively  to reflect the stock  dividend
declared on October 5, 2004.  The  consolidated  balance sheet and  consolidated
statement of stockholders' equity do not give retroactive effect to the dividend
declared  October 5, 2004.  The shares and per share data have been  adjusted to
retroactively  reflect the stock  dividends in fiscal 2003 and 2002. The Company
recorded  a charge to  accumulated  deficit  and a credit  to  common  stock and
additional  paid-in  capital in the  amounts of  approximately  $37,709,000  and
$26,988,000 in fiscal 2003 and fiscal 2002 and fiscal 2001, respectively,  which
reflects the fair value of the dividends on the dates of declaration.

         EQUITY COMPENSATION PLAN DISCLOSURE

         The following table summarizes  equity  compensation  plans approved by
security  holders  and  equity  compensation  plans  that were not  approved  by
security holders as of July 31, 2004:

<TABLE>
<CAPTION>
                                                                                                         Number of securities
                                          Number of Securities                                          remaining available for
                                           To be Issued Upon          Weighted-Average               future issuance under equity
                                         Exercise of outstanding      Exercise Price of              compensation plans (excluding
                                          options, warrants and      outstanding options,                      securities
Plan category                                     rights             warrants and rights                 reflected in column (a)
----------------------------------------------------------------------------------------------------------------------------------
                                                    (a)                      (b)                                   (c)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                       <C>                                   <C>
Equity compensation plans
(stock options) approved by
security holders                                 2,856,801                 $11.86                                238,780

Equity compensation plans not
Approved by security holders                           ---                    ---                                    ---
                                                 ---------                 ------                                -------

Total                                            2,856,801                 $11.86                                238,780
                                                 =========                 ======                                =======
</TABLE>

                                       26
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

         The selected  operating results for the years ended July 31, 2004, 2003
and 2002 and the financial position data as of July 31, 2004 and 2003, have been
derived from the Company's audited  consolidated  financial  statements included
elsewhere in this Annual Report on Form 10-K. The selected operating results for
the years ended July 31, 2001 and 2000, and the selected financial position data
as of July  31,  2002,  2001 and 2000 are  derived  from the  Company's  audited
consolidated  financial  statements which are not included in this Annual Report
on Form 10-K.

         The following tables summarize the Company's  consolidated statement of
operations and balance sheet data. This information should be read together with
the discussion in "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" and the Company's  consolidated  financial statements
and notes to those statements  included  elsewhere in this Annual Report on Form
10-K.

<TABLE>
<CAPTION>
                                                                      For the Years Ended July 31,
                                                 --------------------------------------------------------------------
                                                                  (In thousands, except per share data)

                                                   2004           2003           2002           2001          2000
                                                   ----           ----           ----           ----          ----
<S>                                              <C>            <C>            <C>             <C>            <C>
OPERATING RESULTS:

Operating revenues                                $41,644        $52,767        $54,015        $52,266        $42,847


Interest income                                     1,152          1,355          1,350          3,003          2,585

(Loss) income before benefit (provision)
   for taxes on income                            (11,080)         5,725         10,340         12,231          7,668

Benefit (provision) for taxes on income             4,848         (1,881)        (3,417)        (5,418)        (1,044)

Net (loss) income                                 $(6,232)        $3,844         $6,923         $6,813         $6,624
                                                  =======         ======         ======         ======         ======

Basic net (loss) income per common share:           $(.20)         $0.12          $0.22          $0.22          $0.22
                                                    =====          =====          =====          =====          =====

Diluted net (loss) income per common share:         $(.20)         $0.12          $0.21          $0.21          $0.20
                                                    =====          =====          =====          =====          =====

Denominator for per share calculation:
     Basic                                         31,700         31,399         31,359         31,254         30,789
     Diluted                                       31,700         32,175         32,327         32,558         32,802

FINANCIAL POSITION:
Working capital                                   $92,259        $97,723        $92,772        $85,094        $74,094
Total assets                                     $110,334       $115,878       $109,291       $102,931        $92,886
Stockholders' equity                             $104,166       $109,380       $104,733        $97,517        $87,176
</TABLE>

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

         The  following  discussion  of our  financial  condition and results of
operations  should be read in  conjunction  with our  financial  statements  and
related notes. This discussion contains forward-looking  statements that involve
risks and  uncertainties.  Our actual results could differ materially from those
anticipated  in  these  forward-looking  statements.  See  "Forward-Looking  and
Cautionary Statements." Because of the foregoing factors, you should not rely on
past financial results as an indication of future  performance.  We believe that
period-to-period   comparisons  of  our  financial   results  to  date  are  not
necessarily meaningful and expect that our results of operations might fluctuate
from period to period in the future.

         Enzo Biochem, Inc. (the "Company" or "Enzo") is a leading life sciences
and  biotechnology  company focused on harnessing  genetic  processes to develop
research  tools,  diagnostics  and  therapeutics.  Enzo also  provides  clinical
laboratory  services to the medical  community.  In  addition,  our work in gene
analysis  has  led  to  our  development  of  significant   therapeutic  product
candidates,  several of which are currently in clinical trials,  and several are
in preclinical studies.

                                       27
<PAGE>

         The business  activities  of the Company are performed by the Company's
three  wholly  owned  subsidiaries.  These  activities  are:  (1)  research  and
development,  manufacturing  and marketing of biomedical  research  products and
tools through Enzo Life  Sciences and research and  development  of  therapeutic
products  through  Enzo  Therapeutics,  and  (2)  the  operation  of a  clinical
reference laboratory through Enzo Clinical Labs. For information relating to the
Company's business segments,  see Note 15 of the Notes to Consolidated Financial
Statements.

         The  Company's  source of  revenue  has been from the  direct  sales of
research  products of labeling  and  detection  reagents  for the  genomics  and
sequencing markets,  as well as through  non-exclusive  distribution  agreements
with  other  companies.  Another  source of revenue  has been from the  clinical
laboratory service market. Clinical laboratory services are provided to patients
covered by various third party insurance  programs,  including Medicare and self
payors for the services provided. The clinical laboratory is subject to seasonal
fluctuations in operating  results.  Volume of testing generally declines during
the summer months,  the year-end  holiday periods and other major  holidays.  In
addition,  volume  declines  due to inclement  weather may reduce net  revenues.
Therefore,  comparison of the results of successive  quarters may not accurately
reflect trends or results for the full year. For the fiscal years ended July 31,
2004  and  2003,  respectively,  approximately  31%  and  44% of  the  Company's
operating  revenues were derived from research  product sales and  approximately
69% and 56% were derived from clinical  laboratory  services.  Research  product
revenue  from  Affymetrix  represented  approximately  0 %,  22%  and 23% of the
consolidated  revenues  in fiscal  2004,  2003 and 2002,  respectively,  under a
non-exclusive  distribution and supply agreement.  Research product revenue from
this major distributor  accounted for approximately 0 % and 50% of the Company's
total research  product revenue in fiscal 2004 and 2003,  respectively.  At July
31, 2004 and 2003,  of the  Company's  net  accounts  receivable  no monies were
included from this one major distributor. Research product revenue from Amersham
represented  approximately 0%, 1% and 1% of the consolidated  revenues in fiscal
2004, 2003 and 2002, respectively, under a non-exclusive distribution and supply
agreement. At July 31, 2004 and 2003, 0% and 2%, respectively,  of the Company's
net accounts  receivable relate to amounts due from this  distributor.  Research
product revenue from Perkin-Elmer represented approximately 8%, 4% and 5% of the
consolidated  revenues  in fiscal  2004,  2003 and 2002,  respectively,  under a
non-exclusive  distribution and supply agreement.  At July 31, 2004 and 2003, 5%
and 3%, respectively, of the Company's net accounts receivable relate to amounts
due from this  distributor.  Research  product  revenue  from Roche  represented
approximately  8%, 6% and 8% of the  consolidated  revenues in fiscal 2004, 2003
and 2002, respectively, under a non-exclusive distribution and supply agreement.
At July 31, 2004 and 2003, 0% and 6%  respectively of the Company's net accounts
receivable  relate to amounts due from the this  distributor.  At July 31, 2004,
the  Company  had  written  off $1.8  million  against  the amount due from this
distributor.  See Item 3. Legal Proceedings.  The following is a table outlining
the above for the respective consolidated fiscal years:

<TABLE>
<CAPTION>
                                                % of Revenue                                 % of Accounts Receivable
                                  2004              2003              2002                   2004                2003
                                --------------------------------------------               ----------------------------

<S>                                <C>               <C>               <C>                    <C>                 <C>
Affymetrix                         0%                22%               23%                    0%                  0%

Perkin-Elmer                       8%                 4%                6%                    5%                  3%

Amersham                           0%                 1%                1%                    0%                  2%

Roche                              8%                 6%                5%                    0%                  6%
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

         At July 31, 2004,  our cash and cash  equivalents  of $54.5 million and
marketable securities of $17.2 million totaled $71.7 million, a decrease of $6.7
million from July 31, 2003. We had working  capital of $92.3 million at July 31,
2004 compared to $97.7 million at July 31, 2003. On October 14, 2004 the Company
received $16 million from Digene  Corporation in connection  with execution of a
settlement and license agreement. See Item 3. Legal Proceeding.

         Net cash used in operating  activities for the year ended July 31, 2004
was  approximately  $5.6  million as compared to net cash  provided by operating
activities  of $12.1  million for the year ended July 31, 2003.  The decrease in
net cash  provided by operating  activities  from fiscal 2003 to fiscal 2004 was
primarily  due to a net loss in the  current  year  offset by the net  change in
operating assets and liabilities compared to the prior year.

         Net cash used in investing  activities  decreased  approximately  $12.5
million from fiscal 2003, primarily as a result of a decrease in the purchase of
marketable securities in the current year.

         Net cash provided by financing activities increased by $.3 million from
fiscal 2003  primarily as a result of the increase in proceeds from the exercise
of stock options.

                                       28
<PAGE>

         Net accounts  receivable of $14.8 million and $17.3 million represented
130  days  and 119  days of  operating  revenues  at July  31,  2004  and  2003,
respectively.  The change in net  accounts  receivable  is due to a decrease  in
accounts  receivable at the clinical reference  laboratory of approximately $1.3
million and a decrease of research products accounts receivable of approximately
$1.2 million.  The decrease in the clinical  laboratory  receivable is primarily
due to the decrease in revenue.  The decrease in the research  products accounts
receivable  is  primarily  due to the  decrease  in  revenue  from one  specific
distributor  of research  products.  The  Company  had written off $1.8  million
against the open accounts receivable due from this one distributor in the fourth
quarter of 2004.

         The Company has entered into various real estate  operating leases with
both related and unrelated  parties.  See Note 6 to the  Consolidated  Financial
Statements for a further description of these various leases.

         The  Company  has an  exclusive  licensing  agreement  to an  invention
covered by licensed  patents.  Under this agreement,  the Company is required to
make certain minimum  royalty  payments of $200,000 per year through the life of
the patents. See Note 10 to the Consolidated Financial Statement.

         The total future payments under the Company's  contractual  obligations
as of July 31, 2004 are as follows:

<TABLE>
<CAPTION>
                                                             Payments Due by Period
                                                             ----------------------

                                            Total       Less Than 1 Year     1-3 Years     4-5 Years
                                            -----       ----------------     ---------     ---------

<S>                                       <C>               <C>              <C>           <C>
Operating Leases                          $1,393,000        $705,000         $498,000      $190,000
                                          ----------        --------         --------      --------
Total Contractual Cash Obligations        $1,393,000        $705,000         $498,000      $190,000
                                          ==========        ========         ========      ========
</TABLE>

         We  believe  that our  current  cash  position  is  sufficient  for our
foreseeable  liquidity  and capital  resource  needs,  although  there can be no
assurance that future events will not alter such view.

         Management  is not aware of any  material  claims,  disputes or settled
matters concerning third-party  reimbursements that would have a material effect
on our financial statements.

CRITICAL ACCOUNTING POLICIES

GENERAL

         The Company's  discussion  and analysis of its financial  condition and
results of operations are based upon Enzo Biochem, Inc.  consolidated  financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States.  The  preparation  of these  financial
statements  requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities,  revenues and expenses; these estimates
and  judgments  also  affect  related   disclosure  of  contingent   assets  and
liabilities.  On an on-going basis,  we evaluate our estimates,  including those
related  to  contractual  allowance,   allowance  for  uncollectible   accounts,
intangible  assets  and  income  taxes.  The  Company  bases  its  estimates  on
experience and on various other  assumptions  that are believed to be reasonable
under  the  circumstances,  the  results  of which  form the  basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different assumptions or conditions.

REVENUE RECOGNITION

         Revenues from the clinical  laboratory  are  recognized as services are
rendered  upon  completion  of the testing  process  for a specific  patient and
reported to the ordering  physician.  The Company's  revenue is based on amounts
billed or billable for services  rendered,  net of contractual  adjustments  and
other arrangements made with third-party payors to provide services at less than
established  billing rates.  Revenues from research product sales,  exclusive of
certain non-exclusive  distribution agreements, are recognized when the products
are shipped.

         The Company has certain non-exclusive  distribution  agreements,  which
provide for  consideration to be paid to the distributors for the manufacture of
certain   products.   The  Company  records  such   consideration   provided  to
distributors under these non-exclusive distribution agreements as a reduction to
research product  revenues.  The revenue from these  non-exclusive  distribution
agreements are recognized when shipments are made to their respective  customers
and reported to the Company.

