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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, 2010                         
|                                                                  |                                                                                          
|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 $165,991,000 as of January 31, 2010

The number of shares of the
Companys common stock, $.01 par value, outstanding at October 1, 2010 was
approximately 38,160,000.

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 14, 2011 are
incorporated by reference into Part III of this annual report.

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TABLE OF CONTENTS

|         |                                                                                                               |     
|-------- | ------------------------------------------------------------------------------------------------------------- | ----
|         | Description                                                                                                   | Page
|Part I   |                                                                                                               |     
|         |                                                                                                               |     
|Item 1.  | Business                                                                                                      | 2   
|Item 1A. | Risk Factors                                                                                                  | 24  
|Item 1B. | Unresolved
 Staff Comments                                                                                    | 33  
|Item 2.  | Properties                                                                                                    | 34  
|Item 3.  | Legal
 Proceedings                                                                                            | 35  
|Item 4.  | (Removed and
 Reserved)                                                                                       | 37  
|         |                                                                                                               |     
|Part II  |                                                                                                               |     
|         |                                                                                                               |     
|Item 5.  | Market for Registrants Common Equity,
 Related Stockholder Matters and Issuer Purchases of Equity Securities | 38  
|Item 6.  | Selected
 Financial Data                                                                                      | 39  
|Item 7.  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                        | 40  
|Item 7A. | Quantitative
 and Qualitative Disclosures About Market Risk                                                   | 55  
|Item 8.  | Financial
 Statements and Supplementary Data                                                                  | 55  
|Item 9.  | Changes in and
 Disagreements with Accountants on Accounting and Financial Disclosure                         | 55  
|Item 9A. | Controls and
 Procedures                                                                                      | 56  
|Item 9B. | Other Information                                                                                             | 58  
|         |                                                                                                               |     
|Part III |                                                                                                               |     
|         |                                                                                                               |     
|Item 10. | Directors,
 Executive Officers and Corporate Governance                                                       | 58  
|Item 11. | Executive
 Compensation                                                                                       | 58  
|Item 12. | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters              | 58  
|Item 13. | Certain
 Relationships and Related Transactions, and Director Independence                                    | 58  
|Item 14. | Principal
 Accountant Fees and Services                                                                       | 58  
|         |                                                                                                               |     
|Part IV  |                                                                                                               |     
|         |                                                                                                               |     
|Item 15. | Exhibits and
 Financial Statement Schedules                                                                   | 58  
|         |                                                                                                               |     
|         | 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

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PART I

Item 1. Business

Overview

Enzo
Biochem, Inc. (the Company we, our or Enzo) is a growth-oriented
integrated life sciences and biotechnology company focused on harnessing
biological processes to develop research tools, diagnostics and therapeutics
and serves as a provider of test services, including esoteric tests, to the
medical community. Since our founding in 1976, our strategic focus has been on
the development of enabling technologies in research,
development, manufacture, licensing and marketing of innovative health care
products, platforms and services based on molecular and cellular technologies.
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, comprising 71 key issued patents
worldwide, and over 200 pending patent applications, along with extensive
enabling technologies and platforms.

Recent Events

In
September 2010, we announced that we had streamlined our operations, which is
expected to result in a reduction in annualized operating expenses beginning in
the fiscal 2011 first quarter. These initiatives are also expected to result in
increased gross margins. The operating cost reductions affect all of our
operating businesses as well as corporate overhead. The overall improvements
are primarily a result of streamlining operations at Enzo Life Sciences, where
we completed a series of acquisitions over the past three years, and Enzo
Clinical Labs, where we have invested significantly over the past year in
technology and process improvements.

At
Enzo Clinical Labs, we expect gross margin improvements and expense reductions,
primarily through selective work force rationalization and process
improvements, including customer service and billing designed to reduce
processing and collection costs of receivables, improved laboratory service
operations and lower reagent costs. At Enzo Life Sciences, as a result of the
acquisitions that we have completed, certain operations have become redundant,
which provided opportunities to reduce costs through realignment or
centralization of R&D, customer service and manufacturing activities. Enzo
Life Sciences has also undertaken a repositioning of its product offerings,
refocusing its marketing efforts on higher-margin, higher volume products. As a
result, we recorded a charge in the fiscal 2010 fourth quarter of $1.3 million
as certain low-volume products were rationalized. We expect the benefits of the
operational improvements to occur commencing with our fiscal 2011 first quarter
ending October 31, 2010. In connection with the streamlining, we also recorded
a one-time charge of approximately $500,000 in its fiscal 2010 fourth quarter
to reflect severance payments to terminated employees.

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, 2010, 2009 and 2008 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. Enzo Life
 Sciences, Inc. is a recognized leader in labeling and detection technologies
 across research and diagnostic markets. Our strong portfolio of proteins,
 antibodies, peptides, small molecules, labeling probes, dyes and kits
 provides life science researchers tools for target identification/validation,
 high content analysis, gene expression analysis, nucleic acid detection,
 protein biochemistry and detection, and cellular analysis. We are
 internationally recognized and acknowledged as a leader in manufacturing,
 in-licensing, and commercialization of over 9,000 of our own products and in
 addition distribute over 30,000 products made by over 40 other original
 manufacturers. Our strategic focus is directed to innovative high quality
 research reagents and kits in the primary key research areas of protein
 homeostasis, epigenetics, live cell analysis, molecular biology and
 immunoassays.

