---

---

|                                  
|----------------------------------
|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, 2009                               
|                                                                        |                                                                                          
|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             |  | (I.R.S.
 Employer   
|of
 incorporation or organization)        |  | 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 has submitted electronically and posted on its
 corporate Web site, if any, every Interactive Data File required to be
 submitted and posted pursuant to Rule 405 of Regulation S-T during the
 preceding 12 months (or for such shorter period that the registrant was
 required to submit and post such files).
|                                                                                                                                                                                                                                                                                                                                                                 | Yes o No o
|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                        
|                                                                                                                                                                                                                                                                                                                                                                 | Yes x No 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 o | Smaller 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 $166,537,000 as of January 31, 2009

The number of shares of the
Companys common stock, $.01 par value, outstanding at October 1, 2009 was
approximately 37,854,000.

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 26, 2010
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                                                                                     |  | 32  
|Item 2.   | Properties                                                                                                     |  | 33  
|Item 3.   | Legal
 Proceedings                                                                                             |  | 33  
|Item 4.   | Submission of
 Matters to a Vote of Security Holders                                                           |  | 35  
|          |                                                                                                                |  |     
|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                                                    |  | 53  
|Item 8.   | Financial
 Statements and Supplementary Data                                                                   |  | 53  
|Item 9.   | Changes in and
 Disagreements with Accountants on Accounting and Financial Disclosure                          |  | 53  
|Item 9A.  | Controls and
 Procedures                                                                                       |  | 53  
|Item 9B.  | Other
 Information                                                                                             |  | 56  
|          |                                                                                                                |  |     
|Part
 III |                                                                                                                |  |     
|          |                                                                                                                |  |     
|Item 10.  | Directors,
 Executive Officers and Corporate Governance                                                        |  | 56  
|Item 11.  | Executive
 Compensation                                                                                        |  | 56  
|Item 12.  | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters               |  | 56  
|Item 13.  | Certain
 Relationships and Related Transactions, and Director Independence                                     |  | 56  
|Item 14.  | Principal
 Accountant Fees and Services                                                                        |  | 56  
|          |                                                                                                                |  |     
|Part
 IV  |                                                                                                                |  |     
|          |                                                                                                                |  |     
|Item 15.  | Exhibits and
 Financial Statement Schedules                                                                    |  | 56  
|          |                                                                                                                |  |     
|          | 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 biological 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 249 issued patents
worldwide, and over 200 pending patent applications, along with extensive
enabling technologies and platforms

Recent Developments

On
March 12, 2009, Enzo Life Sciences, Inc. and Enzo Life Sciences Acquisition,
Inc., a newly formed wholly owned subsidiary of Enzo Life Sciences, Inc.
acquired the assets of Assay Designs, Inc. (Assay Designs). Assay Designs, at
the time of our acquisition was a privately owned company with annual sales of
approximately $11 million, engaged in researching, developing, manufacturing,
distributing, marketing and selling specialty immunological and biochemical
protein detection kits, assays, reagents, antibodies, recombinant proteins and
related products and providing related services for use in the biotechnology, pharmaceutical
and life sciences research industries (Business). (See 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, 2009, 2008 and 2007 is located in Note 17
in the notes to consolidated financial statements.

Below
are brief descriptions of each of our operating segments:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Enzo Life
 Sciencesmanufactures, develops and markets functional
 biology and cellular biochemistry 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 12,000
 innovative high quality research reagents in the primary key research areas
 of epigenetics, live cell analysis, protein degradation pathways and
 metabolism. The division is an established source for a comprehensive panel
 of products to scientific experts in the fields of Antibiotics, Autophagy,
 Cancer, Cell Cycle, Cell Death, Cell Signaling, Cell trafficking,
 Genomics/Molecular Biology, Immunology, Inflammation, Lipid Signaling,
 Neurobiology, Protein Degradation, ROS/RNS, and Stress/Heat Shock
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Enzo Clinical
 Labsis a regional clinical laboratory serving the New
 York Metropolitan and New Jersey areas. The Company believes having clinical
 diagnostic services allows us to capitalize first hand on our extensive
 advanced molecular and cytogenetic capabilities and the broader trends in
 predictive and personalized 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 30 patient service centers throughout NY and NJ, a stand alone
 stat or rapid response laboratory in New York City, and a full-service
 phlebotomy department.                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Enzo
 Therapeuticsis a biopharmaceutical venture 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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, 2009, 2008 and 2007, (in $000s and
percentages):

|                             |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|---------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
|Fiscal year
 ended July 31,  |  | 2009 |        | 2008 |  | 2007 |  
|                             |  |      |        |      |  |      |  
|                            
|Product revenues             |  | $    | 40,592 |      |  | 45   | % | $ | 28,087 |  |  | 36  | % | $ | 6,658  |  |  | 13  | %
|Royalty and license fees     |  |      | 9,376  |      |  | 11   |   |   | 7,630  |  |  | 10  |   |   | 5,820  |  |  | 11  |  
|Clinical laboratory services |  |      | 39,604 |      |  | 44   |   |   | 42,078 |  |  | 54  |   |   | 40,430 |  |  | 76  |  
|                             |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|Total                        |  | $    | 89,572 |      |  | 100  | % | $ | 77,795 |  |  | 100 | % | $ | 52,908 |  |  | 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 genomic research in both the
public and private sectors, including the Human Genome Project. The ongoing
challenge of the scientific research community is to determine the function and
relevance of each gene, as well as gene to gene and gene/environment
interactions. 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
diagnostic 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 and genotyping 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, immunoassays, genomics, proteomics, gene
expression profiling blood banking, and cancer screening assays through
histology as well as newer body fluid based approaches. 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 and often its susceptibility to FDA approved drugs.

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.

3

---



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

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

According
to 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 is, 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 over expression 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, services, and
diagnostic technologies used to study and identify disease at the molecular
level and to be a provider of therapeutic platforms 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:

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.

Expand
marketing and distribution infrastructure

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, Biomol in May 2008, and Assay Designs in March 2009 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.

5

---



In fiscal
2007, Enzo Life Sciences and Abbott Molecular, Inc. entered into a multi-year
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.

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.

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 2009, we were awarded
    fourteen patents and expanded our patent estate in the area of nucleotides,
amplification, labeling, detection, among others.

6

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Core
Technologies

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

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
Platform Development

Cell
Signaling Pathway

Our newest
therapeutic platform development project 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 state of the art
electronic information and ordering marketplace. We in-license and manufacture
over 12,000 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.

9

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These
products include small molecules, proteins, antibodies, peptides, assay kits
and custom services. Our comprehensive portfolio of high quality reagents and
kits in key research areas are sold to scientific experts in the following
fields:

|                                 |                                         
|-------------------------------- | ----------------------------------------
|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 seven
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 key research areas including the fields of cell death, nitric oxide, and
obesity/adipogenesis.

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 ubiquitin-like proteins, acetylation, methylation,
phosphorylation, sulphation, or glycolsylation.

Assay DesignsThe Assay Designs branded product portfolio employs
our immunoassay development capability in the fields of inflammation, steroids
and hormones, and cell signaling.

StressgenThe Stressgen brand is focused exclusively on the
fields of the heat shock and cell stress.

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.

AutoimmuneUveitis.
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).

10

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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

In
September of 2009, we entered into a Cooperative Research and Development
Agreement (CRADA) with the National Eye Institute, part of the National
Institute of Health (NIH), to conduct a human clinical trial of Optiquel.
Under the terms of the CRADA, the NIH and Enzo will share the development costs
of the studies and Enzo will supply its proprietary compound, Optiquel. The
clinical trial will be conducted to assess the safety and efficacy of Optiquel
in a proof-of-concept clinical trial designed as a randomized, double-masked,
placebo-controlled study with a long-term follow-up. The agreement additionally
includes non clinical research focusing on the use of various compounds that
may serve to enhance the immune mediated oral tolerance response to specific
antigens. Such research may be applicable across the entire spectrum of the
Companys immune regulation platform.

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.

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 was completed at Hadassah Hospital in Jerusalem. The data was
presented at the 2009 annual Digestive Disease Week conference. The study met
its primary and secondary endpoints

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.

11

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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

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 early 2010.

Human
Immunodeficiency Virus (HIV-1)

Based on
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 continuing to
monitor the progress. We have not expanded our trial, and are looking towards
other alternatives.

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 extensive 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 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 levels, or search for an otherwise undiagnosed condition.

Our full
service clinical laboratory in Farmingdale, NY contains infrastructure that
includes comprehensive information technology applications, logistics, client
service and billing departments. Also, we have a network of over thirty
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.

12

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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
delivered 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, 2009, 2008, and 2007, respectively, 44%, 54% and 76% of
the Companys revenues were derived from the clinical laboratory. At July 31,
2009 and 2008, respectively, approximately 40%, and 58% 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.

Revenue,
net of contractual adjustment, from direct billings under the Federal Medicare
program during the years ended July 31, 2009, 2008 and 2007 were approximately
23%, 22% and 21%, 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 25%, 26% and 20% of the Clinical Labs segments net revenue for the
fiscal year ended July 31, 2009, 2008 and 2007, respectively. 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.

13

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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 had been subjected to a five-year freeze
which ended 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 Biomol, and Assay Designs, as
well as developing innovative new therapeutic platforms. We have developed our
core research expertise in the life science field as a result of over 30 years
of dedicated focus in this area. We conduct our research and other product
development efforts through internal research and collaborative relationships.

In the
fiscal years ended July 31, 2009, 2008 and 2007, the Company incurred costs of
approximately $9,220,000, $8,637,000 and $9,393,000, respectively, for research
and development activities.

Internal
Research Programs

Our professional staff of 84 scientists, including 77
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. ELS International, formally 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 MarketingOur 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, Assay
Designs, Stressgen, 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, Benelux, and 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 who are
supported by customer service and patient service representatives. We monitor
and 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 and
adding clinical tests to our service menu to assist sales in new account
penetration.

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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.

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, offer innovative products at the forefront of
technological development to targeted market segments, 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, and local entities, some of which are larger than we are and have
greater financial resources than we do. Our laboratory competes primarily on
the basis of the quality and specialized nature of its testing, reporting and
information services, its reputation in the medical community, its reliability
and speed in performing diagnostic tests, and its ability to employ qualified
laboratory personnel.

Intellectual
Property

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

At
    the end of fiscal 2009 we owned or licensed 249 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.

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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
AFFECTING OUR BUSINESSES

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.

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.

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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.

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.

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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.

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.

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

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

Clinical
laboratories also are subject to state regulation. CLIA provides that a state
may adopt different or more stringent regulations than Federal law, and permits
states to apply for exemption from CLIA if HHS determines that the states laboratory
laws are equivalent to, or more stringent than, CLIA. The State of New Yorks
clinical laboratory regulations contain provisions that are more stringent than
Federal law, and New York has received exemption from CLIA.

Therefore,
as long as New York maintains its CLIA-exempt status, laboratories in New York,
including our laboratory, are regulated under New York law rather than CLIA.
Our laboratory is licensed in New York and has continuing programs to ensure
that its operations meet all applicable regulatory requirements.

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

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.

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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.

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 insurers 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.

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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.

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 revised 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 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. We use outside vendors to dispose of 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.

21

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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.

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
in the United States and internationally 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, integrated laboratory and scientific efforts for our
three segments take place primarily at our two facilities in Farmingdale, New
York. The second facility adjacent to our first facility was acquired in June
2006 and effective July 1, 2008, a major portion became utilized by Life
Science for research and manufacturing with special handling capabilities and
clean rooms suitable for our operations. 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. In
connection with the Assay Designs acquisition, the Life Sciences segment has
added manufacturing and research operations in Ann Arbor, Michigan. 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, 2009, we employed 539 full-time and 75 part-time employees. Of
    the full-time employees, 214 were engaged in research, development, manufacturing,
and marketing of research products, 8 in therapeutics research, 299 in the
clinical laboratories and 18 in finance, legal and administrative functions.
Our scientific staff, including 77 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.

22

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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.

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

23

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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 $ 23.6 million and $10.7 million for the fiscal years ended July
31, 2009 and 2008, 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,
| |   |                                                                                                                                                         
| |  | expenses
 associated with defending our intellectual property portfolio                                                                                 
| |   |                                                                                                                                                         
| |  | 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
three fiscal years we have made significant acquisitions. Our strategy
envisions that a part our future growth will come from acquiring and
integrating similar operations and/or product lines. 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.

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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
integrating numerous brands. 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, Belgium, 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 professionals.

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;                         
| |   |                                                                                     
| |  | 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.

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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.

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, 2009, goodwill and other intangible assets with indefinite
lives represented approximately 35% 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.

26

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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:

| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

27

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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 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.

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.

28

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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.

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.

29

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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.

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 paying 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.

30

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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
    15% of total revenues in fiscal 2009. 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,                             
| |   |                                                                                                                          
| |  | 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.                                    

31

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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.

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

32

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Item 2. Properties

The
following are the principal facilities of the Company:

|                                  |  |                                                                                  |  |                              |  |              |  |                | 
|--------------------------------- |  | -------------------------------------------------------------------------------- |  | ---------------------------- |  | ------------ |  | -------------- | 
|Location                          |  | Primary use                                                                      |  | Segments                     |  | Leased/owned |  | Square footage
|                                  |  |                                                                                  |  |                              |  |              |  |               
|Farmingdale, NY
 (Note 1)         |  | Clinical
 laboratory and research                                                |  | 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
 (Note 2)    |  | Operational
 headquarters in Europe, including sales, warehouse and distribution |  | Life Sciences                |  | Leased       |  | 15,400         | 
|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          | 
|Ann Arbor,
 Michigan
 (Note 4)    |  | Sales,
 manufacturing, research, administration, and distribution                |  | Life Sciences                |  | Leased       |  | 26,820         | 

| |                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 lease
 for this property was 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.                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                    
| | Note 4 - The lease
 for this property was acquired in connection with the Assay Designs
 acquisition in March 2009.                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                    
| | 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 2009, 2008 and 2007. The Company
recorded other income from Perkin Elmer in fiscal 2007 (See Note 13).

33

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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, 2009, 2008 or
2007.

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, 2009, 2008 or 2007. 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 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.

34

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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
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. The Connecticut Court granted this
request. The Company subsequently filed an Appeal on April 7, 2009. Briefing is
completed and the matter has not yet been set for submission or argument. The
Company and other plaintiff intend to vigorously argue 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 (the Court). The
actions seek damages in excess of $8 million and 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 thereafter 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 the 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 once again to dismiss those Amended Complaints. The Court granted in part
and denied in part those motions. The remaining Plaintiffs then conducted discovery,
and following the completion of discovery, the Company and other defendants
moved for summary judgment dismissal of the Amended Complaints. The Court
recently granted the defendants motion and dismissed all the Amended
Complaints. Several of the Plaintiffs then filed a notice of appeal to the
Second Circuit Court of Appeals.

The Company
believes that the latest complaints in these actions have no merit and that the
appeals also lacks merit. The Company will continue to defend these actions vigorously.

Shahram
K. Rabbani (Mr. Rabbani), the Secretary and Treasurer and a member of the
board of directors of the Company and the former President of Enzo Clinical
Labs, Inc., in connection with the termination of his employment, submitted on
April 30, 2009 a demand for arbitration and related statement of claim to the
American Arbitration Association. The statement of claim names the Company, Dr.
Elazar Rabbani, the Chairman of the Board and Chief Executive Officer of the
Company, and Barry W. Weiner, the President and Chief Financial Officer and a
member of the board of directors of the Company, as respondents and alleges,
among other things, claims relating to the termination of Mr. Rabbanis
employment as President of Clinical Labs. The statement of claim purports to
allege claims for breach of contract against the Company, unlawful retaliation
under the Sarbanes-Oxleys whistleblower statute (the Claims) against the
Company, Dr. Rabbani and Mr. Weiner, and tortious interference with contract
against Dr. Rabbani and Mr. Weiner. Mr. Rabbani seeks damages of no less than
$10 million including attorneys fees, costs, and punitive damages. The Company
believes the Claims are without merit and intends to defend vigorously against
them. Subsequent
to April 30, 2009, the Company conducted a review, as directed by a special
committee of the Board of Directors, relating to the aforementioned Claims
pertaining to Enzo Clinical Labs. The review concluded that the purported
Claims were unsubstantiated. On
September 18, 2009, Mr. Rabbani amended his statement of claim to add a claim
for defamation against the Company and a claim against the Company, Dr. Rabbani
and Mr. Weiner seeking a declaratory judgment. The Company also believes these
Claims are without merit and intends to defend vigorously against them.

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, 2009.