                                       29
<PAGE>

CONTRACTUAL ALLOWANCES

         The percentage of the Company's  revenues derived from Medicare,  third
party  payers,  commercial  insurers  and  managed  care  patients  continue  to
increase.  The Medicare regulations and various managed care contracts are often
complex and may include multiple reimbursement mechanisms for different types of
services  provided in our clinical  laboratory.  We estimate the  allowance  for
contractual allowances on a payer-specific basis given our interpretation of the
applicable  regulations  and  historical  calculations.  However,  the  services
authorized  and  provided  and  related   reimbursement  are  often  subject  to
interpretation  that could  result in payments  that differ from our  estimates.
Additionally,  updated  regulations  occur  frequently  necessitating  continual
review and assessment of the estimation process by management.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The Company's  ability to collect  outstanding  receivables  from third
party  payers is  critical to its  operating  performance  and cash  flows.  The
primary  collection  risk lies with  uninsured  patients  or  patients  for whom
primary  insurance  has paid but a  patient  portion  remains  outstanding.  The
Company estimates the allowance for doubtful  accounts  primarily based upon the
age of the accounts  since invoice date.  The Company  continually  monitors its
accounts  receivable  balances and utilizes cash collections data to support the
basis for its  estimates of the  provision  for doubtful  accounts.  Significant
changes  in payer mix or  regulations  could  have a  significant  impact on the
Company's  results of operations  and cash flows.  In addition,  the Company has
implemented a process to estimate and review the collectibles of its receivables
based on the period they have been outstanding.  Historical collection and payor
reimbursement  experience is an integral part of the estimation  process related
to reserves for doubtful  accounts.  The Company also assesses the current state
of  its  billing  functions  in  order  to  identify  any  known  collection  or
reimbursement  issues in order to assess  the  impact,  if any,  on the  reserve
estimates, which involves judgment. The Company believes that the collectibility
of its receivables is directly  linked to the quality of its billing  processes,
most notably,  those related to obtaining  the correct  information  in order to
bill  effectively for the services  provided.  Revisions in reserve for doubtful
accounts  estimates  are  recorded as an  adjustment  to bad debt  expense.  The
Company  believes that its  collection  and reserves  processes,  along with the
close monitoring of its billing processes, helps reduce the risk associated with
material  revisions  to reserve  estimates  resulting  from  adverse  changes in
collection and reimbursement experience and billing operations.

INCOME TAXES

         The Company  accounts  for income taxes under the  liability  method of
accounting for income taxes. Under the liability method, deferred tax assets and
liabilities  are  recognized  for the future tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and liabilities and their  respective tax bases.  The liability  method requires
that any tax benefits recognized for net operating loss carry forwards and other
items be reduced by a valuation  allowance  where it is more likely than not the
benefits may not be realized.  Deferred tax assets and  liabilities are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled. Under
the liability  method,  the effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

IMPAIRMENT OF LONG-LIVED ASSETS

         The Company evaluates the requirement to recognize impairment losses on
long-lived  assets used in operations  when indicators of impairment are present
and the  undiscounted  cash flows  estimated to be generated by those assets are
less than the assets'  carrying  amount.  Company  management  believes  that no
impairment to its long-lived assets has occurred.

                                       30
<PAGE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          Comparative financial data for the years ended July 31,
                                          -------------------------------------------------------

                                                    Increase                    Increase
                                        2004       (Decrease)       2003       (Decrease)      2002
                                      ---------------------------------------------------------------
                                                               (in thousands)

<S>                                   <C>           <C>             <C>         <C>            <C>
Revenues:
Research product sales                 $12,972      ($10,281)      $23,253      ($2,710)      $25,963
Clinical laboratory services            28,672          (842)       29,514        1,462        28,052
                                        ------          ----        ------        -----        ------
              Total revenue            $41,644       (11,123)      $52,767       (1,248)      $54,015
                                       -------       -------       -------       ------       -------

Costs and expenses:
Cost of research products                2,518          (871)        3,389        1,552         1,837
Cost of laboratory services             10,586           993         9,593         (516)       10,109
Research & development                   8,078          (233)        8,311        2,132         6,179
Selling expense                          4,335           829         3,506          263         3,243
General & administrative                10,032         1,441         8,591        1,233         7,358
Provision for uncollectible A/R         11,987         2,642         9,345       (4,843)       14,188
Legal expenses                           6,340           679         5,661        3,550         2,111
                                         -----           ---         -----        -----         -----
         Total costs and expenses      $53,876         5,480       $48,396        3,371       $45,025
                                       -------         -----       -------        -----       -------

Operating (loss) income               $(12,232)     $(16,603)       $4,371      $(4,619)       $8,990
                                      ========      ========        ======      =======        ======
</TABLE>

FISCAL 2004 COMPARED TO FISCAL 2003

         Revenues from  operations  for the fiscal year ended July 31, 2004 were
$41.6 million a decrease of $11.1 million over revenues from  operations for the
fiscal year ended July 31,  2003.  This  decrease was due to a decrease of $10.3
million in revenues from our research  product sales  operations and decrease of
$.8  million in revenues  from  clinical  reference  laboratory  operation  over
revenues for such activities in fiscal 2004.

          The  decrease in research  product  sales  resulted  primarily  from a
decrease in direct sales of research products of labeling and detection reagents
for the genomics and  sequencing  markets  related to shipments to  Affymetrix a
major  distributor.  Research  product  revenue from this one major  distributor
accounted for  approximately  0% and 50% of the Company's total research product
revenues in fiscal 2004 and 2003, respectively. See Item 3. Legal Proceedings.

         The decrease of clinical  laboratory services revenue was due primarily
to  the  recent   downward   trends  that  had   indicated  a  decrease  in  the
reimbursements  rates from the Medicare Program,  certain third party payors and
HMO's.  Clinical laboratory services are provided to patients covered by various
third  party  payor  programs,   including   Medicare  and  health   maintenance
organizations  ("HMO's").  Billings  for services are included in revenue net of
allowances for contractual discounts and allowances paid for differences between
the  amounts  billed  and the  estimated  amount to be paid.  The effect of such
reduced  reimbursement  rates have been  reflected in fiscal 2004.  The clinical
laboratory is subject to seasonal  fluctuations in operating results.  Volume of
testing  generally  declines  during the summer  months,  the  year-end  holiday
periods and other major holidays. In addition,  volume declines due to inclement
weather  may  reduce  net  revenues.  Therefore,  comparison  of the  results of
successive  quarters may not  accurately  reflect trends or results for the full
year.

         The cost of research  products  sold  decreased by $.9 million from the
prior fiscal year.  This  decrease was primarily due to the decrease in research
product  revenue  based  on  the  termination  of  a  contract  with  one  major
distributor.

         The cost of clinical  laboratory  services  increased  by $1.0  million
during this period  primarily due to an increase in costs with certain  esoteric
tests and costs related to performing more testing in house.

         Research  and  development  expenses  decreased  by  approximately  $.2
million as a result of a decrease in the expenses  related to the clinical trial
activities and other research projects.

         Selling  expenses  increased by $.8 million during this fiscal year, as
compared to the prior year's fiscal year.  This increase was primarily due to an
increase in both the sales  personnel  and marketing  expenditures  for research
product sales and clinical laboratory services.

         The Company's provision for uncollectible accounts receivable increased
by $2.6 million to $11.9  million from $9.3 million as compared to last year. At
the  clinical   laboratory   division  the   percentage  of  the  provision  for
uncollectible  accounts  receivable as a  relationship  to revenue  increased to
35.7% this fiscal year as compared to 29.6% for last year.  These increases were
primarily due to

                                       31
<PAGE>

the change in the mix of payors  during the  current  fiscal  year.  The company
wrote  off  $1.8  million  of  an  uncollectible  receivable  from  one  of  its
distributors  at the Life Science  division this fiscal year.  See Item 3. Legal
Proceedings.

         The Company's  legal expenses  increased by $.6 million to $6.3 million
from $5.7 million as compared to the previous  year.  This increase is primarily
due to the increase in patent  infringement  proceedings and the increase in the
overall legal activities on these infringement proceedings.

         General and administrative expenses increased by $1.4 million due to an
increase at the clinical lab in the information technology  expenditures and the
in-house legal patent costs.

         Interest income was comparable to the prior fiscal year.

         In fiscal 2004, we recorded a benefit for income taxes of $4.8 million,
based  upon an $11.1  million  loss  before  benefit  for taxes on income in the
current  year as  compared to a provision  for income  taxes of $1.9  million in
fiscal 2003, which were based on the combined effective federal, state and local
income tax rates.

         Net accounts  receivable  from our clinical  laboratory  operations  of
$13.1 million and $14.4 million  represented an average of 167 days and 174 days
of operating revenues at July 31, 2004 and 2003, respectively.

         Loss  before  provision  for  taxes on  income  from the  research  and
development  segment  activities  and related  costs was $1.3  million in fiscal
2004, as compared to income before provision for taxes on income of $9.4 million
in fiscal 2003. The decrease in the profit resulted primarily from a decrease in
direct  sales of research  products of labeling and  detection  reagents for the
genomics and sequencing markets to Affymetrix a major  distributor.  Loss before
provision for taxes on income from the clinical reference  laboratories  segment
amounted  to a $1.5  million  for fiscal  2004,  as  compared  to income of $3.0
million for fiscal 2003.  The  decrease in income  before taxes for the clinical
laboratory  segment was primarily due to the  reduction in  reimbursement  rates
from third party payors.  Loss before provision for taxes on income at the other
segment  amounted to a loss of $8.3  million for fiscal  2004,  as compared to a
loss of $6.7 million for fiscal 2003,  due to the increase in legal  expenses in
fiscal 2004.

FISCAL 2003 COMPARED TO FISCAL 2002

         Revenues from  operations  for the fiscal year ended July 31, 2003 were
$52.8 million a decrease of $1.2 million over revenues from  operations  for the
fiscal year ended July 31,  2002.  This  decrease  was due to a decrease of $2.7
million in revenues  from our research  product  sales  operations  offset by an
increase  of  $1.5  million  in  revenues  from  clinical  reference  laboratory
operation over revenues for such activities in fiscal 2003.

         The  decrease in  research  product  sales  resulted  primarily  from a
decrease in direct sales of research products of labeling and detection reagents
for the  genomics  and  sequencing  markets  related to  shipments  to one major
distributor.  Research product revenue from this one major distributor accounted
for  approximately  50% and 49% of the Company's total research product revenues
in fiscal 2003 and 2002, respectively.

         The increase of clinical  laboratory services revenue was due primarily
to increase volume of higher priced esoteric tests. Clinical laboratory services
are  provided  to  patients  covered  by various  third  party  payor  programs,
including Medicare and health maintenance organizations ("HMO's").  Billings for
services are included in revenue net of allowances for contractual discounts and
allowances  paid for  differences  between the amounts  billed and the estimated
amount to be paid.  Recent  trends had  indicated a decrease  in the  collection
rates from the  Medicare  Program,  certain  third party  payors and HMO's.  The
effect of such reduced  collection rates have been reflected in fiscal 2003. The
clinical  laboratory is subject to seasonal  fluctuations in operating  results.
Volume of testing  generally  declines  during the summer  months,  the year-end
holiday  periods and other major holidays.  In addition,  volume declines due to
inclement weather may reduce net revenues. Therefore,  comparison of the results
of successive quarters may not accurately reflect trends or results for the full
year.

         Although,  research product revenue  decreased for the fiscal year, the
cost of research  products  sold  increased by $1.6 million to $3.4 million from
the prior  fiscal  year.  This  increase  was  primarily  due to the increase in
reagent costs, the expansion of the manufacturing,  processing  capabilities and
an increase in headcount in these areas, due to the unusually high volume of the
orders shipped in the first quarter of fiscal 2003 to one major distributor that
did not continue for the balance of fiscal 2003.

         The cost of  clinical  laboratory  services  decreased  by $.5  million
during  this period  primarily  due to a reduction  in  personnel  costs and the
improved  efficiency of performing  certain esoteric tests in-house that reduced
certain other expenses.

                                       32
<PAGE>

         Research  and  development  expenses  increased by  approximately  $2.1
million as a result of an increase in the expenses related to the clinical trial
activities and other research projects.

         Selling  expenses  increased by $.3 million during this fiscal year, as
compared to the prior year's  fiscal year.  This  increase was  primarily due to
costs  associated  with the unusually  high volume of the orders  shipped in the
first quarter of fiscal 2003 to one major distributor of research products.

         General and  administrative  expenses  increased by $1.2 million due to
the increase in overall  insurance costs of professional,  directors & officers,
liability insurance premiums and an increase in data processing personnel costs.

         The Company's legal expenses  increased by $3.6 million to $5.7 million
from $2.1 million as compared to the previous  year.  This increase is primarily
due to the increase in patent  infringement  proceedings and the increase in the
overall legal activities on these infringement proceedings.

         The Company's provision for uncollectible accounts receivable decreased
by $5.5 million to $8.7  million from $14.2  million as compared to last year at
the  clinical  laboratory   division.   The  percentage  of  the  provision  for
uncollectible  accounts  receivable as a  relationship  to revenue  decreased to
30.8% this fiscal year as compared to 50.6% for last year.  These decreases were
primarily  due to the  change  in the  mix of  payors  and  improved  collection
procedures  and the effect of the canceled HMO contract  last year. In addition,
during  the  current  fiscal  year,  the  Company  wrote off $.6  million  as an
uncollectible  receivable  from  one of its  distributors  at the  Life  Science
division.

         Interest income was comparable to the prior fiscal year.

         In fiscal 2003 and 2002,  we recorded a provision  for income  taxes of
$1.8 and $3.4 million,  respectively,  which was based on the combined effective
federal, state and local income tax rates.

