---

---

|                                  
|----------------------------------
|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, 2008
|                                        
|or                                      
|                                        
|o                                        | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934

For the transition period
from ________________ to ___________________


Commission File Number 001-09974


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

|                                                                 |  |                                       
|---------------------------------------------------------------- |  | --------------------------------------
|New
 York                                                        |  | 13-2866202                            
|                                                                 |  |                                       
|(State
 or other jurisdiction
 of incorporation or organization) |  | (I.R.S.
 Employer
 Identification No.)
|                                                                 |  |                                       
|527
 Madison Ave.                                                |  |                                       
|New
 York, New York                                              |  | 10022                                 
|                                                                 |  |                                       
|(Address
 of principal executive offices)                        |  | (Zip
 Code)                           
|                                                                 |  |                                       

|                                                     
|-----------------------------------------------------
|(212)
 583-0100                                      
|                                                     
|(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                

|                                                                                                                                                                                                                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Indicate by
 check mark if the registrant is a well-known seasoned issuer, as defined in
 Rule 405 of the Securities Act.                                                                                                                                                                                                                                    
|Yes
 o
 No x                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                             
|Indicate by check mark if
 the registrant is not required to file reports pursuant to Section 13 or
 Section 15(d) of the Act.                                                                                                                                                                                                                               
|Yes
 o
 No x                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                             
|Indicate by check mark
 whether the registrant (1) has filed all reports required to be filed by Section
 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
 months (or for such shorter period that the registrant was required to file
 such reports), and (2) has been subject to such filing requirements for the
 past 90 days.
|Yes
 x
 No o                                                                                                                                                                                                                                                                                                                                                 

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer,  a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer
     o Accelerated
filer x     Non-accelerated
filer oSmaller
Reporting Company o

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act of 1934). Yes o No x

The aggregate market value of
the registrants voting stock held by non-affiliates of the registrant was
approximately $303,311,000 as of January 31, 2008.

The number of shares of the
Companys common stock, $.01 par value, outstanding at October 6, 2008 was
approximately 37,382,300.

DOCUMENTS 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 on or about January 22, 2009
are incorporated by reference into Part III of this annual report.

---

---



TABLE OF CONTENTS

|         |                                                                                                               |  |     
|-------- | ------------------------------------------------------------------------------------------------------------- |  | ----
|         | Description                                                                                                   |  | Page
|         |                                                                                                               |  |     
|Part I   |                                                                                                               |  |     
|         |                                                                                                               |  |     
|Item 1.  | Business                                                                                                      |  | 2   
|Item 1A. | Risk Factors                                                                                                  |  | 24  
|Item 1B. | Unresolved Staff Comments                                                                                     |  | 33  
|Item 2.  | Properties                                                                                                    |  | 33  
|Item 3.  | Legal Proceedings                                                                                             |  | 34  
|Item 4.  | Submission of Matters to a Vote of Security Holders                                                           |  | 36  
|         |                                                                                                               |  |     
|Part II  |                                                                                                               |  |     
|         |                                                                                                               |  |     
|Item 5.  | Market for Registrants Common Equity, Related Stockholder
 Matters and Issuer Purchases of Equity Securities |  | 36  
|Item 6.  | Selected Financial Data                                                                                       |  | 37  
|Item 7.  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations                        |  | 38  
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 51  
|Item 8.  | Financial Statements and Supplementary Data                                                                   |  | 51  
|Item 9.  | Changes in and Disagreements with Accountants on Accounting and
 Financial Disclosure                         |  | 52  
|Item 9A. | Controls and Procedures                                                                                       |  | 52  
|Item 9B. | Other Information                                                                                             |  | 54  
|         |                                                                                                               |  |     
|Part III |                                                                                                               |  |     
|         |                                                                                                               |  |     
|Item 10. | Directors, Executive Officers and Corporate Governance                                                        |  | 54  
|Item 11. | Executive Compensation                                                                                        |  | 54  
|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                |  | 54  
|Item 13. | Certain Relationships and Related Transactions, and Director Independence                                     |  | 54  
|Item 14. | Principal Accounting Fees and Services                                                                        |  | 54  
|         |                                                                                                               |  |     
|Part IV  |                                                                                                               |  |     
|         |                                                                                                               |  |     
|Item 15. | Exhibits, Financial Statement Schedules                                                                       |  | 54  
|         |                                                                                                               |  |     
|         | List of Consolidated Financial Statements and Financial
 Statements Schedule                                  |  | F-1 
|         | Report of Independent Registered Public Accounting Firm                                                       |  | F-2 
|         | Consolidated Balance Sheets                                                                                   |  | F-3 
|         | Consolidated Statements of Operations                                                                         |  | F-4 
|         | Consolidated Statements of Stockholders Equity &
 Comprehensive Income (Loss)                                |  | F-5 
|         | Consolidated Statements of Cash Flows                                                                         |  | F-6 
|         | Notes to Consolidated Financial Statements                                                                    |  | F-7 
|         | Schedule II - Valuation Accounts and Qualifying Accounts                                                      |  | S-1 

1

---



PART I

Item 1. Business

Overview

Enzo
Biochem, Inc. (the Company we, our or Enzo) is a life sciences and
biotechnology company focused on harnessing genetic processes to develop
research tools, diagnostics and therapeutics and on serving as a provider of
diagnostic services to the medical community. Since our founding in 1976, our
strategic focus has been on the development of enabling technologies in the
life sciences field. Our pioneering work in genomic analysis coupled with its
extensive patent estate and enabling platforms have strategically positioned
the Company to play an important role in the rapidly growing life sciences and
molecular medicine marketplaces.

In
the course of our research and development activities, we have built a
substantial portfolio of intellectual property assets, with 236 issued patents
worldwide, and 213 pending patent applications, along with extensive enabling
technologies and platforms.

Recent
Developments

On
May 8, 2008, Enzo Life Sciences, Inc. acquired substantially all of the U.S.
based assets and certain liabilities of Biomol International, LP through a
newly formed US subsidiary Biomol International, Inc. and all of the stock of
Biomols wholly-owned United Kingdom subsidiary, Affinity Limited. by Axxora
UK, a wholly-owned subsidiary of Enzo Life Sciences, referred to as Biomol
for approximately $18.1 million in cash and stock, subject to adjustment, exclusive
of acquisition costs of approximately $800,000 and contingent payments of $2.5
million on each of the next two anniversary dates. Effective May 8, 2008,
Biomol became a wholly-owned subsidiary of Enzo Life Sciences. The acquisition
was financed with the Companys cash and cash equivalents and Enzo common
stock. (See Item 7, Recent Developments and Note 2 in the notes to
consolidated financial statements).

Operating
Segments

We
are comprised of three operating segments, of which the Therapeutics and Life
Sciences segments have evolved out of our core competencies: the use of nucleic
acids as informational molecules and the use of compounds for immune
modulation. Information concerning sales by geographic area and business segments
for the years ended July 31, 2008, 2007 and 2006 is located in Note 17 in the
notes to consolidated financial statements.

Below are brief descriptions of
each of our operating segments:

Enzo Life Sciences is a company that
manufactures, develops and markets biomedical research products and tools to
research and pharmaceutical customers world-wide and has amassed a large patent
and technology portfolio. The pioneering platforms developed by Enzo Life
Sciences enable the development of a wide range of products in the research
products marketplace. We are internationally recognized and acknowledged as a
leader in manufacturing, in-licensing, and commercialization of over 8,000
innovative high quality research reagents in key research areas. The division
is an established source for a comprehensive panel of products to scientific
experts in the fields of gene expression, non-radioactive labeling and
detection, adipokines & obesity, apoptosis, bioactive lipids, cell cycle,
cytoskeletal research, DNA damage & repair, epigenetics, immunology &
cancer research, inflammation, neurobiology, nitric oxide & oxidative
stress, and signal transduction.

Enzo Therapeutics is a biopharmaceutical
company that has developed multiple novel approaches in the areas of gastrointestinal,
infectious, ophthalmic and metabolic diseases, many of which are derived from
the pioneering work of Enzo Life Sciences. Enzo Therapeutics has focused its
efforts on developing treatment regimens for diseases and conditions for which
current treatment options are ineffective, costly, and/or cause unwanted side
effects. This focus has generated a clinical and preclinical pipeline, as well
as more than 40 patents and patent applications.

Enzo Clinical Labs is a
regional clinical laboratory to the New York Metropolitan and New Jersey areas.
The Company believes this allows us to capitalize firsthand on our extensive
advanced molecular and cytogenetic capabilities and the broader trends in
predictive diagnostics. Enzo Clinical Labs offers a menu of routine and
esoteric clinical laboratory tests or procedures used in general patient care
by physicians to establish or support a diagnosis, monitor treatment or
medication, and search for an otherwise undiagnosed condition.

We
    operate a full-service clinical laboratory in Farmingdale, New York, a network
    of 23 patient service centers, a stand alone stat or rapid response laboratory in
New York City, and a full-service phlebotomy department.

2

---



The
Companys primary sources of revenue have historically been from product
revenues and royalty and licensing of Life Sciences products utilized in life
science research and from the clinical laboratory services provided to the
healthcare community. The following table summarizes the sources of revenues
for the fiscal years ended July 31, 2008, 2007 and 2006, (in $000s and
percentages):

|                             |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|---------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
|Fiscal year ended July 31,   |  | 2008 |        | 2007 |  | 2006 |  
|                             |  |      |        |      |  |      |  
|Product revenues             |  | $    | 28,087 |      |  | 36   | % | $ | 6,658  |  |  | 13  | % | $ | 4,750  |  |  | 12  | %
|Royalty and license fees     |  |      | 7,630  |      |  | 10   |   |   | 5,820  |  |  | 11  |   |   | 3,150  |  |  | 8   |  
|Clinical laboratory services |  |      | 42,078 |      |  | 54   |   |   | 40,430 |  |  | 76  |   |   | 31,926 |  |  | 80  |  
|                             |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|Total                        |  | $    | 77,795 |      |  | 100  | % | $ | 52,908 |  |  | 100 | % | $ | 39,826 |  |  | 100 | %
|                             |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  

Markets

Background

Deoxyribonucleic
Acid (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
well over 30,000 genes, has been identified by genome research, including the
Human Genome Project. The ongoing challenge of the scientific research
community is to determine the function and relevance of each gene. This information
will facilitate the understanding of biological mechanisms and how variations
and mutations in such mechanisms may 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
diagnostics tools that both facilitate and accelerate the generation of
biological information. This demand can be met by gene-based diagnostics for
which a variety of formats, or tools, have been developed that enable
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 and systems, 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 continue to grow as a result of:

| |                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  research spending by academic,
 government and private organizations to determine the function and clinical
 relevance of the gene sequences that have been identified by genome research;
| |                                                                                                                                                                                             
| |  development of commercial
 applications based on information derived from this research; and                                                                                              
| |                                                                                                                                                                                             
| |  ongoing advancements in tools
 that accelerate these research and development activities.                                                                                                 

Clinical
diagnostics

The
clinical diagnostics market has been reported by industry sources to be greater
than $22 billion annually. It is comprised of a broad range of tests based on
clinical chemistry, microbiology, immunoassay, blood banking and cancer
screening assays. 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 a microorganism.

There
are several drawbacks to these more traditional technologies. Immunoassays do
not allow for early detection of diseases because they require minimum levels
of antigens to be produced by the microorganism in order to be identified.
These levels vary by microorganism, and the delay involved could be several
days or several months, 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 has many advantages over the traditional technologies. Since
gene-based diagnostics focuses on the identification of diseases at the gene
level, it 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.

3

---



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 industry sources, the market for molecular diagnostic tools, assays and
other products is currently more than $4 billion per year, and is acknowledged
as one of the fastest growing segments in the in-vitro diagnostic industry.
Contributing to this growth are, among other factors:

| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the increasing
 number of diagnostic tests being developed from discoveries in genome
 research;                                          
| |   |                                                                                                                                           
| |  | advances in
 formats and other technologies that automate and accelerate gene-based
 diagnostic testing:                                  
| |   |                                                                                                                                           
| |  | growing emphasis
 by the health care industry on early diagnosis and treatment of disease; and                                            
| |   |                                                                                                                                           
| |  | application of
 gene-based diagnostics as tools to match therapies to specific patient
 genetics commonly referred to as pharmacogenomics.

Therapeutics

As science
progresses, we are learning more about biochemical processes and how the cells
machinery is directed towards normal functioning of physiological, genetic and
immune system pathways. Disease may result as the consequence of an
inappropriate reaction in any of these systems.

In
    the normal physiologic functioning of the body key modulators interact with
    membrane-bound proteins and initiate a cascade of biochemical reactions that
    regulate the cell. How modulators interact with membrane-bound proteins set
    the stage for a variety of possible activities that the cell then controls.
    The membrane-bound proteins are multiligand receptors, hence the modulator(s)
    and their activity at a specific binding docking station determine
    the ultimate activity of the cell. This constitutes a cell signaling pathway.
    One of the most notable cell signaling pathways is the Wnt pathway and an
    associated membrane protein, LDL (low density lipoprotein) receptor-related
    protein LRP.
    Recent research by Enzo and others have unlocked the key to the activation/inhibition
    of the Wnt and/or LRP system resulting in the discovery and subsequent regulation
    of natural processes, such as development, cell division, and metabolic activity,
    among others. Manipulation of this system through small molecules, peptides,
oligonucleotides or antibodies may possibly correct dysfunctional systems.

Other diseases
may be the consequence of an inappropriate reaction of the bodys immune
system, either to a foreign antigen, such as a bacterium or virus, or, in the
case of an autoimmune condition, to the bodys own components. In recent years,
several new strategies of medication for the treatment of immune-based diseases
such as Crohns disease, autoimmune uveitis, and rheumatoid arthritis, have
been developed. These treatments are all based on a systemic suppression of
certain aspects of the immune system and can lead to significant side effects.
Thus, there continues to be a need for a therapeutic strategy that is more
specific and less global in its effect on the immune system.

Still other
diseases result from either the expression of foreign genes, such as those
residing in viruses and pathogenic organisms, or from the abnormal or
unregulated expression of the bodys own genes. In other cases, it is the
failure to express, or overexpression of, a gene that causes the disease. In
addition, a number of diseases result from the bodys failure to adequately
regulate its immune system.

Advances in
gene analysis have provided the information and tools necessary to develop
drugs that interfere with the disease process at the genetic level. For a broad
spectrum of diseases, this approach can be more precise and effective than
interfering with downstream events such as protein synthesis or enzyme
activation. 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, ribonucleic
acid (RNA) produced by a specific 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, they are
quickly metabolized or eliminated by the body. Consequently, large quantities
of oligos must be delivered in multiple treatments, which can be both toxic to
the body as well as costly.

4

---



Genetic
medicine or gene therapy involves the insertion of a gene into a cell. The
inserted gene biologically manufactures the therapeutic product within the cell
on an ongoing basis. This gene may be introduced to bring about 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 or the inserted gene may code for a
molecule that would deactivate either an overactive gene or a gene producing an
unwanted protein. As a permanent addition to the cellular DNA, the inserted
gene produces RNA and/or proteins where needed.

A major
challenge in designing gene therapy medicines has been to enable 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
nucleic acid 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 the tools and diagnostic
technologies used to study and detect disease at the molecular level and to be
a provider of therapeutic approaches to manage specific diseases. There can be
no assurance that our objective will be met. Key elements of our strategy
involving three separate platforms include our ability to:

Apply
our innovative technology to a variety of diseases mediated by cell signaling
pathways, by the immune system, or, in advanced cases, gene therapy.

We believe
our core technologies have broad diagnostic and therapeutic applications. We
have focused our efforts on discovering how best to correct pathologies
associated with bone or metabolic control, and immune-mediated diseases.
Although the cause of disorders such as Crohns disease, autoimmune uveitis and
non-alcoholic steatohepatitis (NASH) remains unknown, various features suggest
immune system involvement in their pathogenesis.

We continue
to test 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 continue to capitalize on our nucleic acid labeling, amplification
and detection technologies and intellectual property to develop diagnostic and
monitoring tests for various diseases.

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.

During
fiscal 2005, we acquired the rights and intellectual property to a candidate
drug and technology intended for use in the treatment
of autoimmune uveitis. We are collaborating with scientists and physicians in
the United States and abroad to develop this candidate drug into a product for
treating autoimmune uveitis. Through these collaborations and other licensing
agreements we continue to develop novel therapeutics for the stimulation and
enhancement of bone formation and glucose control, among others. Such products,
if any, emanating from this technology could provide potential therapy for bone
disorders, including bone loss, bone fractures, periodontitis, diabetes and
other indications.

We have
research collaborations with other institutions including, Hadassah University
Hospital in Jerusalem, Israel relating to our immune regulation technology and
the University of California at San Francisco for the application of our genetic
antisense technology against HIV. Through other collaborations we are
developing our candidate drug Optiquel for autoimmune uveitis. There can be no
assurance that any of these collaborative projects will be successful.

Similarly,
we seek to fully exploit the commercial value of our technology by partnering
with for-profit enterprises in specific areas in order to act on opportunities
that can be accretive to our efforts in accelerating our development program.

Apply
our biomedical research technology to the clinical diagnostics market

We intend
to develop our proprietary research technology for use in 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 can permit multiple diagnoses to be performed on the same specimen.

5

---



Leverage
marketing and distribution infrastructure of leading life sciences companies

Enzo Life
Sciences continues to develop its sales and marketing infrastructure to more
directly service its end users, while simultaneously positioning the Company
for product line expansion. Our acquisitions of Axxora in May 2007 and Biomol
in May 2008, have expanded our global sales, marketing, manufacturing, product
development and distribution infrastructure. Enzo Life Sciences now operates
worldwide through wholly owned subsidiaries (in USA, Switzerland, Benelux,
Germany, and UK) and a network of third party distributors in most other
significant markets worldwide.

Expand
our collaborations with major life sciences companies

We intend
to seek opportunities to secure strategic partnerships and assert our
intellectual property estate with multiple market participants. Further, we
will look to advance proprietary business opportunities.

In fiscal
2007, Enzo Life Sciences and Abbott Molecular, Inc. entered into an agreement
covering the supply of certain Enzo Life Sciences products to Abbott Molecular
for use in their fluorescence in situ hybridization (FISH) product line. Both
companies have also entered into a limited non-exclusive royalty bearing
cross-licensing agreement of patents for FISH systems, comparative genomic
hybridization (CGH) analysis and labeling and detection technologies. The
cross-licensing agreement includes the Companys patents directed towards its
proprietary labeling and detection systems as they relate to Abbotts FISH
platform. The license also provides the Company with limited access to Abbotts
FISH technology patents, CGH patents and various patents which relate to
particular chromosome targets. These agreements relate to products in the field
of molecular diagnostics, which is the fastest-growing segment of the
diagnostics market, according to industry sources. FISH involves the use of
labeled DNA probes which are used to identify specific genetic conditions.
Currently, this technology is used to help diagnose and/or select therapy for
certain cancers, such as breast, bladder, and leukemia, as well as to help
diagnose genetic disorders. CGH is a molecular cytogenetic method for the
analysis of chromosomal copy number changes (gains/losses) which are recognized
as the underlying basis for congenital disorders and complex diseases such as
cancer. See Note 14 to the notes to consolidated financial statements.

In fiscal
2005, the Company, as plaintiff, finalized and executed a settlement and
license agreement with Digene Corporation to settle a patent litigation
lawsuit. Digene Corporation was acquired by QIAGEN. The license agreement with
the Company was assigned to QIAGEN Gaithersburg Inc. (Qiagen). Under the
terms of the license agreement, the Company would earn quarterly running
royalties on the net sales of Qiagen products subject to the license until the
expiration of the patent on April 24, 2018. In the license agreement, Qiagen
was granted a world-wide, non-exclusive license to the Company U.S. Patent
number 6,222,581, which is related to the use of a methodology called
hybrid-capture in which certain nucleic acid probes are hybridized to target
nucleic acids and then captured indirectly on a solid surface. The resulting
nucleic acid hybrids are then detected by antibodies conjugated to
signal-generating molecules which produce an amplified signal allowing for more
sensitive detection of the resultant hybrids. This platform is one of the most
desirable formats for the detection of nucleic acids in a reliable and economic
manner, and has formed the basis for one of the most commonly ordered
genomic-based assays. See Note 13 to the notes to consolidated financial
statements.

Expand
and protect our intellectual property estate

Since our
inception, we have followed a strategy of creating 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. During Fiscal 2008, we were awarded seven patents
and expanded our patent estate in the area of nucleotides, amplification,
labeling, detection, among others

Core
Technologies

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

6

---



Diagnostic
Technology Platform

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:

| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | amplification of
 the target DNA sequence (a process that is essential for the detection of
 very small amounts of nucleic acid);
| |   |                                                                                                                                  
| |  | labeling the probe
 with a marker that generates a detectable signal upon hybridization;                                         
| |   |                                                                                                                                  
| |  | addition of the
 probe to the sample containing the DNA; and                                                                     
| |   |                                                                                                                                  
| |  | 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 which is supported by our
significant proprietary position in these fields.

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 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.

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.

7

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Therapeutic
Technology Platforms

Cell
Signaling Pathway

Our newest
therapeutic technology platform involves the development of pharmaceutical
agents that affect with protein-protein interactions. Over the past several
years, our scientists and collaborators have unlocked the secrets of a major
cell signaling pathway thus producing a means to modify biologic activity in a
number of physiological systems. Further investigation into the design and
control of this system has allowed our scientists and their collaborators to
determine the structure of key regulatory proteins and to identify active sites
that then become targets for Enzos proprietary technology generating system.
Our technology is capable of generating active compounds that range from orally
delivered small molecules to peptides, oligonucleotides or antibodies. We have
performed pioneering work on the structure and function of LRP and its ligands,
developed a screening technology to identify active compounds, and have
synthesized proprietary molecules capable of producing biological effects in
cell-based systems and animal models of disease. Specifically, this system
allows the Company to successfully:

| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | generate
 biological, genetic, and structural information concerning LRP;         
| |  
| |  | determine the
 structure of LRP docking sites of its ligands;                     
| |  
| |  | identify the
 functionally important residues via site-directed mutagenesis;      
| |  
| |  | build the fine
 structure map and employ it as the basis for virtual screening;   
| |  
| |  | show that
 compounds specifically bind to wild type LRP5, but not to mutated LRP5;
| |  
| |  | generate a
 cell-based assay capable of identifying active compounds and;         
| |  
| |  | synthesize
 proprietary molecules that are active in animal models of disease.    

| |                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Through this
 novel, proprietary, functional screening system, we have identified small
 molecules capable of reversing sclerostin-mediated inhibition of Wnt
 signaling. Preclinical animal studies with several candidate lead compounds
 produced the following results:

| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | significant
 increases in total and femoral bone density through new bone formation;
| |  
| |  | significant
 reduction in alveolar bone loss and;                                   
| |  
| |  | significant reduction
 in bone resorption.                                          

The anabolic induction of new bone formation and prevention of bone
loss by our small molecule compounds may promise new paths for the treatment of
osteoporosis.

In addition, our proprietary technology has enabled the generation of
novel chemical entities that have significant glucose lowering activity. These
effects are separate from its effects on bone metabolism indicating a
specificity of action conferred by the interaction of a particular compound
with the cell signaling pathway. Therefore, this approach may be broadly
applicable to the generation of therapeutic drug candidates for multiple
indications.

Immune
Regulation

Oral
Immune Regulation.We are exploring 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 as foreign and, consequently,
against which the body mounts an immune response. We are developing our
technology to treat immune-mediated diseases, specifically autoimmune uveitis
and Crohns Disease.

Gene
Regulation

We have
developed an 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,
in a process called transduction, we have developed proprietary vector
technology. Our vector technology has the following strengths:

 Efficient transduction. A
principal
problem of many 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.

8

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 Immunologically
Quiet. Transduced or
engineered cells (cells containing the gene that was delivered by the vector)
often produce non-essential proteins that may 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 have not
expressed extraneous proteins.

 Smart
Vectors. We incorporate
into the surface of our vectors proteins that are designed to 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.

 Safety components.
Certain
retroviral vectors have been shown to insert within the cell in regions of the
cellular DNA that could activate genes that cause cells to grow or multiply.
This insertional gene activation may cause uncontrolled cell division resulting
in a cancer. Our vector has been designed to prevent insertional gene
activation by inactivation of the viral promoters.

We believe,
though there can be no assurance, that our vector technology has broad
applicability in the field of gene medicine. This can be attributed to the
following properties of our construct:

| |   |                                                                   
| | - | ------------------------------------------------------------------
| |  | the viral
 promoters are inactivated;                             
| |   |                                                                   
| |  | insertional gene
 activation is prevented  a major safety factor;
| |   |                                                                   
| |  | chromosomal
 integration; and                                     
| |   |                                                                   
| |  | nuclear
 localization.                                            

In summary,
we have developed proprietary technologies in the areas of cell signaling,
immune modulation and gene regulation (genetic antisense or antisense RNA) that
we are using as platforms for a portfolio of novel therapeutics. There can be
no assurance that we will be able to secure patents or that these programs will
be successful. The potential therapeutics we are developing could be used, if
successful, for the treatment of a variety of diseases, including osteoporosis,
osteonecrosis and other bone pathologies, diabetes, autoimmune uveitis, and
inflammatory bowel disease, including Crohns Disease and ulcerative colitis,
among others.

We have
developed an immunomodulator agent EGS21 as a potential therapeutic for
treating immune mediated disorders. EGS 21 is a glycolid that has been shown by
our scientists and collaborators to act as an anti-inflammatory agent in animal
model systems and is being evaluated as a drug candidate in the treatment of
various immune mediated diseases.

In summary,
we have developed proprietary technologies in the areas of cell signaling,
immune modulation and gene regulation (genetic antisense RNA) that we are using
as platforms for a portfolio of novel therapeutics.

There can
be no assurance that we will be able to secure patents or that these programs
will be successful. The potential therapies we are developing could be used, if
successful for the treatment of a variety of diseases, including osteoporosis,
osteonecrosis and other bone pathologies, diabetes, autoimmune uveitis and
inflammatory bowel disease, including Crohns disease and ulcerative colitis,
among others.

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 New York Metropolitan and New Jersey area.

Research
Products

We are organized
to lead in the development, production, marketing and sales of innovative life
science research reagents worldwide based on over 30 years of experience in
building strong international market recognition, implementing outstanding
operational capabilities, and establishing a state of the art electronic
information and ordering marketplace. We in-license and manufacture over 8,000
products, and distribute an additional 20,000 products, that may be sold
individually or combined in a kit to meet the specific needs of researchers. We
market these products to biomedical and pharmaceutical firms as well as
academic and government research institutions worldwide. Our comprehensive
portfolio of high quality reagents and kits in key research areas are sold to
scientific experts in the following fields:

9

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|                                |  |                                         
|------------------------------- |  | ----------------------------------------
|Adipokines                      |  | Interferons                             
|Antibiotics                     |  | Kinases/Inhibitors                      
|Apotosis/Cell
 Death            |  | Leukotrienes/Prostaglandins/Thromboxanes
|Biologically
 Active Peptides   |  | Microarray
 Labeling                    
|Bone Metabolism                 |  | Multidrug Resistance                    
|Cancer Research                 |  | Natural
 Products/Antibiotics           
|Cell Death                      |  | Neuroscience                            
|Cell Cycle                      |  | Nitric Oxide
 Pathway                   
|Chemokines/Cytokines            |  | Nuclear Receptors                       
|Cytoskeletal
 Research          |  | Oxidative Stress                        
|Dependence
 Receptors           |  | Proteosome/Ubiqutin                     
|DNA Fragmentation/Damage/Repair |  | Receptors                               
|DNA Regulation                  |  | Signal
 Transduction                    
|Epigenetics                     |  | Stem Cell/Cell
 Differentiation         
|FISH                            |  | Stress
 Proteins/Heat Shock Proteins    
|Growth
 Factors/Cytokines       |  | TNF/TNF Receptor
 Superfamily           
|Hypoxia                         |  | Transcription
 Factors                  
|Immunology                      |  | Viral Signaling                         
|Inflammation/Innate
 Immunity   |  |                                         

Enzo Life
Sciences is organized to promote and market its product through its five
brands.

EnzoThe Enzo
brand products and
technologies are primarily focused in the areas of microarray analysis, gene
regulation and gene modification. Patented Enzo technologies and products are
recognized as key tools in non-radioactive gene and protein labeling.

AlexisThe
Alexis brand is internationally
recognized as a leader in producing and commercializing innovative high quality
reagents and as an established source for a comprehensive panel of products in
many of the fields listed above.

ApotechThe
Apotech branded product
portfolio focuses on the fields of apoptosis and inflammation. These products
include high quality recombinant proteins, antibodies and research kits.

AxxoraThe
Axxora brand provides an
electronic one-stop information, service and purchasing location for innovative
high quality life science research reagents and research kits from the three
product brands listed above as well as products from original manufacturers.

BiomolThe
Biomol branded product
portfolio is targeted towards the cellular biochemistry segment with an
emphasis on areas related to protein post-translational modification, be it by
ubiquitin or the ubiquiting-like proteins, acetylation, methylation,
phosphorylation, sulphation, or glycolsylation.

Therapeutic
Development Programs

We have a
number of therapeutic products in various stages of development that are based
on our proprietary cell signaling, immune regulation and gene therapy
technologies. Our therapeutic programs are described below.

Osteoporosis
(and certain bone disorders) and Diabetes

We have a
number of new compounds in preclinical development that could provide therapy
for treating bone disorders including osteoporosis, bone loss, fractures,
abnormalities, diseases, and other applications. These candidate compounds were
identified through an innovative approach, combining structural biology,
computational screening, mutational analyses and biological in vitro assays,
followed by validation in animal model systems.

Enzo-D58 is
one of several compounds found to induce new bone formation in mouse calvaria
when injected subcutaneously. When delivered orally the candidate compound was
shown to prevent alveolar bone loss in a periodontitis-induced rat model.

10

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One
of the most challenging problems in clinical dentistry chronicled throughout
history is the loss of alveolar bone. Alveolar bone loss is characterized by
the reduction in height and volume of the maxillary and mandibular bones that
underlie and support the teeth. The primary causes of alveolar bone loss are
periodontitis and tooth loss, although osteoporosis may also contribute. The
lack of an effective treatment for periodontal bone loss has encouraged the
continued search for a successful therapeutic approach. Our preliminary results
which were presented at the annual meeting of the American Society for Bone and
Mineral Research 2007 suggest that Enzo-D58 may be effective in preventing
alveolar bone loss. We have continued this effort and have synthesized and
developed novel compounds that appear to be active in standard animal models
which assess bone density. We continue to develop these drug candidates and
progress them along the drug development continuum.

In
addition, we and our collaborators have investigated the biochemical pathways
involved in glucose homeostasis. Using animal genetic models, and structural
and computational biology we have been able to decipher some of the complex
cellular machinery that controls glucose, synthesize novel entities that
interact at key targets and test them in standard animal models of diabetes. We
continue to explore this very exciting line of research and continue activities
geared toward the development of potential therapeutics for diabetes with novel
mechanisms of action.

Autoimmune Uveitis. Autoimmune uveitis, which results from inflammation
of a part of the eye known as the uvea, is believed to result from an immune
reaction to antigens in the eye, specifically the S-antigen and the
interphotoreceptor retinoid-binding protein (IRBP). There is no known cure for
uveitis, which in the United States, according to the American Uveitis Society,
is newly diagnosed in approximately 38,000 people every year. While there are
steps that can be taken to preserve sight and slow the progress of vision loss,
individuals with uveitis also are at increased risk of developing cataracts,
glaucoma or retinal detachment.

          In fiscal 2005, we acquired rights and
intellectual property to a candidate drug and technology intended for use in
the treatment of uveitis. The drug is the result of a discovery by scientists
at the eye clinic of the Ludwig Maximilians University in Munich, Germany, who
found a small peptide that when fed to rats with experimental allergic uveitis
promoted their recovery. Based on favorable preclinical studies, the developers
conducted an open, pilot Phase I clinical trial in Germany with encouraging
results.           Using our immune regulation platform and the recently acquired rights
to the candidate drug, Optiquel (B27PD), Enzo is currently developing a
protocol for a multi-center, double-blind, placebo-controlled, proof-of-concept
clinical trial to be carried out in the United States and possibly ex-US. We
have begun collaborations with scientists and physicians in both the US and
abroad and have assembled an advisory board of consultants who are experts in
the management and treatment of uveitis. In addition, we have held a pre-IND
meeting with the U.S. Food and Drug Agency (FDA) in preparation for regulatory
approval to initiate clinical studies in the US. We will be filing an IND with
the FDA assuming all manufacturing, quality and preclinical studies meet FDA
requirements.

We
previously had filed with the regulatory authorities in Europe, and Optiquel
has been granted orphan status under European regulations. We will apply for
the same in the U.S. since Orphan status designation can confer both financial
and marketing benefits.

Inflammatory
bowel diseases.We believe
our immune regulation technology may be used to treat inflammatory bowel
disease (IBD), including ulcerative colitis and Crohns Disease. According to
the Crohns and Colitis 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.

Patients
are managed during short-term episodes through the use of anti-inflammatory
medications, or immunosuppressants, which 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 may make the body more prone to
infection, lymphoma, or other diseases.

Alequel is
    an individualized protein product mixture produced from autologous tissue
    and extracted during a routine colonoscopy from a patient. The Enzo protein
    extract is administered to the patient orally. Interim results of a Phase
    II clinical study, were presented at the 2007 annual Digestive Disease Week
    conference. In these studies, 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. Forty-nine
    patients with moderate to severe Crohns disease
were randomized to receive either placebo or Alequel
Patients were monitored on an intent-to-treat basis for remission (a decrease
in CDAI to 150 or lower), clinical response (a decrease in CDAI of 100 or
greater) and quality of life as measured by the inflammatory bowel disease
questionnaire (IBDQ). The results, although not statistically significant,
indicated that patients receiving Alequel
achieved improved rates of clinical remission compared with the placebo group
(39% vs. 22%), clinical response (50% vs. 30%) and improved quality of life in
the drug study group compared to placebo.

11

---



No
treatment-related adverse events were noted. Thus, we concluded that Alequel may be a safe and effective
method for treatment of patients with moderate to severe Crohns disease. 
          An
expanded double-blind, placebo-controlled study to broaden the diversity of the
patient population is currently being completed at Hadassah Hospital in
Jerusalem. We expect results from this study in Fiscal 2009. If the results are
positive, we will request a pre-IND meeting with the US FDA to plan for
regulatory approval to initiate studies in the US. We have begun collaborations
with scientists and physicians and have assembled an advisory board of
consultants who are experts in the management and treatment of inflammatory
bowel disease.