35

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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.

|                                                     |  |      |       |     |   |       | 
|---------------------------------------------------- |  | ---- | ----- | --- | - | ----- | 
|2009 Fiscal Year
 (August 1, 2008 to July 31, 2009): |  |      |       |     |   |       | 
|                                                     |  | High |       | Low |  
|                                                     |  |      |       |     |  
|1st Quarter                                          |  | $    | 14.90 |     | $ | 4.44  | 
|2nd Quarter                                          |  | $    | 6.97  |     | $ | 4.23  | 
|3rd Quarter                                          |  | $    | 5.58  |     | $ | 2.86  | 
|4th Quarter                                          |  | $    | 5.64  |     | $ | 3.75  | 
|                                                     |  |      |       |     |   |       | 
|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 30, 2009, the Company had approximately 1,011 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, 2009.

|                                                            |  |                                                                                                      |  |                                                                                     |  |                                                                                                                                                         | 
|----------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|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     |  | 1,191,519                                                                                            |  | $14.41                                                                              |  | 401,000                                                                                                                                                 | 
|Equity compensation plans not approved by
 security holders |  |                                                                                                     |  |                                                                                    |  |                                                                                                                                                        | 
|                                                            |  |                                                                                                      |  |                                                                                     |  |                                                                                                                                                         | 
|Total                                                       |  |                                                                                                      |  | $14.41                                                                              |  | 401,000                                                                                                                                                 | 
|                                                            |  |                                                                                                      |  |                                                                                     |  |                                                                                                                                                         | 

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 2005 through 2009 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)                            |  | 2009                                                                         |         | 2008 |   | 2007    |   | 2006 |         | 2005 |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |  
|Operating revenues                               |  | $                                                                            | 89,572  |      | $ | 77,795  |   | $    | 52,908  |      | $ | 39,826  |   | $ | 43,403  |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Other income                                     |  |                                                                              | 74      |      |   | 171     |   |      | 2,699   |      |   |        |   |   | 14,000  |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Interest income                                  |  |                                                                              | 581     |      |   | 3,696   |   |      | 5,092   |      |   | 3,144   |   |   | 1,523   |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|(Loss) income before income taxes                |  |                                                                              | (23,477 | )    |   | (10,892 | ) |      | (13,175 | )    |   | (17,009 | ) |   | 5,217   |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|(Provision) Benefit for income taxes             |  |                                                                              | (87     | )    |   | 239     |   |      | (85     | )    |   | 1,342   |   |   | (2,213  | )
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Net loss                                         |  | $                                                                            | (23,564 | )    |   | (10,653 | ) | $    | (13,260 | )    | $ | (15,667 | ) | $ | 3,004   |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Basic net (loss) income per common share:
 (2)   |  | $                                                                            | (0.63   | )    | $ | (0.29   | ) | $    | (0.38   | )    | $ | (0.49   | ) | $ | 0.09    |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Diluted net (loss) income per common share:
 (2) |  | $                                                                            | (0.63   | )    | $ | (0.29   | ) | $    | (0.38   | )    | $ | (0.49   | ) | $ | 0.09    |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Weighted average common shares                   |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Basic                                            |  |                                                                              | 37,511  |      |   | 36,883  |   |      | 35,017  |      |   | 32,215  |   |   | 32,097  |  
|Diluted                                          |  |                                                                              | 37,511  |      |   | 36,883  |   |      | 35,017  |      |   | 32,215  |   |   | 32,763  |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                                 |  | July 31,
 (in thousands)                                                     |        
|                                                 |  |                                                                              |        
|Financial Position:                              |  | 2009                                                                         |         | 2008 |   | 2007    |   | 2006 |         | 2005 |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Working capital                                  |  | $                                                                            | 60,518  |      | $ | 92,392  |   | $    | 113,850 |      | $ | 80,161  |   | $ | 96,280  |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Total assets                                     |  |                                                                              | 133,128 |      |   | 154,522 |   |      | 159,002 |      |   | 101,524 |   |   | 116,466 |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Long term obligations                            |  |                                                                              |        |      |   |        |   |      |        |      |   |        |   |   | 150     |  
|                                                 |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Stockholders equity                             |  |                                                                              | 116,781 |      |   | 138,289 |   |      | 141,894 |      |   | 95,587  |   |   | 108,267 |  

|                                  |                                                                                                                                                                                                                                                                                                                                                                                                               
|--------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes to Selected
 Financial Data
|                                 
|(1)                               | See Note 2 in the
 notes to consolidated financial statements regarding the acquisitions in
 Fiscal 2009, 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. There was no impact for the fiscal year ended July 31, 2009.

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 functional biology and cellular biochemistry
products and tools to research and pharmaceutical customers world-wide 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 as a leader in
manufacturing, in-licensing, and commercialization of over 12,000 innovative
high quality research reagents in the primary key research areas of epigenetics,
live cell analysis, protein degradation pathways and metabolism. The division
is an established source for a comprehensive panel of products to scientific
experts in the fields of Antibiotics, Autophagy, Cancer, Cell Cycle, Cell
Death, Cell Signaling, Cell trafficking, Genomics/Molecular Biology,
Immunology, Inflammation, Lipid Signaling, Neurobiology, Protein Degradation,
ROS/RNS and Stress/Heat Shock.

Enzo Clinical Labs is a regional
clinical laboratory serving the greater New York and New Jersey medical
community. The Company believes having clinical diagnostic services allows us
to capitalize firsthand on our extensive advanced molecular and cytogenetic
capabilities and the broader trends in predictive and personalized 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 30 patient service centers throughout greater New York and
New Jersey, 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.

38

---



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.

The
following table summarizes the sources of revenues for the fiscal years ended
July 31, 2009, 2008 and 2007, (in $000s and percentages):

| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
| | ----------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
| | Fiscal year ended July 31,    |  | 2009 |        | 2008 |  | 2007 |  
| |                               |  |      |        |      |  |      |  
| | Product revenues              |  | $    | 40,592 |      |  | 45   | % | $ | 28,087 |  |  | 36  | % | $ | 6,658  |  |  | 13  | %
| | Royalty and
 license fees     |  |      | 9,376  |      |  | 11   |   |   | 7,630  |  |  | 10  |   |   | 5,820  |  |  | 11  |  
| | Clinical
 laboratory services |  |      | 39,604 |      |  | 44   |   |   | 42,078 |  |  | 54  |   |   | 40,430 |  |  | 76  |  
| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
| | Total                         |  | $    | 89,572 |      |  | 100  | % | $ | 77,795 |  |  | 100 | % | $ | 52,908 |  |  | 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

Assay
Designs, Inc.

On March
12, 2009, Enzo Life Sciences, Inc. and Enzo Life Sciences Acquisition, Inc., a
newly formed wholly owned subsidiary of Enzo Life Sciences, Inc. (Acquisition
Sub), entered into an asset purchase agreement (Purchase Agreement) dated as
of March 12, 2009 with Assay Designs, Inc. (Assay Designs). Assay Designs, a
privately owned company with annual sales of approximately $11 million, was
engaged in researching, developing, manufacturing, distributing, marketing and
selling specialty immunological and biochemical protein detection kits, assays,
reagents, antibodies, recombinant proteins and related products and providing
related services for use in the biotechnology, pharmaceutical and life sciences
research industries (Business). Under the terms of the Purchase Agreement,
Acquisition Sub purchased from Assay Designs substantially all of its assets,
including trade accounts receivable, inventory, fixed assets, and intellectual
property, used in or related to the Business and assumed certain of Assay
Designs liabilities, including trade accounts payable, capital lease
obligations and certain other current liabilities.

The
execution of the Purchase Agreement and the closing of the transaction occurred
simultaneously on March 12, 2009. The purchase price consisted of $12,228,000
in cash, exclusive of acquisition costs of approximately $540,000, and was
subject to an upward or downward post-closing purchase price adjustment based
on Assay Designs working capital as of the closing date and $328,000
representing estimated costs to consolidate an acquired facility and
involuntary termination of certain employees, of which $184,000 is outstanding
and included in accrued liabilities in the accompanying balance sheet at July
31, 2009.

At the
closing, $100,000 was held in escrow to secure the payment of any downward
post-closing purchase price adjustment and $750,000 was held in escrow for 12
months to secure the payment of any indemnification obligations of Assay
Designs under the Purchase Agreement.

39

---



Subsequent
to the acquisition date, the Company paid $270,000 in additional purchase price
in connection with the working capital adjustment and released the $100,000
escrow amount. The Company expects the cost of the acquisition to be increased
when the integration plan to consolidate a facility and the involuntary termination
of certain employees is finalized. The Assay Design acquisition strengthens the
Companys position as a global provider of life sciences reagents by broadening
our product offerings and manufacturing capabilities.

The
acquisition was funded with the Companys cash. Effective March 12, 2009, Assay
Designs became a wholly-owned subsidiary of Enzo Life Sciences. The
consolidated financial statements include the results of operations for Assay
Designs from the date of acquisition.

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,
through 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 two contingent earn-out payments accounted for as
additional purchase consideration 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 and EBITDA targets, 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 include the results of operations for Biomol
from the date of acquisition. Effective February 2, 2009, the names of Biomol
International, Inc. and Affinity Limited were changed to Enzo Life Sciences
International, Inc. and Enzo Life Sciences (UK) Ltd., respectively.

In June
2009, the conditions for the first annual earn-out of $2.5 million were met and
the Company recorded $2.5 million of additional goodwill. The Company issued
202,196 shares of Enzo common stock at fair value and paid $1.5 million in cash
to satisfy the $2.5 million earn-out liability.

40

---



Results of Operations

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

|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------------------- | - | --------- | ------ | - | --- | - | 
|                                                 |  | 2009 |         | 2008 |   | Increase
 (Decrease) |   | %
 Change |       
|                                                 |  |      |         |      |   |                      |   |           |       
|Revenues:                                        |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Product revenues                                 |  | $    | 40,592  |      | $ | 28,087               |   |           | 12,505 |   | 45  |   | 
|Royalty and
 license fee income                  |  |      | 9,376   |      |   | 7,630                |   |           | 1,746  |   | 23  |   | 
|Clinical
 laboratory services                    |  |      | 39,604  |      |   | 42,078               |   |           | (2,474 | ) | (6  | ) | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Total revenues                                   |  |      | 89,572  |      |   | 77,795               |   |           | 11,777 |   | 15  |   | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Costs and expenses
 and other (income):          |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Cost of product
 revenues                        |  |      | 26,766  |      |   | 19,159               |   |           | 7,607  |   | 40  |   | 
|Cost of laboratory
 services                     |  |      | 26,295  |      |   | 22,209               |   |           | 4,086  |   | 18  |   | 
|Research and
 development                        |  |      | 9,220   |      |   | 8,637                |   |           | 583    |   | 7   |   | 
|Selling, general,
 and administrative            |  |      | 41,314  |      |   | 33,272               |   |           | 8,042  |   | 24  |   | 
|Provision for
 uncollectible accounts receivable |  |      | 5,189   |      |   | 3,716                |   |           | 1,473  |   | 40  |   | 
|Legal expenses                                   |  |      | 4,195   |      |   | 5,588                |   |           | (1,393 | ) | (25 | ) | 
|Interest income                                  |  |      | (581    | )    |   | (3,696               | ) |           | 3,115  |   | (84 | ) | 
|Other loss
 (income)                             |  |      | (74     | )    |   | (171                 | ) |           | 97     |   | (57 | ) | 
|Foreign currency
 loss (gain)                    |  |      | 725     |      |   | (27                  | ) |           | 752    |   |    |   | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Total costs and
 expenses  net                  |  |      | 113,049 |      |   | 88,687               |   |           | 24,362 |   | 27  |   | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Loss before income
 taxes                        |  |      | (23,477 | )    |   | (10,892              | ) |           | 12,585 |   | 116 |   | 
|(Provision)
 benefit for income taxes            |  |      | (87     | )    |   | 239                  |   |           | 326    |   |    |   | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 
|Net loss                                         |  | $    | (23,564 | )    | $ | (10,653              | ) | $         | 12,911 |   | 121 |   | 
|                                                 |  |      |         |      |   |                      |   |           |        |   |     |   | 

Fiscal 2009 compared to Fiscal 2008

Consolidated Results:

The 2009
period and the 2008 period refer to the fiscal years ended
July 31, 2009 and 2008, respectively. The 2009 period includes the full year
results of Biomol which was acquired on May 8, 2008 and the results of Assay
Designs from March 12, 2009, the date of acquisition, to July 31, 2009.

Product
revenues during the 2009 period were $40.6 million compared to $28.1 million in
the 2008 period, an increase of $12.5 million or 45%. Acquisition growth
represented $12.1 million or a 43% increase over product revenues in the 2008
period, primarily from Biomol and Assay Designs, $1.4 million or 5% was from
organic growth, offset by $1.0 million or 4% negative effect from foreign
currency.

Royalty and
license fee income during the 2009 period was $9.4 million compared to $7.6
million in the 2008 period, an increase of $1.7 million or 23%. Royalties are
primarily earned from net sales of Qiagen products subject to a license and
from a License Agreement with Abbott. During the 2009 period, the Company
recognized royalties of approximately $6.7 million from Qiagen, an increase of
approximately $1.2 million over the 2008 period, and royalties and license fees
under the Abbott License Agreement of approximately $2.7 million, an increase
of $0.5 million over the 2008 period. There are no direct expenses relating to
royalty and license fee income.

Clinical
laboratory revenues during the 2009 period were $39.6 million compared to $42.1
million in the 2008 period, a decrease of $2.5 million or 6%. Revenues were
adversely affected by contractual adjustments of $2.3 million. These
immaterial adjustments related to computational errors that affected the
calculated expected reimbursement rate in fiscal 2008, 2007 and 2006 and for
periods prior to August 1, 2005 for the majority of payers and credits issued
which were not accrued for timely. The reduced service volume was partially
impacted by reduced billings on our legacy billing system in fiscal 2009,
including the investigation of and rebilling of denials during the period, as
    a result of the realignment of certain billing personnel to implement our
    new comprehensive billing and accounts receivable system. This new system
    was effective for all laboratory services performed after August 1, 2008.
    We believe that the new billing and accounts receivable system enhances our
billing and collection process.

The cost of
product revenues during the 2009 period was $26.8 million compared to $19.2
million in the 2008 period, an increase of $7.6 million or 40%. The increase is
principally due to the inclusion of Biomol and Assay Designs cost of product
revenues of approximately $7.4 million in the 2009 period, which includes the
impact of an inventory fair value adjustment of $2.2 million related to sales
of inventory acquired from Biomol and Assay Designs.

41

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The cost of
clinical laboratory services during the 2009 period was $26.3 million as
compared to $22.2 million in the prior period, an increase of $4.1 million or
18%. The Company incurred increased costs primarily relating to reagent and
supplies costs of $1.1 million, laboratory personnel costs of $1.8 million, and
outside testing labs of $0.7 million, and other related lab costs of $0.5
million. Laboratory personnel costs increases resulted from additional
headcounts in phlebotomists to expand patient collection sites and other
personnel to manage expanded internal operations.

Research
and development expenses were approximately $9.2 million during the 2009 period
compared to $8.6 million in the 2008 period an increase of $0.6 million or 7%.
Research and development costs increased $2.4 million at the Life Sciences
segment, principally related to the inclusion of Biomol and Assay Designs,
offset by a decrease at the Therapeutic segment of $1.8 million due to a
decrease in clinical trial activities.

Selling,
general and administrative expenses were approximately $41.3 million during the
2009 period as compared to $33.3 million in the 2008 period, an increase of
$8.0 million or 24%. Life Sciences selling, general and administrative costs
increased by $5.2 million over the 2008 period, which principally related to
the inclusion of Biomol and Assays Designs. The increase in the Companys
other segments selling, general and administrative expenses of approximately
$2.9 million was primarily due to payroll and related personnel costs approximating
$0.5 million, consulting and professional fees of $1.2 million, other overhead
costs of $1.0 million and information technology costs of $0.3 million.

The
provision for uncollectible accounts receivable, primarily relating to the
Clinical Labs segment, was $5.2 million for the 2009 period as compared to $3.7
million in the 2008 period. The increase in the 2009 period of $1.5 million or
40% was attributed to 1) increased provisions for the Clinical Labs legacy
billing system, which was replaced in August 2008, due to reduced collection
efforts relating to the legacy billing system, 2) the correction of the
immaterial $0.6 million error in the allowance for doubtful accounts determined
relating to 2008, and 3) increased provisions required based on changes in
payer mix. Outstanding receivables, which are fully reserved, will remain on
the legacy system until the earlier of: all invoices are collected, all collection
    efforts are exhausted, or all invoices are written off in accordance with
    our critical accounting policy.