         Net accounts  receivable  from our clinical  laboratory  operations  of
$14.4 million and $13.8 million  represented an average of 174 days and 180 days
of operating revenues at July 31, 2003 and 2002, respectively.

         Income  before  provision  for taxes on income  from the  research  and
development  segment  activities  and related  costs was $9.4  million in fiscal
2003,  as  compared  to  income  before  provision  for taxes on income of $16.6
million in fiscal 2002.  The decrease in the profit  resulted  primarily  from a
decrease in direct sales of research products of labeling and detection reagents
for the genomics and sequencing markets to one specific customer.  Income before
provision for taxes on income from the clinical reference  laboratories  segment
amounted  to a $3.0  million  for fiscal  2003,  as  compared  to a loss of $3.8
million for fiscal 2002.  The  increase in income  before taxes for the clinical
laboratory segment was primarily due to the increase in revenue from an increase
in higher gross margin reimbursement and an increase in volume of esoteric tests
being ordered by physicians.  These esoteric tests have higher pricing levels as
compared to the regular tests performed at the laboratory.

         The Company does not have any "off-balance sheet  arrangements" as such
term is defined in Item 303(a) (4) of Regulation S-K.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company  believes  that it does not have any  material  exposure to
market risk associated with interest rate risk,  foreign currency  exchange rate
risk, commodity price risk, equity price risk, or other market risks.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The response to this item is  submitted  in a separate  section of this
report. See Item 15(a) (1) and (2)

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

         Not applicable.

                                       33
<PAGE>

Item 9A. CONTROLS AND PROCEDURES

Quarterly Evaluation of the Company's Disclosure Controls and Internal Controls.
As of the end of the period  covered  by this  Annual  Report on Form 10-K,  the
Company  evaluated  the  effectiveness  of  the  design  and  operation  of  its
"disclosure controls and procedures" ("Disclosure Controls"),  and its "internal
controls and procedures for financial  reporting"  ("Internal  Controls").  This
evaluation (the "Controls  Evaluation")  was done under the supervision and with
the  participation  of our chief  executive  officer ("CEO") and chief financial
officer ("CFO"). Rules adopted by the Securities and Exchange Commission ("SEC")
require that in this section of the Annual Report we present the  conclusions of
the CEO and the CFO about  the  effectiveness  of our  Disclosure  Controls  and
Internal Controls based on and as of the date of the Controls Evaluation.

Disclosure  Controls  and Internal  Controls.  As provided in Rule 13a-14 of the
General Rules and Regulations  under the Securities and Exchange Act of 1934, as
amended, Disclosure Controls are defined as meaning controls and procedures that
are designed  with the  objective of insuring  that  information  required to be
disclosed in our reports  filed under the  Securities  Exchange Act of 1934,  as
amended (the  "Exchange  Act"),  is recorded,  processed,  designed and reported
within the time  periods  specified  by the SEC's  rules and  forms.  Disclosure
Controls  include,  within the  definition  under the Exchange  Act, and without
limitation,  controls and procedures to insure that  information  required to be
disclosed  by  us  in  our  reports  is  accumulated  and  communicated  to  our
management,  including our CEO and CFO, as appropriate to allow timely decisions
regarding  disclosure.  Internal Controls are procedures which are designed with
the objective of providing  reasonable  assurance that (1) our  transactions are
properly  authorized;  (2) our assets are  safeguarded  against  unauthorized or
improper use; and (3) our transactions are properly  recorded and reported,  all
to permit  the  preparation  of our  financial  statements  in  conformity  with
generally accepted accounting principles.

Scope of the Controls Evaluation.  The evaluation made by our CEO and CFO of our
Disclosure Controls and our Internal Controls included a review of the controls'
objectives  and  design,  the  controls'  implementation  by the Company and the
effect of the  controls  on the  information  generated  for use in this  Annual
Report.  In the course of the Controls  Evaluation,  we sought to identify  data
errors,  control  problems  or acts of fraud  and to  confirm  that  appropriate
corrective action, including process improvements,  were being undertaken.  This
type of  evaluation  will be done on a quarterly  basis so that the  conclusions
concerning  controls  effectiveness  can be reported in our Quarterly Reports on
Form 10-Q and Annual  Report on Form 10-K.  The overall  goals of these  various
evaluation  activities are to monitor our  Disclosure  Controls and our Internal
Controls and to make  modifications  as necessary;  our intent in this regard is
that the  Disclosure  Controls and the Internal  Controls  will be maintained as
dynamic systems that change  (including with  improvements  and  corrections) as
conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were
any  "significant  deficiencies"  or  "material  weaknesses"  in  the  Company's
Internal  Controls,  or whether  the Company  had  identified  any acts of fraud
involving  personnel  who  have a  significant  role in the  Company's  Internal
Controls.  In the professional auditing literature,  "significant  deficiencies"
are referred to as "reportable conditions";  these are control issues that could
have a significant adverse effect on the ability to record,  process,  summarize
and report financial data in the financial statements.  A "material weakness" is
defined  in  the  auditing  literature  as  a  particularly  serious  reportable
condition  where the internal  control does not reduce to a relatively low level
the risk that  misstatements  caused by error or fraud may occur in amounts that
would be material in relation to the  financial  statements  and not be detected
within a timely  period by employees in the normal  course of  performing  their
assigned  functions.  We also sought to deal with other controls  matters in the
Controls Evaluation, and in each case if a problem was identified, we considered
what revision, improvement and/or correction to make in accord with our on-going
procedures.  In fiscal  2004,  we have  established  an internal  "Hotline"  for
employees  to  report  to the  audit  committee  acts of fraud in the  financial
reporting process.

In  accord  with SEC  requirements,  our CEO and CFO each have  confirmed  that,
during  the most  recent  fiscal  quarter  and  since  the date of the  Controls
Evaluation  to the date of this Annual  Report,  there have been no  significant
changes in Internal Controls or in other factors that have materially  affected,
or are reasonably likely to materially  affect, the Company's Internal Controls,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.

Conclusions.  Based  upon the  Controls  Evaluation,  our CEO and CFO have  each
concluded  that, our  Disclosure  Controls are effective to ensure that material
information  relating to the Company and its  consolidated  subsidiaries is made
known to management,  including the CEO and CFO,  particularly during the period
when our periodic reports are being prepared, and that our Internal Controls are
effective to provide  reasonable  assurance  that our financial  statements  are
fairly presented in conformity with generally accepted accounting principles.

                                       34
<PAGE>

Item 9B. OTHER INFORMATION

On October  13,  2004,  the  Company,  its  wholly  owned  subsidiary  Enzo Life
Sciences,  Inc. ("Enzo Life Sciences") and Digene Corporation ("Digene") entered
into  a  Settlement  and  License   Agreement  (the  "Agreement")  and  a  Joint
Stipulation  and Order of Dismissal  with  Prejudice  (the  "Stipulation").  The
Agreement  provides for (i) the full and final  settlement of the Litigation and
(ii) the grant to Digene of a non-exclusive,  worldwide, royalty-bearing license
with respect to such `581 Patent and the  remaining  patents in the '581 patents
global family.  The '581 patent is set to expire on April 24, 2018.  Pursuant to
the  Agreement  Digene is  irrevocably  required  to pay Enzo Life  Sciences  an
aggregate of $30.5 million of which Life Sciences received U.S. $16 million (the
"First  Payment") from Digene on October 14, 2004.  Digene will pay to Enzo U.S.
$16.5 million (subject to the $2 million credit  discussed  below)  ("Additional
Irrevocable Payments"); $2.5 million of which shall be paid by November 14, 2005
and $3.5 million per year by November 14 of each of 2006,  2007,  2008 and 2009.
In addition,  Digene shall pay Enzo Life Sciences Running Royalties on Net Sales
of Licensed Products. Each Additional Irrevocable Payment is fully creditable by
Digene against the Running Royalties that are due under the Agreement. Digene at
its  discretion  may credit $2 million of the First Payment  against  either the
payment  required  to be paid by  Digene by  November  14,  2005 or the  Running
Royalties due Enzo Life Sciences under the Agreement. The Stipulation which will
be filed with the Court by October 15, 2004 dismisses with prejudice all claims,
counterclaims and defenses brought or raised by any party to the Litigation.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS

                  The information  required under this item will be set forth in
the  Company's  proxy  statement  to be filed with the  Securities  and Exchange
Commission  on or  before  November  26,  2004  and is  incorporated  herein  by
reference.

Item 11. EXECUTIVE COMPENSATION

                  The information  required under this item will be set forth in
the  Company's  proxy  statement  to be filed with the  Securities  and Exchange
Commission  on or  before  November  26,  2004  and is  incorporated  herein  by
reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  The information  required under this item will be set forth in
the  Company's  proxy  statement  to be filed with the  Securities  and Exchange
Commission  on or  before  November  26,  2004  and is  incorporated  herein  by
reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  The information  required under this item will be set forth in
the  Company's  proxy  statement  to be filed with the  Securities  and Exchange
Commission  on or  before  November  26,  2004  and is  incorporated  herein  by
reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

                  The information  required under this item will be set forth in
the  Company's  proxy  statement  to be filed with the  Securities  and Exchange
Commission  on or  before  November  26,  2004  and is  incorporated  herein  by
reference.

PART IV

Item 15.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
              ON FORM 8-K

(a)   (1)     Consolidated Financial Statements
                Consolidated Balance Sheets - July 31, 2004 and 2003
                Consolidated Statements of Operations-
                  Years ended July 31, 2004, 2003 and 2002
                Consolidated Statements of Stockholders' Equity-

                                       35
<PAGE>

                  Years ended July 31, 2004, 2003 and 2002
                Consolidated Statements of Cash Flows-
                  Years ended July 31, 2004, 2003 and 2002 Notes to Consolidated
                Financial Statements.

      (2)   Financial Statement Schedule
                Schedule II - Valuation and Qualifying Accounts

            All  other   schedules  have  been  omitted   because  the  required
information is included in the  consolidated  financial  statements or the notes
thereto or because they are not required.

      (3)   Exhibits

            The following documents are filed as Exhibits to this Annual  Report
on Form 10-K:

         Exhibit                    Description
           No                       -----------
           --

          3(a)      Certificate of Incorporation, as amended March 17, 1980. (1)

          3(b)      June 16, 1981 Certificate of Amendment of the Certificate of
                    Incorporation. (2)

          3(c)      Certificate    of   Amendment   to   the    Certificate   of
                    Incorporation. (11)

          3(d)      Bylaws. (1)

         10(a)      1983 Incentive Stock Option Plan. (4)

         10(b)      1993 Incentive Stock Option Plan. (5)

         10(c)      Employment Agreement with Elazar Rabbani. (5)

         10(d)      Employment Agreement with Shahram Rabbani. (5)

         10(e)      Employment Agreement with Barry Weiner. (5)

         10(f)      1994 Stock Option Plan. (6)

         10(g)      Agreement  with Corange  International  Limited  (Boehringer
                    Mannheim) effective April 1994. (19) (7)

         10(h)      Agreement  with Amersham  International  effective  February
                    1995. (7)

         10(i)      Agreement with Dako A/S effective May 1995. (7)

         10(j)      Agreement with Baxter Healthcare Corporation (VWR Scientific
                    Products) effective September 1995. (7)

         10(k)      Agreement with Yale University and amendments thereto. (7)

         10(l)      Agreement  with The Research  Foundation of the State of New
                    York effective May 1987. (7)

         10(m)      1999 Stock Option Plan filed. (8)

         10(n)      Amendment to Elazar Rabbani's employment agreement. (9)

         10(o)      Amendment to Shahram Rabbani's employment agreement. (9)

         10(p)      Amendment to Barry Weiner's employment agreement. (9)

                                       36
<PAGE>

         10(q)      Lease Addendum (9)

         10(r)      Code of Ethics filed herewith.

         10(s)      Settlement  and License  Agreement  with Digene  Corporation
                    effective as of September 30, 2004 filed herewith (10)

         10(t)      Joint  Stipulation  and Order of  Dismissal  with  Prejudice
                    dated October , 2004 filed herewith (10).

         21         Subsidiaries of the registrant:
                    Enzo Clinical Labs, Inc., a New York corporation.
                    Enzo Life Sciences, Inc., a New York corporation.
                    Enzo Therapeutics, Inc., a New York corporation.

         23         Consent of Independent  Registered  Public  Accounting  Firm
                    filed herewith.

         31(a)      Certification   of  CEO  Pursuant  to  Section  302  of  the
                    Sarbanes-Oxley Act of 2002 filed herewith.

         31(b)      Certification   of  CFO  Pursuant  to  Section  302  of  the
                    Sarbanes-Oxley Act of 2002 filed herewith.

         32(a)      Certification   of  CEO  Pursuant  to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 filed herewith.

         32(b)      Certification   of  CFO  Pursuant  to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 filed herewith.

(1) The exhibits were filed as exhibits to the Company's  Registration Statement
on Form S-18 (File No. 2-67359) and are incorporated herein by reference.

(2) This exhibit was filed as an exhibit to the Company's Form 10-K for the year
ended July 31, 1981 and is incorporated herein by reference.

(3) This exhibit was filed with the Company's Annual Report on Form 10-K for the
year ended July 31, 1989 and is incorporated herein by reference.

(4) This exhibit was filed with the Company's  definitive  proxy statement dated
February 4, 1983 and is incorporated herein by reference.

(5) This exhibit was filed with the Company's Annual Report on Form 10-K for the
year ended July 31, 1994 and is incorporated herein by reference.

(6) This exhibit was filed with the Company's Annual Report on Form 10-K for the
year ended July 31, 1995 and is incorporated herein by reference.