Human
Immunodeficiency Virus (HIV-1)

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 individual 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 more than 60 million individuals
worldwide living with HIV infection during 2007. There were over 5 million new
infections and 3 million deaths from HIV during that same year. More than 20
million have died since the first cases of AIDS were identified in 1981. At
present, several classes of products have received FDA marketing approval for
HIV-1 infection: reverse transcriptase inhibitors protease inhibitors, fusion
inhibitors and binding inhibitors.

HGTV43 gene medicine. Enzos proprietary
Stealth Vector HGTV43 gene construct is a vehicle designed to carry and
deliver anti-HIV-1 antisense RNA genes. These genes produce antisense RNA
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 long-term safety 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® HGTV43 transducing vector and infused
into the subject. Results of the trial showed that all subjects tolerated the
procedure and that:

       all
subjects tolerated the procedure. There were no treatment-related adverse
events during the study and no evidence for expansion of the inserted
transgenes in any subjects tested, nor was any evidence of leukemia seen by
standard hematology;

       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, indicating engraftment of the engineered
cells;

| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | anti HIV-1 antisense RNA-containing immune
 cells were detected in the circulation of subjects, the longest at 72 months;
| |   |                                                                                                                          
| |  | 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 initiated a
Phase I/II study at University of California San Francisco (UCSF), the site of
the Phase I study. This study focuses on a strategy designed to increase the
percentage of engineered CD4+ cells that contain the anti-HIV-1 antisense
genes. The first patient has undergone treatment and we are monitoring the
progress.

Non-Alcoholic
SteatoHepatitis (NASH)

We
are currently conducting a double-blind, placebo-controlled study at Hadassah
Hospital in Jerusalem which is designed to investigate the effects of EGS-21, a
glycolipid, as an immune modulator for the alleviation of NASH. We expect to
have results from this study by the end of fiscal 2009.

12

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Hepatitis
B Virus (HBV)

We
have developed a HBV therapeutic 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.

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 may
enhance a secondary immune response to clear the viral infection, resulting in
reduction in liver damage and decrease in viral load.

Based
on both the preclinical and clinical results, the Company began exploring
several options for development of the candidate drug. Our current strategy is
to seek a commercial partner to continue the drug development. To this end
pharmaceutical partnerships are being explored and evaluated, although there
can be no assurances that such efforts will be successful

Clinical
Laboratory Services

We
operate a regional clinical laboratory that offers full diagnostic services to
the New York Metropolitan and New Jersey medical community. Our 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 and may be performed less frequently than routine tests. We do not
perform certain low-volume esoteric tests in-house; generally many of these
tests are referred to an esoteric clinical testing laboratory that specializes
in performing these more complex tests.

We
offer 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.

Our
full service clinical laboratory in Farmingdale, NY contains infrastructure
that includes a comprehensive information technology, logistics, client service
and billing departments. Also, we have a network of over twenty three
strategically located patient service centers and a full service phlebotomy
department. Patient service centers collect the specimens as requested by
physicians. We also operate a fully equipped STAT laboratory in New York City.
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 laboratory facilities by our logistics
department accompanied by a test requisition form. These forms, which are
completed by the ordering physician, indicate the tests to be performed and
demographic patient information. Once this information is entered into the
laboratory computer system the tests are performed and the results are entered
primarily through an interface from the laboratory testing equipment or in some
instances, manually into the laboratory computer system. 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 electronically via
our proprietary EnzoDirect system or delivered by our logistics department directly
to the ordering physicians offices. Physicians who request that they be called
with a particular result are so notified.

For
fiscal years ended July 31, 2008, 2007, and 2006, respectively, 54%, 76% and
80% of the Companys revenues were derived from the clinical laboratory. At
July 31, 2008 and 2007, respectively, approximately 58% and 68% of the
Companys net accounts receivable were derived from its clinical laboratory
business. The Company believes that the concentration of credit risk with
respect to the Clinical Labs accounts receivable is mitigated by the diversity
of its numerous third party payers and individual patient accounts, and is
limited to certain large payers that insure individuals that utilize the
Clinical Labs services. To reduce risk, the Company routinely assesses the
financial strength of these payers and, consequently, believes that its
accounts receivable credit risk exposure, with respect to these payers, is
limited. While the Company also has receivables due from the Federal Medicare
program, the Company does not believe that these receivables represent a credit
risk since the Medicare program is funded by the federal government and payment
is primarily dependent on our submitting the appropriate documentation.

13

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Revenue,
net of contractual adjustment, from direct billings under the Federal Medicare
program during the years ended July 31, 2008, 2007 and 2006 were approximately
22%, 21% and 23%, respectively, of the clinical laboratory segments total
revenue. We estimate contractual adjustment based on significant assumptions
and judgments, such as the interpretation of payer reimbursement policies which
bears the risk of change. The estimation process is based on the experience of
amounts approved as reimbursable and ultimately settled by payers, versus the
corresponding gross amount billed to the respective payers. The contractual
adjustment is an estimate that reduces gross revenue, based on gross billing
rates, to amounts expected to be approved and reimbursed. Gross billings are
based on a standard fee schedule we set for all third party payers, including
Medicare, health maintenance organizations (HMOs) and managed care providers.
We adjust the contractual adjustment estimate quarterly, based on our
evaluation of current and historical settlement experience with payers,
industry reimbursement trends, and other relevant factors. The other relevant
factors that affect our contractual adjustment include the monthly and
quarterly review of: 1) current gross billings and receivables and
reimbursement by payer, 2) current changes in third party arrangements. 3) the
growth of in-network provider arrangements and managed care plans specific to
our Company. The clinical 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 payers for reimbursement, and the inaccurate information received from
the covered individual patients for unreimbursed unpaid amounts. Our provision
for uncollectible accounts receivable is within historical expectations.

Other
than the Medicare program, revenues from United Healthcare of New York, Inc.
    represented 26% and 20% of the Clinical Labs segments net revenue for
    the fiscal year ended July 31, 2008 and 2007, respectively. Other than the
    Medicare program, no other provider exceeded 10% of Clinical Labs service
    revenue for the fiscal year ended July 31, 2006.

Billing
for laboratory services is complicated. Depending on the billing arrangement
and applicable law, we must bill various payers, such as patients, insurance
companies and the Federal Medicare Program, all of which have different requirements.
In New York State, the law prohibits the Company from billing the ordering
physician. Compliance with applicable laws and regulations as well as, internal
compliance policies and procedures adds further complexity to the billing
process. We depend on the ordering physician to provide timely, accurate
billing demographic and diagnostic coding information to us. Additional factors
complicating the billing process include:

| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | pricing
 differences between our standard gross fee schedules and the reimbursement
 rates of the payers;
| |   |                                                                                                          
| |  | disputes
 with payers as to which party is responsible for payment; and                                  
| |   |                                                                                                          
| |  | disparity
 in coverage and information requirements among various payers.                                

We
believe that most of our bad debt expense is primarily the result of missing or
incorrect billing information on requisitions received from the ordering
physician rather than credit related issues. We perform the requested tests and
report test results regardless of whether the billing or diagnostic coding
information is incorrect or missing. We subsequently attempt to contact the
ordering physician to obtain any missing information and rectify incorrect
billing information. Missing or incorrect information on requisition adds
complexity to and slows the billing process, creates backlogs of unbilled
requisitions, and generally increases the aging of accounts receivable. When
all issues relating to the missing or incorrect information are not resolved in
a timely manner, the related receivables are fully reserved to the allowance
for doubtful accounts or written off.

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.

The
permitted Medicare reimbursement rate for clinical laboratory services has been
reduced by the Federal government in a number of instances over the past
several years to a present level equal to 74% of the national median of
laboratory charges. Clinical Labs have been subjected to a five-year freeze
(ending in 2008) on Laboratory fee updates, as required by the Medicare
Modernization Act of 2003. A number of proposals for legislation or regulation,
such as competitive bidding on laboratory services are under discussion which
could have the effect of substantially reducing Medicare reimbursements to
clinical laboratories through reduction of the present allowable percentage or
through other means. In addition, the structure and nature of Medicare
reimbursement for laboratory services is also under discussion and we are
unable to predict the outcome of these discussions. Depending upon the nature
of congressional and/or regulatory action, if any, which is taken and the content
of legislation, if any, which is adopted, we could experience a significant
decrease in revenue from Medicare, which could have a material adverse effect
on us.

Research
and Development

Our
principal research and development efforts are directed toward expanding our
research product lines, given our increased manufacturing, distribution
capability following the acquisitions of Axxora and Biomol, as well as
developing innovative new therapeutic products to meet unmet market needs. We
have developed our core research expertise in the life science field as a
result of 30 years of dedicated focus in this area. We conduct our research and
other product development efforts through internal research and collaborative
relationships.

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In
the fiscal years ended July 31, 2008, 2007 and 2006, the Company incurred costs
of approximately $8,637,000, $9,393,000 and $7,896,000, respectively, for
research and development activities.

Internal
Research Programs

Our
professional staff of 58 scientists, including 46 with post graduate degrees,
performs our internal research and development activities. 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.

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. Apotech Laboratories, Inc., a wholly
owned subsidiary of Axxora Inc., is involved in three EU collaborative projects
aimed at developing novel anti-cancer drugs, novel targets for the design of
new cancer therapies and developing new diagnostics to significantly improve
haematopoieteic stem cell transplants. Biomol International Europe is a
participant in the RUBICON Network of Excellence which is funded by the
Framework Programme 6 of the European Commission focused on the development of
reagents and assays facilitating investigation of ubiquitin and ubiquitin-like
(Ubl) pathway components. We also have a number of external collaborations
around the world to enhance our ongoing therapeutic development program.

Sales
and Marketing

Our
sales and marketing strategy for Enzo Life Sciences is to sell our life science
products through three distinct channels: (i) direct sales to end-users (ii)
supply agreements with manufacturers and (iii) through distributors in major
geographic markets. We operate with an understanding of local markets and a
well-functioning distribution network system across the globe. Scientists
around the world recognize the brands (Alexis, Apotech, Axxora, Biomol and Enzo)
for innovative high quality products and as a source for life science research
reagents from original manufacturers. Our marketing and sales network includes
fully-owned subsidiaries (USA, Switzerland, Germany, UK), and a network of
third party distributors in most other significant markets worldwide.

For
Enzo Clinical Labs, we focus our sales efforts on obtaining and retaining
profitable accounts. We market the clinical laboratory services to ordering
physicians in the metro New York and New Jersey region through our direct sales
force, customer service and patient service representatives. 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. We are focusing our efforts to attract and
retain clients who participate with the providers with whom we have regional
contracts.

Distribution
Arrangements

We
also distribute our life science products internationally through a network of
distributors. Through these arrangements, we are able to leverage the
established marketing and distribution infrastructure of these companies. Prior
to fiscal 2005, the Company distributed through leading life science companies
and is currently evaluating new relationships. 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. Many of these companies are performing research targeting the same
technology, applications and markets. Some of these competitors are
significantly larger than we are and have more 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,
regional, 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, its reliability and speed in
performing diagnostic tests, and its ability to employ qualified laboratory
personnel.

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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 2008 we owned or licensed 53 U.S. and 183 foreign patents
relating to products, methods and procedures resulting from our internal or
sponsored research projects.

There
can be no assurance that patents will be issued on pending applications or that
any issued patents will not be challenged (see Item 3, Legal Proceedings), or
that they 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 to sign a confidentiality agreement that prohibits the
employee from disclosing any confidential information about us, including our
technology or trade secrets.

Our
intellectual property portfolio can be divided into patents that provide claims
in three primary categories, as described below:

Nucleic
Acid Chemistry

We
currently have broad patent coverage in the area of nucleic acid chemistry. We
have done extensive work on the labeling of nucleic acids for the purpose of
generating a signal that dates back over twenty years. Enzo has multiple issued
patents covering the modification of nucleic acids at all three potential
modification sites (sugar, base and phosphate). The claims contained in these
patents cover any product that incorporates a signaling moiety into a nucleic
acid for the purpose of nucleic acid sequence detection or quantification.

Signal
Delivery

We
also have a long history of innovation in the area of analyte detection using
non-radioactive signaling entities. At the signaling entity itself, there are
several Enzo patents that cover the formation of this structure. A patent which
was allowed in 2006 covers the attachment of signaling molecules through the
phosphate moiety of a nucleic acid, which is how the signal-generating enzyme
is bound.

Nucleic
Acid Analysis Format

We
also have patents with issued claims covering the use of arrays of
single-stranded nucleic acids fixed or immobilized in hybridizable form to a
non-porous solid support. These patents cover any product that uses arrays of
nucleic acids for molecular analysis.

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. 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. We plan to utilize its
technological expertise to develop a line of products and services designed
specifically for the cytogenetics research market.

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 regulations promulgated thereunder 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.

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Any
therapeutics products that we develop will require regulatory review before
clinical trials, and additional regulatory clearances before commercialization.
New human gene medicine products as well as immune regulation products, as
therapeutics, are subject to regulation by the FDA and comparable agencies in
other countries. The FDA on a case-by-case basis currently reviews each
protocol. In addition, 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.

Federal
requirements are detailed in Title 21 of the Code of Federal Regulations (21
CFR). In addition, the FDA publishes guidance documents with respect to the
development of therapeutics protocols.

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 (GLP). 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
satisfactorily review 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 investigational product.
It is the sponsors responsibility to ensure that the investigations are
conducted and monitored in accordance with FDA regulations, Good Clinical
Practices (GCP) and the general investigational plan and protocols contained in
the IND. This may be done using in-house trained personnel or an outside
contract research organization (CRO). 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.

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 Panel 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.

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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 designation 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 by 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 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.

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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 by 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.

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.

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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.

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
payers, 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
payers, commercial insurer and health maintenance organizations are likely 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. Clinical laboratories must
bill Medicare directly for the services provided to Medicare beneficiaries and
may only collect the amounts permitted under the Medicare Fee Schedule.
Reimbursement to clinical laboratories under the Medicare Fee Schedule has been
steadily declining since its inception. Furthermore, Medicare has 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.

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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 payers,
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 regulations, 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 have had 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 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. The Company is
unaware of any material violations.

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 Provider 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 deadline for providers to
obtain and implement use of the National Provider Identifier was May 23, 2007.

21

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The
National Provider Identifier is an identifier that will replace all other
identifiers that are currently used for healthcare transactions (e.g., UPIN,
Medicaid provider numbers; identifiers assigned by commercial insurers). We
received its National Provider Identifier well in advance of the deadline.

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 in February 2003 and went into
effect April 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.

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.

The
implementation of the Health Insurance Portability and Accountability Act of
1996 (HIPAA) regulations impacts electronic billing and the security and
privacy of patient identifiable health information by all health providers
including Enzo Clinical Labs. In response to this challenge, we have
implemented an approach to identify, assess and plan for changes required by
the HIPAA regulations. A HIPAA Oversight Committee (Oversight Committee) was
formed to coordinate this task. The Oversight Committee consists of members
from management and a designated HIPAA Compliance Officer. We have in place a
framework for activities in this area. As the HIPAA rules are released and
their impact upon our operations are analyzed, our response to HIPAA is
reviewed and revised as necessary. We believe that we are in compliance with
these HIPAA regulations.

Medical
Regulated Waste

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, 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 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.

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
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.

22

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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 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 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 Research Facilities

Our
internal manufacturing and scientific efforts for our three segments took place
primarily at our facility in Farmingdale, New York prior to June 2007. At this
facility we have a completely integrated laboratory and manufacturing facility,
with special handling capabilities and clean rooms suitable for our operations.
In June 2006, we acquired a facility adjacent to our Farmingdale, New York
facility that effective July 1, 2008, a major portion became utilized by Life
Science for research and manufacturing. In connection with the Axxora
acquisition, the Life Sciences segment has added manufacturing and research
operations in Switzerland and a research facility in San Diego, California. The
Epilanges, Switzerland site houses the research and development laboratories of
Apotech. A portion of the San Diego, California facility is used to perform
research and development activities. In connection with the Biomol acquisition,
the Life Sciences segment has added manufacturing and research operations in
Plymouth Meeting, Pa. and a research facility in Exeter, United Kingdom. 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, 2008, we employed 439 full-time and 71 part-time employees. Of the
full-time employees, 132 were engaged in research, development, manufacturing,
and marketing of research products, 13 in therapeutics research, 266 in the
clinical laboratories and 28 in finance, legal and administrative functions. Our
scientific staff, including 46 individuals with post graduate degrees,
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 clinical
laboratory 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 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. We have invested heavily in the upgrade of our
information and telecommunications systems to improve the quality, efficiency
and security of our businesses. In addition, to complement our proprietary
physician connectivity solution, EnzoDirect we have introduced a web portal
version which allows physicians to receive laboratory results from any personal
computer with a browser and an Internet connection.

Despite
the precautionary measures that we have taken to prevent unanticipated problems
that could affect our information technology systems, 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.

23

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Quality Assurance

We consider
the quality of our clinical laboratory tests to be of critical importance, and,
therefore, we maintain 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.

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.

The Company
files annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the SEC). These
filings are available to the public via the Internet at the SECs website
located at http://www.sec.gov. You may also read and copy any document the
Company files with the SEC at the SECs public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. For more information, please call the SEC
at 1-800-SEC-0330.

The
Companys website is located at www.enzo.com. The Company makes available
on its website a link to all filings that it makes with the SEC. You may request
a copy of the Companys
filings with the SEC (excluding exhibits) at no cost by writing or telephoning
us at the following address or telephone number:

| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Enzo Biochem, Inc.
 
 527 Madison Ave. 
 New York, New York 10022 
 Tel: (212) 583-0100 
 Attn: Investor Relations

Item 1A. Risk
Factors

Risks
relating to our Company and our industries

We
have experienced significant losses in our last two fiscal years and quarter to
quarter. If such losses continue, the value of your investment could decline
significantly.

We incurred
a net loss of $10.7 million and $13.3 million for the fiscal years ended July
31, 2008 and 2007, respectively. If our revenues do not increase, or if our
operating expenses exceed expectations or cannot be reduced, we will continue
to suffer substantial losses which could have an adverse effect on our business
and adversely affect your investment in our Company.

Our
operating results may vary from period to period.

Our
operating results may vary significantly from quarter to quarter and from year
to year, depending on a variety of factors including:

| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | competitive
 conditions, including changes in third-party reimbursements,                                                                               
| |   |                                                                                                                                                         
| |  | exchange rate
 fluctuations,                                                                                                                            
| |   |                                                                                                                                                         
| |  | changes in tax
 laws, the results of tax audits or the measurement of tax uncertainties,                                                                
| |   |                                                                                                                                                         
| |  | the timing of our
 research and development, sales and marketing expenses,                                                                              
| |   |                                                                                                                                                         
| |  | the introduction
 of new products by us or our competitors,                                                                                             
| |   |                                                                                                                                                         
| |  | the success of
 identifying, acquiring and integrating businesses that complement our product
 offering, add new technology or add presence in a market,

24

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| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | customer demand
 for our products due to changes in purchasing requirements and research
 needs, and
| |   |                                                                                                     
| |  | general worldwide
 economic conditions affecting funding of research.                               

Consequently,
results for any interim period may not necessarily be indicative of results in
subsequent periods.

Our
future success will depend in part upon our ability to enhance existing
products and to develop and introduce new products.

The market
for our products is characterized by rapidly changing technology, evolving
industry standards and new product introductions, which may make our existing
products obsolete. Our future success will depend in part upon our ability to
enhance existing products and to develop and introduce new products.

The
development of new or enhanced products is a complex and uncertain process
requiring the accurate anticipation of technological and market trends as well
as precise technological execution. In addition, the successful development of
new products will depend on the development of new technologies. We will be
required to undertake time-consuming and costly development activities and to
seek regulatory approval for these new products. We may experience difficulties
that could delay or prevent the successful development, introduction and
marketing of these new products. Regulatory clearance or approval of any new
products may not be granted by the FDA or foreign regulatory authorities on a
timely basis, or at all, and the new products may not be successfully
commercialized.

We may
be unable to identify, acquire and integrate acquisition targets.

In the past
two fiscal years we have made significant acquisitions. Our strategy envisions
that a part our future growth will come from acquiring and integrating similar
operations. There can be no assurance that we will be able to identify suitable
acquisition candidates and, once identified, to negotiate successfully their
acquisition at a price or on terms and conditions favorable to us, or to
integrate the operations of such acquired businesses with the existing operations.
In addition, we compete for acquisition candidates with other entities, some of
which have greater financial resources than ours. Our failure to implement
successfully its acquisition strategy would limit our potential growth.

Our
inability to carry out certain of our marketing and sales plans may make it
difficult for us to grow or maintain our business.

The Life
Sciences segment continues to implement an aggressive marketing program
designed to more directly service its end users, while simultaneously
positioning us for product line expansion. We will continue to expand the reach
of companies by our direct field sales force, continued attendance at top
industry trade meetings, and publications in leading scientific journals, as
well as the on-going enhancement of our interactive web sites. In addition to
our direct sales, we operate worldwide through wholly-owned subsidiaries (in
USA, Switzerland, Germany, and UK) and a network of third-party distributors in
most other significant markets. If we are unable to successfully implement
these programs, we may be unable to grow and our business could suffer.

We
face intense competition, which could cause us to decrease the prices for our
products or services or render our products uneconomical or obsolete, any of
which could reduce our revenues and limit our growth.

Our
competitors in the biotechnology industry in the United States and abroad are
numerous and include major pharmaceutical, energy, food and chemical companies,
as well as specialized genetic engineering firms. Many of our large competitors
have substantially greater resources than us and have the capability of
developing products which compete directly with our products. Many of these
companies are performing research in the same areas as we are. The markets for
our products are also subject to competitive risks because markets are highly
price competitive. Our competitors have competed in the past by lowering prices
on certain products. The clinical laboratory business is highly fragmented and
intensely competitive, and we compete with numerous national and local
companies. Some of these entities are larger than we are and have greater
resources than we do. We compete primarily on the basis of the quality of our
testing, reporting and information services, our reputation in the medical
community, the pricing of our services and our ability to employ qualified
laboratory personnel.

These
competitive conditions could, among other things:

| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | Require us to
 reduce our prices to retain market share;                            
| |   |                                                                                     
| |  | Require us to
 increase our marketing efforts which could reduce our profit margins;
| |   |                                                                                     
| |  | Increase our cost
 of labor to attract qualified personnel;                         

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| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | Render our
 biotechnology products uneconomical or obsolete; or
| |   |                                                                
| |  | Reduce our
 revenue.                                           

We
depend on distributors and contract manufacturers and suppliers for materials
that could impair our ability to manufacture or distribute our products.

Outside distributors,
suppliers and contract manufacturers provide key finished goods, components and
raw materials used in the sale and manufacture of our products. Our Life
Sciences segment distributes product for over 40 unrelated third party
manufacturers. To the extent we are unable to maintain or replace a distributor
in a reasonable time period, or on commercially reasonable terms, if at all,
our operations could be disrupted. Although we believe that alternative sources
for components and raw materials are available, any supply interruption in a
limited or sole source component or raw material would harm our ability to
manufacture our products until a new source of supply is identified and
qualified. In addition, an uncorrected defect or suppliers variation in a
component or raw material, either unknown to us or incompatible with our
manufacturing process, could harm our ability to manufacture products. We might
not be able to find a sufficient alternative supplier in a reasonable time
period, or on commercially reasonable terms, if at all. If we fail to obtain a
supplier for the components of our products, our operations could be disrupted.

We
use hazardous materials in our business. Any claims relating to improper
handling, storage or disposal of these materials could be costly and
time-consuming.

Our
manufacturing, clinical laboratory and research and development processes
involve the storage, use and disposal of hazardous substances, including
hazardous chemicals, biological hazardous materials and radioactive compounds.
We are subject to federal, state and local regulations governing the use,
manufacture, storage, handling and disposal of materials and waste products.
Although we believe that our safety and environmental management practices and
procedures for handling and disposing of these hazardous materials are in
accordance with good industry practice and comply with applicable laws,
permits, licenses and regulations, the risk of accidental environmental or
human contamination or injury from the release or exposure of hazardous
materials cannot be completely eliminated. In the event of an accident, we
could be held liable for any damages that result, including environmental
clean-up or decontamination costs, and any such liability could exceed the
limits of, or fall outside the coverage of, our insurance.

We may not
be able to maintain insurance on acceptable terms, or at all. We could be
required to incur significant costs to comply with current or future
environmental and public and workplace safety and health laws and regulations.

We are required to expend significant
resources for
research and development for our products in development and these products may
not be developed successfully. Failure to successfully develop these products
may prevent us from earning a return on our research and development
expenditures.

The
products we are developing are at various stages of development and clinical
evaluations and may require further technical development and investment to
determine whether commercial application is practicable. There can be no
assurance that our efforts will result in products with valuable commercial
applications. Our cash requirements may vary materially from current estimates
because of results of our research and development programs, competitive and
technological advances and other factors. In any event, we will require
substantial funds to conduct development activities and pre-clinical and
clinical trials, apply for regulatory approvals and commercialize products, if
any, that are developed. We do not have any commitments or arrangements to
obtain any additional financing and there is no assurance that required
financing will be available to us on acceptable terms, if at all. Even if we
spend substantial amounts on research and development, our potential products
may not be developed successfully. If our product candidates on which we have
expended significant amounts for research and development are not
commercialized, we will not earn a return on our research and development
expenditures, which may harm our business.

Risks
relating to our Intellectual Property and Regulatory Approval

Protecting
our proprietary rights is difficult and costly. If we fail to adequately
protect or enforce our proprietary rights, we could lose potential revenue from
licensing and royalties.

Our
potential revenue and success depends in large part on our ability to obtain,
maintain and enforce our patents. Our ability to commercialize any product
successfully will largely depend on our ability to obtain and maintain patents
of sufficient scope to prevent third parties from developing similar or
competitive products. In the absence of patent protection, competitors may impact
our business by developing and marketing substantially equivalent products and
technology.

26

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Patent
disputes are frequent and can preclude the commercialization of products. We
have in the past been, are currently, and may in the future be, involved in
material patent litigation, such as the matters discussed under Part I - Item
3. Legal Proceedings in this report. Patent protection litigation is
time-consuming and we have incurred significant legal costs. In addition, an
adverse decision could force us to either obtain third-party licenses at a
material cost or cease using the technology or product in dispute.

We have
filed applications for United States and foreign patents covering certain
aspects of our technology, but there is no assurance that pending patents will
issue or as to the degree of protection which any issued patent might afford.

Lawsuits,
including patent infringements, in the biotechnology industry are not uncommon.
If we become involved in any significant litigation, we would suffer as a
result of the diversion of our managements attention, the expense of
litigation and any judgments against us.

In addition
to intellectual property litigation for infringement, other substantial,
complex or extended litigation could result in large expenditures by us and
distraction of our management. Patent litigation is time-consuming and costly
in its own right and could subject us to significant liabilities to third
parties. In addition, an adverse decision could force us to either obtain
third-party licenses at a material cost or cease using the technology or
product in dispute. In addition, lawsuits by employees, stockholders,
collaborators or distributors could be very costly and substantially disrupt our
business. Disputes from time to time with companies or individuals are not
uncommon in the biotechnology industry, and we cannot assure you that we will
always be able to resolve them out of court.

We also
utilize certain unpatented proprietary technology.

We
may incur impairment charges on our goodwill and other intangible assets with
indefinite lives that would reduce our earnings.

We are
subject to Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, (SFAS 142) which requires that goodwill and other
intangible assets that have an indefinite life be tested at least annually for
impairment. Goodwill and other intangible assets with indefinite lives must
also be tested for impairment between the annual tests if a triggering event
occurs that would likely reduce the fair value of the asset below its carrying
amount. As of July 31, 2008, goodwill and other intangible assets with
indefinite lives represented approximately 25% of our total assets. If we
determine that there has been impairment, our financial results for the
relevant period would be reduced by the amount of the impairment, net of tax
effects, if any.

We
may be unable to obtain or maintain regulatory approvals for our products,
which could reduce our revenue or prevent us from earning a return on our
research and development expenditures.

Our
research, preclinical development, clinical trials, product manufacturing and
marketing are subject to regulation by the FDA and similar health authorities
in foreign countries. FDA approval is required for our products, as well as the
manufacturing processes and facilities, if any, used to produce our products
that may be sold in the United States. The process of obtaining approvals from
the FDA is costly, time consuming and often subject to unanticipated delays.
Even if regulatory approval is granted, such approval may include significant
limitations on indicated uses for which any products could be marketed. Further,
even if such regulatory approvals are obtained, a marketed product and its
manufacturer are subject to continued review, and later discovery of previously
unknown problems may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market.

New
government regulations in the United States or foreign countries also may be
established that could delay or prevent regulatory approval of our products
under development. Further, because gene therapy is a relatively new technology
and has not been extensively tested in humans, the regulatory requirements
governing gene therapy products are uncertain and may be subject to substantial
further review by various regulatory authorities in the United States and abroad.
This uncertainty may result in extensive delays in initiating clinical trials
and in the regulatory approval process. Our failure to obtain regulatory
approval of their proposed products, processes or facilities could have a
material adverse effect on our business, financial condition and results of
operations. The proposed products under development may also be subject to
certain other federal, state and local government regulations, including, but
not limited to, the Federal Food, Drug and Cosmetic Act, the Environmental
Protection Act, and Occupational Safety and Health Act, and state, local and
foreign counterparts to certain of such acts.

We cannot
be sure that we can obtain necessary regulatory approvals on a timely basis, if
at all, for any of the products we are developing or manufacturing or that we
can maintain necessary regulatory approvals for our existing products, and all
of the following could have a material adverse effect on our business:

27

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| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Significant delays
 in obtaining or failing to obtain required approvals;                                                                                              
| |   |                                                                                                                                                                        
| |  | Loss of, or
 changes to, previously obtained approvals;                                                                                                                
| |   |                                                                                                                                                                        
| |  | Failure to comply
 with existing or future regulatory requirements; and                                                                                                
| |   |                                                                                                                                                                        
| |  | Changes to
 manufacturing processes, manufacturing process standards or Good
 Manufacturing Practices following approval or changing interpretations of
 these factors.

Adverse
perception and increased regulatory scrutiny of gene medicine and genetic
research might limit our ability to conduct our business.

Ethical,
social and legal concerns about gene medicine, genetic testing and genetic
research could result in additional regulations restricting or prohibiting the
technologies we or our collaborators may use. Recently, gene medicine studies
have come under increasing scrutiny, which has delayed ongoing and could delay
future clinical trials and regulatory approvals. Federal and state agencies,
congressional committees and foreign governments have expressed interest in
further regulating biotechnology. More restrictive regulations or claims that
our products are unsafe or pose a hazard could prevent us from commercializing
any products.

Risks
relating to our Clinical Labs services segment

Our
clinical laboratory business is subject to extensive government regulation and
our loss of any required certifications or licenses could require us to cease
operating this part of our business, which would reduce our revenue and injure
our reputation.

The clinical
laboratory industry is
subject to significant governmental regulation at the Federal, state and local
levels. Under the Clinical Laboratory Improvement Act of 1967 and the Clinical
Laboratory Improvement Amendments of 1988 (collectively, as amended, CLIA)
virtually all clinical laboratories, including ours, must be certified by the
Federal government. Many clinical laboratories also must meet governmental
standards, undergo proficiency testing and are subject to inspection.
Certifications or licenses are also required by various state and local laws.
The failure of our clinical laboratory to obtain or maintain such
certifications or licenses under these laws could interrupt our ability to
operate our clinical laboratory business and injure our reputation.

Reimbursements
from third-party payers, upon which our clinical laboratory business is
dependent, are subject to inconsistent rates and coverage and legislative
reform that are beyond our control. This inconsistency and any reform that
decreases coverage and rates could reduce our earnings and harm our business.

Our
clinical laboratory business is primarily dependent upon reimbursement from
third-party payers, such as Medicare (which principally serves patients 65 and
older) and insurers. We are subject to variances in reimbursement rates among
different third-party payers, as well as constant renegotiation of
reimbursement rates. We also are subject to audit by Medicare which can result
in the return of payments made to us under these programs. These variances in
reimbursement rates and audit results could reduce our margins and thus our
earnings.

The health
care industry continues to undergo significant change as third-party payers
increase their efforts to control the cost, utilization and delivery of health
care services. In an effort 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. Some of the proposals include managed competition, global budgeting
and price controls. Changes that decrease reimbursement rates or coverage, or
increase administrative burdens on billing third-party payers could reduce our
revenues and increase our expenses.

Changes
in provider mix, including a continued growth in capitated managed-cost health
care and changes in certain third party provider agreements could have a
material adverse impact on the Companys net revenues and profitability.

Certain third party
provider
companies have adopted national and regional programs which include multiple
managed-care reimbursement models. If the Company is unable to participate in
these programs or if the Company would lose a material contract, it could have
a material adverse impact on the Companys net revenues and profitability.

28

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The number
of individuals covered under managed care contracts or other similar
arrangements has grown over the past several years and may continue to grow in
the future. In addition, Medicare and other government healthcare programs may
continue to shift to managed care. Entities providing managed care coverage
have reduced payments for medical services, including clinical laboratory services,
in numerous ways such as entering into arrangements under which payments to a
service provider are capitated, limiting testing to specified procedures,
denying payment for services performed without prior authorization and refusing
to increase fees for specified services. These trends reduce our revenues and
limit our ability to pass cost increases to our customers. Also, if these or
other managed care organizations do not select us as a participating provider,
we may lose some or all of that business, which could have an adverse effect on
our business, financial condition and results of operations.

Because of competitive pressures and the
complexity
and expense of the billing process in our clinical laboratory business, we must
obtain new customers while maintaining existing customers to grow our business.

Intense
competition in the clinical laboratory business, increasing administrative
burdens upon the reimbursement process and reduced coverage and payments by
insurers make it necessary for us to increase our volume of laboratory
services. To do so, we must obtain new customers while retaining existing
customers. Our failure to attract new customers or the loss of existing
customers or a reduction in business from those customers could significantly
reduce our revenues and impede our ability to grow.

Compliance
with Medicare administrative policies, including those pertaining to certain
automated blood chemistry profiles, may reduce the reimbursements we receive.