Legal
expense was $4.2 million during the 2009 period compared to $5.6 million in the
2008 period, a decrease of $1.4 million or 25%, primarily due to a decrease in
patent litigation activity in the current period of $2.6 million offset by
increases in the Life Science segment of $0.2 million for realignment of
existing and establishment of new global operating units and increases in other
legal costs of $1.0 million.

Interest
income decreased by $3.1 million or 84% to $0.6 million during the 2009 period
compared to $3.7 million during the 2008 period. Interest income decreased
during the 2009 period due to the decline in interest rates in response to
monetary policy actions taken by the U.S. Federal Reserve and lower invested
balances. The Company earns interest by investing primarily in short term and
liquid U.S. government instruments and money market accounts.

Other
income was $0.1 million during the 2009 period versus $0.2 million in the year
ago period.

The loss on
foreign currency was $0.7 million during the 2009 period. During the 2009
period, the Companys Life Sciences segment incurred a non-cash foreign
currency loss of approximately $0.7 million on an intercompany term loan denominated
in pounds sterling due to the strengthening of the US dollar as at July 31,
2009 versus July 31, 2008.

The
Companys effective income tax rate (provision) benefit for the 2009 period was
(0.4%), compared to 2.2% during the 2008 period. The tax provision for both
periods was based on state and local taxes and book to tax differences for
inventory acquired from Biomol 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.

42

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Segment Results

The Life
Sciences segments income before taxes was approximately $1.7 million for the
2009 period and $3.4 million for the 2008 period. Revenues from product
shipments increased by $12.5 million primarily due to the inclusion of products
sales of $12.1 million from Biomol and Assay Designs in the 2009 period.
Royalty and license fee income increased $1.7 million primarily from the
existing Qiagen and Abbott licensing and royalty agreements.

The
segments gross margin of $23.2 million increased $6.6 over the prior year
period, after being negatively impacted by a $2.2 million fair value adjustment
attributed to the sale of inventory acquired from Biomol and Assay Designs.
Segment operating expenses, including selling, general and administrative and
legal of $14.9 million and research and development of $5.9 million, increased
by approximately $7.5 million during the 2009 period primarily due to the
inclusion of Biomol and Assay Designs expenses of $7.5 million. The 2009
expenses include amortization of intangibles of $1.2 million, $0.4 million in
legal costs to establish new and realign existing global entities, and
marketing costs of $0.2 million relating to the integration of our brands. The
segment experienced a non-cash foreign currency loss of $0.7 million resulting
from an intercompany loan denominated in pounds sterling. In aggregate, the
inventory fair value adjustment, amortization of intangibles, the one-time
legal and marketing costs and the non-cash foreign currency loss, negatively
impacted the segment operating results by $4.7 million.

The
Clinical Labs segments loss before taxes was $7.3 million for the 2009 period
as compared to income before taxes of $2.0 million in the 2008 period. The 2009
results were negatively impacted by lower service volume of $2.5 million
partially due to a charge of $2.3 million relating to contractual adjustments
discussed above, The decrease in the 2009 periods gross margin of $6.6 million
was due to the decreased service revenues, change in fiscal 2009 payer mix and
increased cost of laboratory services. Selling, general and administrative
increased approximately $1.1 million primarily due to increases in office
support salaries and operational costs to maintain the facility. The provision
for uncollectible accounts increased by $1.5 million primarily due to an
increased provision related to the legacy billing system and the correction of
the previously noted immaterial error $0.6 million in the allowance for
doubtful accounts related to fiscal 2008. The segment earned interest in the
2009 period of $0.1 million and $0.2 million in the 2008 period.

The
Therapeutics segments loss before income taxes was approximately $3.4 million
for the 2009 period as compared to a loss of $5.1 million for the 2008 period.
The decrease in the loss of $1.7 million was primarily due to a decrease in
clinical trial activities of $1.8 million offset by a non-recurring government
grant of $0.1 million which was recognized in the 2008 period.

The Other
segments loss before taxes for the 2009 period was approximately $14.6 million
compared to $11.3 million in the 2008 period, an increase of $3.3 million.
Selling, general, and administrative and legal increased by $0.3 million as the
result of a $1.6 million decrease in legal expenses due to decreased patent
litigation activity, partially offset by increases in professional and
consulting fees of $1.2 million, and payroll and related costs of $0.7 million.
The decrease in interest income of $2.9 million due to the decline in interest
rates in response to monetary policy actions taken by the U.S. Federal Reserve
and lower levels of cash available for investment.

43

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Results of Operations

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

|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------------------- | - | -------- | ------ | - | --- | - | 
|                                                 |  | 2008 |         | 2007 |   | Increase
 (Decrease) |   | % Change |       
|                                                 |  |      |         |      |   |                      |   |          |       
|Revenues:                                        |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Product revenues                                 |  | $    | 28,087  |      | $ | 6,658                |   | $        | 21,429 |   | 322 |   | 
|Royalty and
 license fee income                  |  |      | 7,630   |      |   | 5,820                |   |          | 1,810  |   | 31  |   | 
|Clinical
 laboratory services                    |  |      | 42,078  |      |   | 40,430               |   |          | 1,648  |   | 4   |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Total revenues                                   |  |      | 77,795  |      |   | 52,908               |   |          | 24,887 |   | 47  |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Costs and expenses
 and other (income):          |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Cost of product
 revenues                        |  |      | 19,159  |      |   | 5,034                |   |          | 14,125 |   | 281 |   | 
|Cost of laboratory
 services                     |  |      | 22,209  |      |   | 19,151               |   |          | 3,058  |   | 16  |   | 
|Research and
 development                        |  |      | 8,637   |      |   | 9,393                |   |          | (756   | ) | (8  | ) | 
|Selling, general,
 and administrative            |  |      | 33,272  |      |   | 25,348               |   |          | 7,924  |   | 31  |   | 
|Provision for
 uncollectible accounts receivable |  |      | 3,716   |      |   | 4,653                |   |          | (937   | ) | (20 | ) | 
|Legal expenses                                   |  |      | 5,588   |      |   | 10,295               |   |          | (4,707 | ) | (46 | ) | 
|Interest income                                  |  |      | (3,696  | )    |   | (5,092               | ) |          | 1,396  |   | (27 | ) | 
|Other loss
 (income)                             |  |      | (171    | )    |   | (2,699               | ) |          | 2,528  |   | (94 | ) | 
|Foreign currency
 (gain)                         |  |      | (27     | )    |   |                     |   |          | (27    | ) |    |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Total costs and
 expenses  net                  |  |      | 88,687  |      |   | 66,083               |   |          | 22,604 |   | 34  |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Loss before income
 taxes                        |  |      | (10,892 | )    |   | (13,175              | ) |          | 2,283  |   | 17  |   | 
|Benefit
 (provision) for income taxes            |  |      | 239     |      |   | (85                  | ) |          | 324    |   |    |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 
|Net loss                                         |  | $    | (10,653 | )    | $ | (13,260              | ) | $        | 2,607  |   | 20  |   | 
|                                                 |  |      |         |      |   |                      |   |          |        |   |     |   | 

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 May 8, 2008, the 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.

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.

44

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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 $22.2 million as
compared to $19.2 million in the prior period, an increase of $3.0 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 $33.3 million during the
2008 period as compared to $25.3 million in the 2007 period, an increase of
$8.0 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
$4.7 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.

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.

45

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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 $3.0 million as compared to the 2007
period. In the 2008 period the selling, general and administrative costs
increased by approximately $0.9 million due primarily due to increases in sales
commissions of $0.3 million and payroll and payroll related costs of $0.6
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
million, a decrease of $3.1 million as compared to $14.4 million 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.

Liquidity
and Capital Resources

At July 31,
2009, our cash and cash equivalents were $6.9 million and short-term
investments of $43.3 million, or $50.2 million in aggregate as compared to
$78.3 at July 31, 2008. Short-term investments are in U.S. Government instruments.
We had working capital of $60.5 million at July 31, 2009 compared to $92.4
million at July 31, 2008. In 2009, the decrease of $ 31.9 million was primarily
due to the use of cash for acquisitions of approximately $14.5 million, cash
used in operations of $11.5 million and $2.7 million used for capital
expenditures.

Net cash
used in operating activities for the year ended July 31, 2009 was approximately
$11.5 million as compared to net cash used in operating activities of $8.6
million for the year ended July 31, 2008. The increase in net cash used in
operating activities in fiscal 2009 of $2.9 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 $12.9
million increase in the net loss.

In fiscal
2009, net cash used in investing activities was approximately $60.2 million as
compared to the fiscal 2008 net cash used of $18.8 million. Fiscal 2009 uses
were primarily due to: net purchases of short-term investment of $43.3 million,
acquisitions of $14.5 million, of which $13.0 million related to the
acquisition of Assay Designs, Inc., inclusive of acquisition costs, and an
additional purchase price of $1.5 million relating to the Biomol earn-out and
capital expenditures of approximately $2.7 million.

In fiscal
2009, net cash provided by financing activities was approximately $0.4 million
as compared to $0.5 million in fiscal 2008, arising in both years from the
proceeds from the exercise of stock options.

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.

46

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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
June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles  a
replacement of FASB Statement No. 162. SFAS No. 168 establishes the FASB
Accounting Standards Codification as the source of authoritative accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS No. 162 is effective for the Companys interim reporting
period ending on October 31, 2009. The Company does not anticipate the adoption
of SFAS No. 168 will have a material impact on its financial position, results
of operations or cash flows.

In May
2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165). SFAS 165
is intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, SFAS 165 sets forth
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; the circumstances under
which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements; and the disclosures that an
entity should make about events or transactions that occurred after the balance
sheet date. SFAS 165 is effective for interim or annual financial periods
ending after June 15, 2009. During the three months ended July 31, 2009, the
Company adopted SFAS SFAS 165. In response to SFAS 165, management has
evaluated subsequent events through October 14, 2009, which is the date that
the Companys financial statements were filed.

In
April 2009, the FASB issued FSP SFAS No. 141(R)-1 Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies,  FSP SFAS No. 141(R)-1 will amend the provisions related to the
initial recognition and measurement, subsequent measurement and disclosure of
assets and liabilities arising from contingencies in a business combination
under SFAS No. 141(R), Business Combinations. The FSP will carry forward the
requirements in SFAS No. 141, Business Combinations, for acquired
contingencies, thereby requiring that such contingencies be recognized at fair
value on the acquisition date if fair value can be reasonably estimated during
the allocation period. Otherwise, entities would typically account for the
acquired contingencies in accordance with SFAS No. 5, Accounting for
Contingencies. The FSP will have the same effective date as SFAS No. 141(R),
and will therefore be effective for the Companys business combinations for
which the acquisition date is on or after August 1, 2009. The Company is
currently evaluating the impact of the implementation of FSP SFAS No. 141(R)-1
on its consolidated financial position, results of operations and cash flows.

In
April 2009, the FASB issued FSP SFAS No. 107-1 and APB 28-1,Interim
Disclosures about Fair Value of Financial Instruments. FSP SFAS No. 107-1 and
APB 28-1 enhances consistency in financial reporting by increasing the
frequency of fair value disclosures. The FSP relates to fair value disclosures
for any financial instruments that are not currently reflected on a companys
balance sheet at fair value. Prior to the effective date of this FSP, fair
values for these assets and liabilities have only been disclosed once a year.
The FSP will now require these disclosures on a quarterly basis, providing
qualitative and quantitative information about fair value estimates for all
those financial instruments not measured on the balance sheet at fair value.
The disclosure requirement under this FSP is effective for the Companys
interim reporting period ending on October 31, 2009.

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.

47

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SFAS
    No. 141R further requires that: 1) contingent consideration arrangements
    will be fair valued at the acquisition date and included on that basis in
    the purchase price consideration, 2) acquisition-related costs will be expensed
    as incurred rather than capitalized as part of the purchase price, 3) reversal
    of valuation allowances created in purchase accounting will be recorded through
    the income tax provision, 4) in order to accrue for a restructuring plan
    in purchase accounting, the requirements of SFAS No. 146, Accounting
    for Costs Associated with Exit or Disposal Activities, would have to
    be met at the acquisition date. 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.

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, 2009:

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   |  | $ | 20,316 |  | $                 | 4,410 |           | $ | 7,195     |  | $            | 4,565 |  | $ | 4,146 | 
|Employment agreements              |  |   | 3,159  |  |                   | 1,948 |           |   | 1,211     |  |              |      |  |   |      | 
|                                   |  |   |        |  |                   |       |           |   |           |  |              |       |  |   |       | 
|Total contractual cash obligations |  | $ | 23,475 |  | $                 | 6,358 |           | $ | 8,406     |  | $            | 4,565 |  | $ | 4,146 | 
|                                   |  |   |        |  |                   |       |           |   |           |  |              |       |  |   |       | 

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.

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.

Royalties

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

48

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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.

The
following table represents the clinical laboratory segments net revenues
and percentages by revenue category:

|                   |  |                          |            |                          |        |                          |            |   |        |  |            |     |        |   |        |  |  |     |   | 
|------------------ |  | ------------------------ | ---------- | ------------------------ | ------ | ------------------------ | ---------- | - | ------ |  | ---------- | --- | ------ | - | ------ |  |  | --- | - | 
|                   |  | Year ended July 31
 2009 |            | Year ended July 31
 2008 |        | Year ended July 31
 2007 |           
|                   |  |                          |            |                          |        |                          |           
|Revenue category   |  |                          | (In 000s) |                          | (in %) |                          | (In 000s) |   | (in %) |  | (In 000s) |     | (in %) |  
|                   |  |                          |            |                          |        |                          |            |   |        |  |            |     |        |  
|Medicare           |  | $                        | 9,138      |                          |        | 23                       |            | $ | 9,078  |  |            | 22  |        | $ | 8,478  |  |  | 21  |  
|Third-party payers |  |                          | 20,073     |                          |        | 51                       |            |   | 24,768 |  |            | 59  |        |   | 25,060 |  |  | 62  |  
|Patient self-pay   |  |                          | 6,056      |                          |        | 15                       |            |   | 3,582  |  |            | 8   |        |   | 2,952  |  |  | 7   |  
|HMOs              |  |                          | 4,337      |                          |        | 11                       |            |   | 4,650  |  |            | 11  |        |   | 3,940  |  |  | 10  |  
|                   |  |                          |            |                          |        |                          |            |   |        |  |            |     |        |   |        |  |  |     |  
|Total              |  | $                        | 39,604     |                          |        | 100                      | %          | $ | 42,078 |  |            | 100 | %      | $ | 40,430 |  |  | 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 25%, 26%, and 20% of the Clinical Labs services net revenues for
the fiscal years ended July 31, 2009, 2008 and 2007 respectively.

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.

49

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During the
years ended July 31, 2009, 2008 and 2007, the contractual adjustment
percentages, determined using current and historical reimbursement statistics,
were 80.8%, 81.8% and 79.0%, respectively, of gross billings. The Company
believes a decline in reimbursement rates or a shift to managed care, 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 $2,040,000 and $2,316,000, for
    the years ended July 31, 2009 and 2008, respectively, and a change in the
    net accounts receivable of approximately $287,000 and $301,000 as of July
    31, 2009 and 2008, respectively.

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, 2009 and 2008,
approximately 40% and 58%, 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 $2.1 million or 28% and $3.3 million or 51% represents
foreign receivables as of July 31, 2009 and 2008 respectively, includes royalty
receivables of $2.5 and $2.1 million, as of July 31, 2009 and 2008,
respectively, of which approximately $1.9 million and $1.5 million,
respectively is from Qiagen Corporation.

Net
accounts receivable

|                           |  |                      |            |                      |        |     |            |   |        |  |  |     |   | 
|-------------------------- |  | -------------------- | ---------- | -------------------- | ------ | --- | ---------- | - | ------ |  |  | --- | - | 
|                           |  | As of
 July 31, 2009 |            | As of
 July 31, 2008 |       
|                           |  |                      |            |                      |       
|Billing category           |  |                      | (In 000s) |                      | (in %) |     | (In 000s) |   | (in %) | 
|                           |  |                      |            |                      |        |     |            |   |        | 
|Clinical Labs              |  |                      |            |                      |        |     |            |   |        |  |  |     |  
|Medicare                   |  | $                    | 1,113      |                      |        | 22  |            | $ | 1,600  |  |  | 18  |  
|Third party payers         |  |                      | 2,003      |                      |        | 40  |            |   | 4,610  |  |  | 52  |  
|Patient self-pay           |  |                      | 1,635      |                      |        | 32  |            |   | 2,144  |  |  | 24  |  
|HMOs                      |  |                      | 303        |                      |        | 6   |            |   | 537    |  |  | 6   |  
|                           |  |                      |            |                      |        |     |            |   |        |  |  |     |  
|Total clinical
 labs       |  |                      | 5,054      |                      |        | 100 | %          |   | 8,891  |  |  | 100 | %
|                           |  |                      |            |                      |        |     |            |   |        |  |  |     |  
|Total life
 sciences       |  |                      | 7,426      |                      |        |     |            |   | 6,457  |  |  |     |  
|                           |  |                      |            |                      |        |     |            |   |        |  |  |     |  
|Total accounts
 receivable |  | $                    | 12,480     |                      |        |     |            | $ | 15,348 |  |  |     |  
|                           |  |                      |            |                      |        |     |            |   |        |  |  |     |  

50

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

|                                 |  |   |               |   |               |        |   | 
|-------------------------------- |  | - | ------------- | - | ------------- | ------ | - | 
|In 000s                         |  |   | July 31, 2009 |   | July 31, 2008 |       
|                                 |  |   |               |   |               |       
|Beginning balance                |  | $ | 886           |   | $             | 1,404  |  
|Provision for
 doubtful accounts |  |   | 5,189         |   |               | 3,716  |  
|Write-offs, net                  |  |   | (1,289        | ) |               | (4,234 | )
|                                 |  |   |               |   |               |        |  
|Ending balance                   |  | $ | 4,786         |   | $             | 886    |  
|                                 |  |   |               |   |               |        |  

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.