(7) This exhibit was filed with the Company's Annual Report on Form 10-K for the
year  ended  July  31,  1996  or  previously  filed  amendment  thereto  and  is
incorporated herein by reference.

(8) This exhibit was filed with the Company's Registration Statement on Form S-8
(333-87153) and is incorporated herein by reference.

(9) This exhibit was filed with the Company's Annual Report on Form 10-K for the
year ended July 31, 2000 and is incorporated herein by reference.

(10) These exhibits are subject to a confidential  treatment request pursuant to
the Securities Exchange Act Rule 24b-2.

(b) See Item 15(a)(3), above.
(c) See Item 15(a)(2), above.

                                  *************

                                       37
<PAGE>

S I G N A T U R E S

         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.

                                                  ENZO BIOCHEM, INC.

Date:    October 14, 2004                         By:   /s/ Elazar Rabbani Ph.D.
                                                        ------------------------
                                                        Chairman of the Board


         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.

By: /s/ Elazar Rabbani Ph.D.                                    October 14, 2004
----------------------------
Elazar Rabbani
Chairman of Board of Directors
(Principal Executive Officer)


By: /s/ Shahram K. Rabbani                                      October 14, 2004
--------------------------
Shahram K. Rabbani,
Chief Operating Officer, Secretary
and Director


By: /s/ Barry W. Weiner                                         October 14, 2004
-----------------------
Barry W. Weiner,
President, Chief Financial Officer, and Director


By: /s/ John B. Sias                                            October 14, 2004
--------------------
John B. Sias, Director


By: /s/ John J. Delucca                                         October 14, 2004
-----------------------
John J. Delucca, Director


By: /s/ Irwin Gerson                                            October 14, 2004
--------------------
Irwin Gerson, Director


By: /s/ Melvin F. Lazar                                         October 14, 2004
-----------------------
Melvin F. Lazar, Director



------------------------
Marcus A. Conant, Director

                                       38
<PAGE>

FORM  10-K, ITEM 15(a) (1) and (2)
ENZO BIOCHEM, INC.


                  LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE


The following consolidated financial statements and financial statement schedule
of Enzo Biochem, Inc. are included in Item 15(a):

Report of Registered Public Accounting Firm                                  F-2

Consolidated Balance Sheets -- July 31, 2004 and 2003                        F-3

Consolidated Statements of Operations --
         Years ended July 31, 2004, 2003 and 2002                            F-4

Consolidated Statements of Stockholders' Equity --
         Years ended July 31, 2004, 2003 and 2002                            F-5

Consolidated Statements of Cash Flows --
         Years ended July 31, 2004, 2003 and 2002                            F-6

Notes to Consolidated Financial Statements                                   F-7

Schedule II - Valuation and Qualifying
         Accounts --Years ended July 31, 2004, 2003 and 2002                 S-1




All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

                                       F-1
<PAGE>


                   Report of Registered Public Accounting Firm



Board of Directors and Stockholders
Enzo Biochem, Inc.

We have audited the  accompanying  consolidated  balance sheets of Enzo Biochem,
Inc. (the "Company") as of July 31, 2004 and 2003, and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period  ended July 31,  2004.  Our audits also  included  the
financial  statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial position of Enzo
Biochem,  Inc. at July 31, 2004 and 2003 and the  consolidated  results of their
operations  and their cash flows for each of the three years in the period ended
July 31, 2004, in conformity with United States  generally  accepted  accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly in all  material  respects  the  information  set forth
therein.


                                                 /s/ Ernst & Young LLP
Melville, New York
October 7, 2004, except for Note 14
and the third paragraph of Note 7,
as to which the date is October 14, 2004



                                       F-2
<PAGE>

                                ENZO BIOCHEM, INC
                           CONSOLIDATED BALANCE SHEETS

                             JULY 31, 2004 AND 2003

<TABLE>
<CAPTION>
ASSETS                                                                            2004                  2003
                                                                                  ----                  ----

<S>                                                                            <C>                   <C>
Current assets:
   Cash and cash equivalents ........................................          $54,499,100           $63,267,600
   Marketable securities ............................................           17,241,500            15,154,100
   Accounts receivable, less allowance for doubtful accounts of
        $5,503,000 in 2004 and $4,900,000 in 2003 ...................           14,794,400            17,266,400
   Income tax receivable ............................................            3,906,900               542,300
   Inventories ......................................................            3,434,300             3,421,800
   Prepaid expenses .................................................            1,832,500             2,232,900
   Deferred taxes ...................................................            1,974,800             1,013,800
                                                                                 ---------             ---------
Total current assets ................................................           97,683,500           102,898,900
Property and equipment, at cost less accumulated depreciation
    and amortization ................................................            2,414,600             2,199,800
Goodwill ............................................................            7,452,000             7,452,000
Deferred patent costs, less accumulated amortization of $8,383,600
    in 2004 and $7,097,200 in 2003 ..................................            2,624,500             3,166,200
Other ...............................................................              159,600               161,000
                                                                                   -------               -------
                                                                              $110,334,200          $115,877,900
                                                                              ============          ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Trade accounts payable ...........................................           $2,092,300            $1,321,000
   Accrued legal fees ...............................................            2,050,500             1,915,200
   Other accrued expenses ...........................................              711,600               551,000
   Accrued research and development expenses ........................              225,000               453,400
   Accrued payroll ..................................................              258,100               703,000
   Deferred rent ....................................................               86,700               232,300
                                                                                    ------               -------
Total current liabilities ...........................................            5,424,200             5,175,900

Deferred taxes ......................................................              444,200             1,234,800
Deferred rent .......................................................                  ---                87,000
Long term payable ...................................................              300,000                   ---
Commitments and contingencies
Stockholders' equity:
   Preferred Stock, $.01 par value; authorized 25,000,000 shares; no
       shares issued or outstanding
   Common Stock, $.01 par value; authorized 75,000,000 shares; shares
       issued and outstanding: 30,864,800 in 2004 and 29,975,100
       in 2003 ......................................................              308,600               299,800
   Additional paid-in capital .......................................          205,920,000           199,081,800
   Less treasury stock at cost, 349,900 shares ......................           (5,668,900)                  ---
   Accumulated deficit ..............................................          (96,148,000)          (89,916,400)
   Accumulated other comprehensive loss .............................             (245,900)              (85,000)
                                                                               -----------           -----------
Total stockholders' equity ..........................................          104,165,800           109,380,200
                                                                               -----------           -----------
                                                                              $110,334,200          $115,877,900
                                                                              ============          ============
</TABLE>

                                       F-3

                             See accompanying notes.
<PAGE>

                               ENZO BIOCHEM, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS

                    YEARS ENDED JULY 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                  2004              2003             2002

<S>                                                                           <C>               <C>               <C>
Revenues:
   Research product revenues ........................................         $12,972,200       $23,253,100       $25,963,400
   Clinical laboratory services .....................................          28,672,200        29,513,900        28,051,700
                                                                               ----------        ----------        ----------
                                                                               41,644,400        52,767,000        54,015,100

Costs and expenses:
   Cost of research product revenues ................................           2,517,800         3,388,900         1,837,100
   Cost of clinical laboratory services .............................          10,586,200         9,592,900        10,109,500
   Research and development expense .................................           8,078,300         8,311,200         6,178,600
   Selling expense ..................................................           4,334,900         3,506,100         3,242,800
   Provision for uncollectible accounts receivable ..................          11,986,500         9,345,300        14,188,400
   Legal expense ....................................................           6,339,900         5,661,000         2,111,000
   General and administrative expense ...............................          10,032,300         8,591,300         7,358,200
                                                                               ----------         ---------         ---------
                                                                               53,875,900        48,396,700        45,025,600
                                                                               ----------        ----------        ----------
(Loss) income before interest income and benefit
   (provision) for  taxes on income .................................         (12,231,500)        4,370,300         8,989,500
Interest income .....................................................           1,151,800         1,355,000         1,350,400
                                                                                ---------         ---------         ---------
(Loss) income before benefit (provision) for taxes on income.........         (11,079,700)        5,725,300        10,339,900
Benefit (provision) for taxes on income .............................           4,848,100        (1,881,300)       (3,417,100)
                                                                                ---------        ----------        ----------
Net (loss) income ...................................................         ($6,231,600)       $3,844,000        $6,922,800
                                                                              ===========        ==========        ==========
Net (loss) income per common share:
   Basic ............................................................              $(0.20)            $0.12             $0.22
                                                                                   ======             =====             =====
   Diluted ..........................................................              $(0.20)            $0.12             $0.21
                                                                                   ======             =====             =====
Denominator for per share calculation:
   Basic ............................................................          31,700,000        31,399,000        31,359,000
                                                                               ==========        ==========        ==========
   Diluted ..........................................................          31,700,000        32,175,000        32,327,000
                                                                               ==========        ==========        ==========
</TABLE>

                                       F-4

                             See accompanying notes
<PAGE>

                                ENZO BIOCHEM, INC
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                    YEARS ENDED JULY 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                                                                                Other         Total
                                        Common Treasury    Common     Treasury    Additional                  Compre-        Stock-
                                         Stock    Stock     Stock        Stock       Paid-in   Accumulated    hensive      holders'
                                        Shares   Shares    Amount       Amount       Capital       Deficit       Loss        Equity
                                        ------   ------    ------       ------       -------       -------       ----        ------

<S>                                 <C>         <C>      <C>       <C>          <C>           <C>           <C>        <C>
Balance at July 31, 2001 .........  27,080,100      ---  $270,700          ---  $133,136,100  $(35,889,800)       ---   $97,517,000
Net income for the year ended
  July 31, 2002 ..................         ---      ---       ---          ---           ---     6,922,800        ---     6,922,800
5% stock dividend (fair value on
  date declared)..................   1,353,500      ---    13,600          ---    26,974,000   (26,987,600)       ---           ---
Payment of cash for fractional
  shares for the 5% stock
  dividend .......................         ---      ---       ---          ---           ---       (96,600)       ---       (96,600)
Increase in common stock and
  paid-in capital due to exercise
  of stock options ...............      15,200      ---       200          ---       127,800           ---        ---       128,000
Tax benefit from stock options
  exercised ......................         ---      ---       ---          ---        15,000           ---        ---        15,000
Issuance of stock for employee
  401(k) plan ....................      11,000      ---       100          ---       246,900           ---        ---       247,000
                                    ----------  -------  --------  -----------  ------------  ------------  ---------  ------------
Balance at July 31, 2002 .........  28,459,800      ---   284,600          ---   160,499,800   (56,051,200)       ---   104,733,200
Net income for the year ended
  July 31, 2003 ..................         ---      ---       ---          ---           ---     3,844,000        ---     3,844,000
Net unrealized loss on available
  for-sale securities, net of
  tax ............................         ---      ---       ---          ---           ---           ---   ($85,000)      (85,000)
                                                                                                                            -------
Comprehensive income .............                                                                                        3,759,000
                                                                                                                          =========
5% stock dividend (fair value on
  date declared)..................   1,423,600      ---    14,300          ---    37,694,900   (37,709,200)       ---           ---
Increase in common stock and
  paid-in capital due to exercise
  of stock options ...............      73,300      ---       700          ---       630,100           ---        ---       630,800
Issuance of stock for employee
  401(k) plan ....................      18,400      ---       200          ---       257,000           ---        ---       257,200
                                    ----------  -------  --------  -----------  ------------  ------------  ---------  ------------
Balance at July 31, 2003 .........  29,975,100      ---   299,800          ---   199,081,800   (89,916,400)   (85,000)  109,380,200
Net loss for the year ended
  July 31, 2004 ..................         ---      ---       ---          ---           ---    (6,231,600)       ---    (6,231,600)
Net unrealized loss on available
  for-sale securities, net of
  tax ............................         ---      ---       ---          ---           ---           ---   (160,900)     (160,900)
                                                                                                                           --------
Comprehensive loss ...............                                                                                       (6,392,500)
                                                                                                                         ==========
Purchase of treasury stock .......         ---  349,900       ---  $(5,668,900)          ---           ---        ---    (5,668,900)
Increase in common stock and
  paid-in capital due to exercise
  of stock options ...............     873,900      ---     8,700          ---     6,556,100           ---        ---     6,564,800
Issuance of stock for employee
  401(k) plan ....................      15,800      ---       100          ---       282,100           ---        ---       282,200
                                    ----------  -------  --------  -----------  ------------  ------------  ---------  ------------
Balance at July 31, 2004 .........  30,864,800  349,900  $308,600  $(5,668,900) $205,920,000  $(96,148,000) $(245,900) $104,165,800
                                    ==========  =======  ========  ===========  ============  ============  =========  ============
</TABLE>