Containment
of health care costs, including reimbursement for clinical laboratory services,
has been a focus of ongoing governmental activity. 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, Medicare has mandated use of the
Physicians Current Procedural Terminology, or 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.

Regulations
requiring the use of standard transactions for healthcare services issued
under the Health Insurance Portability and Accountability Act of 1996, or
HIPAA, may negatively impact our profitability and cash flows.

Pursuant to
the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the
Secretary of the Department of Health and Human Services, or HHS, has issued
final regulations designed to improve the efficiency and effectiveness of the
healthcare system by facilitating the electronic exchange of information in
certain financial and administrative transactions while protecting the privacy
and security of the information exchanged. Three principal regulations have
been issued in final form: standards for electronic transactions, security
regulations and privacy regulations.

The HIPAA
transaction standards are complex, and subject to differences in interpretation
by payers. For instance, some payers may interpret the standards to require us
to provide certain types of information, including demographic information not
usually provided to us by physicians. While most of our transactions are
submitted and / or received in ANSI standard format, inconsistent application
of transaction standards by some remaining payers or our inability to obtain
certain billing information not usually provided to us by physicians could
increase our costs and the complexity of billing. In addition, new requirements
for additional standard transactions, such as claims attachments, could prove
technically difficult, time-consuming or expensive to implement. We are working
closely with our payers to establish acceptable protocols for claims
submissions and with our industry trade association and an industry coalition
to present issues and problems as they arise to the appropriate regulators and
standards setting organizations.

29

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Compliance
with the HIPAA security regulations and privacy regulations may increase our
costs.

The HIPAA
privacy and security regulations, which became fully effective in April 2003
and April 2005, respectively, establish comprehensive federal standards with
respect to the uses and disclosures of protected health information by health
plans, healthcare providers and healthcare clearinghouses, in addition to
setting standards to protect the confidentiality, integrity and availability of
protected health information. The regulations establish a complex regulatory
framework on a variety of subjects, including:

| |   |                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the circumstances
 under which uses and disclosures of protected health information are
 permitted or required without a specific authorization by the patient,
 including but not limited to treatment purposes, activities to obtain
 payments for our services, and our healthcare operations activities;
| |   |                                                                                                                                                                                                                                                                                                             
| |  | a patients rights
 to access, amend and receive an accounting of certain disclosures of
 protected health information;                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                             
| |  | the content of
 notices of privacy practices for protected health information; and                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                             
| |  | administrative,
 technical and physical safeguards required of entities that use or receive
 protected health information.                                                                                                                                                                                  

We have
implemented practices to meet the requirements of the HIPAA privacy and
security regulations, as required by law. The privacy regulations establish a
floor and do not supersede state laws that are more stringent. Therefore, we
are required to comply with both federal privacy regulations and varying state
privacy laws. In addition, for healthcare data transfers from other countries
relating to citizens of those countries, we must comply with the laws of those
other countries. The federal privacy regulations restrict our ability to use or
disclose patient-identifiable laboratory data, without patient authorization,
for purposes other than payment, treatment or healthcare operations (as defined
by HIPAA), except for disclosures for various public policy purposes and other
permitted purposes outlined in the privacy regulations. The privacy and
security regulations provide for significant fines and other penalties for
wrongful use or disclosure of protected health information, including potential
civil and criminal fines and penalties. Although the HIPAA statute and
regulations do not expressly provide for a private right of damages, we also
could incur damages under state laws to private parties for the wrongful use or
disclosure of confidential health information or other private personal
information.

Compliance
with all of the HIPAA regulations, including new standard transactions,
requires ongoing resources from all healthcare organizations, not just clinical
laboratories. While we believe our total costs to comply with HIPAA will not be
material to our operations or cash flows, new standard transactions and additional
customer requirements resulting from different interpretations of the current
regulations could impose additional costs on us.

FDA
regulation of laboratory-developed tests, analyte specific reagents, or genetic
testing could lead to increased costs and delays in introducing new genetic
tests.

The FDA has
regulatory responsibility over instruments, test kits, reagents and other
devices used to perform diagnostic testing by clinical laboratories. In the
past, the FDA has claimed regulatory authority over laboratory-developed tests,
but has exercised enforcement discretion in not regulating tests performed by
high complexity CLIA-certified laboratories. In December 2000, the HHS
Secretarys Advisory Committee on Genetic Testing recommended that the FDA be
the lead federal agency to regulate genetic testing. In late 2002, a new HHS
Secretarys Advisory Committee on Genetics, Health and Society, or SACGHS, was
appointed to replace the prior Advisory Committee. Ultimately, SACGHS decided that
it would continue to monitor the progress of the federal agencies in the
oversight of genetic technologies, but it did not believe that further action
was warranted. In the meantime, the FDA is considering revising its regulations
on analyte specific reagents, which are used in laboratory-developed tests,
including laboratory-developed genetic testing. FDA interest in or actual
regulation of laboratory-developed tests or increased regulation of the various
medical devices used in laboratory-developed testing could lead to periodic
inquiry letters from the FDA and increased costs and delays in introducing new
tests, including genetic tests.

In the
past, the clinical laboratory industry has received negative publicity. This
publicity has led to increased legislation, regulation, and review of industry
practices. These factors may adversely affect our ability to market our
services, require us to change our services and increase the regulatory burdens
under which we operate, further increasing the costs of doing business and
adversely affecting our operating results. If we experience a significant
disruption in our information technology systems, including our website, or if
we fail to implement new systems and software successfully, our business could
be adversely affected.

30

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We depend
on information systems throughout our Company to control our Life Science
manufacturing, distribution and website and the Clinical Lab processes for:
processing orders, managing inventory, processing shipments to and collecting
cash from our customers, responding to customer inquiries, contributing to our
overall internal control processes, maintaining records of our property, plant
and equipment, and recording and pay amounts due vendors and other creditors.
If we were to experience a prolonged disruption in our information systems that
involve interactions with customers and suppliers, it could result in the loss
of sales and customers and/or increased costs, which could adversely affect our
business.

If
we fail to attract and retain key personnel, including our senior management,
our business could be adversely affected.

Most of our products
and services
are highly technical in nature. In general, only highly qualified and trained
scientists and technician personnel have the necessary skills to develop
proprietary technological products and market our products, support our
research and development programs and provide our Clinical Lab services. In
addition, some of our manufacturing, quality control, safety and compliance,
information technology and e-commerce related positions are highly technical as
well. Further, our sales personnel highly trained and are important to
retaining and growing our businesses. Our success depends in large part upon
our ability to identify, hire, retain and motivate highly skilled
professionals.

We face
intense competition for these professionals from our competitors, customers,
marketing partners and other companies throughout the industries in which we
compete. Since our inception an insignificant number of key employees have left
us. Any failure on our part to hire, train, and retain a sufficient number of
qualified professionals would seriously damage our business.

We depend
heavily on the services of our senior management. We believe that our future
success depends on the continued services of such management. Our business may
be harmed by the loss of a significant number of our senior management in a
short period of time.

The
insurance we purchase to cover our potential business risk may be inadequate.

Although we
believe that our present insurance coverage is sufficient to cover our current
estimated exposures, we cannot assure that we will not incur liabilities in excess
of our policy limits. In addition, although we believe that will be able to
continue to obtain adequate coverage, we cannot assure that we will be able to
do so at acceptable costs.

Risks
relating to our international operations

Foreign
currency exchange rate fluctuations may adversely affect our business.

Since we
operate as a multinational corporation that sells and sources products in many
different countries, changes in exchange rates could in the future, adversely
affect our cash flows and results of operations. Furthermore, reported sales
and purchases made in non-U.S. currencies by our international businesses, when
translated into U.S. dollars for financial reporting purposes, fluctuate due to
exchange rate movement. Due to the number of currencies involved, the
variability of currency exposures and the potential volatility of currency
exchange rates, we cannot predict the effect of exchange rate fluctuations on
future sales and operating results.

We
are subject to economic, political and other risks associated with our
significant international business, which could adversely affect our financial
results.

We
    operate internationally primarily through wholly-owned subsidiaries located
    in North America and Europe. Revenues outside the United States were approximately
    25% of total revenues in fiscal 2008. We expect that sales from international
operations will continue to represent a growing portion of our sales as a
result of the May 2008 acquisition of Biomol. Our sales and earnings could be
adversely affected by a variety of factors resulting from our international
operations, including:

| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | future
 fluctuations in exchange rates,                                                     
| |   |                                                                                             
| |  | complex regulatory
 requirements and changes in those requirements,                         
| |   |                                                                                             
| |  | trade protection
 measures and import or export licensing requirements,                     
| |   |                                                                                             
| |  | multiple
 jurisdictions and differing tax laws, as well as changes in those laws,           
| |   |                                                                                             
| |  | restrictions on
 our ability to repatriate investments and earnings from foreign operations,

31

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| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | changes in the
 political or economic conditions in a country or region, particularly in
 developing or emerging markets,
| |   |                                                                                                                          
| |  | changes in
 shipping costs, and                                                                                          
| |   |                                                                                                                          
| |  | difficulties in
 collecting on accounts receivable.                                                                      

If any of
these risks materialize, we could face substantial increases in costs, the
reduction of profit and the inability to do business.

Risks
Relating to our Common Stock

Our
stock price has been volatile, which could result in substantial losses for
investors.

Our common
stock is quoted on the New York Stock Exchange, and there has been historical
volatility in the market price of our common stock. The trading price of our
common stock has been, and is likely to continue to be, subject to significant
fluctuations due to a variety of factors, including:

| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | fluctuations in
 our quarterly operating and earnings per share results;                                  
| |   |                                                                                                           
| |  | the gain or loss
 of significant contracts;                                                               
| |   |                                                                                                           
| |  | loss of key
 personnel;                                                                                   
| |   |                                                                                                           
| |  | announcements of
 technological innovations or new products by us or our competitors;                     
| |   |                                                                                                           
| |  | delays in the
 development and introduction of new products;                                              
| |   |                                                                                                           
| |  | legislative or
 regulatory changes;                                                                       
| |   |                                                                                                           
| |  | general trends in
 the industries we operate;                                                             
| |   |                                                                                                           
| |  | recommendations
 and/or changes in estimates by equity and market research analysts;                      
| |   |                                                                                                           
| |  | biological or
 medical discoveries;                                                                       
| |   |                                                                                                           
| |  | disputes and/or
 developments concerning intellectual property, including patents and litigation
 matters;
| |   |                                                                                                           
| |  | public concern as
 to the safety of new technologies;                                                     
| |   |                                                                                                           
| |  | sales of common
 stock of existing holders;                                                               
| |   |                                                                                                           
| |  | securities class
 action or other litigation;                                                             
| |   |                                                                                                           
| |  | developments in
 our relationships with current or future customers and suppliers; and                    
| |   |                                                                                                           
| |  | general economic
 conditions, both in the United States and worldwide.                                    

In
addition, the stock market in general has experienced extreme price and volume
fluctuations that have affected the market price of our common stock, as well
as the stock of many companies in our industries. Often, price fluctuations are
unrelated to operating performance of the specific companies whose stock is
affected.

In the
past, following periods of volatility in the market price of a companys stock,
securities class action litigation has occurred against the issuing company. If
we were subject to this type of litigation in the future, we could incur
substantial costs and a diversion of our managements attention and resources,
each of which could have a material adverse effect on our revenue and earnings.
Any adverse determination in this type of litigation could also subject us to
significant liabilities.

Because
we do not intend to pay cash dividends on our common stock, an investor in our
common stock will benefit only if it appreciates in value.

We
currently intend to retain our retained earnings and future earnings, if any,
to finance the expansion of our business and do not expect to pay any cash
dividends on our common stock in the foreseeable future. As a result, the
success of an investment in our common stock will depend entirely upon any
future appreciation. There is no guarantee that our common stock will
appreciate in value or even maintain the price at which investors purchased
their shares.

32

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It
may be difficult for a third party to acquire us, which could inhibit
stockholders from realizing a premium on their stock price.

We are
subject to the New York anti-takeover laws regulating corporate takeovers.
These anti-takeover laws prohibit certain business combinations between a New
York corporation and any interested shareholder (generally, the beneficial
owner of 20% or more of the corporations voting shares) for five years
following the time that the shareholder became an interested shareholder,
unless the corporations board of directors approved the transaction prior to
the interested shareholder becoming interested.

Our
certificate of incorporation, as amended, and by-laws contain provisions that
could have the effect of delaying, deferring or preventing a change in control
of us that stockholders may consider favorable or beneficial. These provisions
could discourage proxy contests and make it more difficult for stockholders to
elect directors and take other corporate actions. These provisions could also
limit the price that investors might be willing to pay in the future for shares
of our common stock. These provisions include:

| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a staggered board
 of directors, so that it would take three successive annual meetings to
 replace all directors; and                                                                                
| |   |                                                                                                                                                                                                       
| |  | advance notice
 requirements for the submission by stockholders of nominations for election
 to the board of directors and for proposing matters that can be acted upon by
 stockholders at a meeting.

Future
sales of shares of our common stock or the issuance of securities senior to our
common stock could adversely affect the trading price of our common stock and
our ability to raise funds in new equity offerings.

We are not
restricted from issuing additional common stock, preferred stock or securities
convertible into or exchangeable for common stock. Future sales of a
substantial number of our shares of common stock or equity-related securities
in the public market or privately, or the perception that such sales could
occur, could adversely affect prevailing trading prices of our common stock,
and could impair our ability to raise capital through future offerings of
equity or equity-related securities. No prediction can be made as to the effect,
if any, that future sales of shares of common stock or the availability of
shares of common stock for future sale will have on the trading price of our
common stock.

Item 1B. Unresolved Staff
Comments

None

Item 2.
Properties

The
following are the principal facilities of the Company:

|                                  |  |                                                                   |  |                              |  |              |  |                |    
|--------------------------------- |  | ----------------------------------------------------------------- |  | ---------------------------- |  | ------------ |  | -------------- | ---
|Location                          |  | Primary use                                                       |  | Segments                     |  | Leased/owned |  | Square footage
|                                  |  |                                                                   |  |                              |  |              |  |               
|Farmingdale, NY                   |  | Clinical
 laboratory and research (Note 1 below)                  |  | Clinical Labs,
 Therapeutics |  | Leased       |  | 43,            | 000
|Farmingdale, NY                   |  | Manufacturing,
 research, Sales and administrative offices        |  | Life Sciences,
 Other        |  | Owned        |  | 22,            | 000
|New York, NY                      |  | Corporate
 headquarters                                           |  | Other                        |  | Leased       |  | 6,             | 400
|San Diego, CA
 (Note 2)           |  | Sales,
 administration, and distribution                          |  | Life Sciences                |  | Leased       |  | 8,             | 800
|Lausen,
 Switzerland              |  | Operational
 headquarters in                                      |  | Life Sciences                |  | Leased       |  | 15,            | 400
|(Note 2)                          |  | Europe, including
 sales, warehouse and distribution              |  |                              |  |              |  |                |    
|Epalinges,
 Switzerland
 (Note 2) |  | Manufacturing and
 research and development                       |  | Life Sciences                |  | Leased       |  | 2,             | 100
|Plymouth Meeting,
 Pa.
 (Note 3)  |  | Sales,
 manufacturing, research, administration, and distribution |  | Life Sciences                |  | Leased       |  | 19,            | 500
|Exeter, United
 Kingdom (Note 3)  |  | Sales,
 manufacturing, research, administration, and distribution |  | Life Sciences                |  | Leased       |  | 3,             | 642

| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Note 1 - In
March 2005, the Company amended and extended the lease for its Farmingdale
laboratory for a period of 12 years.
| |                                                                                                                            
| | Note 2 
The leases for these properties were acquired in connection with the Axxora acquisition in May
2007.              
| |                                                                                                                            
| | Note
      3 
The leases for these properties were acquired in connection with the Biomol acquisition
in May 2008.        

33

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We believe
the current facilities are suitable and adequate for the Companys current
operating needs for its clinical laboratories, life science and therapeutics
segments, and that the production capacity in various locations is sufficient
to manage product requirements

Item 3. Legal
Proceedings

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. The defendants have answered the
individual complaints and asserted a variety of affirmative defenses and
counterclaims. Fact discovery is ongoing. The court issued a claim construction
opinion on July 10, 2006. The Company and Sigma Aldrich (Sigma) entered into
a Settlement Agreement and Release effective September 15, 2006 (the
Agreement). Pursuant to the Agreement, the Companys litigation with Sigma
was dismissed and the Company recognized $2 million on settlement in the
quarter ending October 31, 2006 (See Note 13). On January 3, 2007, the remaining
defendants moved for summary judgment on all counts in the individual
complaints. During a two-day hearing held on July 17 through July 18, 2007, the
defendants subsequently withdrew the invalidity portion of their summary
judgment motions. The court has yet to rule on the pending summary judgment
motions. There can be no assurance that the Company will be successful with the
remaining outstanding 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. The Company has not recorded revenue
under these distribution agreements in fiscal 2008, 2007 and 2006. The Company
recorded other income from Perkin Elmer in fiscal 2007 (See Note 13).

On October
28, 2003, the Company and Enzo Life Sciences, Inc., filed suit in the United
States District Court of the Eastern District of New York against Affymetrix,
Inc (Affymetrix). 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 Affymetrix 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. Initial pleadings
have been completed and discovery has commenced. The Court issued a Markman
(claim construction) opinion on July 10, 2006. The Company did not record any
revenue from Affymetrix during the fiscal years ended July 31, 2008, 2007 or
2006.

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.

34

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The
Complaint seeks declaratory judgment (i) of patent invalidity with respect to
Enzos 4,994,373 patent (the 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. Enzo filed an Answer and Counterclaims on November
3, 2004 alleging multiple breaches of the 1994 Agreement and related
infringement of Enzos 373 patent. Discovery has commenced. The Court issued a
Markman opinion on July 10, 2006. The Company did not record any revenue from
Roche during the fiscal years ended July 31, 2008, 2007 or 2006. The Roche
agreement remains in force to date.

On June 7,
2004, the Company and 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, labeled nucleotide products,
and other technology). Yale University is the owner of four of the patents and
the Company is the exclusive licensee. These four patents are commonly referred
to as the Ward patents. 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
willful infringement). Defendants answered the complaint on July 29, 2004. The
answer pleads affirmative defenses of invalidity, estoppels and laches and
asserts counterclaims of non-infringement and invalidity. A Markman hearing was
held on May 25, 2006 and the district court issued a ruling on October 12,
2006. On August 17, 2007, the Company voluntarily dismissed the infringement
claims for one of the patents in suit without prejudice. Defendants similarly
dismissed their defenses and counterclaims as to that patent. On the same date,
the Company conceded a judgment of non-infringement for another of the patents
in suit based on the district courts claim construction, reserving the right
to appeal their construction. The defendants filed motions for summary judgment
for invalidity, laches and non-infringement of the Ward patents on March 5,
2007. The Company and other plaintiff filed a motion for summary judgement on
infringement of the Ward patents on March 5, 2007. On August 20, 2007, the
district court heard oral arguments on the motions for summary judgement. On
September 6, 2007, the court granted defendants motion for summary judgement
of invalidity of three of the remaining Ward patents and entered judgement to
that effect. The Company and other plaintiff filed a notice of appeal to the
United States Court of Appeals for the Federal Circuit on September 7, 2007. On
January 30, 2008, the Court of Appeals for the Federal Circuit granted the
Companys alternative motion to dismiss its appeal and remand to the
Connecticut Court for further proceedings incident to an entry of a final,
appealable judgment. The Company has requested the Connecticut Court to dispose
of all outstanding issues (including the Companys claim under the fourth Ward
patent and certain counterclaims of Appleras) and enter final judgment. Once
the Connecticut Court does this, the Company intends to appeal that judgment.
The Company and other plaintiff intend to vigorously pursue this appeal; however,
the outcome of the appeal cannot be anticipated at this time. If the appeal is
granted, 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.

In
    January 2006, the Company was named along with certain of its officers and
    directors among others, in several complaints titled Francis Scott Hunt,
    et al. v. Enzo Biochem Inc., et al., Index No. 06-CV-00170 (SAS) and Ken
    Roberts v. Enzo Biochem, Inc. et al., Index No. 06-CV-00213 (SAS), and Paul
    Lewicki v. Enzo Biochem Inc., et al., Index No. 06-CV-06347 (SAS) based only
    upon a claim for common law fraud. These three consolidated actions were
    all filed in the United States District Court for the Southern District of
    New York. In their amended complaints, plaintiffs collectively seek more
    than $8.0 million in damages. Limited discovery has occurred to date.
    The actions are all based on allegations of a fraudulent scheme to pump and
    dump Enzo securities as was initially set forth in a previous action (filed
    by the same attorney) which was dismissed by the Eastern District of Virginia
    and such dismissal was affirmed by the Fourth Circuit Court of Appeals and
    is now final since the U.S. Supreme Court denied a petition for certiorari.
    The Company and the other defendants likewise moved to dismiss all of the
    Complaints in these actions and that motion was granted by U.S. District
    Court. As a result, some of the Plaintiffs were no longer able to pursue
    their claims or choose not to pursue them further. Other Plaintiffs amended
    their Complaints and the Company and the other defendants moved again to
    dismiss those Amended Complaints. The Court recently granted in part and
    denied in part those motions. As a result of the Courts latest decision,
however, certain of the defendants, including Enzo Biochem, Inc. are proceeding
with discovery. The Company believes that the latest Complaints in these actions
have no merit, and intends to move for summary judgment and otherwise to defend
these actions vigorously.

35

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The Company
is party to other claims, legal actions and complaints that arise in the
ordinary course of business. The Company believes that any liability that may
ultimately result from the resolution of these matters will not, individually
or in the aggregate, have a material adverse effect on its financial position
or results of operations.

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, 2008.

PART II

Item 5. Market for
Registrants Common Equity,  Related
Stockholder Matters and Issuer Purchases of Equity Securities

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.

|                                                     |  |      |       |     |   |       | 
|---------------------------------------------------- |  | ---- | ----- | --- | - | ----- | 
|2007 Fiscal Year (August 1, 2006 to July 31, 2007):  |  |      |       |     |   |       | 
|                                                     |  |      |       |     |   |       | 
|                                                     |  | High |       | Low |  
|                                                     |  |      |       |     |  
|1st Quarter                                          |  | $    | 14.68 |     | $ | 11.14 | 
|2nd Quarter                                          |  | $    | 16.00 |     | $ | 13.55 | 
|3rd Quarter                                          |  | $    | 17.44 |     | $ | 13.76 | 
|4th Quarter                                          |  | $    | 17.31 |     | $ | 12.44 | 
|                                                     |  |      |       |     |   |       | 
|2008 Fiscal Year
 (August 1, 2007 to July 31, 2008): |  |      |       |     |   |       | 
|                                                     |  |      |       |     |   |       | 
|                                                     |  | High |       | Low |  
|                                                     |  |      |       |     |  
|1st Quarter                                          |  | $    | 18.65 |     | $ | 11.34 | 
|2nd Quarter                                          |  | $    | 14.23 |     | $ | 9.36  | 
|3rd Quarter                                          |  | $    | 10.16 |     | $ | 7.74  | 
|4th Quarter                                          |  | $    | 14.21 |     | $ | 8.71  | 

As
    of September 26, 2008, the Company had approximately 1,028 stockholders of
record of its common stock.

The
    Company has not paid a cash dividend on its common stock and intends to continue
    a policy of retaining earnings to finance and build its operations. Accordingly,
the Company does not anticipate the payment of cash dividends to holders of
common stock in the foreseeable future.

Securities
Authorized for Issuance Under Equity Compensation Plans

The
following table sets forth information regarding our existing equity compensation plans
as of July 31, 2008.

|Plan
              Category                                                                                |  | Number
            of securities
      to be issued upon
      exercise of
      outstanding options,warrants and rights
      (a) |  | Weighted-average
      exercise price of
      outstanding options,warrants and rights
      (b) |  | Number
            of securities
      remaining available
      for future issuances
      under equity
      compensation plans
      (excluding securities
      reflected in column(a))
      (c)
|---------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                           |  |                                                                                                                                    |  |                                                                                                  |  |                                                                                                                                                                                                      
|Equity
          compensation
                plans approved
      by
                security holders     |  | 2,495,656                                                                                                                          |  | $13.06                                                                                           |  | 588,000                                                                                                                                                                                              
|Equity
          compensation
                plans not approved
      by
                security holders |  |                                                                                                                                   |  |                                                                                                 |  |                                                                                                                                                                                                     
|Total                                                                                                      |  | 2,495,656                                                                                                                          |  | $13.06                                                                                           |  | 588,000                                                                                                                                                                                              
|                                                                                                           |  |                                                                                                                                    |  |                                                                                                  |  |                                                                                                                                                                                                      



36

---



Item 6. Selected Financial
Data

The
following table, which is derived from the audited consolidated financial
statements of the Company for the fiscal years 2004 through 2008 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.

|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|------------------------------------------------ |  | ----------------------------------------------------------------------------- | ------- | ---- | - | ------- | - | ---- | ------- | ---- | - | ------ | - | - | ------- | -
|                                                 |  | For
 the fiscal year ended July 31,
 (In thousands, except per share amounts) |        
|                                                 |  |                                                                               |        
|Operating Results (1)                            |  | 2008                                                                          |         | 2007 |   | 2006    |   | 2005 |         | 2004 |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |  
|Operating revenues                               |  | $                                                                             | 77,795  |      | $ | 52,908  |   | $    | 39,826  |      | $ | 43,403 |   | $ | 41,644  |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Other income                                     |  |                                                                               | 198     |      |   | 2,699   |   |      |        |      |   | 14,000 |   |   |        |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Interest income                                  |  |                                                                               | 3,696   |      |   | 5,092   |   |      | 3,144   |      |   | 1,523  |   |   | 1,152   |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|(Loss) income before income taxes                |  |                                                                               | (10,892 | )    |   | (13,175 | ) |      | (17,009 | )    |   | 5,217  |   |   | (11,080 | )
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Benefit (Provision) for income taxes             |  |                                                                               | 239     |      |   | (85     | ) |      | 1,342   |      |   | (2,213 | ) |   | 4,848   |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Net loss                                         |  | $                                                                             | (10,653 | )    |   | (13,260 | ) | $    | (15,667 | )    | $ | 3,004  |   | $ | (6,232  | )
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Basic net (loss)
 income per common share: (2)   |  | $                                                                             | (0.29   | )    | $ | (0.38   | ) | $    | (0.49   | )    | $ | 0.09   |   | $ | (0.20   | )
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Diluted net (loss)
 income per common share: (2) |  | $                                                                             | (0.29   | )    | $ | (0.38   | ) | $    | (0.49   | )    | $ | 0.09   |   | $ | (0.20   | )
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Weighted average common shares                   |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Basic                                            |  |                                                                               | 36,883  |      |   | 35,017  |   |      | 32,215  |      |   | 32,097 |   |   | 31,700  |  
|                                                 |  |                                                                               |         |      |   |         |   |      |         |      |   |        |   |   |         |  
|Diluted                                          |  |                                                                               | 36,883  |      |   | 35,017  |   |      | 32,215  |      |   | 32,763 |   |   | 31,700  |  

|                      |  |                           |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|--------------------- |  | ------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                      |  | July
 31,
 (in thousands) |        
|                      |  |                           |        
|Financial Position:   |  | 2008                      |         | 2007 |   | 2006    |  | 2005 |         | 2004 |  
|                      |  |                           |         |      |   |         |  |      |         |      |  
|                      |  |                           |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Working capital       |  | $                         | 92,392  |      | $ | 113,850 |  | $    | 80,161  |      | $ | 96,280  |  | $ | 92,259  | 
|                      |  |                           |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Total assets          |  |                           | 154,522 |      |   | 159,002 |  |      | 101,524 |      |   | 116,466 |  |   | 110,334 | 
|                      |  |                           |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Long term obligations |  |                           |        |      |   |        |  |      |        |      |   | 150     |  |   | 300     | 
|                      |  |                           |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Stockholders equity  |  |                           | 138,289 |      |   | 141,894 |  |      | 95,587  |      |   | 108,267 |  |   | 104,166 | 

Notes to Selected Financial Data

|    |                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 2 in the
 notes to consolidated financial statements regarding the acquisitions in
 Fiscal 2008 and 2007.                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                  
|(2) | Effective August
 1, 2005, the Company adopted the fair value recognition provisions of SFAS
 No. 123(R) using the modified prospective application method. The impact of
 the adoption, increased basic and diluted net loss per common share by $0.01,
 $0.02 and $0.05 for the fiscal years ended July 31, 2008, 2007 and 2006,
 respectively.

37

---



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.

The Company
is a life sciences and biotechnology company focused on harnessing genetic
processes to develop research tools and therapeutics and the provision of
diagnostic services to the medical community. Since its founding in 1976,
Enzos strategic focus has been on the development, for commercial purposes, of
enabling technologies in the life sciences field. Enzos pioneering work in
genomic analysis coupled with its extensive patent estate and enabling
platforms have strategically positioned Enzo to play a crucially important role
in the rapidly growing life sciences and molecular medicine marketplaces

We are
comprised of three operating companies that have evolved out of our core
competence: the use of nucleic acids as informational molecules and the use of
compounds for immune modulation. These wholly owned operating companies conduct
their operations through three reportable segments. Below are brief descriptions
of each of the three operating segments (see Note 17 in the notes to
consolidated financial statements):

Enzo Life Sciences is a company
that
manufactures, develops and markets biomedical research products and tools to
research and pharmaceutical customers around the world and has amassed a large
patent and technology portfolio. The companys sources of revenue have been
from the direct sales of products consisting of labeling and detection reagents
for the genomics and sequencing markets, as well as through non-exclusive
distribution agreements with other companies, and royalty and licensing fee
income. The pioneering platforms developed by Enzo Life Sciences enable the
development of a wide range of products in the research products marketplace.
The division is internationally recognized and acknowledged for its
manufacturing, in-licensing, and commercialization of over 8,000 innovative
high quality research reagents in key research areas. The division is an
established source for a comprehensive panel of products to scientific experts
in the fields of gene expression, non-radioactive labeling and detection,
adipokines and obesity, apoptosis, bioactive lipids, cell cycle, cytoskeletal
research, DNA damage and repair, epigenetic immunology and cancer research,
inflammation, neurobiology, nitric oxide & oxidative stress, and signal
transduction.

Enzo
Therapeuticsis a biopharmaceutical company that has developed
multiple novel approaches in the areas of gastrointestinal, infectious, ophthalmic
and metabolic diseases, many of which are derived from the pioneering work of
Enzo Life Sciences. The Company has focused its efforts on developing treatment
regimens for diseases and conditions in which current treatment options are
ineffective, costly, and/or cause unwanted side effects. This focus has
generated a clinical and preclinical pipeline, as well as more than 40 patents
and patent applications.

Enzo
Clinical Labsis a regional clinical laboratory to the greater New
York and New Jersey medical community. The Company believes having this
capability allows us to capitalize firsthand on our extensive advanced
molecular and cytogenetic capabilities and the broader trends in predictive
diagnostics. We offer a menu of routine and esoteric clinical laboratory tests
or procedures used in general patient care by physicians to establish or
support a diagnosis, monitor treatment or medication, or search for an
otherwise undiagnosed condition. We operate a full-service clinical laboratory in
Farmingdale, New York, a network of 23 patient service centers, a stand alone
stat or rapid response laboratory in New York City, and a full-service
phlebotomy department. Payments for clinical laboratory testing services are
made by the Medicare program, healthcare insurers and patients. Fees billed to
patients, Medicare, and third party payers are billed on the laboratorys
standard gross fee schedule, subject to any limitations on fees negotiated with
the third party payers or with the ordering physicians on behalf of their
patients.

38

---



The
following table summarizes the sources of revenues for the fiscal years ended
July 31, 2008, 2007 and 2006, (in $000s and percentages):

| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     | 
| | ----------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | 
| | Fiscal year ended July 31,    |  | 2008 |        | 2007 |  | 2006 |  
| |                               |  |      |        |      |  |      |  
| | Product revenues              |  | $    | 28,087 |      |  | 36   | % | $ | 6,658  |  |  | 13  | % | $ | 4,750  |  |  | 12  | 
| | Royalty and
 license fees     |  |      | 7,630  |      |  | 10   |   |   | 5,820  |  |  | 11  |   |   | 3,150  |  |  | 8   | 
| | Clinical
 laboratory services |  |      | 42,078 |      |  | 54   |   |   | 40,430 |  |  | 76  |   |   | 31,926 |  |  | 80  | 
| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     | 
| | Total                         |  | $    | 77,795 |      |  | 100  | % | $ | 52,908 |  |  | 100 | % | $ | 39,826 |  |  | 100 | 
| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     | 

The Company
incurs additional costs as a result of our participation in the Medicare
programs, as billing and reimbursement for clinical laboratory testing is
subject to considerable and complex federal regulations. Compliance with
applicable laws and regulations, as well as internal compliance policies and
procedures, adds further complexity and costs to our operations. Government
payers such as Medicare, as well as healthcare insurers have taken steps and
may continue to take steps to control the costs, utilizations and delivery of
healthcare services, including clinical laboratory services. Principally as a
result of reimbursement reductions and measures adopted by the Centers for
Medicare & Medicaid Services, or CMS, which establishes procedures and
continuously evaluates and implements changes in the reimbursement process to
control utilization. Despite the added cost and complexity of participating in
the Medicare program, we continue to participate because we believe that our
other business may depend, in part, on continued participation in Medicare
since we believe certain ordering physicians may want a single laboratory
capable of performing their entire clinical laboratory testing services,
regardless of who pays for such services.

Information
systems are used extensively in virtually all aspects of the clinical
laboratory operations, including 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 systems. Through
maintenance, staffing, and investments in our information technology system, we
expect to limit the risk associated with our heavy reliance on these systems.

The
clinical laboratory is subject to seasonal fluctuations in operating results
and cash flows. Typically, testing volume declines during the summer months,
year end holiday periods and other major holidays, reducing net revenues and
operating cash flows. Testing volume is also subject to declines in winter
months due to inclement weather, which varies in severity from year to year.

Recent
Developments

Biomol International
L.P.