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, 2009 and 2008, 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.

During
the period ended 2009 versus 2008, our bad debt expense and related allowance
for doubtful accounts increased by $1.5 million, as a result of the impact of
1) increased provisions for the Clinical Labs legacy billing system, which was
replaced in August 2008, due to reduced collection efforts relating to the
legacy billing system, 2) the correction of the aforementioned $0.6 million
immaterial error in the allowance for doubtful accounts relating to fiscal 2008,
and 3.) increased provisions required based on changes in payer mix. The
Company is presently managing two systems until the legacy system collection
efforts are deemed completed.

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.

51

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The
following table indicates the Clinical Labs aged gross receivables by payer
group (in thousands), 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. The amounts as of July 31, 2009 are from the
Companys new billing system and the amounts as of July 31, 2008 are from the
Companys legacy billing system. The fully reserved amount as of July 31, 2009
is for billing from the new system only. As of July 31, 2009, all uncollected
receivables from the legacy billing system have been fully reserved.

|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|----------------------- |  | ------------- | ------ | - |  | ---------------- | - | - | ----- | ---------------------------- |  | --- | - | ---------------- | ------ | - |  | ------------- | - | - | ----- |  |  | --- | - | - | ----- |  |  | --- | -
|As of July 31, 2009     |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party
 Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |      
|1-30 days               |  | $             | 19,251 |   |  | 70               | % | $ | 3,193 |                              |  | 61  | % | $                | 9,695  |   |  | 73            | % | $ | 2,882 |  |  | 51  | % | $ | 3,481 |  |  | 99  | %
|31-60 days              |  |               | 4,508  |   |  | 17               | % |   | 894   |                              |  | 16  | % |                  | 1,957  |   |  | 15            | % |   | 1,635 |  |  | 29  | % |   | 22    |  |  | 1   | %
|61-90 days              |  |               | 1,783  |   |  | 6                | % |   | 256   |                              |  | 5   | % |                  | 680    |   |  | 5             | % |   | 836   |  |  | 15  | % |   | 11    |  |  |    | %
|91-120 days             |  |               | 1,039  |   |  | 4                | % |   | 249   |                              |  | 5   | % |                  | 483    |   |  | 4             | % |   | 280   |  |  | 5   | % |   | 7     |  |  |    | %
|121-150 days            |  |               | 335    |   |  | 1                | % |   | 134   |                              |  | 3   | % |                  | 202    |   |  | 2             | % |   |      |  |  |    | % |   | 4     |  |  |    | %
|Greater than 150 days*  |  |               | 621    |   |  | 2                | % |   | 536   |                              |  | 10  | % |                  | 100    |   |  | 1             | % |   |      |  |  |    | % |   |      |  |  |    | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 27,537 |   |  | 100              | % | $ | 5,262 |                              |  | 100 | % | $                | 13,117 |   |  | 100           | % | $ | 5,633 |  |  | 100 | % | $ | 3,525 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|As of July 31,
 2008    |  | Total
 Amount |        | % |  | MedicareAmount   |   | % |       | 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   |  |  | 5   | % |   | 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 | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  

** Total includes $340 fully reserved over 210 days as of July 31,
2009.

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

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.

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.

52

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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, 2009 and
2008, our reserve for excess and obsolete inventory was $1,005,000 and $637,000
respectively.

Goodwill and Indefinite-Lived Intangibles

Goodwill, representing
the cost of acquired businesses in excess of the fair value of net 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 if indicators of potential impairment exist.
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,
which is based on  geographic region, is estimated using both a discounted cash
flow model and a weighted average multiple of earnings before interest and taxes
from comparable companies. To date, there have been no impairment charges recorded.
As of May 1, 2009, one  of the Companys reporting units fair value
exceeded its carrying value by 10%. This reporting units goodwill was $5.3
million at the date of our annual impairment test. 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.

Intangible Assets

Intangible assets (exclusive of patents), arose primarily from acquisitions 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. The Company has capitalized 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.

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 acquisitions with foreign locations (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.          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, 2009, our
assets and liabilities would increase or decrease by $2.0 million and $0.5
million, respectively, and our net sales and net earnings would increase or
decrease by $1.6 million and $0.1 million, 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, 2009, our pre-tax earnings would be favorably or unfavorably impacted by
approximately $0.5 million on an annual basis.

Interest
Rate Risk

Our
    excess cash is invested in highly liquid short term US
government instruments and money market funds
    with high credit ratings. Changes in interest rates may affect the investment
    income we earn on cash and cash equivalents and therefore affect our
    cash flows and results of operations. As of July 31, 2009, we were exposed
    to interest rate change market risk with respect to our short-term investments
    in US Government instruments of $43.3 million. The short-term investments
    bear interest rates ranging from 0% to 0.5%. Each 100 basis point (or 1%)
    fluctuation in interest rates will increase or decrease interest income on
the short-term investments by approximately $0.5 million on an annual basis.

As of July
31, 2009, 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)

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, 2009.
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.

53

---



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, 2009, 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, 2009 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 Assay Designs Inc, (ADI), which was acquired
March 12, 2009, and whose financial statements reflect total assets and net
revenues of 10.1% and 4.5% respectively, of the consolidated financial statements
as of and for the year ended July 31, 2009. Management has opted to exclude ADI
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.

Based on
its assessment, management concluded that we maintained effective internal
control over financial reporting as of July 31, 2009. 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, 2009.
This report, in which Ernst & Young LLP has expressed an unqualified
opinion, appears in this Item 9A.

54

---



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, 2009, 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 Assay Designs,
    Inc. which is included in the 2009 consolidated financial statements of Enzo
    Biochem, Inc., and constituted 10.1% and 10.2% of total and net assets, respectively,
    as of July 31, 2009 and $4,100,000 and ($1,200,000) of revenues and net loss,
    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 Assay Designs, Inc.

In our opinion, Enzo Biochem, Inc. maintained, in all material
respects, effective internal control over financial reporting as of July 31,
2009 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, 2009 and 2008 and the
    related consolidated statements of operations, stockholders
equity and comprehensive income (loss) and cash
flows for each of the three years in the period ended July 31, 2009 of Enzo
Biochem, Inc. and our report dated October 14, 2009 expressed an unqualified
opinion thereon.

/s/ Ernst & Young LLP

Melville, New York
October 14, 2009

55

---



| |           |                  
| | --------- | -----------------
| | 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 27, 2009 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 27, 2009 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 27, 2009 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 27, 2009 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 27, 2009 and is incorporated herein by reference.

PART IV

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

| |     |     |                                                                                                                             
| | --- | --- | ----------------------------------------------------------------------------------------------------------------------------
| | (a) | (1) | Consolidated
 Financial Statements                                                                                          
| |     |     | Consolidated
 Balance Sheets - July 31, 2009 and 2008                                                                       
| |     |     | Consolidated
 Statements of Operations- Years ended July 31, 2009, 2008 and 2007                                            
| |     |     | Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss) - Years
 ended July 31, 2009, 2008 and 2007
| |     |     | Consolidated
 Statements of Cash Flows - Years ended July 31, 2009, 2008 and 2007                                           
| |     |     | 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.

56

---



| |  |     |         
| |  | --- | --------
| |  | (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)                                                                         
|           
|10 (p)      |  | Asset Purchase
 Agreement By and Among Enzo Life Sciences, Acquisition, Inc. and Assay
 Designs, Inc. (15).                                                
|           
|14 (a)      |  | Code of Ethics
 (10)                                                                                                                                       
|           
|21          |  | Subsidiaries of
 the registrant:                                                                                                                           
|            |  |                                                                                                                                                            
|            |  | Enzo Clinical
 Labs, Inc., a New York corporation.                                                                                                         
|            |  | Enzo Life
 Sciences, Inc., a New York corporation.                                                                                                         
|            |  | Enzo Therapeutics,
 Inc., a New York corporation.                                                                                                          
|            |  | 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.                                                            

57

---



|     |  |                                                                                                                                                           
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 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
 July31, 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
 July31, 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
 July31, 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
 July31, 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
 July31, 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
 July31, 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.                               
|    
|(15) |  | This exhibit was
 filed with the Companys Current Report on Form 8-K March 13, 2009 and is
 incorporated herein by reference.                            
|     |  |                                                                                                                                                           
|(b)  |  | See Item 15(a)
 (3), above.                                                                                                                               
|     |  |                                                                                                                                                           
|(c)  |  | See Item 15(a)
 (2), above.                                                                                                                               

58

---



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,
 2009 | 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, 2009
|                                                                               |  |                 
|Elazar Rabbani,                                                                |  |                 
|Chairman of Board
 of Directors                                                |  |                 
|(Principal
 Executive Officer)                                                 |  |                 
|                                                                               |  |                 
|By: /s/ Barry W.
 Weiner                                                       |  | October 14, 2009
|                                                                               |  |                 
|Barry W. Weiner,                                                               |  |                 
|President, Chief
 Financial Officer, Principal Accounting Officer and Director |  |                 
|                                                                               |  |                 
|                                                                               |  |                 
|                                                                               |  |                 
|Shahram K.
 Rabbani,                                                           |  |                 
|Secretary,
 Treasurer and Director                                             |  |                 
|                                                                               |  |                 
|By: /s/ Irwin
 Gerson                                                          |  | October 14, 2009
|                                                                               |  |                 
|Irwin Gerson,
 Director                                                        |  |                 
|                                                                               |  |                 
|By: /s/ Stephen B.
 H. Kent Ph.D.                                              |  | October 14, 2009
|                                                                               |  |                 
|Stephen B. H.
 Kent, Director                                                  |  |                 
|                                                                               |  |                 
|By: /s/ Bernard L. Kasten
 MD                                                  |  | October 14, 2009
|                                                                               |  |                 
|Bernard Kasten,
 Director                                                      |  |                 
|                                                                               |  |                 
|By: /s/ Melvin F.
 Lazar                                                       |  | October 14, 2009
|                                                                               |  |                 
|Melvin F. Lazar,
 Director                                                     |  |                 

59

---



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, 2009 and 2008                                                                                |  | F-3
|                                                                                                                                     |  |    
|Consolidated Statements
 of Operations  Years ended July 31, 2009, 2008 and 2007                                                    |  | F-4
|                                                                                                                                     |  |    
|Consolidated Statements
 of Stockholders Equity and Comprehensive Income (Loss)  Years ended July
 31, 2009, 2008 and 2007         |  | F-5
|                                                                                                                                     |  |    
|Consolidated Statements
 of Cash Flows  Years ended July 31, 2009, 2008 and 2007                                                    |  | F-6
|                                                                                                                                     |  |    
|Notes to Consolidated
 Financial Statements                                                                                          |  | F-7
|                                                                                                                                     |  |    
|Schedule II - Valuation
 and Qualifying Accounts  Years ended July 31, 2009, 2008 and 2007                                          |  | 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, 2009 and 2008, and the related consolidated statements of
      operations, stockholders equity and comprehensive income (loss),
      and cash flows for each of the three years in the period ended July 31,
      2009. 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, 2009 and 2008, and the consolidated
    results of their operations and their cash flows for each of the three years
    in the period ended July 31, 2009, 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 forth 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, 2009, 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, 2009 expressed an unqualified opinion.

|                   |                      
|------------------ | ---------------------
|                   | /s/ Ernst & Young LLP
|Melville, New York |                      
|October 14, 2009   |                      

F-2

---



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

|                                                                                                                                         |  |                |          |                |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- | - | -------- | -
|                                                                                                                                         |  | July 31,
 2009 |          | July 31,
 2008 |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|ASSETS                                                                                                                                   |  |                |          |                |   |          |  
|Current assets:                                                                                                                          |  |                |          |                |   |          |  
|Cash and cash equivalents                                                                                                                |  | $              | 6,929    |                | $ | 78,322   |  
|Short term investments                                                                                                                   |  |                | 43,306   |                |   |         |  
|Accounts receivable, net of allowance for
 doubtful accounts of $4,786 in 2009 and $886 in 2008                                          |  |                | 12,480   |                |   | 15,348   |  
|Inventories                                                                                                                              |  |                | 9,264    |                |   | 9,514    |  
|Prepaid expenses                                                                                                                         |  |                | 2,482    |                |   | 2,496    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current assets                                                                                                                     |  |                | 74,461   |                |   | 105,680  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Property, plant, and equipment, net                                                                                                      |  |                | 11,323   |                |   | 9,053    |  
|Goodwill                                                                                                                                 |  |                | 24,896   |                |   | 21,321   |  
|Intangible assets, net                                                                                                                   |  |                | 22,009   |                |   | 17,656   |  
|Other                                                                                                                                    |  |                | 439      |                |   | 812      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total assets                                                                                                                             |  | $              | 133,128  |                | $ | 154,522  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Current liabilities:                                                                                                                     |  |                |          |                |   |          |  
|Accounts payable  trade                                                                                                                 |  | $              | 4,242    |                | $ | 4,299    |  
|Accrued liabilities                                                                                                                      |  |                | 8,426    |                |   | 7,370    |  
|Other current liabilities                                                                                                                |  |                | 1,062    |                |   | 1,161    |  
|Deferred taxes                                                                                                                           |  |                | 213      |                |   | 458      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current liabilities                                                                                                                |  |                | 13,943   |                |   | 13,288   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Deferred revenue                                                                                                                         |  |                | 38       |                |   | 512      |  
|Deferred taxes                                                                                                                           |  |                | 2,366    |                |   | 2,433    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|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: 38,589,880 at July 31, 2009 and 38,007,581
 at July 31, 2008 |  |                | 386      |                |   | 380      |  
|Additional paid-in capital                                                                                                               |  |                | 306,280  |                |   | 303,811  |  
|Less treasury stock at cost: 735,554 shares
 at July 31, 2009 and 777,719 shares at July 31, 2008                                        |  |                | (10,440  | )              |   | (11,331  | )
|Accumulated deficit                                                                                                                      |  |                | (179,721 | )              |   | (156,157 | )
|Accumulated other comprehensive income                                                                                                   |  |                | 276      |                |   | 1,586    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total stockholders equity                                                                                                               |  |                | 116,781  |                |   | 138,289  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total liabilities and stockholders equity                                                                                               |  | $              | 133,128  |                | $ | 154,522  |  
|                                                                                                                                         |  |                |          |                |   |          |  