                                       F-5

                             See accompanying notes
<PAGE>

                                ENZO BIOCHEM, INC
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                    YEARS ENDED JULY 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                          2004               2003              2002
                                                                          ----               ----              ----
<S>                                                                    <C>               <C>               <C>
Cash flows from operating activities:
   Net (loss) income ............................................      ($6,231,600)       $3,844,000        $6,922,800
   Adjustments to reconcile net (loss) income to net cash
        (used in) provided by operating activities:
     Depreciation and amortization of property and
        equipment ...............................................        1,076,000         1,058,000           989,900
     Amortization of costs in excess of fair value of net
        tangible assets acquired ................................                                ---           370,700
     Amortization of deferred patent costs ......................        1,285,500           750,000           793,600
     Provision for uncollectible accounts receivable ............       11,986,500         9,345,300        14,188,400
     Deferred income tax provision ..............................       (1,650,700)         (128,100)          720,000
     Issuance of stock for employee 401(k) plan .................          282,200           257,200           247,000
     Tax benefit from stock options exercised ...................              ---               ---            15,000
     Deferred rent ..............................................         (232,600)         (195,400)         (160,300)
     Changes in operating assets and liabilities:
        Accounts receivable before provision for
           uncollectible amounts ................................       (9,514,500)       (6,344,200)       (9,896,900)
        Inventories .............................................          (12,500)          768,400        (2,170,400)
        Prepaid expenses ........................................          400,400          (741,900)         (358,700)
        Income taxes receivable .................................       (3,364,600)        1,426,300        (1,618,400)
        Trade accounts payable and accrued expenses .............          931,900          (374,700)         (527,200)
        Accrued research and development expenses ...............         (228,400)          453,400               ---
        Accrued legal fees ......................................          135,300         1,775,200          (111,000)
        Accrued payroll .........................................         (444,900)          227,100           153,600
                                                                          --------           -------           -------
        Total adjustments .......................................          649,600         8,276,600         2,635,300
                                                                           -------         ---------         ---------
            Net cash (used in) provided by operating activities..       (5,582,000)       12,120,600         9,558,100
                                                                        ----------        ----------         ---------
Cash flows from investing activities:
   Capital expenditures .........................................       (1,303,800)         (956,700)         (620,400)
   Patent costs deferred ........................................         (443,800)         (353,900)         (490,700)
   Purchase of marketable securities ............................       (2,349,000)      (15,293,400)              ---
   Security deposits ............................................            1,400           (14,800)          (14,400)
                                                                             -----           -------           -------
     Net cash used in investing activities ......................       (4,095,200)      (16,618,800)       (1,125,500)
                                                                        ----------       -----------        ----------
Cash flows from financing activities:
   Payment for fractional shares of stock dividend ..............              ---               ---           (96,600)
   Proceeds from the exercise of stock options ..................          895,700           630,800           128,000
   Proceeds from insurance loss .................................           13,000               ---               ---
                                                                            ------        ----------            ------
     Net cash provided by financing activities ..................          908,700           630,800            31,400
                                                                           -------        ----------            ------
Net (decrease) increase in cash and cash equivalents ............       (8,768,500)       (3,867,400)        8,464,000
Cash and cash equivalents at the beginning of the year ..........       63,267,600        67,135,000        58,671,000
                                                                        ----------      ------------        ----------
Cash and cash equivalents at the end of the year ................      $54,499,100       $63,267,600       $67,135,000
                                                                       ===========       ===========       ===========
</TABLE>

                                       F-6

                             See accompanying notes
<PAGE>



                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 1 -    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

     Enzo  Biochem,  Inc. (the  "Company") is engaged in research,  development,
manufacturing and marketing of diagnostic and research products based on genetic
engineering,  biotechnology and molecular  biology.  These products are designed
for the diagnosis of and/or screening for infectious diseases,  cancers, genetic
defects and other medically  pertinent  diagnostic  information.  The Company is
conducting research and development activities in the development of therapeutic
products based on the Company's  technology  platform of genetic  modulation and
immune  modulation.  The Company also operates a clinical  reference  laboratory
that offers and provides  diagnostic medical testing services to the health care
community.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany transactions and
balances have been eliminated.

CASH AND CASH EQUIVALENTS

     The Company  considers all highly liquid debt  instruments  purchased  with
maturities  of three  months or less to be cash  equivalents.  Cash  equivalents
consist of short-term  debt  securities of domestic  companies  that the Company
intends to hold to maturity  through  October  2004.  The market values of these
securities,  as  determined  by  quoted  sources,   aggregated  $54,449,100  and
$63,267,600 at July 31, 2004 and 2003,  respectively,  and approximated  cost at
the respective dates.

MARKETABLE SECURITIES

     The Company  invests  funds that are not required for  immediate  operating
needs both in income bond mutual  funds and in a  diversified  portfolio of debt
securities.  Management  determines  the  appropriate  classification  of  these
marketable  securities at the time of purchase and reevaluates  such designation
as of each balance sheet date. The Company classifies its marketable  securities
as "available  for sale" and,  accordingly,  carries these  investments at their
aggregate  fair  values.  Unrealized  gains  or  losses,  net of tax,  on  these
marketable  securities  are included as a separate  component  of  stockholders'
equity.   Realized   gains  &  losses  and   declines  in  value  judged  to  be
other-than-temporary  on the  marketable  securities  are included in investment
income.  The cost of  securities  sold is based on the  specific  identification
method.

CONCENTRATION OF CREDIT RISK

     Financial   instruments   that   subject   the   Company   to   significant
concentrations  of credit risk primarily  consist of cash and cash  equivalents,
marketable  securities  and the net  accounts  receivable.  The  Company's  cash
equivalents and marketable securities are invested in financial instruments with
high credit ratings.

     Approximately  89% at  July  31,  2004  and 83% at July  31,  2003,  of the
Company's net accounts  receivable relates to its clinical reference  laboratory
business, which operates in the New York Metropolitan area. The Company believes
that the  concentration  of credit risk with  respect to  clinical  laboratory's
accounts receivable is limited due to the diversity of the Company's client base
and to the various  numbers of insurance  carriers  and the numerous  individual
patient accounts. As is standard in the health care industry,  substantially all
of the  Company's  clinical  laboratory's  accounts  receivable is with numerous
third party insurance  carriers and individual  patient accounts.  However,  the
Company provides  services to certain  patients  covered by various  third-party
payors,  including the Federal  Medicare  program.  Revenue,  net of contractual
allowances,  from direct billings under the Federal  Medicare program during the
years ended July 31, 2004,  2003 and 2002 were  approximately  19%, 11% and 10%,
respectively,  of the Company's total revenue. The clinical reference laboratory
industry is  characterized  by a significant  amount of  uncollectible  accounts
receivable  related to the  inability  to receive  accurate  and timely  billing
information in order to forward it to the third party payors for  reimbursement,
and the inaccurate information received from the covered individual patients for
unreimbursed unpaid amounts. The Company's provision for uncollectible  accounts
receivable is within historical expectations.

                                       F-7
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 1 -    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)


     Research   product   revenue   from  one  major   distributor   represented
approximately 0%, 22% and 23% of the consolidated  revenues in fiscal 2004, 2003
and 2002, respectively, under a non-exclusive distribution and supply agreement.
Research  product  revenue  from  this  one  major  distributor   accounted  for
approximately  0% and 50% of the Company's  total research  product  revenues in
fiscal 2004 and 2003, respectively.

INVENTORIES

     Inventories  are  stated  at the  lower of cost  (first-in,  first-out)  or
market.  Work-in-process  and finished  goods  inventories  consist of material,
labor, outside processing costs and manufacturing overhead.

PROPERTY AND EQUIPMENT

     Property  and  equipment  is  stated  at  cost,  and   depreciated  on  the
straight-line  basis over the  estimated  useful lives of the assets.  Leasehold
improvements  are  amortized  over the term of the related  leases or  estimated
useful lives of the assets, whichever is shorter.

PATENT COSTS

     The Company  capitalizes  certain legal costs directly incurred in pursuing
patent  applications as deferred patent costs under its research and development
segment.  When such applications  result in an issued patent,  the related costs
are  amortized  over a ten year  period,  using the  straight-line  method.  The
Company  reviews its issued patents and pending patent  applications,  and if it
determines  to abandon a patent  application  or that an issued patent no longer
has economic value, the unamortized balance in deferred patent costs relating to
that patent is immediately expensed.

REVENUE RECOGNITION

     The  Company  has  certain  non-exclusive  distribution  agreements,  which
provide for  consideration to be paid to the distributors for the manufacture of
certain  products.  In  accordance  with EITF 00-25 and EITF 01-09,  the Company
records such consideration  provided to distributors  under these  non-exclusive
distribution agreements as a reduction to research product revenues. The revenue
from these non-exclusive  distribution  agreements are recognized when shipments
are made from the distributors to their respective customers and reported to the
Company.

     Revenues  from  services  from  the  clinical   reference   laboratory  are
recognized when services are provided. The Company's revenue is based on amounts
billed or billable for services  rendered,  net of contractual  adjustments  and
other arrangements made with third-party payors to provide services at less than
established  billing  rates.  Revenues from research  product  sales,  excluding
certain non-exclusive  distribution  agreement revenues, are recognized when the
products are shipped.

REIMBURSEMENT CONTINGENCIES

     Laws  and  regulations  governing  Medicare  are  complex  and  subject  to
interpretation for which action for noncompliance  includes fines, penalties and
exclusion  from  the  Medicare  programs.  The  Company  believes  that it is in
compliance  with all  applicable  laws and  regulations  and is not aware of any
pending  or  threatened   investigations   involving  allegations  of  potential
wrongdoing.

SHIPPING AND HANDLING COSTS

     Research  product  revenue  shipping and handling costs included in selling
expense  amounted to  approximately  $384,000,  $414,000 and $325,000 for fiscal
years ended July 31, 2004, 2003 and 2002, respectively.

                                       F-8
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 1 -    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

USE OF ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that  affect  the  reported  amount of  assets  and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

INCOME TAXES

     The  Company  accounts  for  income  taxes  under the  liability  method of
accounting for income taxes. Under the liability method, deferred tax assets and
liabilities  are  recognized  for the future tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and liabilities and their  respective tax bases.  The liability  method requires
that any tax benefits  recognized for net operating loss carryforwards and other
items be reduced by a valuation  allowance where it is more likely than not that
the  benefits  may not be  realized.  Deferred  tax assets and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  Under the  liability  method,  the effect on  deferred  tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

RECLASSIFICATIONS

     Certain amounts in prior years have been reclassified to conform to current
year presentation.

GOODWILL AND OTHER INTANGIBLES

     The Company  follows the provisions of the Financial  Accounting  Standards
Board ("FASB")  Statement No. 142 ("SFAS 142"),  Goodwill and Other Intangibles.
Under SFAS 142, goodwill is no longer subject to amortization over its estimated
useful life.  Rather,  goodwill is subject to at least an annual  assessment for
impairment  by  applying a  fair-value  based  test.  Additionally,  an acquired
intangible  asset  should  be  separately  recognized  if  the  benefit  of  the
intangible  asset is obtained through  contractual or other legal rights,  or if
intangible  asset  can be sold,  transferred,  licensed,  rented  or  exchanged,
regardless of the acquirer's  intent to do so. All of the Company's  goodwill is
related to their clinical reference laboratory segment. The Company adopted SFAS
No. 142 as of August 1, 2002 and has performed the requisite impairment testing.
The Company has performed  their annual  impairment  testing on the first day of
the fourth  quarter of their fiscal  year.  Based on this  testing,  there is no
impairment to the goodwill recorded on the accompanying balance sheet.

     SFAS 142  requires  the  disclosure  of net  income and  earning  per share
computed on a pro forma basis by reversing the goodwill amortized in the periods
presented. Such pro forma disclosures are required in the period of adoption and
thereafter  until  all  periods  presented  reflect  goodwill  accounted  for in
accordance with SFAS 142. The goodwill amortized in the year ended July 31, 2002
was $370,700.  Therefore,  had SFAS 142 been effective  prior to August 1, 2002,
the Company's net income would have been  $7,293,500 for the year ended July 31,
2002.  Basic net income  per share  would have been $.24 for the year ended July
31,  2002.  Diluted net income per share would have been $.24 for the year ended
July 31, 2002.

IMPAIRMENT OF LONG-LIVED ASSETS

     The Company accounts for its investments in long-lived assets in accordance
with FASB  Statement No. 144 ("SFAS No. 144"),  Accounting for the Impairment or
Disposal of Long-Lived  Assets and Long-Lived  Assets.  The Company adopted SFAS
No.  144 on August 1,  2002.  SFAS No.  144  requires  a company  to review  its
long-lived  assets for impairment  whenever  events or changes in  circumstances
indicate that the carrying  amount of an asset may not be  recoverable.  Factors
the Company  considers  important,  which could  trigger an  impairment  review,
include, among others, the following:

     o   a  significant  adverse  change  in the  extent  or  manner  in which a
         long-lived asset is being used;

     o   a significant  adverse change in the business climate that could affect
         the value of a long-lived asset; and

     o   a significant decrease in the market value of assets.

                                       F-9
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 1 -    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     If the Company  determines that the carrying value of long-lived assets may
not be  recoverable,  based  upon  the  existence  of one or more  of the  above
indicators of impairment,  the Company  compares the carrying value of the asset
group to the  undiscounted  cash flows expected to be generated by the group. If
the carrying value exceeds the undiscounted cash flows, an impairment charge may
be  needed.  To  determine  the amount of the  impairment  charge,  the  Company
compares the carrying value of the applicable  asset group to its fair value. If
the fair value is less than the carrying value,  such amount is recognized as an
impairment  charge.  As of  July  31,  2004  the  Company  has not  recorded  an
impairment charge.

STOCK DIVIDEND

         The Company  declared a 5% stock  dividend  on October 5, 2004  payable
November 15, 2004 to  shareholders of record as of October 25, 2004. The Company
declared  a 5%  stock  dividend  on June  10,  2003  payable  July  14,  2003 to
shareholders  of record as of June 30,  2003.  The  Company  declared a 5% stock
dividend on January 23, 2002 payable February 27, 2002 to shareholders of record
as of February 2, 2003.  The per share data has been adjusted  retroactively  to
reflect the stock dividend declared on October 5, 2004. The consolidated balance
sheet and consolidated  statement of stockholders'  equity do not give effect to
the dividend  declared  October 5, 2004. The shares and per share data have been
adjusted to  retroactively  reflect the stock dividends in fiscal 2003 and 2002.
The  Company  recorded a charge to  accumulated  deficit  and a credit to common
stock and additional paid-in capital in the amounts of approximately $37,709,000
and $26,988,000 in fiscal 2003 and fiscal 2002, respectively, which reflects the
fair value of the dividends on the dates of declaration.