On May 8,
2008, Enzo Life Sciences, Inc. acquired substantially all of the U.S. based
assets and certain liabilities of Biomol International, LP (Biomol LP)
through a newly formed US subsidiary Biomol International, Inc. and all of the
stock of Biomols wholly-owned United Kingdom subsidiary, Affinity Limited by
Axxora UK, a wholly-owned subsidiary of Enzo Life Sciences, collectively
referred to as Biomol for approximately $18.1 million in cash and stock,
subject to adjustment, exclusive of acquisition costs of approximately $800,000
and contingent payments which will be accounted for as additional purchase
consideration over the next two years if and when the contingencies are
resolved beyond a reasonable doubt. At closing, the purchase price was
satisfied as follows: $12.9 million in cash was paid to Biomol LP, issuance of
352,000 shares of Enzo common stock, at fair market value, to Biomol LP, $1.5
million in cash was paid to an escrow agent for the one-year period following the
closing to satisfy any indemnification obligations of the sellers under the
Agreement and $550,000 was paid to an escrow agent, for the 60 day period
following the closing to satisfy any specified purchase price adjustments. The
$550,000 was released by the escrow agent in August 2008. The earn-outs of $2.5
million on each of the next two anniversaries of the acquisition date will be
based on attaining certain revenue targets and EBITDA, as defined. Biomol was a
privately owned, closely held global manufacturer and marketer of specialty
life sciences research products. Effective May 8, 2008, Biomol became a
wholly-owned subsidiary of Enzo Life Sciences. The acquisition was financed
with the Companys cash and cash equivalents and Enzo common stock. The consolidated
financial statements presented herein include the results of operations for
Biomol from the date of acquisition.

39

---



Results
of Operations

Comparative Financial Data for the Fiscal
Years Ended July 31,(in 000s)

|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | -------------------- | - | --------- | - | ---- | - | -------------------- | - | --------- | - | ---- | ------ | - | --- |  |  | - | ------- | -
|                                                 |  | 2008 |         | Increase
 (Decrease) |   | %
 Change |   | 2007 |   | Increase
 (Decrease) |   | %
 Change |   | 2006 |       
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |       
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Revenues:                                        |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Product revenues                                 |  | $    | 28,087  |                      | $ | 21,429    |   | 322  |   |                      | $ | 6,658     |   | $    | 1,908  |   | 40  |  |  | $ | 4,750   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Royalty and license fee income                   |  |      | 7,630   |                      |   | 1,810     |   | 31   |   |                      |   | 5,820     |   |      | 2,670  |   | 85  |  |  |   | 3,150   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Clinical laboratory services                     |  |      | 42,078  |                      |   | 1,648     |   | 4    |   |                      |   | 40,430    |   |      | 8,504  |   | 27  |  |  |   | 31,926  |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Total revenue                                    |  |      | 77,795  |                      |   | 24,887    |   | 47   |   |                      |   | 52,908    |   |      | 13,082 |   | 33  |  |  |   | 39,826  |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Costs and expenses and other (income):           |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Cost of product revenues                         |  |      | 19,159  |                      |   | 14,125    |   | 281  |   |                      |   | 5,034     |   |      | 2,634  |   | 110 |  |  |   | 2,400   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Cost of laboratory services                      |  |      | 21,063  |                      |   | 2,864     |   | 16   |   |                      |   | 18,199    |   |      | 4,282  |   | 31  |  |  |   | 13,917  |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Research and development                         |  |      | 8,637   |                      |   | (756      | ) | (8   | ) |                      |   | 9,393     |   |      | 1,497  |   | 19  |  |  |   | 7,896   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Selling, general and administrative              |  |      | 34,418  |                      |   | 8,118     |   | 31   |   |                      |   | 26,300    |   |      | 1,555  |   | 6   |  |  |   | 24,745  |  
|Provision for uncollectible accounts receivables |  |      | 3,716   |                      |   | (937      | ) | (20  | ) |                      |   | 4,653     |   |      | 1,020  |   | 28  |  |  |   | 3,633   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Legal expenses                                   |  |      | 5,588   |                      |   | (4,707    | ) | (46  | ) |                      |   | 10,295    |   |      | 2,907  |   | 39  |  |  |   | 7,388   |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Interest income                                  |  |      | (3,696  | )                    |   | 1,396     |   | 27   |   |                      |   | (5,092    | ) |      | (1,948 | ) | 62  |  |  |   | (3,144  | )
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Other income                                     |  |      | (198    | )                    |   | 2,501     |   | 93   |   |                      |   | (2,699    | ) |      | (2,699 | ) |    |  |  |   |        |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|Total costs and expenses                         |  |      | 88,687  |                      |   | 22,604    |   | 34   |   |                      |   | 66,083    |   |      | 9,248  |   | 16  |  |  |   | 56,835  |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  
|(Loss) before income taxes                       |  | $    | (10,892 | )                    | $ | 2,283     |   |      |   |                      | $ | (13,175   | ) | $    | 3,834  |   |     |  |  | $ | (17,009 | )
|                                                 |  |      |         |                      |   |           |   |      |   |                      |   |           |   |      |        |   |     |  |  |   |         |  

Fiscal
2008 Compared to Fiscal 2007

Consolidated
Results

The 2008 period and the 2007 period refer to the fiscal years ended
July 31, 2008 and 2007, respectively. The 2008 period includes the full year
results of Axxora which was acquired on May 31, 2007 and the results of Biomol
from the May 8, 2008, date of acquisition, to July 31, 2008.

Product revenues during the 2008 period were $28.1 million compared to
$6.7 million in the year ago period, an increase of $21.4 million or 322%. The
2008 period increase is primarily due to the contribution of product revenues
from the Axxora and Biomol acquisitions.

Royalty and license fee income during the 2008 period was $7.6 million
compared to $5.8 million in the 2007 period, an increase of $1.8 million or
31%. Royalties are earned from the reported net sales of Qiagen products
subject to a license and from a License Agreement with Abbott which was entered
into in the third quarter of fiscal 2007. During the 2008 period, the Company
recognized royalties of approximately $5.5 million from Qiagen, an increase of
approximately $0.7 million over the prior year ago period, and royalties and
license fees under the Abbott License Agreement of approximately $2.1 million,
an increase of approximately $1.1 million over the year ago period. There are
no expenses relating to royalty and license fee income.

40

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Clinical laboratory revenues during the 2008 period were $42.1 million
compared to $40.4 million in the 2007 period, an increase of $1.7 million or
4%. The Company experienced an increase in service revenues during the 2008
period primarily due to an expansion of an insurance provider agreement with
United Healthcare which occurred in January 2007, which was partially offset by
an increase in the contractual adjustment, which reduced gross billings by
81.8% as compared to 79.0% in the 2007 period. The increase in the contractual
adjustment is due to continued competitive pricing throughout the industry
which has negatively impacted reimbursement rates for tests and an increase in
revenue mix from lower paying insurance providers.

The cost of product revenues during the 2008 period was $19.1 million
compared to $5.0 million in the 2007 period, an increase of $14.1 million. The
increase is primarily due to the full year impact of Axxoras and the partial
period of Biomols cost of product revenues of approximately $13.0 million and
$1.6 million, respectively for the 2008 period, which includes the impact of an
inventory fair value adjustment of $2.0 million related to sales of inventory
acquired from Axxora and Biomol offset by decreases at Enzo Life Sciences - New
York.

The cost of clinical laboratory services during the 2008 period was
$21.1 million as compared to $18.2 million in the prior period, an increase of
$2.9 million or 16%. Due to the increased volume of patients serviced and tests
performed, the Company incurred increased costs primarily relating to reagent
costs of $1.4 million, laboratory personnel costs of $1.1 million, outside
reference lab costs of $0.1 million, and other related laboratory costs of $0.2
million.

Research and development expenses were approximately $8.6 million
during the 2008 period, compared to $9.4 million in the 2007 period, a decrease
of $0.8 million or 8%. The decrease was due to a decrease of $0.9 million
relating to the timing of clinical trial and related activities at the
Therapeutics segment, a decrease of $0.3 million in research supplies and
related costs at Enzo Life Sciences - New York, offset by the increase in
research and development incurred by Axxora and Biomol of $0.4 million.

Selling, general and administrative expenses were approximately $34.4
million during the 2008 period as compared to $26.3 million in the 2007 period,
an increase of $8.1 million or 31%. Included in the 2008 period is
approximately $6.8 million of selling, general and administrative expenses
increases related to the full year of Axxora and Biomol expenses from the date
of acquisition. The increase in the other Companies operations of
approximately $1.5 million was primarily due to payroll and payroll related
costs of $1.8 million and professional fees of $0.3 million offset by a
decrease in information technology costs of $0.3 million and a decrease in
insurance costs of $0.3 million.

The provision for uncollectible accounts receivable, primarily relating
to the clinical laboratory segment was $3.7 million for the 2008 period as
compared to $4.6 million in the 2007 period, the decrease of $0.9 million or
20% was due to improved billing and collections procedures.

Legal expense was $5.6 million during the 2008 period compared to $10.3
million in the 2007 period, a decrease of $4.7 million or 46%, due to a
decrease in patent litigation activity in the current period.

Interest income was $3.7 million during the 2008 period as compared to
$5.1 million during the 2007 period. The Company earns interest by investing
primarily in short term and liquid investments, including money market
accounts, commercial paper and US government instruments. The Company had
higher average invested balances during the 2007 period due to the net proceeds
from registered direct offerings of common stock in December 2006 and February
2007 offset by uses of cash for operations and the acquisition of Axxora in May
2007. The 2008 periods invested cash was reduced by the use of $15.0 million
of cash to purchase Biomol in May 2008 and by the use of cash to fund
operations. Further, interest income decreased during the 2008 period because
the rates declined in response
to monetary policy actions taken by the U.S. Federal Reserve.

The Company earned other income of $0.2 million during the 2008 period
versus $2.7 million in the 2007 period. During the 2007 period, the Company
recognized a $2.0 million gain on a patent litigation settlement and a $0.7
million payment from a former distributor under an expired distribution
agreement which is presently subject to a lawsuit in which the Company is
plaintiff.

The Companys effective tax rate (benefit) provision
    for the 2008 period was 2.2%, compared to (1.0%) during the 2007 period.
    The tax benefit for the 2008 period was based on state and local taxes, book
    to tax differences for inventory acquired from Axxora, and taxes and interest
    incurred from a local tax audit and differed from the expected net operating
    loss carry forward benefit at the U.S. federal statutory rate of 34% primarily
    due to the inability to recognize such benefit. The carry forward benefit
    cannot be recognized because of uncertainties relating to future taxable
    income, in terms of both its timing and its sufficiency.

41

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The tax provision for the 2007 period was based on state and local
taxes, and differed from the expected net operating loss benefit at the U.S.
federal statutory rate of 34% primarily due the inability to recognize such
benefit. The carry forward benefit cannot be recognized because of
uncertainties relating to future taxable income, in terms of both its timing
and its sufficiency, which would enable the Company to realize the federal
carry forward benefit.

Segment Results

The Life Sciences segments income before taxes was approximately $3.4
million for the 2008 period as compared to $4.0 million in the 2007 period. The
decrease is partially due to the recognition in the 2007 period of the
Companys $2.0 million patent litigation settlement with Sigma Aldrich and a
$0.7 million payment from a former distributor under an expired distribution
agreement which is presently subject to a lawsuit in which the Company is
plaintiff. Product revenues increased by $21.4 million in the 2008 period due
to the contribution of products revenues from Axxora for the full year in 2008
as compared to the two months in 2007 and the Biomol acquisition from the date
of acquisition. Royalty and license fee income increased $1.8 million from the
existing Qiagen agreement and the Abbott License Agreement entered into in the
third quarter of fiscal 2007. The segments gross margin of $16.6 million was
negatively impacted by $2.0 million representing the fair value adjustment
attributed to the sale of inventory acquired from Axxora and Biomol. The
remaining fair value adjustment attributed to inventory acquired from Biomol of
$1.4 million will negatively impact gross margins through May 2009.

Segment operating expenses, including selling, general and
administrative and research and development, increased by approximately $7.1
million during the 2008 period primarily due to the inclusion of Axxoras and
Biomols expenses.

The Clinical Laboratory segments income before
    taxes was $2.0 million for the 2008 period as compared to $3.3 million in
    the 2007 period. The 2008 period was positively impacted by an increase in
    laboratory service revenues of $1.6 million or 4%, due to the expansion of
    an insurance provider agreement effective January 2007. The gross profit
    was negatively impacted by an increase in the cost of laboratory services
    of $2.9 million as compared to the 2007 period. In the 2008 period the selling,
    general and administrative costs increased by approximately $1.1 million
    due primarily due to increases in sales commissions of $0.3 million and payroll
    and payroll related costs of $0.7 million, attributable to the increase in
    service revenues. The provision for uncollectible accounts receivables decreased
    by $1.0 million due to improved billing and collection procedures. The segment
    also earned interest in the 2008 period of $0.2 million on its cash generated
    by operations.

The Therapeutics segments loss before income taxes was approximately
$5.0 million for the 2008 period as compared to a loss of $6.0 million for the
2007 period. The decrease in the loss of $1.0 million was primarily due to
decreases in clinical trial activities, consulting, payroll and payroll related
costs of $0.9 million, and the recognition of $0.1 million from a government
grant, included in other income in the consolidated financial statements.

The Other segments loss before taxes for the 2008 period was
approximately $11.3 a decrease of $3.1 million as compared to $14.4 in the 2007
period. The Other segments 2008 period loss reflects a decrease in legal
expenses of $4.9 million due to a decrease in patent litigation activity in the
current period compared to the 2007 period, partially offset by an increase in
general and administrative expenses of $0.2 million, and a decrease in interest
income of $1.5 million due to lower levels of cash available for investment and
declining interest rates.

Fiscal
2007 Compared to Fiscal 2006

Consolidated
Results

Enzo Life
Sciences product revenues during fiscal 2007 were $6.7 million compared to $4.8
million in the year ago period, an increase of $1.9 million or 40%. The
increase is due to the inclusion of Axxora product sales of $3.3 million for
the two months ended July 31, 2007 partially offset by a decline of $1.4
million in the year over year sales of Enzo Life Sciences New York (New York)
products due to a decline in unit shipments and the continuing competitiveness
in the industry.

Royalty and
license fee income during fiscal 2007 was $5.8 million compared to $3.2 million
in the year ago period, an increase of $2.6 million or 85%. Royalties are
earned from net sales of Qiagen products subject to a license and from a
License Agreement with Abbott which was entered into in the fiscal 2007 third
quarter. During fiscal 2007, the Company recognized approximately $0.9 million
in royalties under the license agreement and approximately $0.1 million of the
$1.5 million upfront payment received from the Abbott License Agreement. There
are no expenses relating to royalty and license fee income.

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Clinical
laboratory revenues during fiscal 2007 were $40.4 million compared to $31.9
million in the 2006 period, an increase of $8.5 million or 27%. The Company
experienced an increase in service revenues during the 2007 period primarily
due to an expansion of an insurance provider agreement with United Healthcare
of New York, Inc., which was partially offset by an increase in the contractual
adjustment, which reduces gross billings by 79.0% as compared to 75.2% in the
prior period. The increase in the contractual adjustment is due to continued
competitive pricing from primary third party payers throughout the industry
which has unfavorably impacted reimbursement rates.

The cost of
products during the fiscal year ended July 31, 2007 was $5.0 million compared
to $2.4 million in the 2006 period, an increase of $2.6 million. The increase
is primarily due to the inclusion of Axxoras operations for the two months
ended July 31, 2007 including the negative impact of an inventory fair value
adjustment of $0.7 million related to the acquisition of the inventory. Gross
profit was also negatively affected during the 2007 period as compared to the
2006 period by the decline in product revenues relating to existing New York
products.

The cost of
clinical laboratory services during the fiscal year ended July 31, 2007 was
$18.2 million as compared to $13.9 million in the prior period, an increase of
$4.3 million or 31%. Due to the increased volume of patients serviced and tests
performed, the Company incurred increased reagent costs of $2.4 million,
laboratory personnel costs of $1.0 million, and outside testing costs of $0.7
million.

Research
and development expenses were approximately $9.4 million during the fiscal year
ended July 31, 2007, compared to $7.9 million in the 2006 period, an increase
of $1.5 million or 19%. The increase was primarily due to increases at the
Therapeutic segment in clinical trial activities of $1.1 million and an
increase in payroll and payroll related costs approximating $0.4 million offset
by a decrease of $0.2 million in research and development supplies.

Selling,
general and administrative expenses were approximately $26.3 million during the
fiscal year ended July 31, 2007 as compared to $24.8 million in the 2006
period, an increase of $1.6 million. Included in the 2007 period is two months
of approximately $1.0 million of selling and general and administrative
expenses related to Axxoras operations. The expense increases for the existing
Company operations were in consulting, payroll and payroll related personnel
costs of $1.1 million and information technology costs of $0.2 million,
partially offset by declines in corporate governance and professional fees of
$0.8 million and travel, advertising and promotion expenses of $0.3 million.

The
provision for uncollectible accounts receivable primarily relating to the
clinical laboratory segment for the fiscal year ended July 31, 2007 was $4.6
million, compared to $3.6 million during the year ago period, an increase of
$1.0 million or 28% and is due to the increase in clinical laboratory revenue
of 27% and the resulting increase in receivables and the composition of
patients being serviced.

Legal
expense was $10.3 million during the fiscal year ended July 31, 2007 compared
to $7.4 million in the year ago period, an increase of $2.9 million or 39%, due
to an increase in ongoing patent litigation.

Other
income was $2.7 million during the fiscal year ended July 31, 2007 versus $0 in
the year ago period. During the 2007 period, the Company as plaintiff and Sigma
Aldrich (Sigma) entered into a Settlement Agreement and Release effective
September 15, 2006 (the Settlement Agreement). Pursuant to the Settlement
Agreement, the Companys litigation with Sigma was dismissed and the Company
recognized a $2 million gain on patent litigation settlement during the fiscal
year ended July 31, 2007. In addition, during the 2007 period, the Company
received a payment of $0.7 million from Perkin Elmer for amounts due under a Distribution
Agreement which terminated December 31, 2004. The Distribution Agreement is
presently subject to a lawsuit for breach of contract, patent infringement,
unfair competition under state law, unfair competition under federal law,
tortuous interference with business relations, and fraud in the inducement of
contract.

Interest
income increased by $2.0 million or 62% to $5.1 million during the fiscal year
ended July 31, 2007 compared to $3.1 million during the 2006 period, due to an
increase in invested cash generated from the proceeds of the issuance of common
stock from the Offerings in December 2006 and February 2007. The net cash
proceeds from the offerings were $57.0 million. See Recent Developments and
Liquidity and Capital Resources. The Company earns interest by investing
primarily in short term (30 to 90 days) commercial paper and money market funds
with high credit ratings.

The tax
provision for the fiscal year ended July 31, 2007 was principally based on
state and local taxes, and because of uncertainties relating to future taxable
income, in terms of both its timing and its sufficiency differed from the
expected net operating loss carryforward benefit at the U.S. federal statutory
rate of 34% primarily due to the inability to recognize such benefit. Due to
the uncertainties, the Company increased its valuation allowance primarily
relating to the federal net operating loss carryforward benefit generated
during fiscal 2007.

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The tax
benefit for the fiscal year ended July 31, 2006 differed from the expected net
operating loss carryforward benefit at the U.S. federal statutory rate of 34%
primarily due to limitations on the timing of the recognition of the Companys
then available federal tax carryback benefit for taxes paid in prior years. The
tax benefit also differed from the expected net operating loss carryforward
benefit due to the inability to recognize such benefit. The carryforward
benefit could not be recognized because of uncertainties relating to future
taxable income, in terms of both its timing and its sufficiency. Also due to
the uncertainties, the Company recorded during the first period of the 2006
period a valuation allowance equal to its net deferred tax assets, including
the federal net operating loss carryforward benefit generated during the first
period of the 2006 period. The Company recorded the valuation allowance as it
concluded that it was not more likely than not that its net deferred tax assets
would be realized in the foreseeable future based on positive and negative
evidence available at the time.

Segment
Results

The Life
Sciences segments income before taxes was approximately $4.0 million for the
fiscal year ended July 31, 2007 as compared to a loss of $0.2 million in the
2006 period. The increase is primarily due to the Companys $2.0 million patent
litigation settlement with Sigma Aldrich, a payment of $0.7 million from Perkin
Elmer for amounts due under a Distribution Agreement which terminated December
31, 2004, and an increase in royalties and license fee income. Revenues from
product shipments increased by $1.9 million due to the inclusion of products
sales of $3.3 million, for the two months, from the acquisition of Axxora,
offset by a decrease of $1.4 million in New York product revenues due to a
decline in unit shipments and the continuing competitiveness in the industry.
Royalty and license income increased $2.7 million from the existing Qiagen
agreement and the Abbott License Agreement entered into in the fiscal 2007
third quarter. The segments gross margin was negatively impacted by $0.7
million representing the fair value adjustment attributed to the sale of
inventory acquired from the Axxora acquisition. Segment operating expenses,
such as selling, general and administrative, increased by approximately $0.7
million during the 2007 period due to the inclusion of $1.0 million of Axxoras
expenses for the two months ended July 31, 2007, offset by lower payroll and
marketing expenses for the existing operations of the segment. The segments
research and development expenses decreased by $0.3 million due lower
expenditures for supplies and patent filing costs.

The
Therapeutics segments loss before income taxes was approximately $6.0 million
for the fiscal year ended July 31, 2007 as compared to a loss of $4.2 million
for the 2006 period. The increase in the loss of $1.8 million was primarily due
to increases in clinical trial activities of $1.1 million and consulting,
payroll and payroll related other costs of $0.4 million.

The
Clinical Labs segments income before taxes was $3.3 million for the fiscal
year ended July 31, 2007 as compared to $0.1 million in the 2006 period. The
2007 period was positively impacted by an increase in laboratory service
revenues of $8.5 million or 27% due to the expansion of an insurance provider
agreement, which increased gross profit by approximately $4.2 million. The
increase in gross profit was offset by an increase in the provision for
doubtful accounts for the fiscal year ended July 31, 2007 of approximately $1.0
million over the year ago period. The increase in the provision for doubtful
accounts was attributed to the 27% increase in service revenues and increase in
receivables.

The Other
segments loss before taxes for the fiscal year ended July 31, 2007 was
approximately $14.4 million as compared to a loss of $12.6 million in the 2006
period. The segments increased loss reflects an increase in general,
administrative and legal expenses of $3.6 million. The increases were primarily
attributed to legal costs of $2.9 million due to ongoing patent litigation.
Payroll and personnel related costs of $1.3 million partially offset by
decreases in professional fees and corporate governance expenses of $0.8
million. The increase in general, administrative and legal expenses was
partially offset by an increase in interest income of $1.8 million due to
increased invested cash balances resulting from proceeds from the issuance of
common stock in 2007.

Liquidity
and Capital Resources

At
    July 31, 2008, our cash and cash equivalents were $78.3 million, a decrease
    of $26.8 million from cash and cash equivalents at July 31, 2007. We had
    working capital of $92.4 million at July 31, 2008 compared to $113.9 million
    at July 31, 2007. In 2008, the decrease was primarily due to the use of cash
    for acquisitions of approximately $16.1 million, cash used in operations
    of $8.6 million and $3.2 million used for capital expenditures.

Net
    cash used in operating activities for the year ended July 31, 2008 was approximately
$8.6 million as compared to net cash used in operating activities of $3.8
million for the year ended July 31, 2007. The increase in net cash used in
operating activities in fiscal 2008 of $4.8 million was due to the net change
in operating assets and liabilities, primarily due to changes in accounts
receivable, accounts payable, accrued liabilities and deferred revenue, as
compared to the prior year and the impact of non cash items offset by the
decrease in the net loss of $2.6 million.

44

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In
    fiscal 2008, net cash used in investing activities was approximately $18.8
    million as compared to the fiscal 2007 net cash used of $18.4 million. Fiscal
2008 uses were primarily due to acquisitions of $16.1, which is principally
related to the acquisition of Biomol International LP and subsidiary of $15.9
million, inclusive of acquisition costs, and capital expenditures of
approximately $3.2 million offset by $1.1 million proceeds from the termination
    of officers life insurance policies. In fiscal 2007, the use of cash in investing
    activities was attributed to acquisitions and capital expenditures.

In fiscal
2008, net cash provided by financing activities was approximately $0.5 million
as compared to $57.5 million in fiscal 2007 primarily as a result of the
proceeds from the issuance of common stock of $57.0 million in fiscal 2007.

We believe
that our current cash and cash equivalents are sufficient for our foreseeable
liquidity and capital resource needs over the next 12 months, although there
can be no assurance that future events will not alter such view. The Company
investment policy limits investments to short-term, low risk and highly liquid
instruments, including money market accounts and funds, commercial paper and US
government instruments.

Effect
of New Accounting Pronouncements

In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with generally accepted accounting principles.
SFAS No. 162 will become effective 60 days following the SECs approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Company does not anticipate the adoption of SFAS No. 162 will
have a material impact on its results of operations, cash flows or financial
condition.

In April
2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No.142, Goodwill and Other Intangible Assets. FSP FAS 142-3 also requires
expanded disclosure related to the determination of intangible asset useful
lives. FSP FAS 142-3 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those
fiscal years. The Company is currently evaluating the impact that the adoption
of FSP FAS 142-3 will have on its consolidated results of operation, cash flows
or financial condition.

In December
2007, the FASB issued Statement No. 141 (revised 2007),Business Combinations
(SFAS No. 141R). SFAS No. 141R establishes principles and requirements for
how the acquirer in a business combination recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any controlling interest in the business and the goodwill acquired. SFAS No.
141R further requires that acquisition-related costs and costs associated with
restructuring or exiting activities of an acquired entity will be expensed as
incurred SFAS No. 141R also establishes disclosure requirements that will
require disclosure of the nature and financial effects of the business
combination. SFAS No. 141R will impact business combinations for the Company
that may be completed on or after August 1, 2009. The Company cannot anticipate
whether the adoption of SFAS No. 141R will have a material impact on its
results of operations and financial condition as the impact is solely dependent
on the terms of any business combination entered into by the Company on or
after August 1, 2009.

45

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In
September 2006, the FASB issued Statement No. 157, Fair Value Measurements
(SFAS 157) which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, delaying
the effective date of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value
on a nonrecurring basis. The delayed portions of SFAS 157 will be adopted by
the Company beginning in its fiscal year ending August 1, 2009, while all other
portions of the standard will be adopted by the Company beginning in its fiscal
year ending August 1, 2008, as required. The Company does not expect that the
adoption SFAS 157 will have a material impact on its consolidated results of
operations, cash flows or financial condition.

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

Contractual
Obligations

The Company
has entered into various real estate and equipment operating leases and has
employment agreements with certain executive officers. The real estate lease
for the Companys Farmingdale Clinical Lab and Research facility is with a
related party. See Item 2, Properties, and Note 15 to the Consolidated
Financial Statements for a further description of these various leases.

The
following is a summary of future payments under the Companys contractual
obligations as of July 31, 2008:

|                                    |  |   |        |  |                    |       |            |   |            |  |               |       |  |   |       |  | 
|----------------------------------- |  | - | ------ |  | ------------------ | ----- | ---------- | - | ---------- |  | ------------- | ----- |  | - | ----- |  | 
|Payments Due by Period             
|                                    |  |   |        |  |                    |       |            |   |            |  |               |       |  |   |       | 
|In 000s                            |  |   | Total  |  | Less
 than
 1 year |       | 1-3
 years |   | 4-5
 years |  | Over
 5 years |      
|                                    |  |   |        |  |                    |       |            |   |            |  |               |      
|Real estate and
 equipment leases   |  | $ | 21,164 |  | $                  | 3,947 |            | $ | 6,658      |  | $             | 4,043 |  | $ | 6,516 | 
|Employment
 agreements              |  | $ | 6,305  |  | $                  | 2,691 |            | $ | 3,614      |  |               |      |  |   |      | 
|                                    |  |   |        |  |                    |       |            |   |            |  |               |       |  |   |       | 
|Total contractual
 cash obligations |  | $ | 27,469 |  | $                  | 6,638 |            | $ | 10,272     |  | $             | 4,043 |  | $ | 6,516 | 
|                                    |  |   |        |  |                    |       |            |   |            |  |               |       |  |   |       | 

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.

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

46

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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 expense, allowance for uncollectible accounts, inventory,
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.

Product
revenues

Revenues
from product sales are recognized when the products are shipped and title
transfers, the sales price is fixed or determinable and collectibility is
reasonably assured. Revenues from these non-exclusive distribution
agreements are recognized when shipments are made to their respective customers
and reported to the Company. 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 product revenues. The Company did not recognize any
revenue from these distributors during the years ended July 31, 2008, 2007 and
    2006.

Royalties

Royalty
revenues are recorded in the period earned. Royalties received in advance of
being earned are recorded as deferred revenues.

License
fees and multiple element arrangements

When
evaluating multiple element arrangements, the Company considers whether the
components of the arrangement represent separate units of accounting as defined
in Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements
with Multiple Deliverables (EITF 00-21). Application of this standard
requires subjective determinations and requires management to make judgments
about the fair value of the individual elements and whether such elements are
separable from the other aspects of the contractual relationship.

Revenues
- Clinical laboratory services

Revenues
from the clinical laboratory are recognized upon completion of the testing
process for a specific patient and reported to the ordering physician. These
revenues and the associated accounts receivable are based on gross amounts
billed or billable for services rendered, net of a contractual adjustment,
which is the difference between amounts billed to payers and the expected
approved reimbursable settlements from such payers.

47

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The
following is a table of the clinical laboratory segments net revenues and
percentages by revenue category for the years ended July 31, 2008, 2007, and
2006:

|                   |  |   |                           |  |                           |     |                           |   |         |  |             |     |         |   |        |  |  |     |   | 
|------------------ |  | - | ------------------------- |  | ------------------------- | --- | ------------------------- | - | ------- |  | ----------- | --- | ------- | - | ------ |  |  | --- | - | 
|                   |  |   | Year
 ended July 31
 2008 |  | Year
 ended July 31
 2007 |     | Year
 ended July 31
 2006 |  
|                   |  |   |                           |  |                           |     |                           |  
|Revenue category   |  |   | (In
 000s)               |  | (in
 %)                   |     | (In
 000s)               |   | (in
 %) |  | (In
 000s) |     | (in
 %) |  
|                   |  |   |                           |  |                           |     |                           |   |         |  |             |     |         |  
|Medicare           |  | $ | 9,078                     |  |                           | 22  |                           | $ | 8,478   |  |             | 21  |         | $ | 7,462  |  |  | 23  |  
|Third-party payers |  |   | 24,768                    |  |                           | 59  |                           |   | 25,060  |  |             | 62  |         |   | 17,680 |  |  | 56  |  
|Patient self-pay   |  |   | 3,582                     |  |                           | 9   |                           |   | 2,952   |  |             | 7   |         |   | 4,925  |  |  | 15  |  
|HMOs              |  |   | 4,650                     |  |                           | 10  |                           |   | 3,940   |  |             | 10  |         |   | 1,859  |  |  | 6   |  
|                   |  |   |                           |  |                           |     |                           |   |         |  |             |     |         |   |        |  |  |     |  
|Total              |  | $ | 42,078                    |  |                           | 100 | %                         | $ | 40,430  |  |             | 100 | %       | $ | 31,926 |  |  | 100 | %
|                   |  |   |                           |  |                           |     |                           |   |         |  |             |     |         |   |        |  |  |     |  

The Company
provides services to certain patients covered by various third-party payers,
including the Federal Medicare program. 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.

Other than
the Medicare program, one provider whose programs are included in the
Third-party payer and Health Maintenance Organizations (HMOs) categories
represented 26% and 20% of the Clinical Labs services net revenues for the
fiscal years ended July 31, 2008 and 2007 respectively. Other than the Medicare
program, no other provider included in the Third-party payer and HMOs
categories exceeded 10% of the Clinical Labs services net revenues for the
fiscal year ended July 31, 2006

Contractual
Adjustment

The
Companys estimate of contractual adjustment is based on significant
assumptions and judgments, such as its interpretation of payer reimbursement
policies, and bears the risk of change. The estimation process is based on the
experience of amounts approved as reimbursable and ultimately settled by
payers, versus the corresponding gross amount billed to the respective payers.
The contractual adjustment is an estimate that reduces gross revenue, based on
gross billing rates, to amounts expected to be approved and reimbursed. Gross
billings are based on a standard fee schedule we set for all third party
payers, including Medicare, health maintenance organizations (HMOs) and
managed care. The Company adjusts the contractual adjustment estimate quarterly,
based on its evaluation of current and historical settlement experience with
payers, industry reimbursement trends, and other relevant factors. The other
relevant factors that affect our contractual adjustment include the monthly and
quarterly review of: 1) current gross billings and receivables and
reimbursement by payer, 2) current changes in third party arrangements. 3) the
growth of in-network provider arrangements and managed care plans specific to
our Company.

Our
clinical laboratory business is primarily dependent upon reimbursement from
third-party payers, such as Medicare (which principally serves patients 65 and
older) and insurers. We are subject to variances in reimbursement rates among
different third-party payers, as well as constant changes of reimbursement
rates. Changes that decrease reimbursement rates or coverage would negatively
impact our revenues. The number of individuals covered under managed care
contracts or other similar arrangements has grown over the past several years
and may continue to grow in the future. In addition, Medicare and other
government healthcare programs continue to shift to managed care. These trends
will continue to reduce our revenues per test.

During the
years ended July 31, 2008, 2007 and 2006, the contractual adjustment
percentages, determined using current and historical reimbursement statistics,
were 81.8%, 79.0% and 75.2%, respectively, of gross billings. The Company
believes the negative impact on revenues from the decline in reimbursement
rates or the shift to managed care, other primary third party payers, or
similar arrangements may be offset by the positive impact of an increase in the
number of tests we perform. However, there can be no assurance that we can
increase the number of tests we perform or that if we do increase the number of
tests we perform, that we can maintain that higher number of tests performed,
or that an increase in the number of tests we perform would result in increased
revenue.

The Company
estimates (by using a sensitivity analysis) that each 1% point change in the
contractual adjustment percentage could result in a change in clinical
laboratory services revenues of approximately $2,316,000, and $1,930,000 for
the years ended July 31, 2008 and 2007, respectively, and a change in the net
accounts receivable of approximately $301,000 and $387,000 as of July 31, 2008
and 2007, respectively.