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, |        
|                                                 |  |                      |        
|                                                 |  | 2009                 |         | 2008 |    | 2007    |  
|                                                 |  |                      |         |      |    |         |  
|Revenues:                                        |  |                      |         |      |    |         |   |    |         |  
|Product revenues                                 |  | $                    | 40,592  |      | $  | 28,087  |   | $  | 6,658   |  
|Royalty and license fee income                   |  |                      | 9,376   |      |    | 7,630   |   |    | 5,820   |  
|Clinical laboratory services                     |  |                      | 39,604  |      |    | 42,078  |   |    | 40,430  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      | 89,572  |      |    | 77,795  |   |    | 52,908  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Costs and expenses and other (income):           |  |                      |         |      |    |         |   |    |         |  
|Cost of product revenues                         |  |                      | 26,766  |      |    | 19,159  |   |    | 5,034   |  
|Cost of clinical laboratory services             |  |                      | 26,295  |      |    | 22,209  |   |    | 19,151  |  
|Research and development expense                 |  |                      | 9,220   |      |    | 8,637   |   |    | 9,393   |  
|Selling, general, and administrative
 expense    |  |                      | 41,314  |      |    | 33,272  |   |    | 25,348  |  
|Provision for uncollectible accounts
 receivable |  |                      | 5,189   |      |    | 3,716   |   |    | 4,653   |  
|Legal expense                                    |  |                      | 4,195   |      |    | 5,588   |   |    | 10,295  |  
|Interest income                                  |  |                      | (581    | )    |    | (3,696  | ) |    | (5,092  | )
|Other income                                     |  |                      | (74     | )    |    | (171    | ) |    | (2,699  | )
|Foreign exchange loss (gain)                     |  |                      | 725     |      |    | (27     | ) |    |        |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      | 113,049 |      |    | 88,687  |   |    | 66,083  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Loss before income taxes                         |  |                      | (23,477 | )    |    | (10,892 | ) |    | (13,175 | )
|(Provision) benefit for income taxes             |  |                      | (87     | )    |    | 239     |   |    | (85     | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss                                         |  | ($                   | 23,564  | )    | ($ | 10,653  | ) | ($ | 13,260  | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss per common share:                       |  |                      |         |      |    |         |   |    |         |  
|Basic                                            |  | ($                   | 0.63    | )    | ($ | 0.29    | ) | ($ | 0.38    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Diluted                                          |  | ($                   | 0.63    | )    | ($ | 0.29    | ) | ($ | 0.38    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Weighted average common shares outstanding:      |  |                      |         |      |    |         |   |    |         |  
|Basic                                            |  |                      | 37,511  |      |    | 36,883  |   |    | 35,017  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Diluted                                          |  |                      | 37,511  |      |    | 36,883  |   |    | 35,017  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  

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, 2009, 2008, and 2007
(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, 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 employee401(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 |   |   |         |  
|                                                           |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|Net (loss)
 for the year ended July 31, 2009               |  |                       |           |                         |  |                      |   |                              |    |                         |   |                     |   |                                                  |        |                              |   | (23,564                      | ) |   |       |   |   | (23,564 | ) | $ | (23,564 | )
|Purchase of
 treasury stock                                |  |                       |           |                         |  | 99,985                |   |                              |     |                         |   |                      |   |                                                  | (1,126  | )                            |   |                             |   |   |       |   |   | (1,126  | ) |   |        |  
|Exercise of
 stock options                                 |  |                       | 251,162    |                         |  |                       |   |                              | 3   |                         |   | 1,471                |   |                                                  |        |                              |   |                             |   |   |       |   |   | 1,474   |   |   |        |  
|Vesting of
 restricted stock                               |  |                       | 128,941    |                         |  |                      |   |                              | 1   |                         |   |                     |   |                                                  |        |                              |   |                             |   |   |       |   |   | 1       |   |   |        |  
|Stock based
 compensation charges                          |  |                       |           |                         |  |                      |   |                              |    |                         |   | 1,435                |   |                                                  |        |                              |   |                             |   |   |       |   |   | 1,435   |   |   |        |  
|Issuance of
 treasury stock for employee 401(k) plan match |  |                       |           |                         |  | (142,150              | ) |                              |    |                         |   | (1,435               | ) |                                                  | 2,017   |                              |   |                             |   |   |       |   |   | 582     |   |   |        |  
|Issuance of
 stock for acquisition earn out                |  |                       | 202,196    |                         |  |                      |   |                              | 2   |                         |   | 998                  |   |                                                  |        |                              |   |                             |   |   |       |   |   | 1,000   |   |   |        |  
|Foreign
 currency translation adjustments                  |  |                       |           |                         |  |                      |   |                              |    |                         |   |                     |   |                                                  |        |                              |   |                             |   |   | (1,310 | ) |   | (1,310  | ) |   | (1,310  | )
|                                                           |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|                                                          
|Comprehensive
 (loss)                                      |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   | $ | (24,874 | )
|                                                           |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|                                                           |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|Balance at
 July 31, 2009                                  |  |                       | 38,589,880 |                         |  | 735,554               |   | $                            | 386 |                         | $ | 306,280              |   | $                                                | (10,440 | )                            | $ | (179,721                     | ) | $ | 276    |   | $ | 116,781 |   |   |         |  
|                                                           |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  

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, |         
|                                                                             |  |                      |         
|                                                                             |  | 2009                 |          | 2008 |    | 2007    |  
|                                                                             |  |                      |          |      |    |         |  
|Cash flows from operating activities:                                        |  |                      |          |      |    |         |   |    |         |  
|Net loss                                                                     |  | ($                   | 23,564   | )    | ($ | 10,653  | ) | ($ | 13,260  | )
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |                      |          |      |    |         |   |    |         |  
|Depreciation and amortization of property,
 plant and equipment              |  |                      | 2,185    |      |    | 1,488   |   |    | 1,038   |  
|Amortization of intangible assets                                            |  |                      | 1,277    |      |    | 658     |   |    | 151     |  
|Provision for uncollectible accounts
 receivable                             |  |                      | 5,189    |      |    | 3,716   |   |    | 4,653   |  
|Write-off and/or reserve for obsolete
 inventory                             |  |                      | 378      |      |    | 283     |   |    | 360     |  
|Deferred income tax (benefit) provision                                      |  |                      |         |      |    | (644    | ) |    | (178    | )
|Share based compensation charges                                             |  |                      | 1,435    |      |    | 1,566   |   |    | 1,477   |  
|Issuance of common stock for 401(k)
 employer match                          |  |                      | 582      |      |    | 481     |   |    | 421     |  
|Deferred revenue recognized                                                  |  |                      | (475     | )    |    | (426    | ) |    |        |  
|Gain on termination of officers life
 insurance policies                     |  |                      |         |      |    | (313    | ) |    |        |  
|Options issued to consultants                                                |  |                      |         |      |    |        |   |    | 130     |  
|Foreign exchange loss on intercompany loan                                   |  |                      | 697      |      |    |        |   |    |        |  
|Other                                                                        |  |                      |         |      |    |        |   |    | 10      |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Changes in operating assets and
 liabilities:                                |  |                      |          |      |    |         |   |    |         |  
|Accounts receivable                                                          |  |                      | (1,409   | )    |    | (2,837  | ) |    | (6,086  | )
|Inventories                                                                  |  |                      | 2,269    |      |    | 1,012   |   |    | 533     |  
|Prepaid expenses                                                             |  |                      | 208      |      |    | (574    | ) |    | 31      |  
|Recoverable and prepaid income taxes                                         |  |                      |         |      |    |        |   |    | 1,931   |  
|Accounts payable  trade                                                     |  |                      | (571     | )    |    | (1,060  | ) |    | 429     |  
|Accrued liabilities                                                          |  |                      | 528      |      |    | (1,066  | ) |    | 2,892   |  
|Other current liabilities                                                    |  |                      | (206     | )    |    | (195    | ) |    | 74      |  
|Deferred revenue                                                             |  |                      |         |      |    |        |   |    | 1,628   |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Adjustments                                                                  |  |                      | 12,087   |      |    | 2,089   |   |    | 9,494   |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Net cash used in operating activities                                        |  |                      | (11,477  | )    |    | (8,564  | ) |    | (3,766  | )
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Cash flows from investing activities:                                        |  |                      |          |      |    |         |   |    |         |  
|Capital expenditures                                                         |  |                      | (2,709   | )    |    | (3,231  | ) |    | (1,448  | )
|Proceeds from termination of officers life
 insurance                        |  |                      |         |      |    | 1,085   |   |    |        |  
|Maturities of short term investments                                         |  |                      | 318,650  |      |    |        |   |    |        |  
|Purchases of short term investments                                          |  |                      | (361,956 | )    |    |        |   |    |        |  
|(Increase) decrease in cash surrender
 values                                |  |                      |         |      |    |        |   |    | (75     | )
|Decrease (increase) in security deposits
 and other                          |  |                      | 384      |      |    | (491    | ) |    | (14     | )
|Acquisitions, net of cash acquired                                           |  |                      | (14,541  | )    |    | (16,144 | ) |    | (16,888 | )
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Net cash used in investing activities                                        |  |                      | (60,172  | )    |    | (18,781 | ) |    | (18,425 | )
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Cash flows from financing activities:                                        |  |                      |          |      |    |         |   |    |         |  
|Net proceeds from issuance of common stock                                   |  |                      |         |      |    |        |   |    | 56,997  |  
|Proceeds from the exercise of stock options                                  |  |                      | 348      |      |    | 470     |   |    | 500     |  
|Issuance costs from issuance of common
 stock                                |  |                      |         |      |    | (12     | ) |    |        |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Net cash provided by financing activities                                    |  |                      | 348      |      |    | 458     |   |    | 57,497  |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Effect of exchange rate changes on cash and
 cash equivalents                |  |                      | (92      | )    |    | 60      |   |    | (11     | )
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|(Decrease) increase in cash and cash
 equivalents                            |  |                      | (71,393  | )    |    | (26,827 | ) |    | 35,295  |  
|Cash and cash equivalents - beginning of
 year                               |  |                      | 78,322   |      |    | 105,149 |   |    | 69,854  |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  
|Cash and cash equivalents - end of year                                      |  | $                    | 6,929    |      | $  | 78,322  |   | $  | 105,149 |  
|                                                                             |  |                      |          |      |    |         |   |    |         |  

F-6

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

---



ENZO BIOCHEM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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 March 12, 2009, Enzo Life Sciences, Inc. and Enzo Life Sciences
Acquisition, Inc., a newly formed wholly owned subsidiary of Enzo Life
Sciences, Inc. (Acquisition Sub), entered into an asset purchase agreement
(Purchase Agreement) dated as of March 12, 2009 with Assay Designs, Inc.
(Assay Designs). Assay Designs, a privately owned company with annual sales
of approximately $11 million, was engaged in researching, developing,
manufacturing, distributing, marketing and selling specialty immunological and
biochemical protein detection kits, assays, reagents, antibodies, recombinant
proteins and related products and providing related services for use in the
biotechnology, pharmaceutical and life sciences research industries
(Business). Under the terms of the Purchase Agreement, Acquisition Sub
purchased from Assay Designs substantially all of its assets, including trade
accounts receivable, inventory, fixed assets, and intellectual property, used
in or related to the Business and assumed certain of Assay Designs
liabilities, including trade accounts payable, capital lease obligations and
certain other current liabilities. The Assay Design Acquisition strengthens the
Companys position as a global provider of life sciences reagents by broadening
our product offerings and manufacturing capabilities (see Note 2).

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 L.P., 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 the 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.

F-7

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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.

Cash and cash equivalents

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

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.

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, 2009 and 2008

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:

|                   |  |            |        |                           |     |            |   |        |  |            |   |        |        |  |     |  
|------------------ |  | ---------- | ------ | ------------------------- | --- | ---------- | - | ------ |  | ---------- | - | ------ | ------ |  | --- | -
|                   |  | 2009       |        | Years ended July 31
 2008 |     | 2007       |  
|                   |  |            |        |                           |     |            |  
|Revenue category   |  | (In 000s) |        | (in %)                    |     | (In 000s) |   | (in %) |  | (In 000s) |   | (in %) |       
|                   |  |            |        |                           |     |            |   |        |  |            |   |        |       
|Medicare           |  | $          | 9,138  |                           | 23  |            | $ | 9,078  |  | 22         |   | $      | 8,478  |  | 21  |  
|Third-party payers |  |            | 20,073 |                           | 51  |            |   | 24,768 |  | 59         |   |        | 25,060 |  | 62  |  
|Patient self-pay   |  |            | 6,056  |                           | 15  |            |   | 3,582  |  | 8          |   |        | 2,952  |  | 7   |  
|HMOs              |  |            | 4,337  |                           | 11  |            |   | 4,650  |  | 11         |   |        | 3,940  |  | 10  |  
|                   |  |            |        |                           |     |            |   |        |  |            |   |        |        |  |     |  
|Total              |  | $          | 39,604 |                           | 100 | %          | $ | 42,078 |  | 100        | % | $      | 40,430 |  | 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 25%, 26% and 20% of the
Clinical labs segment net revenue for the fiscal year ended July 31, 2009, 2008
and 2007 respectively.

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, 2009, 2008 and 2007, the contractual
adjustment percentages, determined using current and historical reimbursement
statistics, were 80.8%, 81.8% and 79.0%, respectively, of gross billings.

F-9

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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, payer mix and other
relevant factors.

During the years ended July 31, 2009 and 2008, 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 Clinical Labs segments net receivables are detailed by billing
category and as a percent to its total net receivables. At July 31, 2009 and
2008, approximately 40% and 58%, 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 includes royalties
receivable of $2.5 million and $2.1 million, as of July 31, 2009 and 2008,
respectively, of which approximately $1.9 million and $1.5 million,
respectively is from Qiagen Corporation (see Note 13).

The following is a table of the Companys net accounts receivable by
segment.

|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|------------------------------------------ |  | -------------------- | ------ | -------------------- | --- | ---------- | - | ------ |  | --- | -
|Net accounts
 receivable
 Billing category |  | As of
 July 31, 2009 |        | As of
 July 31, 2008 |    
|                                           |  |                      |        |                      |    
|Clinical Labs                              |  | (In 000s)           |        | (in %)               |     | (In 000s) |   | (in %) | 
|                                           |  |                      |        |                      |     |            |   |        | 
|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|Medicare                                   |  | $                    | 1,113  |                      | 22  |            | $ | 1,600  |  | 18  |  
|Third party payers                         |  |                      | 2,003  |                      | 40  |            |   | 4,610  |  | 52  |  
|Patient self-pay                           |  |                      | 1,635  |                      | 32  |            |   | 2,144  |  | 24  |  
|HMOs                                      |  |                      | 303    |                      | 6   |            |   | 537    |  | 6   |  
|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|Total Clinical
 Labs                       |  |                      | 5,054  |                      | 100 | %          |   | 8,891  |  | 100 | %
|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|Total Life
 Sciences                       |  |                      | 7,426  |                      |     |            |   | 6,457  |  |     |  
|                                           |  |                      |        |                      |     |            |   |        |  |     |  
|Total accounts
 receivable                 |  | $                    | 12,480 |                      |     |            | $ | 15,348 |  |     |  
|                                           |  |                      |        |                      |     |            |   |        |  |     |  

F-10

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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

|                                 |  |               |        |               |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- | - | ------ | -
|In 000s                         |  | July 31, 2009 |        | July 31, 2008 |  
|                                 |  |               |        |               |  
|Beginning balance                |  | $             | 886    |               | $ | 1,404  |  
|Provision for
 doubtful accounts |  |               | 5,189  |               |   | 3,716  |  
|Write-offs                       |  |               | (1,289 | )             |   | (4,234 | )
|                                 |  |               |        |               |   |        |  
|Ending balance                   |  | $             | 4,786  |               | $ | 886    |  
|                                 |  |               |        |               |   |        |  

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 acquired inventories are
recorded at fair value.

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 indicators of impairment were identified during the years ended July
31, 2009, 2008 or 2007.

Goodwill and Indefinite-Lived Intangibles

Goodwill, representing the cost of acquired businesses in excess of the
fair value of net 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 if
indicators of potential impairment exist. 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, which is based on geographic region,
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 charges
recorded.

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, 2009 and 2008

The Company has capitalized 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
$634,000, $113,000 and $12,000 for the years ended July 31, 2009, 2008 and
2007, 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, 2009, 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, 2009 and 2008

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 2009, 2008 and 2007 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 2009, 2008 and 2007. 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, 2009, 2008, and
2007 was 105,000, 240,000, and 619,000, respectively.

For the years ended July 31, 2009, 2008 and 2007, the effect of
approximately 1,191,000, 1,734,000 and 873,000 respectively, of outstanding
out of the money options to purchase common shares were excluded
from the calculation of diluted net loss per share because their effect would
be anti-dilutive.

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

|                                                            |  |      |         |      |   |         |   |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|In 000s                                                    |  | 2009 |         | 2008 |   | 2007    |  
|                                                            |  |      |         |      |   |         |  
|Numerator:                                                  |  |      |         |      |   |         |   |   |         |  
|Net loss                                                    |  | $    | (23,564 | )    | $ | (10,653 | ) | $ | (13,260 | )
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Denominator:                                                |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding- Basic          |  |      | 37,511  |      |   | 36,883  |   |   | 35,017  |  
|                                                           
|Add: effect of
 dilutive stock options and restricted stock |  |      |        |      |   |        |   |   |        |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding - Diluted       |  |      | 37,511  |      |   | 36,883  |   |   | 35,017  |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Net loss per share                                          |  |      |         |      |   |         |   |   |         |  
|Basic                                                       |  | $    | (0.63   | )    | $ | (0.29   | ) | $ | (0.38   | )
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Diluted                                                     |  | $    | (0.63   | )    | $ | (0.29   | ) | $ | (0.38   | )
|                                                            |  |      |         |      |   |         |   |   |         |  

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, 2009,
2008 and 2007, 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, 2009 and 2008

For the years ended July 31, 2009, 2008 and 2007, share-based
compensation expense relating to the fair value of restricted shares and
restricted stock units vested during the years ended July 31, 2009, 2008 and
2007 was approximately $1,415,000, $1,316,000, and $649,000, respectively (see
Note 11). No excess tax benefits were recognized for the year ended July 31,
2009, 2008 and 2007.