NET (LOSS) INCOME PER SHARE

     The Company  applies  SFAS No.  128,  "Earnings  per  Share."  SFAS No. 128
establishes standards for computing and presenting earnings per share. Basic net
(loss) income per share  represents  net (loss)  income  divided by the weighted
average  number of common  shares  outstanding  during the period.  The dilutive
effect of potential common shares,  consisting of outstanding stock options,  is
determined  using the  treasury  stock method in  accordance  with SFAS No. 128.
Diluted  weighted  average  shares  outstanding  for  2004  do not  include  the
potential  common  shares  from stock  options  because to do so would have been
antidilutive. Accordingly, basic and diluted net loss per share is the same. The
number of potential  common  shares  excluded  from the  calculation  of diluted
earnings per share during the year ended July 31, 2004 was 798,349 shares.

     The  following  table sets forth the  computation  of basic and diluted net
(loss) income per share pursuant to SFAS No. 128.

<TABLE>
<CAPTION>
                                                       2004                2003               2002
                                                       ----                ----               ----
<S>                                                 <C>                 <C>                <C>
Numerator:
Net (loss) income for numerator for basic
    and diluted net income per common share         $(6,231,600)        $3,844,000         $6,922,800
                                                    ===========         ==========         ==========
Denominator:
Denominator for basic net income per
    common share-weighted-average shares             31,700,000         31,399,000         31,359,000

Effect of dilutive  employee and director
    stock options and warrants                              ---            776,000            968,000
                                                     ----------         ----------         ----------
Denominator for diluted net income per
    share-adjusted weighted-average shares           31,700,000         32,175,000         32,327,000
                                                     ==========         ==========         ==========

Basic net (loss) income per share                         $(.20)              $.12               $.22
                                                          =====               ====               ====

Diluted net (loss) income per share                       $(.20)              $.12               $.21
                                                          =====               ====               ====
</TABLE>

                                      F-10
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 1 -    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     Basic  earnings  per share have been  computed  using the  weighted-average
number of shares of common  stock  outstanding.  Diluted  earnings per share has
been  computed  using the basic  weighted-average  shares of common stock issued
plus  outstanding  stock  options,  in the periods in which such  options have a
dilutive effect under the treasury stock method.

STOCK COMPENSATION PLANS

     The  Company  accounts  for  stock  option  grants to  employees  under the
recognition  and measurement  principles of APB Opinion No. 25,  "Accounting for
Stock  Issued to  Employees,"  and  related  Interpretations.  Under APB No. 25,
because the exercise  price of the Company's  employee  stock options equals the
market  price of the  underlying  stock on the date of  grant,  no  compensation
expense is recorded.

     Pro forma  information  regarding  net (loss)  income  applicable to common
stockholders is required by FASB Statement No. 123 ("SFAS 123"), "Accounting for
Stock-Based   Compensation,"   which  also  requires  that  the  information  be
determined  as if the Company has accounted for its stock options under the fair
value  method of that  statement.  For  purposes of pro forma  disclosures,  the
estimated  fair value of the options is  amortized  to expense over the options'
vesting  period.  The fair  value  for these  options  was  estimated  using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for all grants in the years  ended July 31,  2004,  2003,  and
2002: no dividend yield,  weighted-average  expected life of the option of seven
years,  risk-free  interest  rate ranges of 3% to 6.88% and a volatility of .74,
..77 and .78 for all grants.

     The Company  follows the provisions of FASB Statement No. 148 ("SFAS 148"),
"Accounting for Stock-Based  Compensation - Transition and Disclosure." SFAS No.
148 amends SFAS No. 123,  "Accounting for Stock-Based  Compensation," to provide
alternative  methods  of  transition  to SFAS No.  123's  fair  value  method of
accounting for stock-based employee  compensation.  SFAS No. 148 also amends the
disclosure  provisions  of SFAS No. 123 to require  disclosure in the summary of
significant  accounting policies of the effects of an entity's accounting policy
with respect to stock-based employee  compensation on reported net income. While
SFAS No. 148 does not amend SFAS No. 123 to  require  companies  to account  for
employee stock options using the fair value method, the disclosure provisions of
SFAS  No.  148  are  applicable  to  all  companies  with  stock-based  employee
compensation,  method of SFAS No. 123 or the  intrinsic  value method of APB No.
25. The Company adopted SFAS No. 148 effective January 31, 2004.

     The  following  table  illustrates  the effect on net (loss)  income if the
Company  had applied the fair value  recognition  provisions  of SFAS No. 123 to
stock-based (loss) compensation:

<TABLE>
<CAPTION>
Year ended July 31,                                     2004               2003               2002
                                                        ----               ----               ----
<S>                                                 <C>                 <C>                <C>
Reported net (loss) income.....................     ($6,231,600)        $3,844,000         $6,922,800
Stock compensation expense included in net
   income......................................             ---                ---                ---

Pro forma compensation expense.................      (3,239,800)        (3,010,900)        (2,597,800)
                                                     ----------         ----------         ----------

Pro forma net (loss) income....................     ($9,471,400)          $833,100         $4,325,000
                                                    ===========           ========         ==========
Pro forma (loss) earnings per share:
   Basic ......................................           ($.30)              $.03               $.14

   Diluted.....................................           ($.30)              $.03               $.14
</TABLE>

                                      F-11
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 2 - SUPPLEMENTAL DISCLOSURE FOR STATEMENT OF CASH FLOWS

     In the years ended July 31, 2004,  2003 and 2002, the Company paid cash for
income taxes of approximately $219,000, $583,000 and $4,300,000 respectively.

     In fiscal 2004,  certain  officers  exercised  769,290  shares of incentive
stock options.  The officers  surrendered  349,932 of previously owned shares of
the  Company's  common stock to be utilized to exercise the stock  options.  The
Company  recorded  the  349,932  of  surrendered  shares  as  treasury  stock of
approximately $5.6 million as a non cash transaction.

     In fiscal  2004,  the  Company  purchased  the assets of a  privately  held
company for  $650,000,  of which 350,000 was paid in cash during fiscal 2004 and
the remaining $300,000 is to be paid in two $150,000  installments on the 18 and
36  month  anniversary  date of the  acquisition.  The  $300,000  is a  non-cash
transaction at July 31, 2004.

NOTE 3 - MARKETABLE SECURITIES

The following is a summary of available for-sale securities at July 31, 2004 and
2003:

<TABLE>
<CAPTION>
                                                                                                    Unrealized Holding
                                                                Fiscal Years Ended July 31,             Gain (Loss)
                                                                                                    Years Ended July 31,

                                                                  2004             2003             2004           2003
                                                                  ----             ----             ----           ----


<S>                                                           <C>               <C>              <C>            <C>
Income bond mutual fund                                       $15,401,300       $15,154,100       $(132,300)     $(139,300)

Marketable securities
   U.S. Government and agency securities                        1,063,100               ---             ---            ---
   Corporate and other debt securities                            777,100                          (129,400)           ---
                                                              -----------       -----------      ----------     ----------
   (Average of remaining maturity of approximately
    four months at July 31, 2004)                             $17,241,500       $15,154,100       $(261,700)     ($139,300)
                                                              ===========       ===========       =========      =========
</TABLE>


There  were no  realized  gains  during  fiscal  2004 and 2003 on the  Company's
marketable securities.

The following is a summary of income tax effects relating to other comprehensive
income (loss):

<TABLE>
<CAPTION>
                                   Before-Tax Amount     Tax (Expense)       Net-of-Tax
                                   -----------------        or Benefit           Amount
                                                            ----------           ------

<S>                                        <C>                <C>             <C>
Fiscal 2004 unrealized loss ..........     ($261,700)         $100,800        ($160,900)
Fiscal 2003 unrealized loss ..........      (139,300)           54,300          (85,000)
                                            --------            ------          -------
Cumulative balance at July 31, 2004...     ($401,000)         $155,100        ($245,900)
                                           =========          ========        =========
</TABLE>

NOTE 4 - INVENTORIES

     At July 31, 2004 and 2003 inventories consist of:

                                                           2004             2003
                                                           ----             ----
        Raw materials........................          $124,900         $167,900
        Work in process......................         2,188,000        2,057,900
        Finished products....................         1,121,400        1,196,000
                                                      ---------        ---------
                                                     $3,434,300       $3,421,800
                                                     ==========       ==========

                                      F-12
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 5 - PROPERTY AND EQUIPMENT

     At July 31, 2004 and 2003 property and equipment consist of:

<TABLE>
<CAPTION>
                                                                          2004           2003
                                                                          ----           ----
        <S>                                                         <C>            <C>
        Laboratory machinery and equipment.............             $1,901,900     $1,866,700
        Leasehold improvements.........................              2,543,400      2,327,400
        Office furniture and equipment.................              5,650,300      4,896,500
                                                                     ---------      ---------
                                                                    10,095,600      9,090,600
        Accumulated depreciation and amortization......              7,681,000      6,890,800
                                                                     ---------      ---------
                                                                    $2,414,600     $2,199,800
                                                                    ==========     ==========
</TABLE>

NOTE 6 - LEASE OBLIGATIONS

     The Company  leases its office and  laboratory  space under several  leases
that expire  between  November 30, 2004 and December  2008.  Certain  officers /
directors  of the Company  own the  building  that the Company  uses as its main
facility for  laboratories  and research and  manufacturing.  In addition to the
minimum annual rentals of space, this lease is subject to an escalation  clause.
Rent expense under this lease approximated $1,370,000, $1,302,000 and $1,238,000
in fiscal 2004, 2003 and 2002, respectively.

     The Company has various other  operating  leases for office and  laboratory
space, which expire through fiscal 2009.

     Total consolidated rent expense incurred by the Company during fiscal 2004,
2003  and  2002  was   approximately   $1,801,000,   $1,742,000  and  $1,710,000
respectively.  Minimum  annual rentals under  operating  lease  commitments  for
fiscal years ending July 31 are as follows:


                                    2005             $705,000
                                    2006             $288,000
                                    2007             $210,000
                                    2008             $169,000
                                    2009              $21,000
                                                      -------
                                                   $1,393,000
                                                   ==========


NOTE 7 - LITIGATION

PATENT INFRINGEMENT

In June 1999, the Company filed suit in the United States District Court for the
Southern  District of New York against  Gen-Probe  Incorporated,  Chugai  Pharma
U.S.A., Inc., Chugai Pharmaceutical Co., Ltd., bioMerieux,  Inc., bioMerieux SA,
and Becton  Dickinson and Company,  charging them with  infringing the Company's
U.S. Patent  4,900,659,  which concerns probes for the detection of the bacteria
that causes  gonorrhea.  On January 26, 2001, the court granted the  defendants'
motion for summary  judgment that the Company's  patent is invalid.  On July 15,
2002,  the Court of Appeals for the Federal  Circuit  reversed  the  judgment of
invalidity and remanded the case to the district court for further  proceedings.
In March  2003,  settlements  were  reached  with  bioMerieux  and  Chugai;  the
settlements  did not have a material  monetary  impact on the  Company.  In July
2004,  the  district  court  again  granted  another  motion  by  the  remaining
defendants  (Gen-Probe  and Becton  Dickinson)  that all claims of the Company's
patent are invalid. The Company has filed an appeal of that judgment.  There can
be no assurance that the Company will be successful in the on-going proceedings.
However, even if the Company is not successful, management does not believe that
there will be a significant adverse monetary impact to the Company.

                                      F-13
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 7 - LITIGATION (CON'T)

On March 6, 2002, the Company was named,  along with certain of its officers and
directors among others,  in a complaint  entitled Lawrence F. Glaser and Maureen
Glaser,  individually  and on behalf of  Kimberly,  Erin,  Hannah,  and Benjamin
Glasser v. Hyman Gross,  Barry Weiner,  Enzo Biochemical  Inc.,  Elazar Rabbani,
Shahram Rabbani, John Delucca, Dean Engelhardt,  Richard Keating, Doug Yates and
Docs 1-50, in the U.S. District Court for the Eastern District of Virginia.  The
complaint  was filed by an investor in the Company who has filed for  bankruptcy
protection and his family. The complaint alleged securities and common law fraud
and breach of fiduciary duty and seeks in excess of $150 million in damages.  On
August  22,  2002,  the  complaint  was  voluntarily  dismissed;  however  a new
substantially similar complaint was filed at the same time. On October 21, 2002,
the Company and the other  defendants  filed a motion to dismiss the  complaint,
and the plaintiffs responded by amending the complaint and dropping their claims
against  defendants Keating and Yates. On November 18, 2002, the Company and the
other defendants again moved to dismiss the Amended Complaint. On July 16, 2003,
the Court issued a Memorandum  Opinion  dismissing the Amended  Complaint in its
entirety with prejudice. Plaintiffs thereafter moved for reconsideration but the
Court  denied  the motion on  September  8, 2003.  The  plaintiffs  subsequently
appealed to the Fourth Circuit and that appeal is presently pending. The Company
does not believe that the complaint  has any merit and was correctly  dismissed,
and intends to continue to defend the complaint vigorously in any event.