48

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Our
clinical laboratory financial billing system records gross billings using a
standard fee schedule for all payers and does not record contractual adjustment
by payer at the time of billing. Therefore, we are unable to quantify the
effect of contractual adjustment recorded during the current period that relate
to revenue recorded in a previous period. However, we can reasonably estimate
our contractual adjustment to revenue on a timely basis based on our quarterly
review process, which includes:

| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | an analysis of
 industry reimbursement trends;                                                                               
| |   |                                                                                                                              
| |  | an evaluation of
 third-party reimbursement rates changes and changes in reimbursement
 arrangements with third-party payers;
| |   |                                                                                                                              
| |  | a rolling monthly
 analysis of current and historical claim settlement and reimbursement
 experience with payers;            
| |   |                                                                                                                              
| |  | an analysis of
 current gross billings and receivables by payer.                                                             

Accounts
Receivable and Allowance for Doubtful Accounts

Accounts
receivable are reported at realizable value, net of allowances for doubtful
accounts, which is estimated and recorded in the period of the related revenue.

The
following is a table of the Companys net accounts receivable by segment.
The Clinical Labs segments net receivables are detailed by billing category
and as a percent to its total net receivables. As of July 31, 2008 and 2007,
approximately 58% and 68%, respectively, of the Companys net accounts
receivable relates to its Clinical Labs business, which operates in the New
York Metropolitan and New Jersey areas. The Life Sciences segments accounts
receivable, of which $3.3 million or 51% and $1.8 million or 39% represents
foreign receivables as of July 31, 2008 and 2007 respectively, includes royalty
receivables of $2.1 and $1.8 million, as of July 31, 2008 and 2007,
respectively, of which approximately $1.5 million and $1.5 million, respectively
is from Qiagen Corporation.

Net
accounts receivable

|                           |  |   |                       |  |                       |     |             |   |         |  |  |     |   | 
|-------------------------- |  | - | --------------------- |  | --------------------- | --- | ----------- | - | ------- |  |  | --- | - | 
|                           |  |   | As
 of
 July 31, 2008 |  | As
 of
 July 31, 2007 |    
|                           |  |   |                       |  |                       |    
|Billing category           |  |   | (In
 000s)           |  | (in
 %)               |     | (In
 000s) |   | (in
 %) | 
|                           |  |   |                       |  |                       |     |             |   |         | 
|Clinical Labs              |  |   |                       |  |                       |     |             |   |         |  |  |     |  
|Medicare                   |  | $ | 1,600                 |  |                       | 18  |             | $ | 1,628   |  |  | 17  |  
|Third party payers         |  |   | 4,610                 |  |                       | 52  |             |   | 5,856   |  |  | 60  |  
|Patient self-pay           |  |   | 2,144                 |  |                       | 24  |             |   | 1,678   |  |  | 17  |  
|HMOs                      |  |   | 537                   |  |                       | 6   |             |   | 671     |  |  | 6   |  
|                           |  |   |                       |  |                       |     |             |   |         |  |  |     |  
|Total clinical
 labs       |  | $ | 8,891                 |  |                       | 100 | %           | $ | 9,833   |  |  | 100 | %
|                           |  |   |                       |  |                       |     |             |   |         |  |  |     |  
|Total life
 sciences       |  |   | 6,457                 |  |                       |     |             |   | 4,520   |  |  |     |  
|                           |  |   |                       |  |                       |     |             |   |         |  |  |     |  
|Total accounts
 receivable |  | $ | 15,348                |  |                       |     |             | $ | 14,353  |  |  |     |  
|                           |  |   |                       |  |                       |     |             |   |         |  |  |     |  

Changes
in the Companys allowance for doubtful accounts are as follows:

|                                 |  |   |                |   |                |        |   |  |  |  |  |  |  | 
|-------------------------------- |  | - | -------------- | - | -------------- | ------ | - |  |  |  |  |  |  | 
|In 000s                         |  |   | July
 31, 2008 |   | July
 31, 2007 |        |   |  |  | 
|                                 |  |   |                |   |                |        |   |  |  | 
|Beginning balance                |  | $ | 1,404          |   | $              | 1,033  |   |  |  |  |  |  | 
|Provision for
 doubtful accounts |  |   | 3,716          |   |                | 4,653  |   |  |  |  |  |  | 
|Write-offs, net                  |  |   | (4,234         | ) |                | (4,282 | ) |  |  |  |  |  | 
|                                 |  |   |                |   |                |        |   |  |  |  |  |  | 
|Ending balance                   |  | $ | 886            |   | $              | 1,404  |   |  |  |  |  |  | 
|                                 |  |   |                |   |                |        |   |  |  |  |  |  | 

For the
Clinical Labs segment, the allowance for doubtful accounts represents amounts
that the Company does not expect to collect after the Company has exhausted its
collection procedures. The Company estimates its allowance for doubtful
accounts in the period the related services are billed and adjusts the estimate
in future accounting periods as necessary. It bases the estimate for the
allowance on the evaluation of historical collection experience, the aging
profile of accounts receivable, the historical doubtful account write-off
percentages, payer mix, and other relevant factors.

49

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The
allowance for doubtful accounts includes the balances, after receipt of the
approved settlements from third party payers for the insufficient diagnosis
information received from the ordering physician, which result in denials of
payment and the uncollectible portion of receivables from self payers,
including deductibles and copayments, which are subject to credit risk and
patients ability to pay. During the years ended July 31, 2008 and 2007,
the Company determined an allowance for doubtful accounts less than 210 days
and wrote off 100% of accounts receivable over 210 days, as it assumed those
accounts are uncollectible, except for certain fully reserved balances,
principally related to Medicare. These accounts have not been written off because the payers
filing date deadline has not occurred or the collection process has not been
exhausted. The Companys
collection experience on Medicare receivables beyond 210 days has been insignificant.
The Company adjusts the historical collection analysis for recoveries, if any,
on an ongoing basis.

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 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 allowance 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. Should
circumstances change (e.g. shift in payer mix, decline in economic conditions
or deterioration in aging of receivables), our estimates of net realizable
value of receivables could be reduced by a material amount.

Billing for
laboratory services is complicated because of many factors, especially: the
differences between our standard gross fee schedule for all payers and the
reimbursement rates of the various payers we deal with, disparity of coverage
and information requirements among the various payers, and disputes with payers
as to which party is responsible for reimbursement.

The
following tables indicate the Clinical Labs Aged Gross Receivables by Payer
Group (in 000s), which is prior to adjustment to gross receivables for 1)
contractual adjustment, 2) fully reserved balances not yet written off and 3)
other revenue adjustments.

|                       |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|---------------------- |  | ------------- | ------ | - |  | ---------------- | - | - | ----- | ---------------------------- |  | --- | - | ---------------- | ------ | - |  | ------------- | - | - | ----- |  |  | --- | - | - | ----- |  |  | --- | -
|As of July 31, 2008    |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party
 Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                       |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |      
|1-30 days              |  | $             | 15,879 |   |  | 56               | % | $ | 3,278 |                              |  | 44  | % | $                | 7,019  |   |  | 62            | % | $ | 1,654 |  |  | 29  | % | $ | 3,928 |  |  | 94  | %
|31-60 days             |  |               | 4,038  |   |  | 14               | % |   | 725   |                              |  | 10  | % |                  | 2,196  |   |  | 19            | % |   | 960   |  |  | 17  | % |   | 157   |  |  | 4   | %
|61-90 days             |  |               | 1,836  |   |  | 6                | % |   | 468   |                              |  | 6   | % |                  | 636    |   |  | 6             | % |   | 682   |  |  | 12  | % |   | 50    |  |  | 1   | %
|91-120 days            |  |               | 1,460  |   |  | 5                | % |   | 291   |                              |  | 4   | % |                  | 534    |   |  | 5             | % |   | 614   |  |  | 11  | % |   | 21    |  |  | 1   | %
|121-150 days           |  |               | 1,074  |   |  | 4                | % |   | 192   |                              |  | 3   | % |                  | 548    |   |  | 5             | % |   | 323   |  |  | 6   | % |   | 11    |  |  | 0   | %
|Greater than 150 days* |  |               | 4,300  |   |  | 15               | % |   | 2,412 |                              |  | 33  | % |                  | 380    |   |  | 3             | % |   | 1,506 |  |  | 26  | % |   | 2     |  |  | 0   | %
|                       |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                 |  | $             | 28,587 |   |  | 100              | % | $ | 7,366 |                              |  | 100 | % | $                | 11,313 |   |  | 100           | % | $ | 5,739 |  |  | 100 | % | $ | 4,169 |  |  | 100 | %
|                       |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  

|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|----------------------- |  | ------------- | ------ | - |  | ---------------- | - | - | ----- | ---------------------------- |  | --- | - | ---------------- | ------ | - |  | ------------- | - | - | ----- |  |  | --- | - | - | ----- |  |  | --- | -
|As of July 31, 2007     |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party
 Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |      
|1-30 days               |  | $             | 18,120 |   |  | 50               | % | $ | 3,630 |                              |  | 40  | % | $                | 8,561  |   |  | 59            | % | $ | 2,309 |  |  | 30  | % | $ | 3,620 |  |  | 69  | %
|31-60 days              |  |               | 5,306  |   |  | 15               | % |   | 614   |                              |  | 7   | % |                  | 2,731  |   |  | 19            | % |   | 1,434 |  |  | 19  | % |   | 527   |  |  | 10  | %
|61-90 days              |  |               | 3,795  |   |  | 10               | % |   | 629   |                              |  | 7   | % |                  | 1,735  |   |  | 12            | % |   | 1,222 |  |  | 16  | % |   | 209   |  |  | 4   | %
|91-120 days             |  |               | 2,811  |   |  | 8                | % |   | 530   |                              |  | 6   | % |                  | 881    |   |  | 6             | % |   | 732   |  |  | 10  | % |   | 668   |  |  | 13  | %
|121-150 days            |  |               | 1,589  |   |  | 4                | % |   | 405   |                              |  | 4   | % |                  | 263    |   |  | 2             | % |   | 779   |  |  | 10  | % |   | 142   |  |  | 2   | %
|Greater than 150 days** |  |               | 4,760  |   |  | 13               | % |   | 3,246 |                              |  | 36  | % |                  | 226    |   |  | 2             | % |   | 1,173 |  |  | 15  | % |   | 115   |  |  | 2   | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 36,381 |   |  | 100              | % | $ | 9,054 |                              |  | 100 | % | $                | 14,397 |   |  | 100           | % | $ | 7,649 |  |  | 100 | % | $ | 5,281 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  

* Total includes $2,796 fully reserved over 210 days as of July 31,
2008.

** Total includes $2,432 fully reserved over 210 days as of July 31,
2007.

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 not more likely than not the benefits will be
realized in the foreseeable future.

50

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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.

On August
1, 2007, the Company adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a
more-likely-than-not threshold for the recognition and derecognition of tax
positions, provides guidance on the accounting for interest and penalties
relating to tax positions and requires that the cumulative effect of applying
the provisions of FIN 48 be reported as an adjustment to the opening balance of
retained earnings or other appropriate components of equity or net assets in
the statement of financial position. The Company did not have any significant
unrecognized tax positions and there was no material effect on our financial condition
or results of operations as a result of implementing FIN 48.

Inventory

The Company
values inventory at the lower of cost (first-in, first-out) or market.
Work-in-process and finished goods inventories consist of material, labor, and
manufacturing overhead. On a quarterly basis, we review inventory quantities on
hand and analyze the provision for excess and obsolete inventory based on our
estimate of sales forecasts based on sales history and anticipated future
demand. Our estimate of future product demand may not be accurate and we may
understate or overstate the provision for excess and obsolete inventory.
Accordingly, unanticipated changes in demand could have a significant impact on
the value of our inventory and results of operations. At July 31, 2008 and
2007, our reserve for excess and obsolete inventory was $ 637,000 and $379,000,
respectively.

Item 7A. Quantitative and
Qualitative Disclosures About Market
Risk

We are
exposed to market risk from changes in foreign currency exchange rates
resulting from the recent acquisition of Axxora (See Item 1A. Risk Factors and
Note 2 in the notes to consolidated financial statements) and, to a much lesser
extent, interest rates on investments in short-term instruments, that could
impact our results of operations and financial position. We do not currently
engage in any hedging or market risk management tools. There have been no
material changes with respect to market risk previously disclosed in our Annual
Report on Form 10-K for our 2007 fiscal year except for the impact of the
aforementioned Biomol acquisition.

Foreign
Currency Exchange Rate Risk

The
financial reporting of our non-U.S. subsidiaries is denominated in currencies
other than the U.S. dollar. Since the functional currency of our non-U.S.
subsidiaries is the local currency, foreign currency translation adjustments
are accumulated as a component of accumulated other comprehensive income in
stockholders equity. Assuming a hypothetical aggregate change of 10% in the
exchange rates of foreign currencies against the U.S. dollar at July 31, 2008,
our assets and liabilities would increase or decrease by
$2,354,000 and $556,000,
respectively, and our net sales and net earnings would increase or decrease by
$1,555,000 and
$83,000, respectively, on an annual basis.

We
    also maintain intercompany balances and loans receivable with subsidiaries
    with different local currencies. These amounts are at risk of foreign exchange
losses if exchange rates fluctuate. Assuming a hypothetical aggregate change
    of 10% in the exchange rates of foreign currencies against the U.S. dollar
    at July 31, 2008, our pre-tax earnings would be favorably or unfavorably
    impacted by approximately $80,000, on an annual
basis.

Interest
Rate Risk

Our excess
cash is invested in highly liquid short term money market funds and US
government instruments with high credit ratings. Changes in interest rates may
affect the investment income we earn on cash and cash equivalents debt and
therefore affect our cash flows and results of operations. As of July 31, 2008,
we were exposed to interest rate change market risk with respect to our money
market accounts of $73.4 million. The short-term investments bear interest
rates ranging from 2.2 to 2.5%. Each 100 basis point (or 1%) fluctuation in
interest rates will increase or decrease interest income on the short-term
investments by approximately $0.7 million on an annual basis.

As of July
31, 2008, we did not maintain any fixed or variable interest rate financing.

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)

51

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

Not
applicable.

Item 9A. Controls and
Procedures

Evaluation
of Disclosure Controls and Procedures

As required
by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of July 31, 2008.
This evaluation was carried out under the supervision and with participation of
our Chief Executive Officer and Chief Financial Officer. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures. Therefore, effective disclosure controls and procedures can only
provide reasonable assurance of achieving their control objectives. Based upon
our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective at that
reasonable assurance level as of July 31, 2008, and that information required
to be disclosed in the reports that we file under the Exchange Act is recorded,
processed, summarized and reported in a timely manner and is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.

Changes
in Internal Control over Financial Reporting

There was
no change in our internal control over financial reporting during the fourth
quarter ended July 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Managements
Annual Report on Internal Control over Financial Reporting

Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f)
under the Exchange Act.

Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:

          pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;

          provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of management and our directors; and

          provide
reasonable assurance regarding prevention and timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on our financial statements.

Internal
control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems that are determined to be effective provide only
reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

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

Managements
evaluation did not include assessing the effectiveness of internal controls
over financial reporting at Biomol International Inc, and its wholly-owned
subsidiary (Biomol), which was acquired May 8, 2008, and whose financial
statements reflect total assets and net revenues of 13.3% and 3.0%
respectively, of the consolidated financial statements as of and for the year
ended July 31, 2008. Management has opted to exclude Biomol from its assessment
based upon the SECs comments in Managements Report on Internal Control Over
Financial Reporting and Certification of Disclosure in Exchange Act Periodic
Reports, Frequently Asked Questions (FAQ) (revised October 6, 2004). The
response to FAQ No. 3 states that the SEC would not object to management
referring in the report to a discussion in the registrants Form 10-K or 10-KSB
regarding the scope of the assessment and to such disclosure noting that
management excluded the acquired business from managements report on internal
control over financial reporting.

52

---



Based on
its assessment, management concluded that we maintained effective internal
control over financial reporting as of July 31, 2008. Ernst & Young LLP,
our independent registered public accounting firm, has issued an attestation
report on our internal control over financial reporting as of July 31, 2008.
This report, in which Ernst & Young LLP has expressed an unqualified
opinion, appears in this Item 9A.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Enzo Biochem, Inc.

We
have audited Enzo Biochem, Inc.s (the Company) internal control
over financial reporting as of July 31, 2008, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Enzo Biochem,
Inc.s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying
Managements Annual Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the companys internal control
over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.

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

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

As
indicated in the accompanying Managements Annual Report on Internal Control
over Financial Reporting, managements assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of Biomol International, Inc. and subsidiary which is
included in the 2008 consolidated financial statements of Enzo Biochem, Inc.,
and constituted 13.3% and 6.4% of total and net assets, respectively, as of
July 31, 2008 and $2,673,000 and $6,300 of revenues and net income, respectively,
for the year then ended. Our audit of internal control over financial reporting
of Enzo Biochem, Inc. also did not include an evaluation of the internal
control over financial reporting of Biomol International, Inc. and
subsidiary.

In
our opinion, Enzo Biochem, Inc. maintained, in all material respects, effective
internal control over financial reporting as of July 31, 2008 based on the COSO
criteria.

We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Enzo Biochem, Inc. as of July 31, 2008 and 2007 and the related consolidated
statements of operations, consolidated statements of stockholders equity and
comprehensive income (loss) and consolidated statements of cash flows for each
of the three years in the period ended July 31, 2008 of Enzo Biochem, Inc. and
our report dated October 14, 2008 expressed an unqualified opinion thereon.

/s/ Ernst
& Young LLP
Melville, New York
October 14, 2008

53

---



| |          |                  
| | -------- | -----------------
| | Item 9B. | Other Information

None

PART III

| |          |                                                        
| | -------- | -------------------------------------------------------
| | Item 10. | Directors,
 Executive Officers and Corporate Governance

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 28, 2008 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 28, 2008 and is incorporated herein by reference.

| |          |                                                                                                
| | -------- | -----------------------------------------------------------------------------------------------
| | Item 12. | Security Ownership
 of Certain Beneficial Owners and Management and Related Stockholder Matters

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 28, 2008 and is incorporated herein by reference.

| |          |                                                                           
| | -------- | --------------------------------------------------------------------------
| | Item 13. | Certain
 Relationships and Related Transactions, and Director Independence

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 28, 2008 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 expected to be filed with the Securities and Exchange Commission
on or before November 28, 2008 and is incorporated herein by reference.

PART IV

| |           |                                         
| | --------- | ----------------------------------------
| | Item
 15. | Exhibits,
 Financial Statement Schedules

| |                                                  |     |                                                                                                                             
| | ------------------------------------------------ | --- | ----------------------------------------------------------------------------------------------------------------------------
|
| | (a)                                              | (1) | Consolidated
 Financial Statements                                                                                          
| |                                                  |     | Consolidated
 Balance Sheets - July 31, 2008 and 2007                                                                       
| |                                                  |     | Consolidated
 Statements of Operations- Years ended July 31, 2008, 2007 and 2006                                            
| |                                                  |     | Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss) - Years
 ended July 31, 2008, 2007 and 2006
| |                                                  |     | Consolidated
 Statements of Cash Flows - Years ended July 31, 2008, 2007 and 2006                                           
| |                                                  |     | 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.

54

---



| |     |         
| | --- | --------
| | (3) | Exhibits

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

|            |  |                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                
|            |  |                                                                                                                                                            
|            |  |                                                                                                                                                            
|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. (3)                                                                                         
|            |  |                                                                                                                                                            
|3(d)        |  | Amended and
 restated Bylaws. (14)                                                                                                                         
|            |  |                                                                                                                                                            
|10 (c)      |  | Employment
 Agreements 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)       |  | 1999 Stock Option
 Plan. (7)                                                                                                                               
|            |  |                                                                                                                                                            
|10 (h)      |  | Amendment to
 Elazar Rabbanis employment agreement. (8)                                                                                                   
|            |  |                                                                                                                                                            
|10 (i)      |  | Amendment to
 Shahram Rabbanis employment agreement. (8)                                                                                                  
|            |  |                                                                                                                                                            
|10 (j)      |  | Amendment to Barry
 Weiners employment agreement. (8)                                                                                                     
|            |  |                                                                                                                                                            
|10 (k)      |  | 2005 Equity
 Compensation Incentive Plan (10)                                                                                                              
|            |  |                                                                                                                                                            
|10 (l)      |  | Lease agreement
 with Pari Management (11)                                                                                                                 
|            |  |                                                                                                                                                            
|10 (m)      |  | Settlement and
 Release Agreement between the Company and Sigma Aldrich (12)                                                                               
|            |  |                                                                                                                                                            
|10 (n)      |  | Stock Purchase Agreement
 By and Among Enzo Life Sciences, Inc., Axxora Life Sciences Inc., and the
 Stock holders, Option holders and Warrant holders (13)
|            |  |                                                                                                                                                            
|10 (o)      |  | Stock Asset
 Purchase Agreement By and Among Buyer Parties and Seller Parties (14)                                                                         
|            |  |                                                                                                                                                            
|14 (a)      |  | Code of Ethics
 (10)                                                                                                                                       

55

---



|       |  |                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                         
|       |  | Enzo Realty, LLC,
 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.                                                           
|       |  |                                                                                                                                                           
|       |  | Notes
 to exhibits                                                                                                                                        
|       |  |                                                                                                                                                           
|(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.          
|       |  |                                                                                                                                                           
|(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 Registration Statement on Form S-8 (333-87153) and
 is incorporated herein by reference.                       
|       |  |                                                                                                                                                           
|(8)    |  | 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.          
|       |  |                                                                                                                                                           
|(9)    |  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2004 and is incorporated herein by reference.          
|       |  |                                                                                                                                                           
|(10)   |  | This exhibit was
 filed as an exhibit to the Companys Proxy Statement of Schedule 14A filed on
 January 19, 2005 and is incorporated herein by reference.
|       |  |                                                                                                                                                           
|(11)   |  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2006 and is incorporated herein by reference.          
|       |  |                                                                                                                                                           
|(12)   |  | This exhibit was
 filed with the Companys Current Report on Form 8-K on September 21, 2006 and
 is incorporated herein by reference.                     
|       |  |                                                                                                                                                           
|(13)   |  | This exhibit was
 filed with the Companys Current Report on Form 8-K May 30, 2007 and is
 incorporated herein by reference.                              
|       |  |                                                                                                                                                           
|(14)   |  | This exhibit was
 filed with the Companys Current Report on Form 8-K May 8, 2008 and is
 incorporated herein by reference.                               
|       |  |                                                                                                                                                           
|(b)    |  | See Item 15(a)
 (3), above.                                                                                                                               
|       |  |                                                                                                                                                           
|(c)    |  | See Item 15(a)
 (2), above.                                                                                                                               

56

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| |                         |                    |                          
| | ----------------------- | ------------------ | -------------------------
| |                         | ENZO BIOCHEM, INC.
| |                         |                   
| | Date: October 14,
 2008 | 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, 2008
|                                                  |  |                 
|Elazar Rabbani,                                   |  |                 
|Chairman of Board
 of Directors                   |  |                 
|(Principal
 Executive Officer)                    |  |                 
|                                                  |  |                 
|By: /s/ Barry W.
 Weiner                          |  | October 14, 2008
|                                                  |  |                 
|Barry W. Weiner,                                  |  |                 
|President, Chief
 Financial Officer, and Director |  |                 
|                                                  |  |                 
|By: /s/ Shahram K.
 Rabbani                       |  | October 14, 2008
|                                                  |  |                 
|Shahram K.
 Rabbani,                              |  |                 
|Secretary,
 Treasurer and Director                |  |                 
|                                                  |  |                 
|By: /s/ Irwin
 Gerson                             |  | October 14, 2008
|                                                  |  |                 
|Irwin Gerson,
 Director                           |  |                 
|                                                  |  |                 
|By:/s/ Stephen B.
 H. Kent Ph.D.                  |  | October 14, 2008
|                                                  |  |                 
|Stephen B. H.
 Kent, Director                     |  |                 
|                                                  |  |                 
|By:/s/ Bernard L.
 Kasten Ph.D.                   |  | October 14, 2008
|                                                  |  |                 
|Bernard Kasten,
 Director                         |  |                 
|                                                  |  |                 
|By: /s/ Melvin F.
 Lazar                          |  | October 14, 2008
|                                                  |  |                 
|Melvin F. Lazar,
 Director                        |  |                 
|                                                  |  |                 
|By: /s/ John B.
 Sias                             |  | October 14, 2008
|                                                  |  |                 
|John B. Sias,
 Director                           |  |                 

57

---



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 Independent
 Registered Public Accounting Firm                                                                             |  | F-2
|                                                                                                                                     |  |    
|Consolidated Balance
 Sheets  July 31, 2008 and 2007                                                                                |  | F-3
|                                                                                                                                     |  |    
|Consolidated Statements
 of Operations  Years ended July 31, 2008, 2007 and 2006                                                    |  | F-4
|                                                                                                                                     |  |    
|Consolidated Statements
 of Stockholders Equity and Comprehensive Income (Loss)  Years ended July
 31, 2008, 2007 and 2006         |  | F-5
|                                                                                                                                     |  |    
|Consolidated Statements
 of Cash Flows  Years ended July 31, 2008, 2007 and 2006                                                    |  | F-6
|                                                                                                                                     |  |    
|Notes to Consolidated
 Financial Statements                                                                                          |  | F-7
|                                                                                                                                     |  |    
|Schedule II - Valuation
 and Qualifying Accounts  Years ended July 31, 2008, 2007 and 2006                                          |  | 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

---



Report of Independent Registered Public
Accounting Firm

The Board of Directors and Stockholders of
Enzo Biochem, Inc.

We have audited the accompanying consolidated balance sheets of Enzo
Biochem, Inc. (the Company) as of July 31, 2008 and 2007, and the related
consolidated statements of operations, consolidated statements of stockholders
equity and comprehensive income (loss), and consolidated statements of cash
flows for each of the three years in the period ended July 31, 2008. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Enzo
Biochem, Inc. at July 31, 2008 and 2007, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
July 31, 2008, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set for the therein.

As discussed in Note 9 to the consolidated financial
    statements, effective August 1, 2007, the Company adopted the provisions
    of Financial Accounting Standards Board Interpretation No. 48, Accounting
    for Uncertainty in Income Taxes.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), Enzo Biochem Inc.s
internal control over financial reporting as of July 31, 2008, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated October 14, 2008 expressed an unqualified opinion.

/s/ Ernst & Young LLP

Melville, New York 
October 14, 2008

F-2

---



ENZO BIOCHEM, INC.CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

|                                                                                                                                         |  |                |          |                |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- | - | -------- | -
|                                                                                                                                         |  | July 31,
 2008 |          | July 31,
 2007 |  
|                                                                                                                                         |  |                |          |                |  
|ASSETS                                                                                                                                   |  |                |          |                |   |          |  
|Current assets:                                                                                                                          |  |                |          |                |   |          |  
|Cash and cash equivalents                                                                                                                |  | $              | 78,322   |                | $ | 105,149  |  
|Accounts receivable, net of allowance for
 doubtful accounts of $886 in 2008 and $1,404 in 2007                                          |  |                | 15,348   |                |   | 14,353   |  
|Inventories                                                                                                                              |  |                | 9,514    |                |   | 7,022    |  
|Prepaid expenses                                                                                                                         |  |                | 2,496    |                |   | 1,767    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current assets                                                                                                                     |  |                | 105,680  |                |   | 128,291  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Property, plant, and equipment, net                                                                                                      |  |                | 9,053    |                |   | 6,621    |  
|Goodwill                                                                                                                                 |  |                | 21,321   |                |   | 13,676   |  
|Intangible assets, net                                                                                                                   |  |                | 17,656   |                |   | 9,338    |  
|Other                                                                                                                                    |  |                | 812      |                |   | 1,076    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total assets                                                                                                                             |  | $              | 154,522  |                | $ | 159,002  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Current liabilities:                                                                                                                     |  |                |          |                |   |          |  
|Accounts payable  trade                                                                                                                 |  | $              | 4,299    |                | $ | 4,111    |  
|Accrued liabilities                                                                                                                      |  |                | 7,370    |                |   | 8,446    |  
|Other current liabilities                                                                                                                |  |                | 1,161    |                |   | 1,287    |  
|Deferred taxes                                                                                                                           |  |                | 458      |                |   | 597      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current liabilities                                                                                                                |  |                | 13,288   |                |   | 14,441   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Deferred revenue                                                                                                                         |  |                | 512      |                |   | 938      |  
|Deferred taxes                                                                                                                           |  |                | 2,433    |                |   | 1,729    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|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: 38,007,581 at July 31, 2008 and 37,280,723
 at July 31, 2007 |  |                | 380      |                |   | 372      |  
|Additional paid-in capital                                                                                                               |  |                | 303,811  |                |   | 295,899  |  
|Less treasury stock at cost: 777,719 shares
 at July 31, 2008 and 596,456 shares at July 31, 2007                                        |  |                | (11,331  | )              |   | (8,915   | )
|Accumulated deficit                                                                                                                      |  |                | (156,157 | )              |   | (145,504 | )
|Accumulated other comprehensive income                                                                                                   |  |                | 1,586    |                |   | 42       |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total stockholders equity                                                                                                               |  |                | 138,289  |                |   | 141,894  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total liabilities and stockholders equity                                                                                               |  | $              | 154,522  |                | $ | 159,002  |  
|                                                                                                                                         |  |                |          |                |   |          |  

F-3

The accompanying notes are an integral part of these consolidated financial statements

---



ENZO BIOCHEM, INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

|                                                 |  |                       |         |      |    |         |   |    |         |  
|------------------------------------------------ |  | --------------------- | ------- | ---- | -- | ------- | - | -- | ------- | -
|                                                 |  | Years
 ended July 31, |        
|                                                 |  |                       |        
|                                                 |  | 2008                  |         | 2007 |    | 2006    |  
|                                                 |  |                       |         |      |    |         |  
|Revenues:                                        |  |                       |         |      |    |         |  
|Product revenues                                 |  | $                     | 28,087  |      | $  | 6,658   |   | $  | 4,750   |  
|Royalty and license fee income                   |  |                       | 7,630   |      |    | 5,820   |   |    | 3,150   |  
|Clinical laboratory services                     |  |                       | 42,078  |      |    | 40,430  |   |    | 31,926  |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|                                                 |  |                       | 77,795  |      |    | 52,908  |   |    | 39,826  |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Costs and expenses
 and other (income):          |  |                       |         |      |    |         |   |    |         |  
|Cost of product revenues                         |  |                       | 19,159  |      |    | 5,034   |   |    | 2,400   |  
|Cost of clinical laboratory services             |  |                       | 21,063  |      |    | 18,199  |   |    | 13,917  |  
|Research and development expense                 |  |                       | 8,637   |      |    | 9,393   |   |    | 7,896   |  
|Selling, general, and administrative
 expense    |  |                       | 34,418  |      |    | 26,300  |   |    | 24,745  |  
|Provision for uncollectible accounts
 receivable |  |                       | 3,716   |      |    | 4,653   |   |    | 3,633   |  
|Legal expense                                    |  |                       | 5,588   |      |    | 10,295  |   |    | 7,388   |  
|Interest income                                  |  |                       | (3,696  | )    |    | (5,092  | ) |    | (3,144  | )
|Other income                                     |  |                       | (198    | )    |    | (2,699  | ) |    |        |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|                                                 |  |                       | 88,687  |      |    | 66,083  |   |    | 56,835  |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Loss before income
 taxes                        |  |                       | (10,892 | )    |    | (13,175 | ) |    | (17,009 | )
|Benefit
 (provision) for income taxes            |  |                       | 239     |      |    | (85     | ) |    | 1,342   |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Net loss                                         |  | ($                    | 10,653  | )    | ($ | 13,260  | ) | ($ | 15,667  | )
|                                                 |  |                       |         |      |    |         |   |    |         |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Net loss per
 common share:                      |  |                       |         |      |    |         |   |    |         |  
|Basic                                            |  | ($                    | 0.29    | )    | ($ | 0.38    | ) | ($ | 0.49    | )
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Diluted                                          |  | ($                    | 0.29    | )    | ($ | 0.38    | ) | ($ | 0.49    | )
|                                                 |  |                       |         |      |    |         |   |    |         |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Weighted average
 common shares outstanding:     |  |                       |         |      |    |         |   |    |         |  
|Basic                                            |  |                       | 36,883  |      |    | 35,017  |   |    | 32,215  |  
|                                                 |  |                       |         |      |    |         |   |    |         |  
|Diluted                                          |  |                       | 36,883  |      |    | 35,017  |   |    | 32,215  |  
|                                                 |  |                       |         |      |    |         |   |    |         |  

F-4

The accompanying notes are an integral part of these consolidated financial statements

---



ENZO BIOCHEM, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
Years ended July 31, 2008, 2007, and 2006
(In thousands, except share data)

|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|----------------------------------------------------------- |  | --------------------- |  | ----------------------- |  | ----------------------- | --- | ---------------------------- | - | ----------------------- | - | -------------------- | ------- | ------------------------------------------------ | - | ---------------------------- | - | ---------------------------- | ----- | - | - | ------- | - | - | ------- | -
|                                                            |  | Common
 Stock
 Shares |  | Treasury
 Stock
 Shares |  | Common
 