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                             |  | 2009 |       | 2008 |   | 2007  | 
|                                     |  |      |       |      |   |       | 
|Cost of products                     |  | $    | 8     |      | $ | 14    |  | $ | 10    | 
|Research and
 development            |  |      | 13    |      |   | 97    |  |   | 162   | 
|Selling, general
 and administrative |  |      | 1,414 |      |   | 1,455 |  |   | 1,305 | 
|                                     |  |      |       |      |   |       |  |   |       | 
|                                     |  | $    | 1,435 |      | $ | 1,566 |  | $ | 1,477 | 
|                                     |  |      |       |      |   |       |  |   |       | 

As of July 31, 2009, there was $1.7 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 June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles  a replacement
of FASB Statement No. 162. SFAS No. 168 establishes the FASB Accounting
Standards Codification as the source of authoritative accounting principles and
the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles in the United States. SFAS No. 162 is
effective for the Companys interim reporting period ending on October 31,
2009. The Company does not anticipate the adoption of SFAS No. 168 will have a
material impact on its financial position, results of operations or cash flows.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS
165). SFAS 165 is intended to establish general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In particular,
SFAS 165 sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements;
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. SFAS 165 is effective for interim or
annual financial periods ending after June 15, 2009. During the three months
ended July 31, 2009, the Company adopted SFAS SFAS 165. In response to SFAS
165, management has evaluated subsequent events through October 14, 2009, which
is the date that the Companys financial statements were filed.

In April
2009, the FASB issued FSP SFAS No. 141(R)-1 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies.
FSP SFAS No. 141(R)-1 will amend the provisions related to the initial
recognition and measurement, subsequent measurement and disclosure of assets
and liabilities arising from contingencies in a business combination under SFAS
No. 141(R), Business Combinations. The FSP will carry forward the
requirements in SFAS No. 141, Business Combinations, for acquired
contingencies, thereby requiring that such contingencies be recognized at fair
value on the acquisition date if fair value can be reasonably estimated during
the allocation period. Otherwise, entities would typically account for the
acquired contingencies in accordance with SFAS No. 5, Accounting for
Contingencies. The FSP will have the same effective date as SFAS No. 141(R),
and will therefore be effective for the Companys business combinations for
which the acquisition date is on or after August 1, 2009. The Company is
currently evaluating the impact of the implementation of FSP SFAS No. 141(R)-1
on its consolidated financial position, results of operations and cash flows.

In April
2009, the FASB issued FSP SFAS No. 107-1 and APB 28-1,Interim Disclosures
about Fair Value of Financial Instruments. FSP SFAS No. 107-1 and APB 28-1
enhances consistency in financial reporting by increasing the frequency of fair
value disclosures. The FSP relates to fair value disclosures for any financial
instruments that are not currently reflected on a companys balance sheet at
fair value. Prior to the effective date of this FSP, fair values for these
assets and liabilities have only been disclosed once a year.

F-14

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

The FSP
will now require these disclosures on a quarterly basis, providing qualitative
and quantitative information about fair value estimates for all those financial
instruments not measured on the balance sheet at fair value. The disclosure
requirement under this FSP is effective for the Companys interim reporting
period ending on October 31, 2009.

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: 1) contingent
consideration arrangements will be fair valued at the acquisition date and
included on that basis in the purchase price consideration, 2)
acquisition-related costs will be expensed as incurred rather than capitalized
as part of the purchase price, 3) reversal of valuation allowances created in
purchase accounting will be recorded through the income tax provision, 4) in
order to accrue for a restructuring plan in purchase accounting, the
requirements of SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, would have to be met at the acquisition date. 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.

Reclassifications

Certain amounts in prior years have been reclassified to conform to
current year presentation. In Fiscal 2009, the Company reclassified certain
payroll taxes and employee benefits included in selling, general and
administrative expense to cost of sales. The payroll taxes and benefits
reclassed were approximately $1,146,000 and $952,000 for the years ended July
31, 2008 and 2007, respectively.

NOTE 2 - Acquisitions Assay Designs, Inc.

On March 12, 2009, Enzo Life Sciences, Inc. and Enzo Life Sciences
Acquisition, Inc., a newly formed wholly owned subsidiary of Enzo Life
Sciences, Inc. (Acquisition Sub), entered into an asset purchase agreement
(Purchase Agreement) dated as of March 12, 2009 with Assay Designs, Inc.
(Assay Designs). Assay Designs, a privately owned company with annual sales
of approximately $11 million, was engaged in researching, developing,
manufacturing, distributing, marketing and selling specialty immunological and
biochemical protein detection kits, assays, reagents, antibodies, recombinant
proteins and related products and providing related services for use in the
biotechnology, pharmaceutical and life sciences research industries
(Business). Under the terms of the Purchase Agreement, Acquisition Sub
purchased from Assay Designs substantially all of its assets, including trade
accounts receivable, inventory, fixed assets, and intellectual property, used
in or related to the Business and assumed certain of Assay Designs
liabilities, including trade accounts payable, capital lease obligations and
certain other current liabilities.

The execution of the Purchase Agreement and the closing of the
transaction occurred simultaneously on March 12, 2009. The purchase price
consisted of $12,228,000 in cash, exclusive of acquisition costs of
approximately $540,000, and was subject to an upward or downward post-closing
purchase price adjustment based on Assay Designs working capital as of the
closing date and $328,000 representing estimated costs to consolidate an
acquired facility and involuntary termination of certain employees, of which
$184,000 is outstanding and included in accrued liabilities in the accompanying
balance sheet at July 31, 2009. At the closing, $100,000 was held in escrow to
secure the payment of any downward post-closing purchase price adjustment and
$750,000 was held in escrow for 12 months to secure the payment of any
indemnification obligations of Assay Designs under the Purchase Agreement.
Subsequent to the acquisition date, the Company paid $270,000 in additional
purchase price in connection with the working capital adjustment and released the
$100,000 escrow amount.

F-15

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

The Company expects the cost of the acquisition to be increased when
the integration plan to consolidate a facility and the involuntary termination
of certain employees is finalized. The Assay Design Acquisition strengthens the
Companys position as a global provider of life sciences reagents by broadening
our product offerings and manufacturing capabilities.

The acquisition was funded with the Companys cash. Effective March 12,
2009, Assay Designs became a wholly-owned subsidiary of Enzo Life Sciences. The
consolidated financial statements include the results of operations for Assay
Designs from the date of acquisition.

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

|                          |  |   |        | 
|------------------------- |  | - | ------ | 
|Current assets            |  | $ | 4,235  | 
|Property and
 equipment   |  |   | 1,747  | 
|Other assets              |  |   | 11     | 
|Intangible assets         |  |   | 6,360  | 
|Goodwill                  |  |   | 1,803  | 
|                          |  |   |        | 
|Total assets acquired     |  |   | 14,156 | 
|                          |  |   |        | 
|Less:                     |  |   |        | 
|Current
 liabilities      |  |   | 1,115  | 
|                          |  |   |        | 
|Total liabilities assumed |  |   | 1,115  | 
|                          |  |   |        | 
|Net assets
 acquired      |  | $ | 13,041 | 
|                          |  |   |        | 

The preliminary purchase price allocation is based on managements
estimate of acquired tangible and intangible assets and will be adjusted based
on the final valuation to be completed within one year from the acquisition
date. 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.

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, through 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 two contingent earn-out payments accounted for as
additional purchase consideration 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 and EBITDA targets, 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 include the results of operations for Biomol
from the date of acquisition. Effective February 2, 2009, the names of Biomol
International, Inc. and Affinity Limited were changed to Enzo Life Sciences
International, Inc. and Enzo Life Sciences (UK) Ltd., respectively.

In June 2009, the conditions for the first annual earn-out of $2.5
million were met and the Company recorded $2.5 million of additional goodwill.
The Company issued 202,196 shares of Enzo common stock at fair value and paid
$1.5 million in cash to satisfy the $2.5 million earn-out liability.

F-16

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

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

|                          |  |   |        | 
|------------------------- |  | - | ------ | 
|Current assets            |  | $ | 5,167  | 
|Property and
 equipment   |  |   | 939    | 
|Other assets              |  |   | 18     | 
|Intangible assets         |  |   | 7,660  | 
|Goodwill                  |  |   | 9,226  | 
|                          |  |   |        | 
|Total assets acquired     |  |   | 23,010 | 
|                          |  |   |        | 
|                          |  |   |        | 
|Less:                     |  |   |        | 
|Current
 liabilities      |  |   | 1,100  | 
|Deferred tax
 liabilities |  |   | 609    | 
|                          |  |   |        | 
|Total liabilities assumed |  |   | 1,709  | 
|                          |  |   |        | 
|                          |  |   |        | 
|Net assets
 acquired      |  | $ | 21,301 | 
|                          |  |   |        | 

The purchase price allocation is based on a valuation of acquired
tangible and intangible assets based on the final valuation 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-17

---



|                                          
|------------------------------------------
|ENZO BIOCHEM, INC.                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|July 31, 2009 and 2008                    

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 acquisitions 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
2009 and 2008 as if the acquisitions had occurred as of August 1, 2007. 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, |        
|                            |  |                     |         |      |   |         |  
|                            |  | 2009                |         | 2008 |  
|                            |  |                     |         |      |  
|Net revenues                |  | $                   | 96,227  |      | $ | 97,737  |  
|Net loss                    |  | $                   | (24,098 | )    | $ | (10,381 | )
|Net loss per
 common share: |  |                     |         |      |   |         |  
|Basic and diluted           |  | $                   | (0.64   | )    | $ | (0.28   | )

F-18

---



|                                          
|------------------------------------------
|ENZO BIOCHEM, INC.                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|July 31, 2009 and 2008                    

Note 3- Supplemental disclosure for statement
of cash flows

In the years ended July 31, 2009, 2008, and 2007, net income taxes
(refunded to) or paid by the Company approximated $220,000, $233,000, and
$(1,670,000) respectively.

In fiscal 2009, certain officers of the Company exercised 206,576 stock
options in a non-cash transaction. The officers surrendered 99,985 shares of
previously acquired common stock to exercise the stock options. The Company
recorded approximately $1.1 million, the market value of the surrendered
shares, as treasury stock.

In fiscal 2008, certain officers and directors of the Company exercised
220,158 stock options in non-cash transactions. The officers surrendered
181,263 shares of 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 the 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.

Note 4  Short term investments

At July 31, 2009 the Companys short-term investments, whose fair value
approximates cost, are in U.S. Government Treasury bills, which are purchased
at discounts with remaining maturities of under ninety days.

Effective August 1, 2008, the Company adopted SFAS No. 157, Fair Value
Measurements (SFAS 157), for assets and liabilities measured at fair value
on a recurring basis. SFAS 157 establishes a common definition for fair value
to be applied to existing GAAP that require the use of fair value measurements,
establishes a framework for measuring fair value and expands disclosure about
such fair value measurements. The adoption of SFAS 157 did not have an impact
on the Companys financial position or operating results, but did expand
certain disclosures.

SFAS 157 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Additionally, SFAS 157 requires
the use of valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs. These inputs are prioritized below:

| |           |                                                                                                                                    
| | --------- | -----------------------------------------------------------------------------------------------------------------------------------
| | Level
 1: | Observable inputs
 such as quoted market prices in active markets for identical assets or
 liabilities.                            
| |           |                                                                                                                                    
| | Level2:   | Observable
 market-based inputs or unobservable inputs that are corroborated by market
 data.                                      
| |           |                                                                                                                                    
| | Level3:   | Unobservable
 inputs for which there is little or no market data, which require the use of
 the reporting entitys own assumptions.

At July 31, 2009, the Companys short-term investments
    are classified as Level 1 assets. The Company had no short term investments
    or marketable securities at July 31, 2008.

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, 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  |  
|Fiscal 2009  loss on foreign currency
 translation |  |   | (1,310                                | ) |                           |  |                                       |   | (1,310 | )
|                                                    |  |   |                                       |   |                           |   |                                       |   |        |  
|Balance  July 31, 2009                             |  | $ | 276                                   |   |                           |  |                                       | $ | 276    |  
|                                                    |  |   |                                       |   |                           |   |                                       |   |        |  

F-19

---



|                                          
|------------------------------------------
|ENZO BIOCHEM, INC.                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|July 31, 2009 and 2008                    

Note 6 - Inventories

At July 31, 2009 and 2008 inventories, net of reserves of $1,005,000
and $637,000, respectively, consist of:

|                  |  |  |  |  |  |  |  |  |  |  |   |       |  |      |       |  |  |  |  | 
|----------------- |  |  |  |  |  |  |  |  |  |  | - | ----- |  | ---- | ----- |  |  |  |  | 
|In 000s          |  |  |  |  |  |  |  |  |  |  |   | 2009  |  | 2008 |       |  |  | 
|                  |  |  |  |  |  |  |  |  |  |  |   |       |  |      |       |  |  | 
|Raw materials     |  |  |  |  |  |  |  |  |  |  | $ | 1,228 |  | $    | 341   |  |  |  | 
|Work in process   |  |  |  |  |  |  |  |  |  |  |   | 1,072 |  |      | 899   |  |  |  | 
|Finished products |  |  |  |  |  |  |  |  |  |  |   | 6,964 |  |      | 8,274 |  |  |  | 
|                  |  |  |  |  |  |  |  |  |  |  |   |       |  |      |       |  |  |  | 
|                  |  |  |  |  |  |  |  |  |  |  | $ | 9,264 |  | $    | 9,514 |  |  |  | 
|                  |  |  |  |  |  |  |  |  |  |  |   |       |  |      |       |  |  |  | 

Note 7  Property, plant, and equipment

At July 31, 2009 and 2008 property, plant, and equipment consist of:

|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  |  |  | 
|------------------------------------------ |  |  |  |  |  |  | - | ------- | - | - | ------- | ------ | ---- | - | ------ | ---- |  |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  |  |  | 
|In 000s                                   |  |  |  |  |  |  |   |         |   |   |         |        | 2009 |   |        | 2008 |  |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  | 
|Building and
 building improvements        |  |  |  |  |  |  | $ | 4,219   |   | $ | 4,199   |        |      |   |       
|Laboratory
 machinery and equipment        |  |  |  |  |  |  |   | 6,553   |   |   | 4,002   |        |      |   |       
|Office furniture
 and computer equipment   |  |  |  |  |  |  |   | 11,330  |   |   | 8,617   |        |      |   |       
|Leasehold
 improvements                    |  |  |  |  |  |  |   |         |   |   |         | 4,430  |      |   | 4,281  |      |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         | 26,532 |      |   | 21,099 |      |  |  | 
|Accumulated
 depreciation and amortization |  |  |  |  |  |  |   | (15,921 | ) |   | (12,758 | )      |      |   |       
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |       
|                                           |  |  |  |  |  |  |   |         |   |   |         | 10,611 |      |   | 8,341  |      |  |  | 
|Land and land
 improvements                |  |  |  |  |  |  |   |         |   |   |         | 712    |      |   | 712    |      |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   | $       | 11,323 |      | $ | 9,053  |      |  |  | 
|                                           |  |  |  |  |  |  |   |         |   |   |         |        |      |   |        |      |  |  | 

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, 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 |  
|Acquisition  see Note 2     |  |  |  |  |  |  |  |  |  |  |                      | 4,303  |                      |   |      |  |   | 4,303  |  
|Other Adjustments            |  |  |  |  |  |  |  |  |  |  |                      | (148   | )                    |   |      |  |   | (148   | )
|Foreign currency translation |  |  |  |  |  |  |  |  |  |  |                      | (580   | )                    |   |      |  |   | (580   | )
|                             |  |  |  |  |  |  |  |  |  |  |                      |        |                      |   |       |  |   |        |  
|July 31, 2009                |  |  |  |  |  |  |  |  |  |  | $                    | 17,444 |                      | $ | 7,452 |  | $ | 24,896 |  
|                             |  |  |  |  |  |  |  |  |  |  |                      |        |                      |   |       |  |   |        |  
|                             |  |  |  |  |  |  |  |  |  |  |                      |        |                      |   |       |  |   |        |  

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

|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        |  | 
|------------------------------------- |  | ------------- | ------ | ------------------------- | - | ------- | - | ----- | ------ | ------------------------- | - | ------ |  | - | ------- | - | - | ------ |  | 
|                                      |  | July 31, 2009 |        | July 31, 2008             |  
|                                      |  |               |        |                           |  
|                                      |  | Gross         |        | Accumulated
 Amortization |   | Net     |   | Gross |        | Accumulated
 Amortization |   | Net    | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        | 
|Finite-lived intangible assets:       |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Patents                               |  | $             | 11,027 |                           | $ | (10,030 | ) | $     | 997    |                           | $ | 11,027 |  | $ | (9,929  | ) | $ | 1,098  | 
|Customer relationships                |  |               | 12,125 |                           |   | (1,190  | ) |       | 10,935 |                           |   | 8,314  |  |   | (392    | ) |   | 7,922  | 
|Non-compete and employment agreements |  |               | 469    |                           |   | (280    | ) |       | 189    |                           |   | 481    |  |   | (126    | ) |   | 355    | 
|Website and acquired content          |  |               | 1,005  |                           |   | (303    | ) |       | 702    |                           |   | 984    |  |   | (117    | ) |   | 867    | 
|Licensed technology and other         |  |               | 588    |                           |   | (83     | ) |       | 505    |                           |   | 737    |  |   | (29     | ) |   | 708    | 
|Indefinitely-lived intangible assets: |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Trademarks                            |  |               | 8,681  |                           |   |        |   |       | 8,681  |                           |   | 6,706  |  |   |        |   |   | 6,706  | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Total                                 |  | $             | 33,895 |                           | $ | (11,886 | ) | $     | 22,009 |                           | $ | 28,249 |  | $ | (10,593 | ) | $ | 17,656 | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 

F-20

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

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

|     |  |   |       | 
|---- |  | - | ----- | 
|2010 |  | $ | 1,520 | 
|2011 |  |   | 1,421 | 
|2012 |  |   | 1,337 | 
|2013 |  |   | 1,292 | 
|2014 |  |   | 1,211 | 

At July 31, 2009, the weighted average useful lives of amortizable
intangible assets were approximately 10 years.