In March 2002,  Enzo Life Sciences,  a subsidiary of the Company,  filed suit in
the United States  District  Court for the District of Delaware  against  Digene
Corp.,  charging it with infringing the Company's U.S. Patent No.  6,221,581 B1,
which concerns a novel process for detecting  nucleic acids of interest.  On May
31, 2002, Digene filed counterclaims in that suit against Enzo Life Sciences and
the Company,  including business tort counterclaims relating to the `581 patent.
On October  13,  2004,  the  Company,  its  wholly  owned  subsidiary  Enzo Life
Sciences,  Inc. ("Enzo Life Sciences") and Digene Corporation ("Digene") entered
into  a  Settlement  and  License   Agreement  (the  "Agreement")  and  a  Joint
Stipulation  and Order of Dismissal  with  Prejudice  (the  "Stipulation").  The
Agreement  provides for (i) the full and final  settlement of the Litigation and
(ii) the grant to Digene of a non-exclusive,  worldwide, royalty-bearing license
with respect to such `581 Patent and the  remaining  patents in the '581 patents
global family.  The '581 patent is set to expire on April 24, 2018.  Pursuant to
the  Agreement  Digene is  irrevocably  required  to pay Enzo Life  Sciences  an
aggregate of $30.5 million of which Life Sciences received U.S. $16 million (the
"First  Payment")  from  Digene on October 14,  2004.  In  addition,  Digene has
irrevocable  agreed to pay to Enzo U.S. $16.5 million (subject to the $2 million
credit discussed below)  ("Additional  Irrevocable  Payments");  $2.5 million of
which shall be paid by November  14, 2005 and $3.5  million per year by November
14 of each of 2006,  2007, 2008 and 2009.  Digene will pay to Enzo Life Sciences
Running Royalties on Net Sales of Licensed Products. Each Additional Irrevocable
Payment is fully creditable by Digene against the Running Royalties that are due
under the Agreement. Digene at its discretion may credit $2 million of the First
Payment against either the payment required to be paid by Digene by November 14,
2005 or the Running  Royalties due Enzo Life Sciences under the  Agreement.  The
Stipulation  which will be filed with the Court by October  15,  2004  dismisses
with prejudice all claims,  counterclaims  and defenses brought or raised by any
party to the Litigation.

In October 2002,  the Company filed suit in the United States  District Court of
the Southern  District of New York against Amersham plc,  Amersham  Biosciences,
Perkin Elmer, Inc., Perkin Elmer Life Sciences, Inc., Sigma-Aldrich Corporation,
Sigma Chemical Company,  Inc.,  Molecular Probes,  Inc. and Orchid  Biosciences,
Inc. In January 2003,  the Company  amended its complaint to include  defendants
Sigma Aldrich Co. and Sigma  Aldrich,  Inc. The counts set forth in the suit are
for breach of contract; patent infringement; unfair competition under state law;
unfair  competition  under  federal law;  tortious  interference  with  business
relations;  and fraud in the inducement of contract.  The complaint alleges that
these counts arise out of the defendants' breach of  distributorship  agreements
with the Company concerning labeled nucleotide products and technology,  and the
defendants' infringement of patents covering the same. In April, 2003, the Court
directed that individual  complaints be filed separately against each defendant.
A number of the defendants have answered the individual  complaints and asserted
a variety of affirmative defenses and counterclaims. Fact discovery is currently
scheduled to close on May 6, 2005.  The Court will conduct a claim  construction
hearing on June 28,  2005.  There can be no  assurance  that the Company will be
successful in this litigation.  However,  even if the Company is not successful,
management  does not believe that there will be a significant  adverse  monetary
impact to the Company.

                                      F-14
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 7 - LITIGATION (CON'T)

On October 28, 2003, the Company and Enzo Life  Sciences,  Inc., a subsidiary of
the  Company,  filed suit in the United  States  District  Court of the  Eastern
District  of New York  against  Affymetrix,  Inc.  The  Complaint  alleges  that
Affymetrix improperly transferred or distributed  substantial business assets of
the Company to third parties,  including  portions of the Company's  proprietary
technology, reagent systems, detection reagents and other intellectual property.
The  Complaint  also  charges  that  Affymetrix  failed to account  for  certain
shortfalls in sales of the Company's  products,  and that Affymetrix  improperly
induced   collaborators   and  customers  to  use  the  Company's   products  in
unauthorized  fields or otherwise in violation of the  agreement.  The Complaint
seeks full  compensation  from  Affymetrix  to the Company  for its  substantial
damages,  in addition to injunctive and  declaratory  relief to prohibit,  among
other things,  Affymetrix's  unauthorized use, development,  manufacture,  sale,
distribution  and  transfer  of  the  Company's  products,   technology,  and/or
intellectual   property,  as  well  as  to  prohibit  Affymetrix  from  inducing
collaborators,  joint venture partners, customers and other third parties to use
the  Company's  products  in  violation  of the terms of the  agreement  and the
Company's rights.  Subsequent to the filing of the Complaint against Affymetrix,
Inc. referenced above, on or about November 10, 2003, Affymetrix, Inc. filed its
own complaint against the Company and its subsidiary,  Enzo Life Sciences, Inc.,
in the United  States  District  Court for the  Southern  District  of New York,
seeking among other things,  declaratory  relief that Affymetrix,  Inc., has not
breached the parties'  agreement,  that it has not  infringed  certain of Enzo's
Patents,  and that  certain  of  Enzo's  patents  are  invalid.  The  Affymetrix
complaint  also seeks  damages for  alleged  breach of the  parties'  agreement,
unfair  competition,  and tortuous  interference,  as well as certain injunction
relief to prevent  alleged unfair  competition  and tortuous  interference.  The
Company does not believe that the  complaint has any merit and intends to defend
vigorously.  Affymetrix  also moved to  transfer  venue of Enzo's  action to the
Southern  District  of New York,  where  other  actions  commenced  by Enzo were
pending as well as Affymetrix's  subsequently filed action. On January 30, 2004,
Affymetrix's  motion  to  transfer  was  granted.   Accordingly,  the  Enzo  and
Affymetrix  actions are now both pending in the  Southern  District of New York.
Pleadings have not been completed and discovery has not commenced.

On June 2,  2004  Roche  Diagnostic  GmbH  and  Roche  Molecular  Systems,  Inc.
(collectively  "Roche")  filed suit in the U.S.  District  Court of the Southern
District of New York against Enzo  Biochem,  Inc. and Enzo Life  Sciences,  Inc.
(collectively  "Enzo").  The  complaint  was filed after Enzo  rejected  Roche's
latest cash offer to settle Enzo's  claims for,  INTER ALIA,  alleged  breach of
contract and  misappropriation of Enzo's assets. The complaint seeks declaratory
judgment (i) of patent invalidity with respect to Enzo's 4,994,373 patent,  (ii)
of no breach by Roche of its 1994  Distribution  and Supply  Agreement with Enzo
(the "1994  Agreement"),  (iii) that  non-payment  by Roche to Enzo for  certain
sales of Roche products does not constitute a breach of the 1994 Agreement,  and
(iv) that Enzo's claims of ownership to proprietary  inventions,  technology and
products  developed by Roche are without  basis.  In  addition,  the suit claims
tortious interference and unfair competition.  The Company does not believe that
the complaint  has merit and intends to  vigorously  respond to such action with
appropriate affirmative defenses and counterclaims.

On June  7,  2004,  the  Company  and its  wholly-owned  subsidiary,  Enzo  Life
Sciences,  Inc., filed suit in the United States District Court for the District
of Connecticut  against  Applera  Corporation  and its  wholly-owned  subsidiary
Tropix, Inc. The complaint alleges  infringement of six patents (relating to DNA
sequencing systems,  labelled nucleotide products,  and other technology).  Yale
University  is the owner of four of the patents and the Company is the exclusive
licensee.  Accordingly,  Yale is also a plaintiff in the lawsuit.  Yale and Enzo
are aligned in protecting the validity and  enforceability of the patents.  Enzo
Life  Sciences is the owner of the remaining  two patents.  The complaint  seeks
permanent   injunction  and  damages   (including   treble  damages  for  wilful
infringement).  Defendants  answered the complaint on July 29, 2004.  The answer
pleads  affirmative  defences  of  invalidity,  estoppel  and laches and asserts
counterclaims of non-infringement and invalidity. A trial date has not been set.
Discovery  commences on September 15, 2004.  There can be no assurance  that the
Company  will be  successful  in this  litigation.  Even if the  Company  is not
successful, management does not believe that there will be a significant adverse
monetary impact on the Company.

                                      F-15
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 8 - INCOME TAXES

     The Company  accounts for income taxes under the provisions of SFAS No. 109
"Accounting for Income Taxes".

<TABLE>
<CAPTION>
                                                2004             2003             2002
                                                ----             ----             ----
<S>                                         <C>               <C>              <C>
Current
   Federal ............................     ($3,288,000)      $1,828,000       $2,211,600
   State and local ....................         191,500          181,400          485,500
Deferred ..............................      (1,751,600)        (128,100)         720,000
                                            -----------        ---------          -------

(Benefit) provision for income taxes...     $(4,848,100)      $1,881,300       $3,417,100
                                           ============       ==========       ==========
</TABLE>


     Deferred  income  taxes arise from  temporary  differences  between the tax
basis of assets and  liabilities  and their  reported  amounts in the  financial
statements. The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                              2004              2003
                                                              ----              ----
<S>                                                        <C>                <C>
Current deferred tax assets:
   Provision for uncollectible accounts receivable...      $1,072,500         $837,100
   State and local taxes carry forward losses .......         720,900              ---
   Other ............................................         181,400          176,700
                                                              -------          -------
      Current deferred tax assets ...................       1,974,800        1,013,800

Non current deferred tax liability:
   Deferred patent costs ............................        (906,800)      (1,234,800)

Non current deferred tax asset:
   Depreciation .....................................         462,000              ---
                                                              -------          -------
   Non current deferred tax liability, net ..........        (444,800)      (1,234,800)
                                                             --------       ----------
Net deferred tax asset (liability) ..................      $1,530,600        ($221,000)
                                                           ==========       ==========
</TABLE>


     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or the entire  deferred tax
asset will be realized.  The ultimate  realization  of the deferred tax asset is
dependent  upon the generation of future taxable  income.  Management  considers
scheduled reversals of deferred tax liabilities, projected future taxable income
and tax planning  strategies  that can be  implemented  by the Company in making
this assessment.

     The provisions for income taxes were at rates  different from U.S.  federal
statutory rates for the following reasons:

<TABLE>
<CAPTION>
                                                                          2004       2003      2002
                                                                          ----       ----      ----
<S>                                                                       <C>        <C>       <C>
Federal statutory rate ..............................................     (34%)      34%       34%
Expenses not deductible for income
   tax return purposes ..............................................       3%        2%        2%
State income taxes, net (benefit) of federal tax deduction ..........      (4%)       3%        5%
Benefit of foreign sales ............................................      (2%)      (4%)      (4%)
Fixed asset basis difference.........................................      (8%)      ---       ---
Benefit of tax credits ..............................................      ---       ---       (4%)
Other ...............................................................       1%       (2%)      ---
                                                                           ---       ---       ---
                                                                          (44%)      33%       33%
                                                                           ===       ===       ===
</TABLE>

NOTE 9 - STOCKHOLDERS' EQUITY

TREASURY STOCK

     In fiscal 2004,  certain  officers  exercised  769,290  shares of incentive
stock options.  The officers  surrendered  349,932 of previously owned shares of
the  Company's  common stock to be utilized to exercise the stock  options.  The
Company  recorded  the  349,932  of  surrendered  shares  as  treasury  stock of
approximately $5.6 million as a non cash transaction.

                                      F-16
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 9 - STOCKHOLDERS' EQUITY (CON'T)

INCENTIVE STOCK OPTION PLAN

The Company has incentive stock option plans ("1993 plan" and "1994 plan") under
which the Company may grant  options for up to 2,110,650  shares (1993 plan) and
up to 1,336,745 shares (1994 plan) of common stock. No additional options may be
granted under the 1993 plan or the 1994 plan. In fiscal 1999, the Company set up
a new  incentive  stock  options plan ("1999  plan") under which the Company may
grant up to 2,202,244  shares of common  stock.  The  exercise  price of options
granted  under such plans is equal to or greater  than fair market  value of the
common stock on the date of grant. The options granted pursuant to the plans may
be either incentive stock options or no statutory options.  To date, the Company
has only granted incentive stock options under these plans.

A summary of the information pursuant to the Company's stock option plan for the
years ended July 31, 2004, 2003 and 2002 under SFAS No. 123 is as follows:

<TABLE>
<CAPTION>
                                     2004                            2003                              2002
                        -----------------------------    -----------------------------    ------------------------------
                                         Weighted-                        Weighted-                         Weighted-
                                          Average                          Average                           Average
                        Options        Exercise Price    Options        Exercise Price    Options         Exercise Price
                        -------        --------------    -------        --------------    -------         --------------

<S>                    <C>                  <C>         <C>                  <C>         <C>                  <C>
Outstanding at
beginning of
year                   3,397,087             $9.88      2,841,401             $9.38      2,864,595             $8.85
   Granted               428,925            $17.02        661,225            $11.76         26,046            $20.20
   Exercised            (917,539)            $7.16        (79,838)            $6.85        (17,630)            $7.33
   Terminated            (51,672)           $10.13        (25,701)           $12.51        (31,611)           $10.69
                       ---------                        ---------                        ---------

Outstanding at
end of year            2,856,801            $11.86      3,397,087             $9.88      2,841,401             $9.38
                       =========                        =========                        =========

Exercisable at
end of year            1,770,492            $10.54      2,490,003             $8.98      2,297,908             $8.81
                       =========                        =========                        =========

Weighted average
fair value of
options granted
during year                                 $12.40                            $8.49                           $14.18
                                            ======                            =====                           ======
</TABLE>

     The following table summarizes information for stock options outstanding at
July 31, 2004:

<TABLE>
<CAPTION>
                                                       Options Outstanding                             Options Exercisable
                                         -----------------------------------------------           ---------------------------
                                                     Weighted-Average
         Range of Exercise                                  Remaining     Weighted-average                    Weighted-average
                    Prices            Shares         Contractual Life       Exercise Price         Shares       Exercise Price
                    ------            ------         ----------------       --------------         ------       --------------

              <S>                  <C>                     <C>                      <C>         <C>                     <C>
                $5.42-8.08           390,660               3.32 years                $6.00        390,660                $6.00
               $8.32-12.25         1,741,557               5.52 years               $11.09      1,168,734               $11.08
              $12.93-14.36           644,708               1.98 years               $15.92        135,563               $15.92
              $20.20-24.42            61,643               7.00 years               $21.42         57,302               $21.42
                    $36.05            18,232               5.45 years               $36.05         18,232               $36.05
                                      ------                                                       ------
                                   2,856,801                                                    1,770,492
                                   =========                                                    =========
</TABLE>

     Incentive stock options generally become  exercisable at 25% per year after
one year and expire ten years after the date of grant.