 Stock
 Amount |     | Additional
 Paid-in
 Capital |   | Treasury
 Stock
 Amount |   | Accumulated
 Deficit |         | Accumulated
 Other
 Comprehensive
 (Loss) Income |   | Total
 Stockholders
 Equity |   | Comprehensive
 income (loss) |      
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |      
|                                                           
|Balance at
 July 31, 2005                                   |  | 32,526,800            |  | 384,400                 |  | $                       | 325 |                              | $ | 230,644                 |   | $                    | (5,994  | )                                                | $ | (116,577                     | ) | $                            | (131  | ) | $ | 108,267 |   |   |        |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Net (loss)
 for the year ended July 31, 2006                |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   | (15,667                      | ) |                              |      |   |   | (15,667 | ) | $ | (15,667 | )
|Realized
 loss on available for-sale securities, net of tax |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   |                             |   |                              | 131   |   |   | 131     |   |   | 131     |  
|Purchase of
 treasury stock                                 |  |                       |  | 185,300                 |  |                         |    |                              |   |                        |   |                      | (2,505  | )                                                |   |                             |   |                              |      |   |   | (2,505  | ) |   |        |  
|Exercise of
 stock options                                  |  | 285,030               |  |                        |  |                         | 3   |                              |   | 3,113                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 3,116   |   |   |        |  
|Issuance of
 stock for employee 401(k) plan match           |  | 32,370                |  |                        |  |                         |    |                              |   | 402                     |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 402     |   |   |        |  
|Stock based
 compensation charges                           |  |                      |  |                        |  |                         |    |                              |   | 1,763                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 1,763   |   |   |        |  
|Stock based
 compensation for consulting services           |  |                      |  |                        |  |                         |    |                              |   | 80                      |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 80      |   |   |        |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Comprehensive
 (loss)                                       |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |        |   |   | (15,536 | )
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Balance at
 July 31, 2006                                   |  | 32,844,200            |  | 569,700                 |  |                         | 328 |                              |   | 236,002                 |   |                      | (8,499  | )                                                |   | (132,244                     | ) |                              |      |   |   | 95,587  |   |   |        |  
|Net (loss)
 for the year ended July 31, 2007                |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   | (13,260                      | ) |                              |      |   |   | (13,260 | ) | $ | (13,260 | )
|Net
 proceeds from issuance of common stock                 |  | 4,285,715             |  |                        |  |                         | 43  |                              |   | 56,954                  |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 56,997  |   |   |        |  
|Purchase of
 treasury stock                                 |  |                      |  | 26,756                  |  |                         |     |                              |   |                         |   |                      | (416    | )                                                |   |                             |   |                              |      |   |   | (416    | ) |   |        |  
|Exercise of
 stock options                                  |  | 95,525                |  |                         |  |                         | 1   |                              |   | 915                     |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 916     |   |   |        |  
|Issuance of
 stock for employee 401(k) plan match           |  | 29,370                |  |                        |  |                         |    |                              |   | 421                     |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 421     |   |   |        |  
|Vesting of
 restricted stock                                |  | 25,913                |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   |                             |   |                              |      |   |   |        |   |   |        |  
|Stock based
 compensation charges                           |  |                      |  |                        |  |                         |    |                              |   | 1,477                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 1,477   |   |   |        |  
|Stock based
 compensation for consulting services           |  |                      |  |                        |  |                         |    |                              |   | 130                     |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 130     |   |   |        |  
|Foreign
 currency translation adjustments                   |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   |                             |   |                              | 42    |   |   | 42      |   |   | 42      |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Comprehensive
 (loss)                                       |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   | (13,218 | )
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Balance at
 July 31, 2007                                   |  | 37,280,723            |  | 596,456                 |  |                         | 372 |                              |   | 295,899                 |   |                      | (8,915  | )                                                |   | (145,504                     | ) |                              | 42    |   |   | 141,894 |   |   |        |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Net (loss)
 for the year ended July 31, 2008                |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   | (10,653                      | ) |                              |      |   |   | (10,653 | ) | $ | (10,653 | )
|Purchase of
 treasury stock                                 |  |                      |  | 181,263                 |  |                         |     |                              |   |                         |   |                      | (2,416  | )                                                |   |                             |   |                              |      |   |   | (2,416  | ) |   |        |  
|Exercise of
 stock options                                  |  | 267,345               |  |                         |  |                         | 3   |                              |   | 2,881                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 2,884   |   |   |        |  
|Vesting of
 restricted stock                                |  | 70,963                |  |                        |  |                         | 1   |                              |   |                        |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 1       |   |   |        |  
|Stock based
 compensation charges                           |  |                      |  |                        |  |                         |    |                              |   | 1,566                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 1,566   |   |   |        |  
|Issuance of
 stock for employee 401(k) plan match           |  | 36,550                |  |                        |  |                         |    |                              |   | 481                     |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 481     |   |   |        |  
|Issuance of
 stock for acquisition                          |  | 352,000               |  |                        |  |                         | 4   |                              |   | 2,996                   |   |                      |        |                                                  |   |                             |   |                              |      |   |   | 3,000   |   |   |        |  
|Common
 stock issuance costs adjustment.                    |  |                       |  |                        |  |                         |    |                              |   | (12                     | ) |                      |        |                                                  |   |                             |   |                              |      |   |   | (12     | ) |   |         |  
|Foreign
 currency translation adjustments                   |  |                      |  |                        |  |                         |    |                              |   |                        |   |                      |        |                                                  |   |                             |   |                              | 1,544 |   |   | 1,544   |   |   | 1,544   |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Comprehensive
 (loss)                                       |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   | $ | (9,109  | )
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  
|Balance at
 July 31, 2008                                   |  | 38,007,581            |  | 777,719                 |  | $                       | 380 |                              | $ | 303,811                 |   | $                    | (11,331 | )                                                | $ | (156,157                     | ) | $                            | 1,586 |   | $ | 138,289 |   |   |         |  
|                                                            |  |                       |  |                         |  |                         |     |                              |   |                         |   |                      |         |                                                  |   |                              |   |                              |       |   |   |         |   |   |         |  

F-5

The accompanying notes are an integral part of these consolidated financial statements

---



ENZO BIOCHEM, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                             |  |                       |         |      |    |         |   |   |         |  
|---------------------------------------------------------------------------- |  | --------------------- | ------- | ---- | -- | ------- | - | - | ------- | -
|                                                                             |  | Years
 ended July 31, |        
|                                                                             |  |                       |        
|                                                                             |  | 2008                  |         | 2007 |    | 2006    |  
|                                                                             |  |                       |         |      |    |         |  
|Cash flows from
 operating activities:                                       |  |                       |         |      |    |         |   |   |         |  
|Net loss                                                                     |  | ($                    | 10,653  | )    | ($ | 13,260  | ) | $ | (15,667 | )
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Adjustments to
 reconcile net loss to net cash used in operating activities: |  |                       |         |      |    |         |   |   |         |  
|Depreciation and amortization of property,
 plant and equipment              |  |                       | 1,488   |      |    | 1,038   |   |   | 1,049   |  
|Amortization of other intangible assets                                      |  |                       | 658     |      |    | 151     |   |   | 75      |  
|Provision for uncollectible accounts
 receivable                             |  |                       | 3,716   |      |    | 4,653   |   |   | 3,633   |  
|Write-off and/or reserve for obsolete
 inventory                             |  |                       | 283     |      |    | 360     |   |   | 596     |  
|Deferred income tax (benefit) provision                                      |  |                       | (644    | )    |    | (178    | ) |   | 640     |  
|Share based compensation charges                                             |  |                       | 1,566   |      |    | 1,477   |   |   | 1,763   |  
|Issuance of common stock for 401(k)
 employer match                          |  |                       | 481     |      |    | 421     |   |   | 402     |  
|Deferred revenue recognized                                                  |  |                       | (426    | )    |    |        |   |   |        |  
|Gain on termination of officers life
 insurance policies                     |  |                       | (313    | )    |    |        |   |   |        |  
|Options issued to consultants                                                |  |                       |        |      |    | 130     |   |   | 80      |  
|Loss on marketable securities                                                |  |                       |        |      |    |        |   |   | 154     |  
|Other                                                                        |  |                       |        |      |    | 10      |   |   |        |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Changes in operating assets and
 liabilities:                                |  |                       |         |      |    |         |   |   |         |  
|Accounts receivable                                                          |  |                       | (2,837  | )    |    | (6,086  | ) |   | (659    | )
|Inventories                                                                  |  |                       | 1,012   |      |    | 533     |   |   | (120    | )
|Prepaid expenses                                                             |  |                       | (574    | )    |    | 31      |   |   | 332     |  
|Recoverable and prepaid income taxes                                         |  |                       |        |      |    | 1,931   |   |   | (602    | )
|Accounts payable  trade                                                     |  |                       | (1,060  | )    |    | 429     |   |   | (1,110  | )
|Accrued liabilities                                                          |  |                       | (1,066  | )    |    | 2,892   |   |   | (463    | )
|Other current liabilities                                                    |  |                       | (195    | )    |    | 74      |   |   | (279    | )
|Deferred revenue                                                             |  |                       |        |      |    | 1,628   |   |   |        |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Adjustments                                                                  |  |                       | 2,089   |      |    | 9,494   |   |   | 5,491   |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Net cash used in operating activities                                        |  |                       | (8,564  | )    |    | (3,766  | ) |   | (10,176 | )
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Cash flows from
 investing activities:                                       |  |                       |         |      |    |         |   |   |         |  
|Capital expenditures                                                         |  |                       | (3,231  | )    |    | (1,448  | ) |   | (4,227  | )
|Proceeds from termination of officers life
 insurance                        |  |                       | 1,085   |      |    |        |   |   |        |  
|Sales of marketable securities                                               |  |                       |        |      |    |        |   |   | 6,760   |  
|Purchases of marketable securities                                           |  |                       |        |      |    |        |   |   | (69     | )
|(Increase) decrease in cash surrender
 values                                |  |                       |        |      |    | (75     | ) |   | 51      |  
|(Increase) decrease in security deposits
 and other                          |  |                       | (491    | )    |    | (14     | ) |   | 73      |  
|Acquisitions, net of cash acquired                                           |  |                       | (16,144 | )    |    | (16,888 | ) |   |        |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Net cash (used in) provided by investing
 activities                         |  |                       | (18,781 | )    |    | (18,425 | ) |   | 2,588   |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Cash flows from
 financing activities:                                       |  |                       |         |      |    |         |   |   |         |  
|Net proceeds from issuance of common stock                                   |  |                       |        |      |    | 56,997  |   |   |        |  
|Proceeds from the exercise of stock options                                  |  |                       | 470     |      |    | 500     |   |   | 611     |  
|Issuance costs from issuance of common
 stock                                |  |                       | (12     | )    |    |         |   |   |         |  
|Payment of long term installment payable                                     |  |                       |        |      |    |        |   |   | (150    | )
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Net cash provided by financing activities                                    |  |                       | 458     |      |    | 57,497  |   |   | 461     |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Effect of exchange rate changes on cash and
 cash equivalents                |  |                       | 60      |      |    | (11     | ) |   |        |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|(Decrease) increase in cash and cash
 equivalents                            |  |                       | (26,827 | )    |    | 35,295  |   |   | (7,127  | )
|Cash and cash equivalents - beginning of
 year                               |  |                       | 105,149 |      |    | 69,854  |   |   | 76,981  |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  
|Cash and cash equivalents - end of year                                      |  | $                     | 78,322  |      | $  | 105,149 |   | $ | 69,854  |  
|                                                                             |  |                       |         |      |    |         |   |   |         |  

F-6

The accompanying notes are an integral part of these consolidated financial statements

---



ENZO BIOCHEM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Note 1 - Summary of significant accounting
policies

Nature of 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
and are distributed in the United States and internationally. 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
laboratory that offers and provides diagnostic medical testing services to the
health care community in the New York Metropolitan and New Jersey areas. The
Company operates in three segments (see Note 17).

On May 8, 2008, Enzo Life Sciences, Inc. (Enzo Life Sciences), a
wholly-owned subsidiary of the Company, acquired substantially all assets and
certain liabilities of Biomol International L.P. (Biomol LP) and the issued
and outstanding capital stock of Affiniti, Limited, a wholly owned subsidiary
of Biomol LP., referred to as Biomol. Biomol is a developer, manufacturer and
distributor of reagents for the research and biochemical industries and is
based in the U.S. and its wholly-owned subsidiary is located in Exeter, United
Kingdom. Biomol utilizes third-party distributors located in other major
markets throughout the world. As a result of this transaction, Enzo Life
Sciences has expanded its product offerings, both through internal manufacturing
and distribution, and increases its geographic distribution (see Note 2).

Effective May 31, 2007, Enzo Life Sciences completed the acquisition of
all of the issued and outstanding capital stock of Axxora Life Sciences, Inc.
(Axxora). Axxora is a developer, manufacturer and distributor of reagents for
the research and biochemical industries and is based in the U.S. with
wholly-owned subsidiaries in the U.S., Switzerland, Germany and the United
Kingdom. Axxora utilizes third-party distributors located in other major
markets throughout the world. Axxoras electronic marketplace enables customers
to purchase research reagents from internationally recognized manufacturers
covering all areas of the life sciences research reagents field. As a result of
this transaction, Enzo Life Sciences has expanded its product offerings both
through internal manufacturing and distribution and increases its geographic
distribution (see Note 2).

Principles of consolidation

The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States (U.S. GAAP) and include the accounts of the Company and its
wholly-owned subsidiaries, Enzo Clinical Labs, Inc., Enzo Life Sciences, Inc.,
Enzo Therapeutics, Inc. and Enzo Realty LLC (Realty). All intercompany
transactions and balances have been eliminated. The results of operations for
companies acquired are included in the consolidated financial statements from
the effective date of acquisition.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP
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.

Foreign Currency Translation

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 52, Foreign Currency Translation (SFAS No. 52), the Company has
determined that the functional currency for its foreign subsidiaries is the
local currency. Assets and liabilities denominated in foreign currencies are
translated at current exchange rates and profit and loss accounts are
translated at weighted average exchange rates. Resulting translation gains and
losses are included as a separate component of stockholders equity as
accumulated other comprehensive income or loss.

F-7

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Cash and cash equivalents

Cash and cash equivalents include highly liquid money market funds and
US Government instruments with maturities of three months or less at the time
acquired by the Company.

Concentration of credit risk

Financial instruments that potentially subject the Company to
concentrations of credit risk primarily consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities. The Companys cash
equivalents are invested in diverse financial instruments with high credit
ratings. The Company believes the fair value of the aforementioned financial
instruments approximates the current value due to the immediate or short-term
nature of these items.

Concentration of credit risk with respect to the Companys life
sciences segment is mitigated by the diversity of the Companys clients and
their dispersion across many different geographic regions. To reduce risk, the
Company routinely assesses the financial strength of these customers and,
consequently, believes that its accounts receivable credit exposure with
respect to these customers is limited.

The Company believes that the concentration of credit risk with respect
to the Clinical Labs accounts receivable is mitigated by the diversity of its
numerous third party payers and individual patient accounts and is limited to
certain large payers that insure individuals that utilize the Clinical labs
services. To reduce risk, the Company routinely assesses the financial strength
of these payers and, consequently, believes that its accounts receivable credit
risk exposure, with respect to these payers, is limited. While the Company also
has receivables due from the Federal Medicare program, the Company does not
believe that these receivables represent a credit risk since the Medicare
program is funded by the federal government and payment is primarily dependent
on our submitting the appropriate documentation.

Revenue Recognition

Product revenues

Revenues from product sales are recognized when the products are
shipped and title transfers, the sales price is fixed or determinable and
collectibility is reasonably assured. Revenues from non-exclusive distribution
agreements are recognized when shipments are made to their respective customers
and reported to the Company. 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 product revenues. The Company did not recognize any revenue from
these distributors during the years ended July 31, 2008, 2007 and 2006.

Royalties

Royalty revenues are recorded in the period earned. Royalties received
in advance of being earned are recorded as deferred revenues in the
accompanying balance sheet.

License Fees and Multiple Element
Arrangements

When evaluating multiple element arrangements, the Company considers
whether the components of the arrangement represent separate units of
accounting as defined in Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables
(EITF 00-21). Application of this standard requires subjective determinations
and requires management to make judgments about the fair value of the
individual elements and whether such elements are separable from the other
aspects of the contractual relationship.

F-8

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2007 and 2006

Clinical laboratory services

Revenues from the clinical laboratory are recognized upon completion of
the testing process for a specific patient and reported to the ordering
physician. These revenues and the associated accounts receivable are based on
gross amounts billed or billable for services rendered, net of a contractual
adjustment, which is the difference between amounts billed to payers and the
expected approved reimbursable settlements from such payers.

The following are tables of the Clinical Lab segments net revenues and
revenue percentages by revenue category for the years ended July 31, 2008, 2007
and 2006:

|                   |  |                      |        |         |     |             |   |         |  |             |   |         |        |  |     |  
|------------------ |  | -------------------- | ------ | ------- | --- | ----------- | - | ------- |  | ----------- | - | ------- | ------ |  | --- | -
|                   |  | Years
 ended July 31 |       
|                   |  | 2008                 |        | 2007    |     | 2006        |  
|                   |  |                      |        |         |     |             |  
|Revenue category   |  | (In
 000s)          |        | (in
 %) |     | (In
 000s) |   | (in
 %) |  | (In
 000s) |   | (in
 %) |       
|                   |  |                      |        |         |     |             |   |         |  |             |   |         |       
|Medicare           |  | $                    | 9,078  |         | 22  |             | $ | 8,478   |  | 21          |   | $       | 7,462  |  | 23  |  
|Third-party payers |  |                      | 24,768 |         | 59  |             |   | 25,060  |  | 62          |   |         | 17,680 |  | 56  |  
|Patient self-pay   |  |                      | 3,582  |         | 9   |             |   | 2,952   |  | 7           |   |         | 4,925  |  | 15  |  
|HMOs              |  |                      | 4,650  |         | 10  |             |   | 3,940   |  | 10          |   |         | 1,859  |  | 6   |  
|                   |  |                      |        |         |     |             |   |         |  |             |   |         |        |  |     |  
|Total              |  | $                    | 42,078 |         | 100 | %           | $ | 40,430  |  | 100         | % | $       | 31,926 |  | 100 | %
|                   |  |                      |        |         |     |             |   |         |  |             |   |         |        |  |     |  

The Company provides services to certain patients covered by various
third-party payers, including the Federal Medicare program. 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.

Other than the Medicare program, United Healthcare of New York whose
programs are included in the Third-party payers and Health Maintenance
Organizations (HMOs) categories, represents 26% and 20% of the Clinical
labs segment net revenue for the fiscal year ended July 31, 2008 and 2007
respectively. Other than the Medicare program, no other provider included in
the Third party payers and HMOs categories exceeded 10% of Clinical labs
service revenue for the fiscal year ended July 31, 2006.

Contractual Adjustment

The Companys estimate of contractual adjustment is based on significant
assumptions and judgments, such as its interpretation of payer reimbursement
policies, and bears the risk of change. The estimation process is based on the
experience of amounts approved as reimbursable and ultimately settled by
payers, versus the corresponding gross amount billed to the respective payers.
The contractual adjustment is an estimate that reduces gross revenue, based on
gross billing rates, to amounts expected to be approved and reimbursed. Gross
billings are based on a standard fee schedule the Company sets for all
third-party payers, including Medicare, HMOs and managed care providers. The
Company adjusts the contractual adjustment estimate quarterly, based on its
evaluation of current and historical settlement experience with payers, industry
reimbursement trends, and other relevant factors which include the monthly and
quarterly review of: 1) current gross billings and receivables and
reimbursement by payer, 2) current changes in third party arrangements and 3)
the growth of in-network provider arrangements and managed care plans specific
to our Company.

During the years ended July 31, 2008, 2007 and 2006, the contractual
adjustment percentages, determined using current and historical reimbursement
statistics, were 81.8%, 79.0% and 75.2%, respectively, of gross billings.

F-9

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Accounts Receivable and Allowance for
Doubtful Accounts

Accounts receivable are reported at realizable value, net of allowances
for doubtful accounts, which is estimated and recorded in the period of the
related revenue.

For the Clinical Labs segment, the allowance for doubtful accounts
represents amounts that the Company does not expect to collect after the
Company has exhausted its collection procedures. The Company estimates its
allowance for doubtful accounts in the period the related services are billed
and adjusts the estimate in future accounting periods as necessary. It bases
the estimate for the allowance on the evaluation of historical collection
experience, the aging profile of accounts receivable, the historical doubtful
account write-off percentages, payer mix and other relevant factors.

During the years ended July 31, 2008 and 2007, the
    Company determined an allowance for doubtful accounts for customers whose
    accounts receivable have been outstanding less than 210 days and wrote off
    100% of accounts receivable over 210 days, as it determined based on historical
    trends that those accounts were uncollectible, except for certain fully reserved
    balances, principally related to Medicare. These accounts have not been written
    off because the payers
    filing date deadline has not occurred or the collection process has not been
    exhausted. The Company adjusts the historical collection analysis for recoveries,
    if any, on an ongoing basis.

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 also assesses the current state of its billing functions in order to
identify any known collection issues and to assess the impact, if any, on the
allowance 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. Should
circumstances change (e.g. shift in payer mix, decline in economic conditions
or deterioration in aging of receivables), our estimates of net realizable
value of receivables could be reduced by a material amount.

The following is a table of the Companys net accounts receivable by
segment. The Clinical Labs segments net receivables are detailed by billing
category and as a percent to its total net receivables. At July 31, 2008 and
2007, approximately 58% and 68%, respectively, of the Companys net accounts
receivable relates to its Clinical Labs business, which operates in the New
York Metropolitan and New Jersey areas.

|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|------------------------------------------ |  | --------------------- | ------ | --------------------- | --- | ----------- | - | ------- |  | --- | -
|Net accounts
 receivable
 Billing category |  | As
 of
 July 31, 2008 |        | As
 of
 July 31, 2007 |    
|                                           |  |                       |        |                       |    
|Clinical Labs                              |  | (In
 000s)           |        | (in
 %)               |     | (In
 000s) |   | (in
 %) | 
|                                           |  |                       |        |                       |     |             |   |         | 
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|Medicare                                   |  | $                     | 1,600  |                       | 18  |             | $ | 1,628   |  | 17  |  
|Third party payers                         |  |                       | 4,610  |                       | 52  |             |   | 5,856   |  | 60  |  
|Patient self-pay                           |  |                       | 2,144  |                       | 24  |             |   | 1,678   |  | 17  |  
|HMOs                                      |  |                       | 537    |                       | 6   |             |   | 671     |  | 6   |  
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|Total Clinical
 Labs                       |  |                       | 8,891  |                       | 100 | %           |   | 9,833   |  | 100 | %
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|Total Life
 Sciences                       |  |                       | 6,457  |                       |     |             |   | 4,520   |  |     |  
|                                           |  |                       |        |                       |     |             |   |         |  |     |  
|Total accounts
 receivable                 |  | $                     | 15,348 |                       |     |             | $ | 14,353  |  |     |  
|                                           |  |                       |        |                       |     |             |   |         |  |     |  

The Life Sciences segments accounts receivable includes royalties
receivable of $2.1 million and $1.8 million, as of July 31, 2008 and 2007,
respectively, of which approximately $1.5 million and $1.5 million,
respectively is from Qiagen Corporation (see Note 13).

F-10

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Changes in the Companys allowance for doubtful accounts are as
follows:

|                                 |  |                |        |                |   |        |  
|-------------------------------- |  | -------------- | ------ | -------------- | - | ------ | -
|In 000s                         |  | July 31,
 2008 |        | July 31,
 2007 |  
|                                 |  |                |        |                |  
|Beginning balance                |  | $              | 1,404  |                | $ | 1,033  |  
|Provision for
 doubtful accounts |  |                | 3,716  |                |   | 4,653  |  
|Write-offs, net of
 recoveries   |  |                | (4,234 | )              |   | (4,282 | )
|                                 |  |                |        |                |   |        |  
|Ending balance                   |  | $              | 886    |                | $ | 1,404  |  
|                                 |  |                |        |                |   |        |  

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market. Appropriate consideration is given to obsolescence and other factors in
evaluating net realizable value. Work-in-process and finished goods inventories
consist of material, labor and manufacturing overhead.

Property, plant and equipment

Property, plant and equipment is stated at cost, and depreciated on the
straight-line basis over the estimated useful lives of the various asset
classes as follows: building and building improvements 15-30 years and
laboratory machinery and equipment and office furniture and computer equipment
- ranges from 3-10 years. Leasehold improvements are amortized over the term of
the related leases or estimated useful lives of the assets, whichever is
shorter.

Impairment of Long-Lived Assets

The Company reviews the recoverability of the carrying value of
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.
Should indicators of impairment exist, the carrying values of the assets are
evaluated in relation to the operating performance and future undiscounted cash
flows of the underlying business. The net book value of an asset is adjusted to
fair value if its expected future undiscounted cash flow is less than its book
value. No impairment losses were identified during the years ended July 31,
2008, 2007 or 2006.

Goodwill and Intangible Assets

Goodwill, representing the cost of acquired businesses
    in excess of the fair value of assets acquired, and indefinite-lived intangibles
    are not amortized, but are evaluated annually for impairment. The Company
    performs its annual impairment test as of the first day of its fiscal fourth
    quarter, or earlier if indicators of potential impairment exist, to evaluate
    goodwill and indefinite lived intangibles. Goodwill is considered impaired
    if the carrying amount of the reporting unit exceeds its estimated fair value.
    In assessing the recoverability of goodwill, the Company reviews both quantitative
    as well as qualitative factors to support its assumptions with regard to
    fair value. The fair value of a reporting unit is estimated using both a
    discounted cash flow model and a weighted average multiple of earnings before
    interest and taxes from comparable companies. In determining fair value,
    the Company makes certain judgments, including the identification of reporting
    units and the selection of comparable companies. If these estimates or their
    related assumptions change in the future as a result of changes in strategy
    and/or market conditions, the Company may be required to record an impairment
    charge. To date, there has been no impairment of these assets.

Intangible Assets

Intangible assets (exclusive of patents), arose primarily from
acquisitions (See Note 2), and primarily consist of customer relationships,
trademarks, licenses, employment and non-compete agreements, and website and
database content. Finite-lived intangible assets are amortized according to
their estimated useful lives, which range from 4 to 15 years.

F-11

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

The Company capitalizes certain legal costs directly incurred in
pursuing patent applications as patent costs. When such applications result in
an issued patent, the related costs are amortized over a ten year period or the
life of the patent, whichever is shorter, 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.

Comprehensive income (loss)

SFAS No. 130, Reporting Comprehensive Income (SFAS 130), requires
reporting and displaying of comprehensive income (loss) and its components. In
accordance with SFAS 130, the Accumulated Other Comprehensive Income (Loss),
which is comprised of foreign currency translation adjustments, is disclosed as
a separate component of stockholders equity. Comprehensive loss consists of
net loss and foreign currency translation adjustments. Foreign currency translation
adjustments included in comprehensive loss were not tax effected as investments
in international affiliates are deemed to be permanent.

Shipping and Handling Costs

Shipping and handling costs associated with the distribution of
finished goods to customers are recorded in cost of goods sold.

Research and Development

Research and development costs are charged to expense as incurred.

Advertising

All costs associated with advertising are expensed as incurred.
Advertising expense, included in Selling, general and administrative expense,
approximated $113,000, $12,000 and $128,000 for the years ended July 31, 2008,
2007 and 2006, respectively.

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 when 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.

It is the Companys policy to provide for uncertain tax positions and
the related interest and penalties based upon managements assessment of
whether a tax benefit is more likely than not to be sustained upon examination
by tax authorities. At July 31, 2008, the Company believes it has appropriately
accounted for any unrecognized tax benefits. To the extent the Company prevails
in matters for which a liability for an unrecognized tax benefit is established
or is required to pay amounts in excess of the liability, the Companys
effective tax rate in a given financial statement period may be affected.

Segment Reporting

The Company follows SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information (SFAS 131) which establishes standards
for reporting information on operating segments in interim and annual financial
statements. An enterprise is required to separately report information about
each operating segment that engages in business activities from which the
segment may earn revenues and incur expenses, whose separate operating results
are regularly reviewed by the chief operating decision maker regarding
allocation of resources and performance assessment and which exceed specific
quantitative thresholds related to revenue and profit or loss. The Companys
operating activities are reported in three segments (see Note 17).

F-12

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Net income (loss) per share

The Company applies SFAS No. 128, Earnings per Share (SFAS 128).
SFAS 128 establishes standards for computing and presenting earnings per share.
Basic net income (loss) per share represents net income (loss) 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 and unvested restricted stock, is determined using the treasury stock
method in accordance with SFAS 128. Diluted weighted average shares outstanding
for fiscal 2008, 2007 and 2006 do not include the potential common shares from
stock options and unvested restricted stock because to do so would have been
antidilutive. Accordingly, basic and diluted net loss per share is the same in
fiscal 2008, 2007 and 2006. The number of potential common shares (in the
money options) and unvested restricted stock excluded from the calculation of
diluted earnings per share during the years ended July 31, 2008, 2007, and 2006
was 240,000, 619,000, and 423,000, respectively.

For the years ended July 31, 2008, 2007 and 2006, the effect of
approximately 1,734,000, 873,000 and 1,916,000 respectively, of outstanding
out of the money options to purchase common shares were excluded from the
calculation of diluted net (loss) income per share because their effect would
be anti-dilutive.

The following table sets forth the computation of basic and diluted net
(loss) income per share pursuant to SFAS 128 for the years ended July 31:

|                                                            |  |      |         |      |   |         |   |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|In 000s                                                    |  | 2008 |         | 2007 |   | 2006    |  
|                                                            |  |      |         |      |   |         |  
|Numerator:                                                  |  |      |         |      |   |         |   |   |         |  
|Net loss                                                    |  | $    | (10,653 | )    | $ | (13,260 | ) | $ | (15,667 | )
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Denominator:                                                |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding- Basic          |  |      | 36,883  |      |   | 35,017  |   |   | 32,215  |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Add: effect of
 dilutive stock options and restricted stock |  |      |        |      |   |        |   |   |        |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding - Diluted       |  |      | 36,883  |      |   | 35,017  |   |   | 32,215  |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Net loss per share                                          |  |      |         |      |   |         |   |   |         |  
|Basic                                                       |  | $    | (0.29   | )    | $ | (0.38   | ) | $ | (0.49   | )
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Diluted                                                     |  | $    | (0.29   | )    | $ | (0.38   | ) | $ | (0.49   | )
|                                                            |  |      |         |      |   |         |   |   |         |  

Share-Based Compensation

The Company records compensation expense associated
    with stock options and restricted stock in accordance with SFAS No. 123(R), Share-Based
    Payment.
The Company adopted the modified prospective application method provided for
under SFAS 123(R) and consequently did not retroactively adjust results from
prior periods. Under this transition method, compensation cost associated with
stock options and awards recognized in the fiscal years ended July 31, 2008,
2007 and 2006, includes: (a) compensation cost of all stock-based payments
granted prior to, but not yet vested as of July 31, 2005 (based on grant-date
fair value estimated in accordance with the original provisions of SFAS No.
123(R), and (b) compensation cost for all stock-based payments granted
on or after  August 1, 2005 (based on the grant-date fair value estimated in
accordance with the new provision of SFAS No. 123(R)).

F-13

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

For the years ended July 31, 2008, 2007 and 2006, share-based
compensation expense relating to the fair value of restricted shares and
restricted stock units vested during the years ended July 31, 2008, 2007 and
2006 was approximately $1,316,000, $649,000, and $172,000, respectively (see
Note 11). No excess tax benefits were recognized for the year ended July 31,
2008, 2007 and 2006.

The following table sets forth the amount of expense related to
share-based payment arrangements included in specific line items in the
accompanying Statement of operations for the years ended July 31:

|                                     |  |      |       |      |   |       |  |   |       | 
|------------------------------------ |  | ---- | ----- | ---- | - | ----- |  | - | ----- | 
|In 000s                             |  | 2008 |       | 2007 |   | 2006  | 
|                                     |  |      |       |      |   |       | 
|Cost of products                     |  | $    | 14    |      | $ | 10    |  | $ | 21    | 
|Research and
 development            |  |      | 97    |      |   | 162   |  |   | 249   | 
|Selling, general
 and administrative |  |      | 1,455 |      |   | 1,305 |  |   | 1,493 | 
|                                     |  |      |       |      |   |       |  |   |       | 
|                                     |  | $    | 1,566 |      | $ | 1,477 |  | $ | 1,763 | 
|                                     |  |      |       |      |   |       |  |   |       | 

As of July 31, 2008, there was $1.9 million of total unrecognized
compensation cost related to nonvested share-based payment arrangements granted
under the Companys stock option and restricted stock plans, which will be
recognized over a weighted average remaining life of approximately 1.75 years.

Effect of new accounting pronouncements

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 is intended to
improve financial reporting by identifying a consistent framework, or
hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with generally accepted
accounting principles. SFAS No. 162 will become effective 60 days following the
SECs approval of the Public Company Accounting Oversight Board amendments to
AU Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company does not anticipate the adoption
of SFAS No. 162 will have a material impact on its results of operations, cash
flows or financial condition.

In April 2008, the FASB issued
FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP
FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No.142, Goodwill and
Other Intangible Assets. FSP FAS 142-3 also requires expanded disclosure
related to the determination of intangible asset useful lives. FSP FAS 142-3 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The Company
is currently evaluating the impact that the adoption of FSP FAS 142-3 will have
on its consolidated results of operation, cash flows or financial condition.

In December 2007, the FASB issued Statement No. 141 (revised
2007),Business Combinations (SFAS No. 141R). SFAS No. 141R establishes
principles and requirements for how the acquirer in a business combination
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any controlling interest in the business and
the goodwill acquired. SFAS No. 141R further requires that acquisition-related
costs and costs associated with restructuring or exiting activities of an
acquired entity will be expensed as incurred SFAS No. 141R also establishes
disclosure requirements that will require disclosure of the nature and
financial effects of the business combination. SFAS No. 141R will impact
business combinations for the Company that may be completed on or after August
1, 2009. The Company cannot anticipate whether the adoption of SFAS No. 141R
will have a material impact on its results of operations and financial condition
as the impact is solely dependent on the terms of any business combination
entered into by the Company on or after August 1, 2009.

F-14

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

In September 2006, the FASB issued Statement No. 157, Fair
    Value Measurements (SFAS 157) which defines fair value,
    establishes a framework for measuring fair value, and expands disclosures
    about fair value measurements. In February 2008, the FASB issued FASB Staff
    Position (FSP) No. 157-2, delaying the effective date of SFAS 157 for nonfinancial
    assets and nonfinancial liabilities, except for items that are recognized
    or disclosed at fair value on a nonrecurring basis. The delayed portions
    of SFAS 157 will be adopted by the Company beginning in its fiscal year ending
    August 1, 2009, while all other portions of the standard will be adopted
    by the Company beginning in its fiscal year ending August 1, 2008, as required.
    The Company does not expect that the adoption SFAS 157 will have a material
    impact on its consolidated results of operations, cash flows or financial
    condition.

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

Reclassifications

Certain amounts in prior years have been reclassified to conform to
current year presentation. In Fiscal 2007, the Company reclassified shipping
and handling cost previously included in selling, general and administrative
expense to cost of sales. The shipping and handling costs reclassed were
approximately $226,000 for the year ended July 31, 2006.

NOTE 2 - Acquisitions

Biomol International, L.P.