Amortization expense for the years ended July 31, 2009, 2008, and 2007
was $1,277,000, $658,000, and $151,000, 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) |  |   | 2009 |   | 2008 |      | 2007 |  
|                                       |  |   |      |   |      |      |      |  
|Current
 (provision) benefit:          |  |   |      |   |      |      |      |   |      |  
|Federal                                |  | $ |     |   | $    |     |      | $ |     |  
|State and local                        |  |   | (75  | ) |      | (320 | )    |   | (261 | )
|Foreign                                |  |   | (12  | ) |      | (85  | )    |   | (2   | )
|Deferred benefit
 (provision)          |  |   |     |   |      | 644  |      |   | 178  |  
|                                       |  |   |      |   |      |      |      |   |      |  
|(Provision) benefit
 for income taxes  |  | $ | (87  | ) | $    | 239  |      | $ | (85  | )
|                                       |  |   |      |   |      |      |      |   |      |  

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, 2009 and 2008 are as follows:

|                                                                  |  |   |               |   |               |         |   | 
|----------------------------------------------------------------- |  | - | ------------- | - | ------------- | ------- | - | 
|In 000s                                                          |  |   | July 31, 2009 |   | July 31, 2008 |        
|                                                                  |  |   |               |   |               |        
|Deferred tax
 assets:                                             |  |   |               |   |               |         |  
|Federal tax carryforward losses                                   |  | $ | 16,507        |   | $             | 10,693  |  
|Provision for uncollectible accounts
 receivable                  |  |   | 1,763         |   |               | 309     |  
|State and local tax carry forward losses                          |  |   | 2,080         |   |               | 1,478   |  
|Accrued royalties                                                 |  |   | 279           |   |               | 456     |  
|Stock compensation                                                |  |   | 794           |   |               | 505     |  
|Depreciation                                                      |  |   | 152           |   |               | 46      |  
|Research and development and other tax
 credit carryforwards      |  |   | 618           |   |               | 530     |  
|Realized and unrealized losses on
 marketable securities          |  |   | 138           |   |               | 138     |  
|Inventory                                                         |  |   | 261           |   |               |        |  
|Other, net                                                        |  |   | 251           |   |               | 236     |  
|                                                                  |  |   |               |   |               |         |  
|Gross deferred tax assets                                         |  |   | 22,843        |   |               | 14,391  |  
|                                                                  |  |   |               |   |               |         |  
|                                                                  |  |   |               |   |               |         |  
|Deferred tax
 liabilities:                                        |  |   |               |   |               |         |  
|Deferred patent costs                                             |  |   | (235          | ) |               | (252    | )
|Inventory                                                         |  |   |              |   |               | (265    | )
|Intangibles                                                       |  |   | (2,730        | ) |               | (3,039  | )
|Prepaid expenses                                                  |  |   | (657          | ) |               | (686    | )
|Other, net                                                        |  |   | (84           | ) |               | (75     | )
|                                                                  |  |   |               |   |               |         |  
|Gross deferred tax liabilities                                    |  |   | (3,706        | ) |               | (4,317  | )
|                                                                  |  |   |               |   |               |         |  
|                                                                  |  |   |               |   |               |         |  
|Net deferred tax
 assets (liabilities) before valuation allowance |  |   | 19,137        |   |               | 10,074  |  
|Less: valuation
 allowance                                        |  |   | (21,716       | ) |               | (12,965 | )
|                                                                  |  |   |               |   |               |         |  
|Net deferred tax
 assets (liabilities)                            |  | $ | (2,579        | ) | $             | (2,891  | )
|                                                                  |  |   |               |   |               |         |  

F-21

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

At July 31, 2009, the Company had net deferred tax liabilities of
approximately $2.6 million which consists primarily of identifiable intangible
assets and cumulative tax deductions in excess of book expenses recognized by
foreign subsidiaries (see Note 2).

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

|                |  |   |               |  |               |       |  | 
|--------------- |  | - | ------------- |  | ------------- | ----- |  | 
|In 000s        |  |   | July 31, 2009 |  | July 31, 2008 |      
|                |  |   |               |  |               |      
|Deferred taxes: |  |   |               |  |               |       | 
|Current         |  | $ | 213           |  | $             | 458   | 
|Non-current     |  |   | 2,366         |  |               | 2,433 | 
|                |  |   |               |  |               |       | 
|                |  | $ | 2,579         |  | $             | 2,891 | 
|                |  |   |               |  |               |       | 

Pursuant to SFAS 109, the Company recorded a valuation allowance during
the year ended July 31, 2009 and 2008 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, 2009, the Company had U.S. federal net operating loss
carryforwards of approximately $45.8 million. The U.S. federal tax loss
carryforwards, if not fully utilized, expire between 2011 and 2029. Utilization
is dependent on generating sufficient taxable income prior to expiration of the
tax loss carryforwards. As of July 31, 2009, the Company has state and local
tax loss carryforwards of approximately $56.8 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 before income taxes
    consisted of the following for the years ended July 31:

|                          |  |   |         |   |      |         |      |   |         |   | 
|------------------------- |  | - | ------- | - | ---- | ------- | ---- | - | ------- | - | 
|In 000s                  |  |   | 2009    |   | 2008 |         | 2007 |  
|                          |  |   |         |   |      |         |      |  
|United States
 operations |  | $ | (21,221 | ) | $    | (9,605  | )    | $ | (12,595 | )
|International
 operations |  |   | (2,256  | ) |      | (1,287  | )    |   | (580    | )
|                          |  |   |         |   |      |         |      |   |         |  
|Loss
 before taxes        |  | $ | (23,477 | ) | $    | (10,892 | )    | $ | (13,175 | )
|                          |  |   |         |   |      |         |      |   |         |  

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

|                                                               |  |  |       |    |      |       |      |  |       |    | 
|-------------------------------------------------------------- |  |  | ----- | -- | ---- | ----- | ---- |  | ----- | -- | 
|Year ended July
 31,                                           |  |  | 2009  |    | 2008 |       | 2007 | 
|                                                               |  |  |       |    |      |       |      | 
|Federal statutory
 rate                                        |  |  | 34    | %  |      | 34    | %    |  | 34    | % 
|Expenses not
 deductible for income tax return purposes        |  |  | (0.4  | )% |      | (1.1  | %)   |  | (3.0  | %)
|State income
 taxes, net of (benefit) of federal tax deduction |  |  | 2.5   | %  |      | 1.4   | %    |  | (1.0  | %)
|Change in
 valuation allowance                                 |  |  | (37.8 | )% |      | (32.9 | %)   |  | (30.0 | %)
|Other                                                          |  |  | 1.3   | %  |      | 0.8   | %    |  | (1.0  | %)
|                                                               |  |  |       |    |      |       |      |  |       |   
|                                                               |  |  | (0.4  | )% |      | 2.2   | %    |  | (1.0  | %)
|                                                               |  |  |       |    |      |       |      |  |       |   

U.S. federal income taxes have not been provided on the undistributed
earnings of approximately $238,000 at July 31, 2009 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.

F-22

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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:

|                                                     |  |   |      |   | 
|---------------------------------------------------- |  | - | ---- | - | 
|In 000s                                             |  |   |      |   | 
|                                                     |  |   |      |   | 
|Balance at August
 1, 2008                           |  | $ | 291  |  
|Additions for tax
 positions related to prior years  |  |   |     |  
|Additions for tax
 positions related to current year |  |   |     |  
|Reductions for
 lapse of statute of limitations      |  |   | (157 | )
|Tax audit
 settlements                               |  |   | (24  | )
|                                                     |  |   |      |  
|Balance at July
 31, 2009                            |  | $ | 110  |  
|                                                     |  |   |      |  

Approximately $97,000 of the FIN 48 liability at July
    31, 2009, which relates to the Axxora acquisition described in Note 2, 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, 2009, the Company
recognized a net decrease of approximately $2,000. The Company has accrued
approximately $24,000 for the payment of interest and penalties as of July 31,
2009 and had accrued approximately $64,000 as of July 31, 2008.

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,
2006 through fiscal 2008.

Note 10  Accrued Liabilities and Other
Current Liabilities

At July 31, 2009 and 2008, accrued liabilities consist of:

|                                    |  |   |       |  |      |       |  | 
|----------------------------------- |  | - | ----- |  | ---- | ----- |  | 
|In 000s                            |  |   | 2009  |  | 2008 |      
|                                    |  |   |       |  |      |      
|Legal                               |  | $ | 1,095 |  | $    | 1,702 | 
|Payroll, benefits,
 and commissions |  |   | 2,737 |  |      | 1,989 | 
|Research and
 development           |  |   | 656   |  |      | 1,200 | 
|Professional fees                   |  |   | 1,752 |  |      | 584   | 
|Outside reference
 lab testing      |  |   | 65    |  |      | 46    | 
|Other                               |  |   | 2,121 |  |      | 1,849 | 
|                                    |  |   |       |  |      |       | 
|                                    |  | $ | 8,426 |  | $    | 7,370 | 
|                                    |  |   |       |  |      |       | 

At July 31, 2009 and
2008, other current liabilities consist of:

|                 |  |   |       |  |      |       |  | 
|---------------- |  | - | ----- |  | ---- | ----- |  | 
|In 000s         |  |   | 2009  |  | 2008 |      
|                 |  |   |       |  |      |      
|Deferred revenue |  | $ | 850   |  | $    | 1,089 | 
|Other            |  |   | 212   |  |      | 72    | 
|                 |  |   |       |  |      |       | 
|                 |  | $ | 1,062 |  | $    | 1,161 | 
|                 |  |   |       |  |      |       | 

Note 11  Stockholders equity

Common stock offerings

In June 2009, the Company issued 202,196
shares of common stock at a fair value of $1.0 million in connection with the
Biomol earn-out of $2.5 million (see Note 2).

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.

F-23

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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 2009, certain officers of the Company exercised 206,576 stock
options in a non-cash transaction. The officers surrendered 99,985 shares of
previously acquired common stock to exercise the stock options. The Company
recorded approximately $1.1 million, the market value of the surrendered
shares, as treasury stock.

In fiscal 2009, the Company issued 142,150 shares from treasury stock
for its employees 401(k) matched contributions obligation. The Company
recorded approximately $2.0 million, the average acquisition cost of the
shares, as a reduction of treasury stock (see Note 3).

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.

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 or 1999 Plans. 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, 2009, there were approximately 401,000 shares available
for grant under the Companys 2005 Plan.

A summary of the information pursuant to the Companys stock option
plans for the years ended July 31, 2009, 2008, and 2007 is as follows:

|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|----------------------------------------------------------- |  | ------- | --------- | ------------------------------------ | - | ------- |  | ------------------------------------ | --------- | ------- | - | ------------------------------------ |  |  | --------- | - | - | ----- | 
|                                                            |  | 2009    |           | 2008                                 |   | 2007    | 
|                                                            |  |         |           |                                      |   |         | 
|                                                            |  | Options |           | Weighted -
 Average
 Exercise
 Price |   | Options |  | Weighted -
 Average
 Exercise
 Price |           | Options |   | Weighted -
 Average
 Exercise
 Price | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      | 
|Outstanding at beginning of year                            |  |         | 2,275,415 |                                      | $ | 13.13   |  |                                      | 2,700,457 |         | $ | 13.32                                |  |  | 2,877,727 |   | $ | 13.20 | 
|Granted                                                     |  |         |          |                                      | $ |        |  |                                      |          |         | $ |                                      |  |  | 27,761    |   | $ | 17.06 | 
|Exercised                                                   |  |         | (251,162  | )                                    | $ | 5.87    |  |                                      | (267,345  | )       | $ | 10.80                                |  |  | (95,525   | ) | $ | 9.60  | 
|Cancelled                                                   |  |         | (832,734  | )                                    | $ | 13.87   |  |                                      | (157,697  | )       | $ | 20.42                                |  |  | (109,506  | ) | $ | 14.36 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Outstanding at end of year                                  |  |         | 1,191,519 |                                      | $ | 14.41   |  |                                      | 2,275,415 |         | $ | 13.13                                |  |  | 2,700,457 |   | $ | 13.32 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Exercisable at end of year                                  |  |         | 1,191,519 |                                      | $ | 14.41   |  |                                      | 2,250,483 |         | $ | 13.12                                |  |  | 2,670,680 |   | $ | 13.32 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Weighted average fair value of
 options granted during year |  |         |           |                                      | $ |        |  |                                      |           |         |   |                                     |  |  |           |   | $ | 4.42  | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 

F-24

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

The aggregate intrinsic value of stock options exercised during the
years ended July 31, 2009, 2008 and 2007, including the non-cash transactions
(see Note 3) was $1.4 million, $0.7 million and $0.7 million, respectively.
There is no aggregate intrinsic value of options both outstanding and
exercisable at July 31, 2009.

The following table summarizes information for stock options
outstanding at July 31, 2009:

|                          |  |                                     |           |                                                        |  |                                    |  |       |  | 
|------------------------- |  | ----------------------------------- | --------- | ------------------------------------------------------ |  | ---------------------------------- |  | ----- |  | 
|                          |  | Options outstanding and exercisable |          
|                          |  |                                     |          
|Range of
 Exercise prices |  | Shares                              |           | Weighted- Average
 Remaining
 Contractual Life inyears |  | Weighted-
 Average Exercise
 Price |  |      
|                          |  |                                     |           |                                                        |  |                                    | 
|$8.33-12.25               |  |                                     | 621,083   |                                                        |  | 2.7                                |  | 11.89 |  | 
|$12.93-19.02              |  |                                     | 544,388   |                                                        |  | 4.6                                |  | 16.95 |  | 
|$20.20-24.84              |  |                                     | 26,048    |                                                        |  | 2.2                                |  | 21.54 |  | 
|                          |  |                                     |           |                                                        |  |                                    |  |       |  | 
|                          |  |                                     | 1,191,519 |                                                        |  |                                    |  |       |  | 
|                          |  |                                     |           |                                                        |  |                                    |  |       |  | 

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.

Restricted Stock Awards

During fiscal 2009, 2008 and 2007, the compensation committee of the
Companys board of directors approved grants of 291,801, 160,140 and 97,700 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, 2009, 377,400
shares were unvested.