                                      F-17
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

NOTE 9 - STOCKHOLDERS' EQUITY (CON'T)

RESTRICTED STOCK INCENTIVE PLAN

     The Company has a restricted  stock  incentive plan whereby the Company may
award up to 281,420 shares of its common stock. Under the terms of the plan, any
shares  issued are  restricted  in regard to sales and transfers for a period of
five years after award. Such restrictions  begin to expire at 25% per year after
the second year of ownership.  As of July 31, 2004,  the Company has not awarded
any shares of common stock under this plan.

                                   **********

As of July 31,  2004,  the  Company  has  reserved  3,640,359  shares  under the
arrangements described above.

NOTE 10 - COMMITMENTS

     The Company has an exclusive licensing agreement to an invention covered by
licensed patents. Under this agreement,  the Company is required to make certain
minimum royalty payments of $200,000 per year through the life of the patents.

NOTE 11 - ACQUISITIONS

     In fiscal  2004,  the  Company  purchased  the assets of a  privately  held
company for $650,000,  of which $350,000 was paid in cash during fiscal 2004 and
the remaining $300,000 is to be paid in two $150,000  installments on the 18 and
36 month  anniversary  date of the  acquisition.  The Company has  allocated the
entire purchase price to patents as of July 31, 2004.

NOTE 12 - EMPLOYEE BENEFIT PLAN

     The Company has a  qualified  Salary  Reduction  Profit  Sharing  Plan (the
"Plan") for eligible  employees  under  Section  401(k) of the Internal  Revenue
Code.  The Plan provides for voluntary  employee  contributions  through  salary
reduction and voluntary employer contributions at the discretion of the Company.
For the years ended July 31,  2004,  2003 and 2002,  the Company has  authorized
employer  contributions  of 50% of the employees'  contribution up to 10% of the
employees'  compensation in Enzo Biochem, Inc. common stock. The 401(k) employer
contributions expense was $282,300, $257,200, and $247,000 in fiscal years 2004,
2003 and 2002, respectively.

NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table contains  statement of operations  information for each
quarter  of fiscal  2004 and  2003.  The  Company  believes  that the  following
information  reflects  all normal  recurring  adjustments  necessary  for a fair
presentation of the information for the periods presented. The operating results
for any quarter are not necessarily indicative of results for any future period.

                                      F-18
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

     Unaudited quarterly financial data (in thousands, except per share amounts)
for fiscal 2004 and 2003 is summarized as follows:

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                          ------------------
                                     October 31, 2003         January 31, 2004           April 30, 2004            July 31, 2004
                                     ----------------         ----------------           --------------            -------------

<S>                                           <C>                      <C>                      <C>                       <C>
Revenues                                      $10,273                  $11,028                  $11,765                   $8,578

Gross profit                                    7,567                    8,099                    8,705                    4,167

Loss before benefit for taxes
on income                                       ($816)                 ($2,755)                   ($891)                 ($6,618)
                                                =====                  =======                    =====                  =======

Net loss                                        ($323)                 ($1,455)                   ($460)                 ($3,994)
                                                =====                  =======                    =====                  =======

Basic loss per common share                     ($.01)                  ($0.05)                  ($0.02)                  ($0.12)
                                                =====                   ======                   ======                   ======

Diluted loss per common share                   ($.01)                  ($0.05)                  ($0.02)                  ($0.12)
                                                =====                   ======                   ======                   ======
</TABLE>

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                          ------------------
                                     October 31, 2002         January 31, 2003           April 30, 2003            July 31, 2003
                                     ----------------         ----------------           --------------            -------------

<S>                                           <C>                      <C>                      <C>                      <C>
Revenues                                      $17,356                  $13,112                  $11,640                  $10,659

Gross profit                                   13,966                   10,340                    8,923                    6,556

Income (loss) before provision
for taxes on income                             6,047                    2,370                    2,022                   (4,714)

Net income (loss)                              $3,688                   $1,446                   $1,233                  ($2,523)
                                               ======                   ======                   ======                  =======

Basic income (loss) per common
share                                            $.12                     $.04                     $.04                    ($.08)
                                                 ====                     ====                     ====                    =====

Diluted income (loss) per common
share                                            $.12                     $.04                     $.04                    ($.08)
                                                 ====                     ====                     ====                    =====
</TABLE>

NOTE 14 - SUBSEQUENT EVENT

On October  13,  2004,  the  Company,  its  wholly  owned  subsidiary  Enzo Life
Sciences,  Inc. ("Enzo Life Sciences") and Digene Corporation ("Digene") entered
into  a  Settlement  and  License   Agreement  (the  "Agreement")  and  a  Joint
Stipulation  and Order of Dismissal  with  Prejudice  (the  "Stipulation").  The
Agreement  provides  for (i) the full and  final  settlement  of the  litigation
involving Life Sciences' U.S.  Patent No.  6,221,581 (the "581 Patent") which is
the subject  matter of a lawsuit in the U.S.  District Court for the District of
Delaware,   in  a  case  entitled  ENZO  LIFE  SCIENCES  V.  DIGENE  CORP.  (the
"Litigation")  and  (ii) the  grant to  Digene  of a  non-exclusive,  worldwide,
royalty-bearing  license  with  respect to such `581  Patent  and the  remaining
patents in the '581 patents global  family.  The '581 patent is set to expire on
April 24, 2018. Pursuant to the Agreement Digene is irrevocably  required to pay
Enzo Life  Sciences  and  aggregate  of $30.5  million  of which  Life  Sciences
received U.S. $16 million (the "First Payment") from Digene on October 13, 2004.
In addition,  Digene has  irrevocable  agreed to pay to Enzo U.S.  $16.5 million
(subject to the $2 million  credit  discussed  below)  ("Additional  Irrevocable
Payments");  $2.5  million of which shall be paid by November  14, 2005 and $3.5
million  per year by November 14 of each of 2006,  2007,  2008 and 2009.  Digene
will pay to Enzo  Life  Sciences  Running  Royalties  on Net  Sales of  Licensed
Products.  Each  Additional  Irrevocable  Payment is fully  creditable by Digene
against the Running  Royalties that are due under the  Agreement.  Digene at its
discretion may credit $2 million of the First Payment against either the payment
required to be paid by Digene by November 14, 2005 or the Running  Royalties due
Enzo Life Sciences under the Agreement. The Stipulation which will be filed with
the Court by October 14, 2004 dismisses with prejudice all claims, counterclaims
and defenses brought or raised by any party to the Litigation.

                                      F-19
<PAGE>

                               ENZO BIOCHEM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          JULY 31, 2004, 2003 AND 2002

Note 15--Segment Reporting

     The  Company  applies  SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise  and Related  Information."  SFAS No. 131  establishes  standards for
reporting   information   regarding   operating  segments  in  annual  financial
statements and requires selected  information for those segments to be presented
in  interim  financial  reports  issued  to  stockholders.  SFAS  No.  131  also
establishes  standards for related  disclosures  about products and services and
geographic areas. The chief operating decision maker, or decision-making  group,
in making decision how to allocate resources and assess performance,  identifies
operating  segments as components of an enterprise about which separate discrete
financial information is available for evaluation.

     The Company has two  reportable  segments:  research  and  development  and
clinical reference laboratories.  The Company's research and development segment
conducts research and development activities as well as selling products derived
from these activities.  The clinical reference  laboratories  provide diagnostic
services to the health care community.  The Company evaluates  performance based
on (loss) income before (benefit)  provision for taxes on income. The accounting
policies  of the  reportable  segments  are the same as those  described  in the
summary of significant  accounting  policies.  Costs excluded from income before
provision for taxes on income and reported as other consist of corporate general
and administrative  costs that are not allocable to the two reportable segments.
Management  of the  Company  assesses  assets on a  consolidated  basis only and
therefore, assets by reportable segment have not been included in the reportable
segments below.

     The  following   financial   information  (in  thousands)   represents  the
reportable segments of the Company:

<TABLE>
<CAPTION>
                                                                      RESEARCH AND DEVELOPMENT      CLINICAL REFERENCE LABORATORIES
                                                                     --------------------------     -------------------------------
                                                                     FISCAL YEAR ENDED JULY 31,       FISCAL YEAR ENDED JULY 31,
                                                                     --------------------------       --------------------------
                                                                     2004       2003       2002       2004        2003       2002
                                                                     ----       ----       ----       ----        ----       ----
<S>                                                                <C>         <C>        <C>        <C>         <C>        <C>
Operating revenues:
Research product revenues .....................................    $12,972     $23,253    $25,963        ---         ---        ---
Clinical laboratory services ..................................                    ---        ---    $28,672     $29,514    $28,052

Cost and expenses:
Cost of research product revenues .............................      2,518       3,389      1,837        ---         ---        ---
Cost of clinical laboratory services ..........................                    ---        ---     10,586       9,593     10,110
Research and development expense ..............................      8,078       8,311      6,179        ---         ---        ---
Depreciation and amortization .................................      1,414         881        923        902         893      1,231
Provision for uncollectible accounts ..........................      1,753         616        ---     10,234       8,729     14,188
Other costs and expenses ......................................        508         609        420      8,429       7,294      6,279
Interest income ...............................................        ---         ---        ---        ---         ---        ---
                                                                     -----       -----      -----      -----       -----      -----
(Loss) income before (benefit) provision for income
   Taxes on income ............................................    $(1,299)     $9,447    $16,604    $(1,479)     $3,005    $(3,756)
                                                                   ========     ======    =======    ========     ======    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                               OTHER                           CONSOLIDATED
                                                                   ----------------------------        --------------------------
                                                                    FISCAL YEAR ENDED JULY 31,         FISCAL YEAR ENDED JULY 31,
                                                                   ----------------------------        --------------------------
                                                                   2004        2003        2002        2004        2003      2002
                                                                   ----        ----        ----        ----        ----      ----
<S>                                                              <C>         <C>         <C>        <C>           <C>       <C>
Operating revenues:
Research product revenues ...................................        ---         ---         ---     $12,972     $23,253    $25,963
Clinical laboratory services ................................        ---         ---         ---      28,672      29,514     28,052

Cost and expenses:
Cost of research product revenues ...........................        ---         ---         ---       2,518       3,389      1,837
Cost of clinical laboratory services ........................        ---         ---         ---      10,586       9,593     10,110
Research and development expense ............................        ---         ---         ---       8,078       8,311      6,179
Depreciation and amortization ...............................        $45         $34         ---       2,361       1,808      2,154
Provision for uncollectible accounts ........................        ---         ---         ---      11,987       9,345     14,188
Other costs and expenses ....................................      9,409       8,048      $3,858      18,346      15,951     10,557
Interest income .............................................      1,152       1,355       1,350       1,152       1,355      1,350
                                                                   -----       -----       -----       -----       -----      -----
(Loss) income before (benefit) provision for income
   Taxes on income ..........................................    $(8,302)    ($6,727)    ($2,508)   $(11,080)     $5,725    $10,340
                                                                 ========    ========    ========   =========     ======    =======
</TABLE>



     The Company's reportable segments are determined based on the services they
performed and the products they sell, not on the  geographic  area in which they
operate. The Company's clinical reference  laboratories segment operates 100% in
the United States with all revenue  derived from this country.  The research and
development  segment  earns  revenue  both  in the  United  States  and  foreign
countries.  The  following  is a summary of research  and  development  revenues
attributable to customers located in the United States and foreign countries:

                                      2004      2003      2002
                                      ----      ----      ----

     United States ..............    $8,029   $19,492   $21,431
     Foreign Countries...........     4,943     3,761     4,532
                                      -----     -----     -----
                                    $12,972   $23,253   $25,963
                                    =======   =======   =======

                                      F-20
<PAGE>

                                ENZO BIOCHEM, INC
                             SCHEDULE II - VALUATION
                             AND QUALIFYING ACCOUNTS
                    Years ended July 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                              Additions
                                                              ---------

                                               Balance at                 Charged      Charged
                                                Beginning     (credited) to costs     to other     (Additions)           Balance at
Description                                     of period            and expenses     accounts      Deductions        end of period
-----------                                     ---------            ------------     --------      ----------        -------------

<S>                                            <C>                    <C>                  <C>     <C>                   <C>
2004
----
Allowance for doubtful accounts receivable     $4,900,000             $11,986,500          ---     $11,383,500 (1)       $5,503,000

2003
----
Allowance for doubtful accounts receivable     $4,445,000              $9,345,000          ---      $8,890,000 (1)       $4,900,000

2002
----
Allowance for doubtful accounts receivable     $6,526,000             $14,188,000          ---     $16,269,000 (1)       $4,445,000
</TABLE>




(1) Write-off of uncollectible accounts receivable.

                                       S-1