On May 8, 2008, Enzo Life Sciences, Inc. acquired substantially all of
the U.S. based assets and certain liabilities of Biomol International, LP
(Biomol LP) through a newly formed US subsidiary Biomol International, Inc.
and all of the stock of Biomols wholly-owned United Kingdom subsidiary,
Affinity Limited by Axxora UK, a wholly-owned subsidiary of Enzo Life Sciences,
collectively referred to as Biomol for approximately $18.1 million in cash
and stock, subject to adjustment, exclusive of acquisition costs of
approximately $800,000 and contingent payments which will be accounted for as
additional purchase consideration over the next two years if and when the
contingencies are resolved beyond a reasonable doubt. At closing, the purchase
price was satisfied as follows: $12.9 million in cash was paid to Biomol LP,
issuance of 352,000 shares of Enzo common stock, at fair market value, to
Biomol LP, $1.5 million in cash was paid to an escrow agent for the one-year
period following the closing to satisfy any indemnification obligations of the
sellers under the Agreement and $550,000 was paid to an escrow agent, for the
60 day period following the closing to satisfy any specified purchase price adjustments.
The $550,000 was released by the escrow agent in August 2008. The earn-outs of
$2.5 million on each of the next two anniversaries of the acquisition date will
be based on attaining certain revenue targets and EBITDA, as defined. Biomol
was a privately owned, closely held global manufacturer and marketer of
specialty life sciences research products.

F-15

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

Effective May 8, 2008, Biomol became a wholly-owned subsidiary of Enzo
Life Sciences. The acquisition was financed with the Companys cash and cash
equivalents and Enzo common stock. The consolidated financial statements
presented herein include the results of operations for Biomol from the date of
acquisition.

The following table presents the estimated fair values of the
assets acquired and liabilities assumed (in thousands):

|                          |  |   |        | 
|------------------------- |  | - | ------ | 
|Current assets            |  | $ | 5,167  | 
|Property and
 equipment   |  |   | 694    | 
|Other assets              |  |   | 18     | 
|                          |  |   |        | 
|Intangible assets         |  |   | 8,035  | 
|                          |  |   |        | 
|Goodwill                  |  |   | 6,659  | 
|                          |  |   |        | 
|                          |  |   |        | 
|Total assets acquired     |  |   | 20,573 | 
|                          |  |   |        | 
|Less:                     |  |   |        | 
|                          |  |   |        | 
|Current
 liabilities      |  |   | 1,100  | 
|Deferred tax
 liabilities |  |   | 609    | 
|                          |  |   |        | 
|Total liabilities assumed |  |   | 1,709  | 
|                          |  |   |        | 
|                          |  |   |        | 
|Net assets
 acquired      |  | $ | 18,864 | 
|                          |  |   |        | 

The preliminary purchase price allocation is based
    on a valuation of acquired tangible and intangible assets and will be adjusted
    based on the final valuations to be completed in fiscal 2009. The Company
    determined the estimated fair value of the identifiable intangible assets
    based on various factors including: cost, discounted cash flow and relief
    from royalty approaches in determining the purchase price allocation. The
    excess of the total purchase price over the fair value of the net assets
    acquired, including the estimated fair value of the identifiable intangible
    assets, has been allocated to goodwill.

Axxora Life Sciences, Inc.

On May 29, 2007, Enzo Life Sciences entered into a Stock Purchase
Agreement (the Agreement), by and among Enzo Life Sciences, Axxora and the stockholders,
option holders and warrant holders of Axxora who own all of the issued and
outstanding capital stock, options and warrants, respectively, of Axxora
(collectively, the Security holders). Pursuant to the Agreement,
Enzo Life Sciences purchased all of the issued and outstanding capital stock
of Axxora from the Security holders for an aggregate purchase price of $16,322,000,
exclusive of acquisition costs of $1,023,000, $475,000 previously advanced to
Axxora to repay outstanding debt, and acquired cash of $881,000, which is
included in current assets below. Effective May 31, 2007, Axxora became a wholly-owned
subsidiary of Enzo Life Sciences. The acquisition was financed with the Companys cash and cash
equivalents. The consolidated financial statements presented herein include the
results of operations for Axxora from the date of acquisition.

F-16

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

The following table presents the fair values of the assets acquired and
liabilities assumed (in thousands):

|                          |  |   |        | 
|------------------------- |  | - | ------ | 
|Current assets            |  | $ | 9,033  | 
|Property and
 equipment   |  |   | 360    | 
|Other assets              |  |   | 82     | 
|Intangible assets         |  |   | 8,220  | 
|Goodwill                  |  |   | 6,470  | 
|                          |  |   |        | 
|Total assets acquired     |  |   | 24,165 | 
|                          |  |   |        | 
|Less:                     |  |   |        | 
|Current
 liabilities      |  |   | 3,919  | 
|Deferred tax
 liabilities |  |   | 2,426  | 
|                          |  |   |        | 
|Total liabilities assumed |  |   | 6,345  | 
|                          |  |   |        | 
|                          |  |   |        | 
|Net assets
 acquired      |  | $ | 17,820 | 
|                          |  |   |        | 

The purchase price allocation is based on a valuation
    of acquired intangible assets based on the final valuation completed in fiscal
    2008. The Company determined the fair value of the identifiable intangible
    assets based on various factors including: cost, discounted cash flow and
    relief from royalty approaches in determining the purchase price allocation.
    The excess of the total purchase price over the fair value of the net assets
    acquired, including the estimated fair value of the identifiable intangible
assets, has been allocated to goodwill.

On March 7, 2008, Axxora acquired 100% of the outstanding stock of a
distributor of life science products in Belgium for a total consideration of
approximately $229,000 in cash, net of cash acquired, including transaction
costs. Liabilities assumed aggregated $369,000. Prior to the acquisition, the
acquired company was a distributor of Enzo Life Sciences products as well as
other unrelated manufacturers. The Company recorded goodwill of $232,000 and
intangibles for customer relationships of $174,000 related to this acquisition.
The consolidated financial statements presented herein include the results of
operations for the acquired company from the date of acquisition. For financial
reporting purposes, useful lives for the Biomol and Axxora acquisition have
been assigned as follows:

|Customer
 relationships | 8 -15 years
|----------------------- | -----------
|Trademarks              | Indefinite 
|Other intangibles       | 4-5 years  

The following unaudited pro forma financial information
    presents the combined results of operations of the Company and acquisitions
    completed in 2008 and 2007 as if the acquisitions had occurred as of August
    1, 2006. The pro forma financial information reflects appropriate adjustments
    for amortization of intangible assets and interest expense. The pro forma
    financial information presented is not necessarily indicative of either the
    actual consolidated operating results had the acquisition been completed
    at the beginning of each period or future operating results of the consolidated
    entities.

|                            |  |                     |        |      |   |         |  
|--------------------------- |  | ------------------- | ------ | ---- | - | ------- | -
|                            |  | Year Ended July 31, |       
|                            |  |                     |       
|                            |  | 2008                |        | 2007 |  
|                            |  |                     |        |      |  
|Net revenues                |  | $                   | 86,922 |      | $ | 77,939  |  
|Net loss                    |  | $                   | (9,574 | )    | $ | (13,895 | )
|Net loss per
 common share: |  |                     |        |      |   |         |  
|Basic and diluted           |  | $                   | (.26   | )    | $ | (0.39   | )

F-17

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

Note 3- Supplemental disclosure for statement
of cash flows

In the years ended July 31, 2008, 2007, and 2006, net income taxes
(refunded to) or paid by the Company approximated $233,000, ($1,670,000), and
$1,374,000 respectively.

In fiscal 2008, certain officers and a director of the Company
exercised 220,158 stock options in non-cash transactions. The officers and
director surrendered 181,263 previously owned shares of the Companys common
stock to exercise the stock options. The Company recorded approximately $2.4
million, the market value of surrendered shares, as treasury stock.

In fiscal 2007, certain officers of the Company exercised 43,112 stock
options in non-cash transactions. The officers surrendered 26,756 shares of
previously owned shares of the Companys common stock to exercise the stock
options. The Company recorded approximately $0.4 million, the market value of
the surrendered shares, as treasury stock.

In fiscal 2006, certain officers of the Company exercised 227,800 stock
options in non-cash transactions. The officers surrendered 185,300 shares of
previously owned shares of the Companys common stock to exercise the stock
options. The Company recorded approximately $2.5 million, the market value of
the surrendered shares, as treasury stock.

Note 4  Marketable securities

The Company had no investments in marketable securities at July 31,
2008 or 2007.

Note 5  Accumulated Other Comprehensive
Income (Loss)

The following is a summary of accumulated other comprehensive loss,
relating to the effect of foreign currency translation:

|                                                    |  |                                        |       |                            |   |                                        |  |   |       |  
|--------------------------------------------------- |  | -------------------------------------- | ----- | -------------------------- | - | -------------------------------------- |  | - | ----- | -
|In 000s                                            |  | Accumulated
 income
 (loss) before tax |       | Tax
 (expense)
 or benefit |   | Accumulated
 income
 (loss) net of tax | 
|                                                    |  |                                        |       |                            |   |                                        | 
|Balance  July 31,
 2005                            |  |                                        | (131  | )                          |   |                                       |  |   | (131  | )
|Fiscal 2006 
 realized losses, net                 |  |                                        | 131   |                            |   |                                       |  |   | 131   |  
|                                                    |  |                                        |       |                            |   |                                        |  |   |       |  
|Balance - July 31,
 2006                            |  |                                        |      |                            |   |                                       |  |   |      |  
|Fiscal 2007  gain
 on foreign currency translation |  |                                        | 42    |                            |   |                                       |  |   | 42    |  
|                                                    |  |                                        |       |                            |   |                                        |  |   |       |  
|Balance - July 31,
 2007                            |  | $                                      | 42    |                            | $ |                                       |  | $ | 42    |  
|Fiscal 2008  gain
 on foreign currency translation |  |                                        | 1,544 |                            |   |                                       |  |   | 1,544 |  
|                                                    |  |                                        |       |                            |   |                                        |  |   |       |  
|Balance  July 31,
 2008                            |  | $                                      | 1,586 |                            | $ |                                       |  | $ | 1,586 |  
|                                                    |  |                                        |       |                            |   |                                        |  |   |       |  

Note 6 - Inventories

At July 31, 2008 and 2007 inventories, net of reserves of $637,000 and
$379,000, respectively, consist of:

|                  |  |      |       |      |   |       | 
|----------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s          |  | 2008 |       | 2007 |  
|                  |  |      |       |      |  
|Raw materials     |  | $    | 341   |      | $ | 34    | 
|Work in process   |  |      | 899   |      |   | 1,221 | 
|Finished products |  |      | 8,274 |      |   | 5,767 | 
|                  |  |      |       |      |   |       | 
|                  |  |      |       |      |   |       | 
|                  |  | $    | 9,514 |      | $ | 7,022 | 
|                  |  |      |       |      |   |       | 

F-18

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2008 and 2007

Note 7  Property, plant, and equipment

At July 31, 2008 and 2007 property, plant, and equipment consist of:

|                                           |  |      |         |      |   |         |  
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- | -
|In 000s                                   |  | 2008 |         | 2007 |  
|                                           |  |      |         |      |  
|Building and
 building improvements        |  | $    | 4,785   |      | $ | 3,053   |  
|Laboratory
 machinery and equipment        |  |      | 3,616   |      |   | 2,967   |  
|Office furniture
 and computer equipment   |  |      | 8,417   |      |   | 7,506   |  
|Leasehold
 improvements                    |  |      | 4,281   |      |   | 3,211   |  
|                                           |  |      |         |      |   |         |  
|                                           |  |      | 21,099  |      |   | 16,737  |  
|Accumulated
 depreciation and amortization |  |      | (12,758 | )    |   | (10,828 | )
|                                           |  |      |         |      |   |         |  
|                                           |  |      | 8,341   |      |   | 5,909   |  
|Land and land
 improvements                |  |      | 712     |      |   | 712     |  
|                                           |  |      |         |      |   |         |  
|                                           |  | $    | 9,053   |      | $ | 6,621   |  
|                                           |  |      |         |      |   |         |  

Note 8  Goodwill and intangible assets

The Companys change in the net carrying amount of goodwill by business
segment is as follows (in thousands):

| |                               |  |                      |        |                      |   |       |  |   |        | 
| | ----------------------------- |  | -------------------- | ------ | -------------------- | - | ----- |  | - | ------ | 
| |                               |  | Enzo
 Life
 Sciences |        | Enzo
 Clinical
 Labs |   | Total | 
| |                               |  |                      |        |                      |   |      
| | August 1, 2006                |  | $                    |       |                      | $ | 7,452 |  | $ | 7,452  | 
| | Acquisition see Note 2       |  |                      | 6,224  |                      |   |      |  |   | 6,224  | 
| |                               |  |                      |        |                      |   |       |  |   |        | 
| | July 31, 2007                 |  |                      | 6,224  |                      |   | 7,452 |  |   | 13,676 | 
| | Acquisitions  see Note 2     |  |                      | 7,137  |                      |   |      |  |   | 7,137  | 
| | Foreign currency
 translation |  |                      | 508    |                      |   |      |  |   | 508    | 
| |                               |  |                      |        |                      |   |       |  |   |        | 
| | July 31, 2008                 |  | $                    | 13,869 |                      | $ | 7,452 |  | $ | 21,321 | 
| |                               |  |                      |        |                      |   |       |  |   |        | 

Intangible assets, all of which are included in the Life Science
segment, consist of the following (in thousands):

|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|------------------------------------- |  | -------------- | ------ | ------------------------- | - | ------- | - | ----- | ------ | ------------------------- | - | ------ |  | - | ------ | - | - | ----- | 
|                                      |  | July
 31, 2008 |        | July
 31, 2007            |  
|                                      |  |                |        |                           |  
|                                      |  | Gross          |        | Accumulated
 Amortization |   | Net     |   | Gross |        | Accumulated
 Amortization |   | Net    | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        | 
|Finite-lived intangible assets:       |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Patents                               |  | $              | 11,027 |                           | $ | (9,929  | ) | $     | 1,098  |                           | $ | 11,027 |  | $ | (9,849 | ) | $ | 1,178 | 
|Customer relationships                |  |                | 8,314  |                           |   | (392    | ) |       | 7,922  |                           |   | 3,890  |  |   | (36    | ) |   | 3,854 | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Non-compete and employment agreements |  |                | 481    |                           |   | (126    | ) |       | 355    |                           |   | 360    |  |   | (15    | ) |   | 345   | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Website and acquired content          |  |                | 984    |                           |   | (117    | ) |       | 867    |                           |   | 270    |  |   | (9     | ) |   | 261   | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Licensed technology and other         |  |                | 737    |                           |   | (29     | ) |       | 708    |                           |   |        |  |   |        |   |   |       | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Indefinitely-lived intangible assets: |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Trademarks                            |  |                | 6,706  |                           |   |        |   |       | 6,706  |                           |   | 3,700  |  |   |       |   |   | 3,700 | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 
|Total                                 |  | $              | 28,249 |                           | $ | (10,593 | ) | $     | 17,656 |                           | $ | 19,247 |  | $ | (9,909 | ) | $ | 9,338 | 
|                                      |  |                |        |                           |   |         |   |       |        |                           |   |        |  |   |        |   |   |       | 

F-19

---



Estimated amortization expense related to these finite-lived intangible
assets for the five succeeding fiscal years ending July 31 is as follows (in
thousands):

| |      |  |   |       | 
| | ---- |  | - | ----- | 
| | 2009 |  | $ | 1,077 | 
| | 2010 |  |   | 1,036 | 
| | 2011 |  |   | 1,002 | 
| | 2012 |  |   | 918   | 
| | 2013 |  |   | 837   | 

At July 31, 2008, the weighted average useful lives
of amortizable intangible assets was approximately 11 years.

Amortization expense for the years ended July 31, 2008, 2007, and 2006
was $658,000, $151,000, and $75,000, respectively.

Note 9 - Income taxes

The Company accounts for income taxes under the provisions of SFAS 109.
The (provision) benefit for income taxes is as follows:

|                                      |  |      |      |      |   |      |   |   |       |  
|------------------------------------- |  | ---- | ---- | ---- | - | ---- | - | - | ----- | -
|Fiscal year ended July 31, (in 000s) |  | 2008 |      | 2007 |   | 2006 |  
|                                      |  |      |      |      |   |      |  
|Current (provision) benefit:          |  |      |      |      |   |      |   |   |       |  
|Federal                               |  | $    |     |      | $ |     |   | $ | 2,047 |  
|State and local                       |  |      | (320 | )    |   | (261 | ) |   | (65   | )
|Foreign                               |  |      | (85  | )    |   | (2   | ) |   |      |  
|Deferred benefit (provision)          |  |      | 644  |      |   | 178  |   |   | (640  | )
|                                      |  |      |      |      |   |      |   |   |       |  
|(Provision) benefit for income taxes  |  | $    | 239  |      | $ | (85  | ) | $ | 1,342 |  
|                                      |  |      |      |      |   |      |   |   |       |  

Deferred tax assets and liabilities arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts in
the financial statements. The components of deferred tax assets (liabilities)
as of July 31, 2008 and 2007 are as follows:

|                                                                  |  |                |         |                |   |        |  
|----------------------------------------------------------------- |  | -------------- | ------- | -------------- | - | ------ | -
|In 000s                                                          |  | July
 31, 2008 |         | July
 31, 2007 |  
|                                                                  |  |                |         |                |  
|Deferred tax assets:                                              |  |                |         |                |   |        |  
|Federal tax carryforward losses                                   |  | $              | 10,693  |                | $ | 6,941  |  
|Provision for uncollectible accounts
 receivable                  |  |                | 309     |                |   | 531    |  
|State and local tax carry forward
losses                          |  |                | 1,478   |                |   | 1,543  |  
|Accrued royalties                                                 |  |                | 456     |                |   | 543    |  
|Stock compensation                                                |  |                | 505     |                |   | 279    |  
|Depreciation                                                      |  |                | 46      |                |   | 73     |  
|Research and development and other tax
 credit carryforwards      |  |                | 530     |                |   | 460    |  
|Realized and unrealized losses on
 marketable securities          |  |                | 138     |                |   | 138    |  
|Other, net                                                        |  |                | 236     |                |   | 198    |  
|                                                                  |  |                |         |                |   |        |  
|Gross deferred tax assets                                         |  |                | 14,391  |                |   | 10,706 |  
|                                                                  |  |                |         |                |   |        |  
|                                                                  |  |                |         |                |   |        |  
|Deferred tax liabilities:                                         |  |                |         |                |   |        |  
|Deferred patent costs                                             |  |                | (252    | )              |   | (271   | )
|Inventory                                                         |  |                | (265    | )              |   | (325   | )
|Intangibles                                                       |  |                | (3,039  | )              |   | (2,409 | )
|Prepaid expenses                                                  |  |                | (686    | )              |   | (552   | )
|Other, net                                                        |  |                | (75     | )              |   | (90    | )
|                                                                  |  |                |         |                |   |        |  
|Gross deferred tax liabilities                                    |  |                | (4,317  | )              |   | (3,647 | )
|                                                                  |  |                |         |                |   |        |  
|Net deferred tax assets (liabilities)
 before valuation allowance |  |                | 10,074  |                |   | 7,059  |  
|Less: valuation allowance                                         |  |                | (12,965 | )              |   | (9,385 | )
|                                                                  |  |                |         |                |   |        |  
|Net deferred tax assets (liabilities)                             |  | $              | (2,891  | )              | $ | (2,326 | )
|                                                                  |  |                |         |                |   |        |  

At July 31, 2008, the Company had net deferred tax
    liabilities of approximately $2,891,000 which consists primarily of identifiable
    intangible assets, inventory valuation differences and cumulative tax deductions
    in excess of book expenses recognized by foreign subsidiaries attributed
to Axxora and Biomol LP (see Note 2).

F-20

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

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

|                |  |                |       |                |   |       | 
|--------------- |  | -------------- | ----- | -------------- | - | ----- | 
|                |  | July
 31, 2008 |       | July
 31, 2007 |  
|                |  |                |       |                |  
|Deferred taxes: |  |                |       |                |   |       | 
|Current         |  | $              | 458   |                | $ | 597   | 
|Non-current     |  |                | 2,433 |                |   | 1,729 | 
|                |  |                |       |                |   |       | 
|                |  | $              | 2,891 |                | $ | 2,326 | 
|                |  |                |       |                |   |       | 

Pursuant to SFAS 109, the Company recorded a valuation allowance during
the year ended July 31, 2008 and 2007 equal to domestic and certain foreign net
deferred tax assets. The Company believes that the valuation allowance is
necessary as it is not more likely than not that the deferred tax assets will
be realized in the foreseeable future based on positive and negative evidence
available at this time. This conclusion was reached because of uncertainties
relating to future taxable income, in terms of both its timing and its sufficiency,
which would enable the Company to realize the deferred tax assets.

As of July 31, 2008, the Company had U.S. federal
    net operating loss carryforwards of approximately $30.0 million. The U.S.
    federal tax loss carryforwards, if not fully utilized, expire between 2011
    and 2028. Utilization is dependent on generating sufficient taxable income
    prior to expiration of the tax loss carryforwards. As of July 31, 2008, the
    Company has state and local tax loss carryforwards of approximately $39.7
million.

As a result of the acquisition described in Note 2  Axxora
Acquisition, approximately $1.4 million of the Companys U.S. federal net
operating loss carryforwards are subject to an annual limitation under Internal
Revenue Code Section 382 due to the ownership change. However, management does
not believe that such a change would have a significant impact on the Companys
ability to utilize its tax loss carryforwards.

The components of (loss) income before income taxes consisted of the
following for the years ended July 31:

|                            |  |      |         |      |   |         |   |   |         |  
|--------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|                            |  | 2008 |         | 2007 |   | 2006    |  
|                            |  |      |         |      |   |         |  
|United States
 operations   |  | $    | (9,605  | )    | $ | (12,595 | ) | $ | (17,009 | )
|International
 operations   |  |      | (1,287  | )    |   | (580    | ) |   |        |  
|                            |  |      |         |      |   |         |   |   |         |  
|(Loss) income
 before taxes |  | $    | (10,892 | )    | $ | (13,175 | ) | $ | (17,009 | )
|                            |  |      |         |      |   |         |   |   |         |  

The benefit (provision) for income taxes were at rates
different from U.S. federal statutory rates for the following reasons:

|                                                                        |  |      |       |      |  |      |    |  |     |   
|----------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | -- |  | --- | --
|Year ended July 31,                                                     |  | 2008 |       | 2007 |  | 2006 |   
|                                                                        |  |      |       |      |  |      |   
|Federal
          statutory rate                                        |  |      | 34    | %    |  | 34   | %  |  | 34  | % 
|Expenses
          not deductible for income tax return purposes        |  |      | (1.1  | %)   |  | (3   | %) |  | (4  | %)
|State
          income taxes, net of (benefit) of federal tax deduction |  |      | 1.4   | %    |  | (1   | %) |  | 5   | % 
|Change
          in valuation allowance                                 |  |      | (32.9 | %)   |  | (30  | %) |  | (28 | %)
|Other                                                                   |  |      | .8    | %    |  | (1   | %) |  | 1   | % 
|                                                                        |  |      |       |      |  |      |    |  |     |   
|                                                                        |  |      | 2.2   | %    |  | (1   | %) |  | 8   | % 
|                                                                        |  |      |       |      |  |      |    |  |     |   

U.S. federal income taxes have not been provided on the undistributed
earnings of approximately $244,000 at July 31, 2008 of the Companys foreign
subsidiaries, because the determination of the amount of unrecognized US income
tax liability with respect to such earnings is not practicable.

The Company adopted the provisions of FIN 48 on August 1, 2007. The
cumulative effect of adopting FIN 48 did not have a material impact on the
Companys financial position or results of operations. A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows:

|                                                    |  |   |         |  
|--------------------------------------------------- |  | - | ------- | -
|Balance at August
 1, 2007                          |  | $ | 261,014 |  
|Additions for tax
 positions related to prior years |  |   | 91,335  |  
|Tax audit
 settlements                              |  |   | (61,335 | )
|                                                    |  |   |        
|Balance at July
 31, 2008                           |  | $ | 291,014 |  
|                                                    |  |   |         |  

F-21

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Approximately, $157,000 of the FIN 48 liability at July 31, 2008 which
relates to acquisition described in Note 2  Axxora Acquisition can be
completely reduced within the next two months with the lapse of the statute of
limitations. The amount, if recognized, would not affect the Companys
effective tax rate.

Interest and penalties related to income tax liabilities
    are included in income tax expense. During the fiscal year ended July 31,
    2008, the Company recognized a net increase of approximately $29,000. The
    Company has accrued approximately $68,000 for the payment of interest and
    penalties as of July 31, 2008 and had accrued approximately $39,000 for the
    payment of interest at August 1, 2007 upon the adoption of FIN 48.

The Company files income tax returns in the U.S. Federal jurisdiction,
various U.S. state jurisdictions and several foreign jurisdictions. With few
exceptions, the years that remain subject to examination are fiscal July 31,
2005 through fiscal 2007.

Note 10  Accrued Liabilities and Other
Current Liabilities

At July 31, 2008 and 2007, accrued liabilities consist of:

|                                                                  |  |      |       |      |   |       | 
|----------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s                                                          |  | 2008 |       | 2007 |  
|                                                                  |  |      |       |      |  
|Legal                                                             |  | $    | 1,702 |      | $ | 4,542 | 
|Payroll, benefits,
 and commissions                               |  |      | 1,989 |      |   | 1,417 | 
|Research and
 development                                         |  |      | 1,200 |      |   | 344   | 
|Professional fees                                                 |  |      | 584   |      |   | 986   | 
|Outside reference
 lab testing                                    |  |      | 46    |      |   | 276   | 
|Other                                                             |  |      | 1,849 |      |   | 881   | 
|                                                                  |  |      |       |      |   |       | 
|                                                                  |  | $    | 7,370 |      | $ | 8,446 | 
|                                                                  |  |      |       |      |   |       | 
|                                                                  |  |      |       |      |   |       | 
|At July 31, 2008
 and 2007, other current liabilities consist of: |  |      |       |      |   |       | 
|                                                                  |  |      |       |      |   |       | 
|In 000s                                                          |  | 2008 |       | 2007 |  
|                                                                  |  |      |       |      |  
|Deferred revenue                                                  |  | $    | 1,089 |      | $ | 770   | 
|Other                                                             |  |      | 72    |      |   | 517   | 
|                                                                  |  |      |       |      |   |       | 
|                                                                  |  | $    | 1,161 |      | $ | 1,287 | 
|                                                                  |  |      |       |      |   |       | 

Note 11  Stockholders equity

Common stock offerings

During fiscal 2007, the Company entered into two Placement Agent
Agreements with Lazard Capital Markets LLC, as exclusive placement agent,
relating to registered direct offerings (Offerings) of shares of the
Companys common stock. In December 2006, the Company entered into a definitive
Subscription Agreement with various institutional investors relating to the
sale of an aggregate of 3,285,715 shares of common stock for a purchase price
of $14.00 per share. Net proceeds from the Offering aggregating $42.9 million,
net of placement fees and financing costs of $3.1 million, were credited to
common stock and additional paid-in capital. In February 2007, the Company
entered into the second definitive Subscription Agreement with an investor for
the sale of an aggregate of 1,000,000 shares of common stock for a purchase
price of $15.00 per share. Net proceeds from this Offering aggregated $14.1
million, net of placement fees and financing costs of $0.9 million, and were
credited to common stock and additional paid in capital. The Company filed
prospectus supplements with the SEC relating to the Offerings under a
Registration Statement filed and supplement thereto.

Treasury stock

In fiscal 2008, certain officers and a director of the Company
exercised 220,158 stock options in a non-cash transaction. The officers and
director surrendered 181,263 previously owned shares of the Companys common
stock to exercise the stock options. The Company recorded approximately $2.4
million, the market value of surrendered shares, as treasury stock.

In fiscal 2007, certain officers of the Company exercised 43,112 stock options in a
non-cash transaction. The officers surrendered 26,756 shares of previously
owned shares of the Companys common stock to exercise the stock options. The
Company recorded approximately $0.4 million, the market value of the
surrendered shares, as treasury stock.

F-22

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

In fiscal 2006, certain officers of the Company exercised 227,800 stock
options in a non-cash transaction. The officers surrendered 185,300 shares of
previously owned shares of the Companys common stock to exercise the stock
options. The Company recorded approximately $2.5 million, the market value of
the surrendered shares, as treasury stock.

Incentive stock option plans

The Company has incentive stock option plans (the 1994 Plan and 1999
Plan) and an incentive stock option and restricted stock award plan (the 2005
Plan), collectively the Plans, under which the Company may grant options for
up to 1,336,745 common shares under the 1994 plan, options for up to 2,312,356
common shares under the 1999 Plan and options and restricted stock awards for
up to 1,000,000 common shares under the 2005 Plan. No additional options may be
granted under the 1994 Plan. 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 non statutory options. Stock options generally
become exercisable at 25% per year after one year and expire ten years after
the date of grant. The 2005 Plan provides for the issuance of restricted stock
and restricted stock unit awards which generally vest over a two to four year
period.

As of July 31, 2008, there were approximately 588,000 shares available
for grant under the Companys 1999 and 2005 Plans.

A summary of the information
pursuant to the Companys stock option plans for the years ended July 31, 2008,
2007, and 2006 is as follows:

|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       |  |  |           |   |   |       | 
|----------------------------------------------------------- |  | ------- | --------- | ------------------------------------- | - | ------- |  | ------------------------------------- | --------- | ------- | - | ------------------------------------- |  |  | --------- | - | - | ----- | 
|                                                            |  | 2008    |           | 2007                                  |   | 2006    | 
|                                                            |  |         |           |                                       |   |         | 
|                                                            |  | Options |           | Weighted
 -
 Average
 Exercise
 Price |   | Options |  | Weighted
 -
 Average
 Exercise
 Price |           | Options |   | Weighted
 -
 Average
 Exercise
 Price | 
|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       | 
|Outstanding at beginning of year                            |  |         | 2,700,457 |                                       | $ | 13.32   |  |                                       | 2,877,727 |         | $ | 13.20                                 |  |  | 3,154,125 |   | $ | 12.61 | 
|Granted                                                     |  |         |          |                                       | $ |         |  |                                       | 27,761    |         | $ | 17.06                                 |  |  | 100,000   |   | $ | 24.84 | 
|Exercised                                                   |  |         | (267,345  | )                                     | $ | 10.80   |  |                                       | (95,525   | )       | $ | 9.60                                  |  |  | (285,030  | ) | $ | 10.93 | 
|Cancelled                                                   |  |         | (157,697  | )                                     | $ | 20.42   |  |                                       | (109,506  | )       | $ | 14.36                                 |  |  | (91,368   | ) | $ | 12.61 | 
|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       |  |  |           |   |   |       | 
|Outstanding at end of year                                  |  |         | 2,275,415 |                                       | $ | 13.13   |  |                                       | 2,700,457 |         | $ | 13.32                                 |  |  | 2,877,727 |   | $ | 13.20 | 
|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       |  |  |           |   |   |       | 
|Exercisable at end of year                                  |  |         | 2,250,483 |                                       | $ | 13.12   |  |                                       | 2,670,680 |         | $ | 13.32                                 |  |  | 2,554,148 |   | $ | 12.78 | 
|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       |  |  |           |   |   |       | 
|Weighted average fair value of options
 granted during year |  |         |           |                                       | $ |        |  |                                       |           |         | $ | 4.42                                  |  |  |           |   | $ | 1.01  | 
|                                                            |  |         |           |                                       |   |         |  |                                       |           |         |   |                                       |  |  |           |   |   |       | 

The aggregate intrinsic value of stock options exercised during the
years ended July 31, 2008, 2007 and 2006, including the non-cash transactions
(see Note 3) was $0.7 million, $0.7 million and $0.9 million, respectively. The
aggregate intrinsic value of options both outstanding and exercisable at July
31, 2008 is approximately $5.7 million.

F-23

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

The following table summarizes information for stock options
outstanding at July 31, 2008:

|                         |  |                      |           |                                                 |  |                                    |  |        |       |                                    |  |           |  |   |       | 
|------------------------ |  | -------------------- | --------- | ----------------------------------------------- |  | ---------------------------------- |  | ------ | ----- | ---------------------------------- |  | --------- |  | - | ----- | 
|                         |  | Options
 outstanding |           | Options
 exercisable                            | 
|                         |  |                      |           |                                                 | 
|Range of Exercise prices |  | Shares               |           | Weighted-
 Average
 Remaining
 Contractual Life |  | Weighted-
 Average Exercise
 Price |  | Shares |       | Weighted-
 Average
 Exercise Price | 
|                         |  |                      |           |                                                 |  |                                    |  |        |       |                                    | 
|$5.45-6.68               |  |                      | 248,908   |                                                 |  | 0.2 years                          |  | $      | 5.57  |                                    |  | 248,908   |  | $ | 5.57  | 
|$8.33-12.25              |  |                      | 1,133,312 |                                                 |  | 3.1 years                          |  | $      | 11.12 |                                    |  | 1,133,312 |  | $ | 11.12 | 
|$12.93-19.02             |  |                      | 813,318   |                                                 |  | 5.5 years                          |  | $      | 17.10 |                                    |  | 788,386   |  | $ | 17.20 | 
|$20.20-24.84             |  |                      | 61,644    |                                                 |  | 3 years                            |  | $      | 21.42 |                                    |  | 61,644    |  | $ | 21.42 | 
|$36.05                   |  |                      | 18,233    |                                                 |  | 1.5 years                          |  | $      | 36.05 |                                    |  | 18,233    |  | $ | 36.05 | 
|                         |  |                      |           |                                                 |  |                                    |  |        |       |                                    |  |           |  |   |       | 
|                         |  |                      | 2,275,415 |                                                 |  |                                    |  |        |       |                                    |  | 2,250,483 |  |   |       | 
|                         |  |                      |           |                                                 |  |                                    |  |        |       |                                    |  |           |  |   |       | 

During the year ended July 31, 2007, the Company granted 27,761 options
under a two year consulting arrangement with a former employee with an exercise
price of $17.06 which were fully vested at the inception of the arrangement.
The assumptions used to fair value this option grant as of May 2, 2007 were as
follows: risk free interest rate of 4.65%, expected term of 2 years, expected
volatility of 40%, and no dividend yield. The fair value of the options of
approximately $123,000 was recognized as an expense and included in selling,
general and administrative expense in the accompanying statement of operations
for the year ended July 31, 2007.