A summary of the information pursuant to the Companys Restricted Stock
Awards for the years ended July 31, 2009, 2008 and 2007 is as follows:

|                                                             |  |        |          |                                  |   |        |  |                                  |         |        |   |                                  |  |  |         |   |   |       | 
|------------------------------------------------------------ |  | ------ | -------- | -------------------------------- | - | ------ |  | -------------------------------- | ------- | ------ | - | -------------------------------- |  |  | ------- | - | - | ----- | 
|                                                             |  | 2009   |          | 2008                             |   | 2007   | 
|                                                             |  |        |          |                                  |   |        | 
|                                                             |  | Awards |          | Weighted -
 Average
 Award Price |   | Awards |  | Weighted -
 Average
 Award Price |         | Awards |   | Weighted -
 Average
 Award Price | 
|                                                             |  |        |          |                                  |   |        |  |                                  |         |        |   |                                  | 
|Outstanding at
 beginning of year                            |  |        | 220,240  |                                  | $ | 12.34  |  |                                  | 141,062 |        | $ | 14.15                            |  |  | 77,450  |   |   | 12.21 | 
|Awarded                                                      |  |        | 291,801  |                                  | $ | 4.05   |  |                                  | 160,140 |        | $ | 11.42                            |  |  | 97,700  |   | $ | 15.16 | 
|Vested                                                       |  |        | (128,941 | )                                | $ | 12.11  |  |                                  | (70,962 | )      | $ | 13.55                            |  |  | (25,913 | ) |   | 12.34 | 
|Forfeited                                                    |  |        | (5,700   | )                                | $ | 10.18  |  |                                  | (10,000 | )      | $ | 14.73                            |  |  | (8,175  | ) | $ | 13.60 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |         |        |   |                                  |  |  |         |   |   |       | 
|Outstanding at end
 of year                                  |  |        | 377,400  |                                  | $ | 6.05   |  |                                  | 220,240 |        | $ | 12.34                            |  |  | 141,062 |   | $ | 14.15 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |         |        |   |                                  |  |  |         |   |   |       | 
|Weighted average market value of
 awards granted during year |  |        |          |                                  | $ | 4.05   |  |                                  |         |        | $ | 11.42                            |  |  |         |   | $ | 15.16 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |         |        |   |                                  |  |  |         |   |   |       | 

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, 2009, 2008, and 2007, 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 582,000,
481,000, and 421,800, in fiscal years 2009, 2008, and 2007, respectively.

F-25

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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 years
ended July 31, 2009 and 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 $399,000, $325,000,
and $58,000, respectively.

Pension expense at the other international operations
    was approximately $36,000 and $3,000 for the years ended July 31, 2009 and
2008, 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. During the years ended July 31, 2009, 2008 and 2007, the
Company recorded royalty income under the Agreement of approximately $6.7
million, $5.5 million, and $4.7 million, respectively, which is included in the
Life Sciences segment.

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, 2009, the Companys balance sheet includes current and non-current
deferred revenue of approximately $0.4 and $0.1 million, respectively, relating
to the one-time fee. During the years ended July 31, 2009, 2008 and 2007, the
Company recorded approximately $2.7 million, $2.1 million and $1.0 million in
royalties and license fee income under the Licensing Agreement.

F-26

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

Note 15  Commitments

Leases

The Company leases equipment, office and laboratory space under several
non-cancelable operating leases that expire between March 2010 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, approximated $1,424,000, $1,395,000, and $1,376,000 during
fiscal years 2009, 2008, and 2007.

Total rent expense incurred by the Company during fiscal 2009, 2008 and
2007 was approximately $3,818,000, $2,885,000, and $2,510,000, respectively.
Minimum future annual rentals under non-cancelable operating leases as of July
31, 2009, are as follows:

|                     |  |          |        | 
|-------------------- |  | -------- | ------ | 
|Years ended July 31, |  | In 000s |       
|                     |  |          |       
|2010                 |  | $        | 4,410  | 
|2011                 |  |          | 4,090  | 
|2012                 |  |          | 3,105  | 
|2013                 |  |          | 2,623  | 
|2014                 |  |          | 1,942  | 
|Thereafter           |  |          | 4,146  | 
|                     |  |          |        | 
|                     |  | $        | 20,316 | 
|                     |  |          |        | 

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, 2010 and 2011 are $1,948,000 and $1,211,000 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-27

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

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. 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 2009, 2008 and 2007. 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 has not recorded any revenue from Affymetrix during the fiscal years
ended July 31, 2009, 2008 or 2007.

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, 2009, 2008 or 2007. 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).

F-28

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

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 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 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. The
Connecticut Court granted this request. The Company subsequently filed an
Appeal on April 7, 2009. Briefing is completed and the matter has not yet been
set for submission or argument. The Company and other plaintiff intend to
vigorously argue 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 (the
Court). The actions seek damages in excess of $8 million and 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 thereafter
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 the 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 once again to dismiss those Amended Complaints. The Court
granted in part and denied in part those motions. The remaining Plaintiffs then
conducted discovery, and following the completion of discovery, the Company and
other defendants moved for summary judgment dismissal of the Amended
Complaints. The Court recently granted the defendants motion and dismissed all
the Amended Complaints. Several of the Plaintiffs then filed a notice of appeal
to the Second Circuit Court of Appeals.The Company believes that the latest complaints in
these actions have no merit and that the appeals also lacks merit. The Company
will continue to defend these actions vigorously.

Shahram K.
Rabbani (Mr. Rabbani), the Secretary and Treasurer and a member of the board
of directors of the Company and the former President of Enzo Clinical Labs,
Inc., in connection with the termination of his employment, submitted on April
30, 2009 a demand for arbitration and related statement of claim to the
American Arbitration Association. The statement of claim names the Company, Dr.
Elazar Rabbani, the Chairman of the Board and Chief Executive Officer of the
Company, and Barry W. Weiner, the President and Chief Financial Officer and a
member of the board of directors of the Company, as respondents and alleges,
among other things, claims relating to the termination of Mr. Rabbanis
employment as President of Clinical Labs. The statement of claim purports to
allege claims for breach of contract against the Company, unlawful retaliation
under the Sarbanes-Oxleys whistleblower statute (the Claims) against the
Company, Dr. Rabbani and Mr. Weiner, and tortious interference with contract
against Dr. Rabbani and Mr. Weiner. Mr. Rabbani seeks damages of no less than
$10 million including attorneys fees, costs, and punitive damages. The Company
believes the Claims are without merit and intends to defend vigorously against
them.

F-29

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2009 and 2008

Subsequent
to April 30, 2009, the Company conducted a review, as directed by a special
committee of the Board of Directors, relating to the aforementioned Claims
pertaining to Enzo Clinical Labs. The review concluded that the purported
Claims were unsubstantiated.

On
September 18, 2009, Mr. Rabbani amended his statement of claim to add a claim
for defamation against the Company and a claim against the Company, Dr. Rabbani
and Mr. Weiner seeking a declaratory judgment. The Company also believes these
additional claims are without merit and intends to defend vigorously against
them

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-30

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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

|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |   | 
|--------------------------------------------- |  | - | ------------- | - | ------------ | ------ | ------------- | - | ------ | - | ------------ | ------- | - | - | ------- | - | 
|Year
 ended July 31, 2009                     |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |   | 
|Revenues:                                     |  |   | Life Sciences |   | Therapeutics |        | Clinical Labs |   | Other  |   | Consolidated |        
|                                              |  |   |               |   |              |        |               |   |        |   |              |        
|Product revenues                              |  | $ | 40,592        |   |              |        |               |   |        |   |              |         |   | $ | 40,592  |  
|Royalty income and license fee income         |  |   | 9,376         |   |              |        |               |   |        |   |              |         |   |   | 9,376   |  
|Clinical laboratory services                  |  |   |               |   |              |        |               | $ | 39,604 |   |              |         |   |   | 39,604  |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|                                              |  |   | 49,968        |   |              |        |               |   | 39,604 |   |              |         |   |   | 89,572  |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |   | 
|Cost and expenses and other (income):         |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|Cost of product revenues                      |  |   | 26,766        |   |              |        |               |   |        |   |              |         |   |   | 26,766  |  
|Cost of clinical laboratory services          |  |   |               |   |              |        |               |   | 26,295 |   |              |         |   |   | 26,295  |  
|Research and development                      |  |   | 5,855         |   | $            | 3,365  |               |   |        |   |              |         |   |   | 9,220   |  
|Provision for uncollectible accounts          |  |   |               |   |              |        |               |   | 5,189  |   |              |         |   |   | 5,189   |  
|Selling, general and administrative and legal |  |   | 14,938        |   |              |        |               |   | 15,498 |   | $            | 15,073  |   |   | 45,509  |  
|Interest income                               |  |   |               |   |              |        |               |   | (57    | ) |              | (524    | ) |   | (581    | )
|Other income                                  |  |   | (25           | ) |              |        |               |   | (49    | ) |              |         |   |   | (74     | )
|Foreign exchange loss (gain)                  |  |   | 725           |   |              |        |               |   |        |   |              |         |   |   | 725     |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|Income (loss) before income taxes             |  | $ | 1,709         |   | $            | (3,365 | )             | $ | (7,272 | ) | $            | (14,549 | ) | $ | (23,477 | )
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|Depreciation and amortization included above  |  | $ | 2,350         |   | $            | 50     |               | $ | 946    |   | $            | 116     |   | $ | 3,462   |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |   | 
|Share - based compensation included in        |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|Cost of products                              |  |   |               |   |              |        |               | $ | 8      |   |              |         |   | $ | 8       |  
|Research and development                      |  | $ | 13            |   |              |        |               |   |        |   |              |         |   |   | 13      |  
|Selling, general and administrative and legal |  |   | 128           |   | $            | 119    |               |   | 135    |   | $            | 1,032   |   |   | 1,414   |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|Total                                         |  | $ | 141           |   | $            | 119    |               | $ | 143    |   | $            | 1,032   |   | $ | 1,435   |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |   | 
|Capital expenditures                          |  | $ | 1,334         |   | $            | 78     |               |   | 1,253  |   | $            | 44      |   | $ | 2,709   |  
|                                              |  |   |               |   |              |        |               |   |        |   |              |         |   |   |         |  

|                                              |  |   |               |        |              |        |               |   |        |        |              |         |   |   |         |        | 
|--------------------------------------------- |  | - | ------------- | ------ | ------------ | ------ | ------------- | - | ------ | ------ | ------------ | ------- | - | - | ------- | ------ | 
|Year
 ended July 31, 2008                     |  |   |               |        |              |        |               |   |        |        |              |         |   |   |         |       
|                                              |  |   |               |        |              |        |               |   |        |        |              |         |   |   |         |        | 
|Revenues:                                     |  |   | Life Sciences |        | Therapeutics |        | Clinical Labs |   | Other  |        | Consolidated |        
|                                              |  |   |               |        |              |        |               |   |        |        |              |        
|Product revenues                              |  | $ | 28,087        |        |              |        |               |   |        |        |              |         |   | $ | 28,087  |       
|Royalty 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          |  |   |               |        |              |        |               |   | 22,209 |        |              |         |   |   | 22,209  |       
|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         |        |              |        |               |   | 14,349 |        | $            | 14,732  |   |   | 38,860  |       
|Interest income                               |  |   |               |        |              |        |               |   | (239   | )      |              | (3,457  | ) |   | (3,696  | )     
|Other income                                  |  |   | (71           | )      |              | (100   | )             |   |        |        |              |         |   |   | (171    | )     
|Foreign exchange loss (gain)                  |  |   | (27           | )      |              |        |               |   |        |        |              |         |   |   | (27     | )     
|                                              |  |   |               |        |              |        |               |   |        |        |              |         |   |   |         |       
|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   |       
|                                              |  |   |               |        |              |        |               |   |        |        |              |         |   |   |         |       

F-31

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |   | 
|---------------------------------------------- |  | ------------- | ------ | ------------ | - | ------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | - | 
|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           |  |               |        |              |   |               |   |       | 19,151 |              |   |         |   |   | 19,151  |  
|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  |              |   |               |   |       | 13,451 |              | $ | 19,420  |   |   | 35,643  |  
|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   |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  

Geographic financial information is as follows (in thousands):

|                                      |  |      |        |      |   |        |  |   |        | 
|------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|Net sales to
 unaffiliated customers: |  | 2009 |        | 2008 |   | 2007   | 
|                                      |  |      |        |      |   |        | 
|United States                         |  | $    | 75,936 |      | $ | 62,243 |  | $ | 50,051 | 
|Switzerland                           |  |      | 6,487  |      |   | 9,142  |  |   | 945    | 
|United Kingdom                        |  |      | 2,517  |      |   | 2,127  |  |   | 272    | 
|Other international countries         |  |      | 4,632  |      |   | 4,283  |  |   | 1,640  | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Total                                 |  | $    | 89,572 |      | $ | 77,795 |  | $ | 52,908 | 
|                                      |  |      |        |      |   |        |  |   |        | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Long-lived
 assets at July 31,        |  | 2009 |        | 2008 |   | 2007   | 
|                                      |  |      |        |      |   |        | 
|United States                         |  | $    | 45,896 |      | $ | 34,202 |  | $ | 21,438 | 
|Switzerland                           |  |      | 7,075  |      |   | 7,437  |  |   | 6,652  | 
|United Kingdom                        |  |      | 3,334  |      |   | 4,193  |  |   |       | 
|Other international countries         |  |      | 1,923  |      |   | 2,198  |  |   | 1,545  | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Total                                 |  | $    | 58,228 |      | $ | 48,030 |  | $ | 29,635 | 
|                                      |  |      |        |      |   |        |  |   |        | 

F-32

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2009 and 2008

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 that 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          |  |   | 2009   |  | 2008 |        | 2007 |  
|                  |  |   |        |  |      |        |      |  
|United States     |  | $ | 36,332 |  | $    | 20,165 |      | $ | 9,621  | 
|Foreign countries |  |   | 13,636 |  |      | 15,552 |      |   | 2,857  | 
|                  |  |   |        |  |      |        |      |   |        | 
|                  |  | $ | 49,968 |  | $    | 35,717 |      | $ | 12,478 | 
|                  |  |   |        |  |      |        |      |   |        | 

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, 2009 and 2008. 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 2009 and 2008 is summarized as follows:

|                               |  |                   |        |                   |   |                 |   |                |        |   |   |        |   | 
|------------------------------ |  | ----------------- | ------ | ----------------- | - | --------------- | - | -------------- | ------ | - | - | ------ | - | 
|                               |  | Quarter Ended     |       
|                               |  |                   |       
|Fiscal 2009                    |  | October 31,
 2008 |        | January 31,
 2009 |   | April 30,
 2009 |   | July 31,
 2009 |       
|                               |  |                   |        |                   |   |                 |   |                |        |  
|Total revenues                 |  | $                 | 21,065 |                   | $ | 20,916          |   | $              | 23,061 |   | $ | 24,530 |  
|Gross profit                   |  |                   | 8,168  |                   |   | 8,007           |   |                | 9,706  |   |   | 10,630 |  
|Loss before income
 taxes      |  |                   | (6,233 | )                 |   | (7,567          | ) |                | (4,226 | ) |   | (5,451 | )
|Net loss                       |  |                   | (6,372 | )                 |   | (7,673          | ) |                | (4,242 | ) |   | (5,277 | )
|Basic loss per
 common share   |  | $                 | (0.18  | )                 | $ | (0.20           | ) | $              | (0.11  | ) | $ | (0.14  | )
|Diluted loss per
 common share |  | $                 | (0.18  | )                 | $ | (0.20           | ) | $              | (0.11  | ) | $ | (0.14  | )
|                               |  |                   |        |                   |   |                 |   |                |        |   |   |        |  
|                               |  | 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                   |  |                   | 9,632  |                   |   | 8,795           |   |                | 9,082  |   |   | 8,918  |  
|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  | )

F-33

---



ENZO BIOCHEM, INC SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS 
Years ended July 31, 2009, 2008 and 2007 
(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 | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           | 
|2009                 |  |             | Allowance for doubtful accounts receivable |                                  | 886    |                                             |  | 5,189                       |  |            |   |                           |  | 1,289 | (1) | 4,786  |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|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  |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2009                 |  |             | Deferred tax valuation allowance           |                                  | 12,965 |                                             |  | 8,751                       |  |            |  |                           |  |      |     | 21,716 |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2008                 |  |             | Deferred tax valuation allowance           |                                  | 9,385  |                                             |  | 3,580                       |  |            |  |                           |  |      |     | 12,965 |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2007                 |  |             | Deferred tax valuation allowance           |                                  | 4,856  |                                             |  | 5,220                       |  |            |  |                           |  | 691   | (2) | 9,385  |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2009                 |  |             | Reserve for obsolete inventory             |                                  | 637    |                                             |  | 378                         |  |            |   |                           |  | 10    |     | 1,005  |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2008                 |  |             | Reserve for obsolete inventory             |                                  | 379    |                                             |  | 283                         |  |            |  |                           |  | 25    | (3) | 637    |  | 
|                     |  |             |                                            |                                  |        |                                             |  |                             |  |            |   |                           |  |       |     |        |  | 
|2007                 |  |             | Reserve for obsolete inventory             |                                  | 238    |                                             |  | 337                         |  |            |  |                           |  | 196   | (3) | 379    |  | 

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

S-1

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