During the year ended July 31, 2006, the Company granted 100,000
options to a consultant with an exercise price of $24.84, which vest over six
months and have a two year term. The fair value of these options was $88,000.
The fair value of the options, which was accounted for as a variable
instrument, was fair valued and recognized as expense over the six month
vesting term. The assumptions used to fair value this option grant as of July
31, 2006 were as follows: risk free interest rate of 4.97%, expected term of 2
years, expected volatility of 49%, and no dividend yield. In connection with
the options issued to this consultant, the Company recognized an expense of
approximately $8,000 and $80,000 in selling, general and administrative expense
in the accompanying statements of operations for the years ended July 31, 2007
and 2006 respectively.

Restricted Stock Awards

During fiscal 2008, 2007 and 2006, the compensation committee of the
Companys board of directors approved grants of 160,140, 97,700 and 84,950 of
restricted stock and restricted stock unit awards (the Awards), respectively,
under the 2005 Plan to the Companys directors, certain officers and employees.
The Awards vest upon the recipients continued employment or director service
ratably over either two, three or four years. Share-based compensation expense
is recorded over the vesting period on a straight-line basis. The Awards will
be forfeited if the recipient ceases to be employed by or serve as a director
of the Company, as defined in the Award grants. The Awards settle in shares of
the Companys common stock on a one-for-one basis. As of July 31, 2008, 220,240
shares were unvested.

A summary of the information pursuant to the Companys Restricted Stock
Awards for the years ended July 31, 2008, 2007 and 2006 is as follows:

|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   |  |  |        |   |   |       | 
|------------------------------------------------------------ |  | ------ | ------- | --------------------------------- | - | ------ |  | --------------------------------- | ------- | ------ | - | --------------------------------- |  |  | ------ | - | - | ----- | 
|                                                             |  | 2008   |         | 2007                              |   | 2006   | 
|                                                             |  |        |         |                                   |   |        | 
|                                                             |  | Awards |         | Weighted
 -
 Average
 Award Price |   | Awards |  | Weighted
 -
 Average
 Award Price |         | Awards |   | Weighted
 -
 Average
 Award Price | 
|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   | 
|Outstanding at beginning of year                             |  |        | 141,062 |                                   | $ | 14.15  |  |                                   | 77,450  |        | $ | 12.21                             |  |  |       |   |   |      | 
|Awarded                                                      |  |        | 160,140 |                                   | $ | 11.42  |  |                                   | 97,700  |        | $ | 15.16                             |  |  | 84,950 |   | $ | 12.29 | 
|Vested                                                       |  |        | (70,962 | )                                 | $ | 13.55  |  |                                   | (25,913 | )      | $ | 12.34                             |  |  |       |   |   |      | 
|Forfeited                                                    |  |        | (10,000 | )                                 | $ | 14.73  |  |                                   | (8,175  | )      | $ | 13.60                             |  |  | (7,500 | ) | $ | 13.13 | 
|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   |  |  |        |   |   |       | 
|Outstanding at end of year                                   |  |        | 220,240 |                                   | $ | 12.34  |  |                                   | 141,062 |        | $ | 14.15                             |  |  | 77,450 |   | $ | 12.21 | 
|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   |  |  |        |   |   |       | 
|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   |  |  |        |   |   |       | 
|Weighted average market value of awards
 granted during year |  |        |         |                                   | $ | 11.42  |  |                                   |         |        | $ | 15.16                             |  |  |        |   | $ | 12.29 | 
|                                                             |  |        |         |                                   |   |        |  |                                   |         |        |   |                                   |  |  |        |   |   |       | 

F-24

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

Note 12 - Employee benefit plan

The Company has a qualified Salary Reduction Profit Sharing Plan (the
Plan) for eligible U.S. 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, 2008, 2007, and 2006, the Company
authorized employer matched contributions of 50% of the employees contribution
up to 10% of the employees compensation, payable in Enzo Biochem, Inc. common
stock. The 401(k) employer matched contributions expense was approximately
$481,000, $421,800, and $402,300, in fiscal years 2008, 2007, and 2006,
respectively.

The Companys Swiss operations provide a pension
    plan under the Swiss governments social security system for Swiss employees.
    Employees are required to contribute based on a formula and the Companys
    Swiss operations make contributions of at least 50% of the employee contribution.
    During the year ended July 31, 2008 and the two months ended July 31, 2007,
    the period after the acquisition of Axxora Life Sciences, Inc., the employer
    contributions related to the Swiss benefit pension plan was approximately
    $325,000 and $58,000 respectively.

Note 13  Royalty and other income

In fiscal 2007, The Company as plaintiff and Sigma Aldrich (Sigma)
entered into a Settlement Agreement and Release (the Settlement Agreement).
Pursuant to the Settlement Agreement, the Companys litigation with Sigma was
dismissed and the Company recognized a $2 million gain on patent litigation
settlement which is included in Other income in the accompanying statement of
operations for the year ended July 31, 2007 (see Note 16).

In fiscal 2007, the Company received a payment of approximately
$699,000 from Perkin Elmer Inc. (Perkin Elmer) for amounts due under a
Distribution Agreement (the Distribution Agreement) which terminated December
31, 2004. The Distribution Agreement is presently subject to a lawsuit for
breach of contract, patent infringement, unfair competition under state law,
unfair competition under federal law, tortuous interference with business
relations, and fraud in the inducement of contract (See Note 16). Perkin Elmer
advised in a letter to the Company that the payment was owed under the
Distribution Agreement and was delayed because of changes to their accounting
system and personnel changes and that it was always their intent to comply with
the Distribution Agreement. The Company advised Perkin Elmer that the payment
did not represent all amounts owed under the Distribution Agreement.
Accordingly, the payment is included in Other income in the accompanying
statement of operations for the year ended July 31, 2007.

In fiscal 2005, the Company as plaintiff finalized and executed a
settlement and license agreement with Digene Corporation to settle a patent
litigation lawsuit (the Agreement). Under the terms of the Agreement, the
Company received an initial payment of $16.0 million, would earn in the first
annual period (October 1, 2004 to September 30, 2005) a minimum royalty
payment of $2.5 million, and receive a minimum royalty of $3.5 million in each
of the next four annual periods. Digene Corporation was acquired by QIAGEN. The
license agreement with the Company was assigned to QIAGEN Gaithersburg Inc.
(Qiagen).

In addition, the Agreement provides for the Company to receive
quarterly running royalties on the net sales of Qiagen products subject to the
license until the expiration of the patent on April 24, 2018. These quarterly
running royalties are fully creditable against the minimum royalty payments due
in the first five years of the Agreement. The balance, if any, of the minimum
royalty payment is recognized in the final quarter of the applicable annual
royalty period. As a result of the Qiagen Agreement, the Company recorded a
gain on patent litigation settlement of $14.0 million during the year ended
July 31, 2005 and deferred $2 million, which was earned from net sales of the
Companys licensed products covered by the Agreement during the first annual
period. During the years ended July 31, 2008, 2007 and 2006, the Company
recorded royalty income under the Agreement of approximately $5.5 million, $4.7
million, and $3.1 million, respectively, which is included in the Life Sciences
segment.

F-25

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

Note 14 - Licensing and Supply Agreement:

On April 27, 2007 (the Effective Date)
    Enzo Life Sciences, Inc. (Life Sciences) and Abbott Molecular
    Inc. (Abbott) entered into a 5 year
agreement covering the supply of certain of Enzo Life Sciences products to
Abbott for use in their product line. The parties also entered into a limited
non-exclusive royalty bearing cross-licensing agreement (Licensing Agreement)
for various patents. The Licensing Agreement requires each party to pay
royalties, as defined through the lives of the related covered patents. In
connection with a component of the License Agreement, Abbott paid a one-time
fee of $1.5 million relating to a fully paid-up license and sublicense, as
defined. The one-time fee will be recognized as revenue over the longest expected
patent life. At July 31, 2008, the Companys balance sheet includes current
and non-current deferred revenue of approximately $0.4 and $0.5 million,
respectively, relating to the one-time fee. During the years ended July 31,
2008 and 2007, the Company recorded approximately $2.1 million and $1.0 million
in royalties and license fee income under the Licensing Agreement.

Note 15  Commitments

Leases

The Company leases equipment, office and laboratory space under several
non-cancelable operating leases that expire between September 2008 and March
2017. Certain leases include renewal options and rent escalation clauses. An
entity owned by certain executive officers/directors of the Company owns the
building that the Company leases as its main facility for laboratory operations
and certain research operations. In March 2005, the Company amended and
extended the lease for another 12 years. In addition to the minimum annual
rentals of space, the lease is subject to annual increases, based on the
consumer price index. Annual increases are limited to 3% per year. Rent
expense, inclusive of real estate taxes, under this renewed lease and the prior
lease approximated $1,395,000, $1,376,000, and $1,337,000 during fiscal years
2008, 2007, and 2006.

Total rent expense incurred by the Company during fiscal 2008, 2007 and
2006 was approximately $2,885,000, $2,510,000, and $2,257,000, respectively.
Minimum future annual rentals under non-cancelable operating leases as of July
31, 2008, are as follows:

|                      |  |           |        | 
|--------------------- |  | --------- | ------ | 
|Years
 ended July 31, |  | In
 000s |       
|                      |  |           |       
|2009                  |  | $         | 3,947  | 
|2010                  |  |           | 3,427  | 
|2011                  |  |           | 3,231  | 
|2012                  |  |           | 2,110  | 
|2013                  |  |           | 1,933  | 
|Thereafter            |  |           | 6,516  | 
|                      |  |           |        | 
|                      |  | $         | 21,164 | 
|                      |  |           |        | 

Employment Agreements

The Company has employment agreements with certain officers that are
cancelable at any time but provide for severance pay in the event an officer is
terminated by the Company without cause, as defined in the agreements. Unless
cancelled earlier, the contracts expire through May 2010. Aggregate minimum
compensation commitments, exclusive of any severance provisions, for the years
ending July 31, 2009, 2010 and 2011 are $2,691,000, $2,175,000 and $1,439,000,
respectively.

Note 16 Contingences

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. The defendants have answered the
individual complaints and asserted a variety of affirmative defenses and
counterclaims.

F-26

---



Fact discovery is ongoing. The court issued a claim construction
opinion on July 10, 2006. The Company and Sigma Aldrich (Sigma) entered into
a Settlement Agreement and Release effective September 15, 2006 (the Agreement).
Pursuant to the Agreement, the Companys litigation with Sigma was dismissed
and the Company recognized $2 million on settlement in the quarter ending
October 31, 2006 (See Note 13). On January 3, 2007, the remaining defendants
moved for summary judgment on all counts in the individual complaints. During a
two-day hearing held on July 17 through July 18, 2007, the defendants
subsequently withdrew the invalidity portion of their summary judgment motions.
The court has yet to rule on the pending summary judgment motions. There can be
no assurance that the Company will be successful with the remaining outstanding
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. The Company has not recorded revenue under these distribution
agreements in fiscal 2008, 2007 and 2006. The Company recorded other income
from Perkin Elmer in fiscal 2007 (See Note 13).

On October 28, 2003, the Company and Enzo Life Sciences, Inc., filed
suit in the United States District Court of the Eastern District of New York
against Affymetrix, Inc (Affymetrix). 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 Affymetrix 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.
Initial pleadings have been completed and discovery has commenced. The Court
issued a Markman (claim construction) opinion on July 10, 2006. The Company did
not record any revenue from Affymetrix during the fiscal years ended July 31,
2008, 2007 or 2006.

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 (the 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.
Enzo filed an Answer and Counterclaims on November 3, 2004 alleging multiple
breaches of the 1994 Agreement and related infringement of Enzos 373 patent.
Discovery has commenced. The Court issued a Markman opinion on July 10, 2006.
The Company did not record any revenue from Roche during the fiscal years ended
July 31, 2008, 2007 or 2006. The Roche agreement remains in force to date.

On June 7, 2004, the Company and 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,
labeled nucleotide products, and other technology). Yale University is the
owner of four of the patents and the Company is the exclusive licensee. These
four patents are commonly referred to as the Ward patents. 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 willful infringement). Defendants answered the
complaint on July 29, 2004. The answer pleads affirmative defences of
invalidity, estoppels and laches and asserts counterclaims of non-infringement
and invalidity.

F-27

---



A Markman hearing was held on May 25, 2006 and the district court
issued a ruling on October 12, 2006. On August 17, 2007, the Company
voluntarily dismissed the infringement claims for one of the patents in suit
without prejudice. Defendants similarly dismissed their defenses and
counterclaims as to that patent. On the same date, the Company conceded a
judgment of non-infringement for another of the patents in suit based on the
district courts claim construction, reserving the right to appeal their
construction. The defendants filed motions for summary judgment for invalidity,
laches and non-infringement of the Ward patents on March 5, 2007. The Company
and other plaintiff filed a motion for summary judgment on infringement of the
Ward patents on March 5, 2007. On August 20, 2007, the district court heard
oral arguments on the motions for summary judgment. On September 6, 2007, the
court granted defendants motion for summary judgment of invalidity of three of
the remaining Ward patents and entered judgment to that effect. The Company and
other plaintiff filed a notice of appeal to the United States Court of Appeals
for the Federal Circuit on September 7, 2007. On January 30, 2008, the Court of
Appeals for the Federal Circuit granted the Companys alternative motion to
dismiss its appeal and remand to the Connecticut Court for further proceedings
incident to an entry of a final, appealable judgment. The Company has requested
the Connecticut Court to dispose of all outstanding issues (including the
Companys claim under the fourth Ward patent and certain counterclaims of
Appleras) and enter final judgment. Once the Connecticut Court does this, the
Company intends to appeal that judgment. The Company and other plaintiff intend
to vigorously pursue this appeal; however, the outcome of the appeal cannot be
anticipated at this time. If the appeal is granted, 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.

In January 2006, the Company was named along with
    certain of its officers and directors among others, in several complaints
    titled Francis Scott Hunt, et al. v. Enzo Biochem Inc., et al., Index No.
    06-CV-00170 (SAS) and Ken Roberts v. Enzo Biochem, Inc. et al., Index No.
    06-CV-00213 (SAS), and Paul Lewicki v. Enzo Biochem Inc., et al., Index No.
    06-CV-06347 (SAS) based only upon a claim for common law fraud. These three
    consolidated actions were all filed in the United States District Court for
    the Southern District of New York. In their amended complaints, plaintiffs
    collectively seek more than $8.0 million in damages. Limited discovery has
    occurred to date. The actions are all based on allegations of a fraudulent
    scheme to pump and dump Enzo securities as was initially set forth in a previous
    action (filed by the same attorney) which was dismissed by the Eastern District
    of Virginia and such dismissal was affirmed by the Fourth Circuit Court of
    Appeals and is now final since the U.S. Supreme Court denied a petition for
    certiorari. The Company and the other defendants likewise moved to dismiss
    all of the Complaints in these actions and that motion was granted by U.S.
    District Court. As a result, some of the Plaintiffs were no longer able to
    pursue their claims or choose not to pursue them further. Other Plaintiffs
    amended their Complaints and the Company and the other defendants moved again
    to dismiss those Amended Complaints. The Court recently granted in part and
    denied in part those motions. As a result of the Courts latest decision,
    however, certain of the defendants, including Enzo Biochem, Inc. are proceeding
    with discovery. The Company believes that the latest Complaints in these
    actions have no merit, and intends to move for summary judgment and otherwise
    to defend these actions vigorously.

The Company is party to other claims, legal actions and complaints that
arise in the ordinary course of business. The Company believes that any
liability that may ultimately result from the resolution of these matters will
not, individually or in the aggregate, have a material adverse effect on its
financial position or results of operations.

Note 17  Segment reporting

The Company has three reportable segments: Life Sciences, Therapeutics
and Clinical Labs. The Companys Life Sciences segment develops, manufactures,
and markets products to research and pharmaceutical customers. The Companys
Therapeutic segment conducts research and development activities for
therapeutic drug candidates. The Clinical Labs segment provides diagnostic
services to the health care community. The Company evaluates segment
performance based on segment income (loss) before taxes. Costs excluded from
segment income (loss) before taxes and reported as other consist of corporate
general and administrative costs which are not allocable to the three
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 accounting policies of the reportable segments
are the same as those described in the summary of significant accounting
policies.

F-28

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2008 and 2007

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

|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |   | 
|---------------------------------------------- |  | - | -------------- | - | ------------ | ------ | -------------- | - | ------ | - | ------------ | ------- | - | - | ------- | - | 
|Year
 ended July 31, 2008                      |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Revenues:                                      |  |   | Life
 Sciences |   | Therapeutics |        | Clinical
 Labs |   | Other  |   | Consolidated |        
|                                               |  |   |                |   |              |        |                |   |        |   |              |        
|Product revenues                               |  | $ | 28,087         |   |              |        |                |   |        |   |              |         |   | $ | 28,087  |  
|Royalty income and license fee income          |  |   | 7,630          |   |              |        |                |   |        |   |              |         |   |   | 7,630   |  
|Clinical laboratory services                   |  |   |                |   |              |        |                | $ | 42,078 |   |              |         |   |   | 42,078  |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   | 35,717         |   |              |        |                |   | 42,078 |   |              |         |   |   | 77,795  |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost and expenses and other (income):          |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost of product revenues                       |  |   | 19,159         |   |              |        |                |   |        |   |              |         |   |   | 19,159  |  
|Cost of clinical laboratory services           |  |   |                |   |              |        |                |   | 21,063 |   |              |         |   |   | 21,063  |  
|Research and development                       |  |   | 3,473          |   | $            | 5,164  |                |   |        |   |              |         |   |   | 8,637   |  
|Provision for uncollectible accounts           |  |   |                |   |              |        |                |   | 3,716  |   |              |         |   |   | 3,716   |  
|Selling, general and administrative and
 legal |  |   | 9,779          |   |              |        |                |   | 15,495 |   | $            | 14,732  |   |   | 40,006  |  
|Interest income                                |  |   |                |   |              |        |                |   | (239   | ) |              | (3,457  | ) |   | (3,696  | )
|Other income                                   |  |   | (98            | ) |              | (100   | )              |   |        |   |              |         |   |   | (198    | )
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Income (loss) before income taxes              |  | $ | 3,404          |   | $            | (5,064 | )              | $ | 2,043  |   | $            | (11,275 | ) | $ | (10,892 | )
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Depreciation and amortization included
 above  |  | $ | 1,138          |   | $            | 35     |                | $ | 853    |   | $            | 120     |   | $ | 2,146   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Share - based compensation included in         |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost of products                               |  | $ | 8              |   |              |       |                | $ | 6      |   |              |        |   | $ | 14      |  
|Research and development                       |  |   | 34             |   | $            | 63     |                |   |       |   |              |        |   |   | 97      |  
|Selling, general and administrative and
 legal |  |   | 129            |   |              |       |                |   | 247    |   | $            | 1,079   |   |   | 1,455   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Total                                          |  | $ | 171            |   | $            | 63     |                | $ | 253    |   | $            | 1,079   |   | $ | 1,566   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Capital expenditures                           |  | $ | 2,308          |   | $            | 63     |                |   | 797    |   | $            | 63      |   | $ | 3,231   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  

|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |   | 
|---------------------------------------------- |  | - | -------------- | - | ------------ | ------ | -------------- | - | ------ | - | ------------ | ------- | - | - | ------- | - | 
|Year
 ended July 31, 2007                      |  |   |                |   |              |        |                |   |        |   |             
|                                               |  |   |                |   |              |        |                |   |        |   |             
|Revenues:                                      |  |   | Life
 Sciences |   | Therapeutics |        | Clinical
 Labs |   | Other  |   | Consolidated |        
|                                               |  |   |                |   |              |        |                |   |        |   |              |        
|Product revenues                               |  | $ | 6,658          |   |              |       |                |   |       |   |              |        |   | $ | 6,658   |  
|Royalty and
 license fee income                |  |   | 5,820          |   |              |       |                |   |       |   |              |        |   |   | 5,820   |  
|Clinical
 laboratory services                  |  |   |               |   |              |       |                | $ | 40,430 |   |              |        |   |   | 40,430  |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   | 12,478         |   |              |       |                |   | 40,430 |   |              |        |   |   | 52,908  |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost and expenses
 and other (income):         |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost of product
 revenues                      |  |   | 5,034          |   |              |       |                |   |       |   |              |        |   |   | 5,034   |  
|Cost of clinical
 laboratory services          |  |   |               |   |              |       |                |   | 18,199 |   |              |        |   |   | 18,199  |  
|Research and
 development                      |  |   | 3,349          |   | $            | 6,044  |                |   |       |   |              |        |   |   | 9,393   |  
|Provision for
 uncollectible accounts          |  |   |               |   |              |       |                |   | 4,653  |   |              |        |   |   | 4,653   |  
|Selling, general
 and administrative and legal |  |   | 2,772          |   |              |       |                |   | 14,403 |   | $            | 19,420  |   |   | 36,595  |  
|Interest income                                |  |   |               |   |              |       |                |   | (99    | ) |              | (4,993  | ) |   | (5,092  | )
|Other income                                   |  |   | (2,699         | ) |              |       |                |   |       |   |              |        |   |   | (2,699  | )
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Income (loss)
 before income taxes             |  | $ | 4,022          |   | $            | (6,044 | )              | $ | 3,274  |   | $            | (14,427 | ) | $ | (13,175 | )
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Depreciation and
 amortization included above  |  | $ | 288            |   | $            | 16     |                | $ | 838    |   | $            | 47      |   | $ | 1,189   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Share - based
 compensation included in        |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Cost of products                               |  | $ | 10             |   |              |       |                |   |       |   |              |        |   | $ | 10      |  
|Research and development                       |  |   | 51             |   | $            | 111    |                |   |       |   |              |        |   |   | 162     |  
|Selling, general and administrative and
 legal |  |   | 66             |   |              |       |                | $ | 358    |   | $            | 881     |   |   | 1,305   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Total                                          |  | $ | 127            |   | $            | 111    |                | $ | 358    |   | $            | 881     |   | $ | 1,477   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  
|Capital
 expenditures                          |  | $ | 106            |   | $            | 82     |                | $ | 698    |   | $            | 562     |   | $ | 1,448   |  
|                                               |  |   |                |   |              |        |                |   |        |   |              |         |   |   |         |  

F-29

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

Year ended July 31, 2006

|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|---------------------------------------------- |  | -------------- | ----- | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|Revenues:                                      |  | Life
 Sciences |       | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                               |  |                |       |              |   |                |   |       |        |              |  
|Product revenues                               |  | $              | 4,750 |              |   |               |   |       |       |              |   |        |   | $ | 4,750   |  
|Royalty income                                 |  |                | 3,150 |              |   |               |   |       |       |              |   |        |   |   | 3,150   |  
|Clinical laboratory services                   |  |                |      |              |   |               |   | $     | 31,926 |              |   |        |   |   | 31,926  |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                               |  |                | 7,900 |              |   |               |   |       | 31,926 |              |   |        |   |   | 39,826  |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost and expenses and other (income):          |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of product revenues                       |  |                | 2,400 |              |   |               |   |       |       |              |   |        |   |   | 2,400   |  
|Cost of clinical laboratory services           |  |                |      |              |   |               |   |       | 13,917 |              |   |        |   |   | 13,917  |  
|Research and development                       |  |                | 3,659 |              | $ | 4,237          |   |       |       |              |   |        |   |   | 7,896   |  
|Provision for
 uncollectible accounts          |  |                |      |              |   |               |   |       | 3,633  |              |   |        |   |   | 3,633   |  
|Selling, general and administrative and
 legal |  |                | 2,034 |              |   |               |   |       | 14,322 |              | $ | 15,777  |   |   | 32,133  |  
|Interest income                                |  |                |      |              |   |               |   |       |       |              |   | (3,144  | ) |   | (3,144  | )
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|(Loss) income before income taxes              |  | $              | (193  | )            | $ | (4,237         | ) | $     | 54     |              | $ | (12,633 | ) | $ | (17,009 | )
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Depreciation and amortization included
 above  |  | $              | 180   |              | $ | 12             |   | $     | 897    |              | $ | 35      |   | $ | 1,124   |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Share - based compensation included in         |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of products                               |  | $              | 21    |              |   |               |   |       |       |              |   |        |   | $ | 21      |  
|Research and development                       |  |                | 106   |              | $ | 143            |   |       |       |              |   |        |   |   | 249     |  
|Selling, general and administrative and
 legal |  |                | 87    |              |   |               |   | $     | 539    |              | $ | 867     |   |   | 1,493   |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total                                          |  | $              | 214   |              | $ | 143            |   | $     | 539    |              | $ | 867     |   | $ | 1,763   |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  
|Capital
 expenditures                          |  | $              | 3,332 |              | $ | 6              |   | $     | 860    |              | $ | 29      |   | $ | 4,227   |  
|                                               |  |                |       |              |   |                |   |       |        |              |   |         |   |   |         |  

Geographic financial
information is as follows (in thousands):

|                                     |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 
|------------------------------------ |  |  |  |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  |  |  | 
|Net sales to unaffiliated customers: |  |  |  |  | 2008 |        | 2007 |   | 2006   |  |   |        | 
|                                     |  |  |  |  |      |        |      |   |        |  |   |        | 
|United States                        |  |  |  |  | $    | 62,243 |      | $ | 50,051 |  | $ | 38,287 |  |  |  | 
|Switzerland                          |  |  |  |  |      | 9,142  |      |   | 945    |  |   |       |  |  |  | 
|United Kingdom                       |  |  |  |  |      | 2,127  |      |   | 272    |  |   |       |  |  |  | 
|Other international countries        |  |  |  |  |      | 4,283  |      |   | 1,640  |  |   | 1,539  |  |  |  | 
|                                     |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 
|Total                                |  |  |  |  | $    | 77,795 |      | $ | 52,908 |  | $ | 39,826 |  |  |  | 
|                                     |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 

|                              |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 
|----------------------------- |  |  |  |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  |  |  | 
|Long-lived assets at July 31, |  |  |  |  | 2008 |        | 2007 |   | 2006   |  |   |        | 
|                              |  |  |  |  |      |        |      |   |        |  |   |        | 
|United States                 |  |  |  |  | $    | 34,202 |      | $ | 21,438 |  | $ | 14,557 |  |  |  | 
|Switzerland                   |  |  |  |  |      | 7,437  |      |   | 6,652  |  |   |       |  |  |  | 
|United Kingdom                |  |  |  |  |      | 4,193  |      |   |       |  |   |       |  |  |  | 
|Other international countries |  |  |  |  |      | 2,198  |      |   | 1,545  |  |   |       |  |  |  | 
|                              |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 
|Total                         |  |  |  |  | $    | 48,030 |      | $ | 29,635 |  | $ | 14,557 |  |  |  | 
|                              |  |  |  |  |      |        |      |   |        |  |   |        |  |  |  | 

F-30

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2008 and 2007

The Companys reportable segments are determined based on the services
they perform, the products they sell, and the royalties and license fee income
they earn, not on the geographic area in which they operate. The Companys
Clinical Labs segment operates 100% in the United States with all revenue
derived from this country. The Life Sciences segment earns product revenue both
in the United States and foreign countries and royalty and license fee income
in the United States. The following is a summary of the Life Sciences segment
revenues attributable to customers located in the United States and foreign
countries:

|                  |  |      |        |      |   |        |  |   |       | 
|----------------- |  | ---- | ------ | ---- | - | ------ |  | - | ----- | 
|In 000s          |  | 2008 |        | 2007 |   | 2006   | 
|                  |  |      |        |      |   |        | 
|United States     |  | $    | 20,165 |      | $ | 9,621  |  | $ | 6,361 | 
|Foreign countries |  |      | 15,552 |      |   | 2,857  |  |   | 1,539 | 
|                  |  |      |        |      |   |        |  |   |       | 
|                  |  | $    | 35,717 |      | $ | 12,478 |  | $ | 7,900 | 
|                  |  |      |        |      |   |        |  |   |       | 

Note 18  Summary of Selected Quarterly
Financial Data (unaudited)

The following table contains statement of operations information for
each quarter of the years ended July 31, 2008 and 2007. 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.

Unaudited quarterly financial data (in thousands, except per share
amounts) for fiscal 2008 and 2007 is summarized as follows:

|                               |  |                    |        |                    |   |                  |   |                 |        |   |   |        |  
|------------------------------ |  | ------------------ | ------ | ------------------ | - | ---------------- | - | --------------- | ------ | - | - | ------ | -
|                               |  | Quarter
 Ended     |       
|                               |  |                    |       
|Fiscal 2008                    |  | October
 31,
 2007 |        | January
 31,
 2008 |   | April
 30,
 2008 |   | July
 31,
 2008 |       
|                               |  |                    |        |                    |   |                  |   |                 |       
|Total revenues                 |  | $                  | 19,447 |                    | $ | 18,224           |   | $               | 18,948 |   | $ | 21,176 |  
|Gross profit                   |  |                    | 9,882  |                    |   | 9,045            |   |                 | 9,336  |   |   | 9,310  |  
|Loss before income
 taxes      |  |                    | (1,347 | )                  |   | (4,013           | ) |                 | (1,940 | ) |   | (3,592 | )
|Net loss                       |  |                    | (1,232 | )                  |   | (4,055           | ) |                 | (2,107 | ) |   | (3,259 | )
|Basic loss per
 common share   |  | $                  | (0.03  | )                  | $ | (0.11            | ) | $               | (0.06  | ) | $ | (0.09  | )
|Diluted loss per
 common share |  | $                  | (0.03  | )                  | $ | (0.11            | ) | $               | (0.06  | ) | $ | (0.09  | )

|                               |  |                    |        |                    |   |                  |   |                 |        |   |   |        |  
|------------------------------ |  | ------------------ | ------ | ------------------ | - | ---------------- | - | --------------- | ------ | - | - | ------ | -
|                               |  | Quarter
 Ended     |       
|                               |  |                    |       
|Fiscal 2007                    |  | October
 31,
 2006 |        | January
 31,
 2007 |   | April
 30,
 2007 |   | July
 31,
 2007 |       
|                               |  |                    |        |                    |   |                  |   |                 |       
|Total revenues                 |  | $                  | 10,442 |                    | $ | 10,594           |   | $               | 13,960 |   | $ | 17,912 |  
|Gross profit                   |  |                    | 6,391  |                    |   | 6,157            |   |                 | 7,934  |   |   | 9,193  |  
|Loss before income
 taxes      |  |                    | (1,201 | )                  |   | (4,777           | ) |                 | (3,754 | ) |   | (3,443 | )
|Net loss                       |  |                    | (1,246 | )                  |   | (4,852           | ) |                 | (3,833 | ) |   | (3,329 | )
|Basic loss per
 common share   |  | $                  | (0.04  | )                  | $ | (0.14            | ) | $               | (0.10  | ) | $ | (0.09  | )
|Diluted loss per
 common share |  | $                  | (0.04  | )                  | $ | (0.14            | ) | $               | (0.10  | ) | $ | (0.09  | )

F-31

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ENZO BIOCHEM, INC SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS 
Years ended July 31, 2008, 2007 and 2006 
(in thousands)

|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|--------------------- |  | ------------------------------------------- |  | --------------------------------- |  | ------------------------------------------- | ----- | --------------------------- |  | ---------- |  | -------------------------- | --- | ------ | 
|Year
 ended
 July 31, |  | Description                                 |  | Balance
 at
 Beginning
 of period |  | Charged
 (credited) to
 costs
 and expenses |       | Charged
 to other
 accounts |  | Deductions |  | Balance
 at
 end of period
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                           
|2008                  |  | Allowance for
 doubtful accounts receivable |  | 1,404                             |  |                                             | 3,716 |                             |  |           |  | 4,234                      | (1) | 886    | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2007                  |  | Allowance for
 doubtful accounts receivable |  | 1,033                             |  |                                             | 4,653 |                             |  |           |  | 4,282                      | (1) | 1,404  | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2006                  |  | Allowance for
 doubtful accounts receivable |  | 2,292                             |  |                                             | 3,633 |                             |  |           |  | 4,892                      | (1) | 1,033  | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2008                  |  | Deferred tax
 valuation allowance           |  | 9,385                             |  |                                             | 3,580 |                             |  |           |  |                           |     | 12,965 | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2007                  |  | Deferred tax
 valuation allowance           |  | 4,856                             |  |                                             | 5,220 |                             |  |           |  | 691                        | (2) | 9,385  | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2006                  |  | Deferred tax
 valuation allowance           |  | 129                               |  |                                             | 4,727 |                             |  |           |  |                           |     | 4,856  | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2008                  |  | Reserve for
 obsolete inventory             |  | 379                               |  |                                             | 283   |                             |  |           |  | 25                         | (3) | 637    | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2007                  |  | Reserve for
 obsolete inventory             |  | 238                               |  |                                             | 337   |                             |  |           |  | 196                        | (3) | 379    | 
|                      |  |                                             |  |                                   |  |                                             |       |                             |  |            |  |                            |     |        | 
|2006                  |  | Reserve for
 obsolete inventory             |  |                                  |  |                                             | 596   |                             |  |           |  | 358                        | (3) | 238    | 

| |     |                                                                   
| | --- | ------------------------------------------------------------------
| | (1) | Write-off of uncollectible
 accounts receivable net of recoveries.
| |     |                                                                   
| | (2) | Utilization of
 deferred tax assets                               
| |     |                                                                   
| | (3) | Write-off of
 obsolete inventory                                  

S-1

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Consent of Independent Registered Public
Accounting Firm

We consent to the incorporation by reference in the following Registration
Statements:

| |     |                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Registration
 Statement (Form S-3 No. 333-138417, 333-15533, 33-58736, 33-60229, 33-78760,
 33-72170, and 33-68542) of Enzo Biochem, Inc., and                                                                                                
| |     |                                                                                                                                                                                                                                               
| | (2) | Registration
 Statement (Form S-8 No. 33-45348, 33-75466, 33-88826, 333-87153, 333-89308
 and 333-123712) pertaining to the 2005 Equity Compensation Incentive Plan,
 1999 Stock Option Plan and 1994 Stock Option Plan of Enzo Biochem, Inc.;

of our report dated October 14, 2008, with respect to the consolidated
financial statements and schedule of Enzo Biochem, Inc., and our report dated
October 14, 2008, with respect to the effectiveness of internal control over
financial reporting of Enzo Biochem, Inc., included in this Annual Report (Form
10-K) of Enzo Biochem, Inc.

/s/ Ernst & Young LLP

Melville, New York 
October 14, 2008

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