2

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The segment is an established
 source for a comprehensive panel of products to scientific experts in the
 fields of Natural Products/Antibiotics, Autophagy, Cancer, Cell Cycle, Cell
 Death, Cell Signaling, Cellular Analysis, Endocrinology/Hormones, DNA
 regulation, Compound Screening, Genomics/Molecular Biology, GPCRs,
 Immunology, Inflammation, Metabolism, Neuroscience, Nitric Oxide pathway,
 Obesity/Adipokines, Oxidative Stress, Proteases. Proteosomes, Protein
 Expression and modification, Signal Transduction, Stress/Heat Shock proteins
 and Ubiquitin/Ubl signaling.                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Enzo Clinical
 Labsis a regional clinical laboratory serving the New
 York, New Jersey and Eastern Pennsylvania medical communities. 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 approximately 30 patient service centers
 throughout New York and New Jersey, a stand alone stat or rapid response
 laboratory in New York City and a full-service phlebotomy and logistics
 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.                                                                                                                                                                                                                                                                                                                                                   

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, 2010, 2009 and 2008, (in $000s and
percentages):

|                               |  |      |        |      |     |      |   |        |  |     |   |   |        |  |     |  
|------------------------------ |  | ---- | ------ | ---- | --- | ---- | - | ------ |  | --- | - | - | ------ |  | --- | -
|Fiscal year
 ended July 31,    |  | 2010 |        | 2009 |     | 2008 |  
|                               |  |      |        |      |     |      |  
|                               |  |      |        |      |     |      |  
|Product revenues               |  | $    | 43,111 |      | 44  | %    | $ | 40,592 |  | 45  | % | $ | 28,087 |  | 36  | %
|Royalty and license fee income |  |      | 9,793  |      | 10  |      |   | 9,376  |  | 11  |   |   | 7,630  |  | 10  |  
|Clinical laboratory services   |  |      | 44,178 |      | 46  |      |   | 39,604 |  | 44  |   |   | 42,078 |  | 54  |  
|                               |  |      |        |      |     |      |   |        |  |     |   |   |        |  |     |  
|Total                          |  | $    | 97,082 |      | 100 | %    | $ | 89,572 |  | 100 | % | $ | 77,795 |  | 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. In addition, scientists are looking in detail at the proteins
that are expressed by genes, their control and regulation in the cellular
environment. 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
research and 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,
microarrays, fluorescent microscopes, high content screening systems, flow
cytometers and plate readers. Common among these formats is the need for
reagents that allow the identification, quantification and characterization,
and interactions of specific genes or nucleic acid sequences, proteins, cells
and other cellular structures and organelles.

3

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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 and proteins 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.

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 $5 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.
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.

4

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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.

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.

In
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. 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.

5

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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 International 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 the UK)
and a network of third party distributors in most other significant markets
worldwide.

Expand our collaborations with major
life sciences companies

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

In
fiscal 2007, Enzo Life Sciences and Abbott Molecular, Inc. entered into a five
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.

The
Company has a license agreement with QIAGEN Gaithersburg Inc. (Qiagen) that
began in 2005, whereby the Company earns 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.

6

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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 2010, we were awarded eleven
patents and expanded our patent estate in the area of nucleotides,
amplification, labeling and detection, among others.

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.

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

7

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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.

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

8

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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, New Jersey and Eastern Pennsylvania
medical communities.

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, through two main channels to market.

| |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Enzo Life Sciences 
 Enabling Discovery in Life Sciences 
| |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                              | Enzo Life Sciences is a positioned
 as a leading manufacturer and supplier of high quality reagents, kits and
 products supplied to scientific researchers in academia, clinical research
 and drug discovery. With direct sales operations in US, Switzerland, Germany,
 UK, France and Benelux, Enzo Life Sciences also supports its 9,000 products
 through a global network of dedicated distributors.                                                                      
| |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Axxora.com  the
 Innovative Research Reagents Marketplace
| |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                              | Axxora.com is a
 proven distribution platform for original manufacturers of innovative
 research reagents. An increasing number of researchers use our unique
 marketplace to instantly connect with over 40 specialty manufacturers and
 gain access to over 30,000 products. Purchasing groups from universities,
 research institutes, biotech and pharmaceutical companies utilize this
 extensive catalog to source research reagents and conveniently consolidate
 orders.

9

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The
products supplied by Enzo Life Sciences 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                      | In Vitro
 Toxicology                    
| | Apotosis/Cell
 Death             | Kinases/Inhibitors                      
| | Biologically
 Active Peptides    | Leukotrienes/Prostaglandins/Thromboxanes
| | Bone Metabolism                  | Microarray
 Labeling                    
| | Cancer Research                  | Multidrug
 Resistance                   
| | Cell Death                       | Natural
 Products/Antibiotics           
| | Cell Cycle                       | Neuroscience                            
| | Chemokines/Cytokines             | Nitric Oxide
 Pathway                   
| | Cytoskeletal
 Research           | Nuclear Receptors                       
| | Dependence
 Receptors            | Oxidative Stress                        
| | DNA
 Fragmentation/Damage/Repair | Protein
 Aggregation                    
| | DNA Regulation                   | Proteosome/Ubiquitin                    
| | Epigenetics                      | Receptors                               
| | FISH                             | Signal
 Transduction                    
| | Growth
 Factors/Cytokines        | Stem Cell/Cell
 Differentiation         
| | Hypoxia                          | Stress
 Proteins/Heat Shock Proteins    
| | Immunology                       | TNF/TNF Receptor
 Superfamily           
| | Inflammation/Innate
 Immunity    | Transcription
 Factors                  
| |                                  | Viral Signaling                         

Enzo Life
Sciences is organized to promote and market its products and brands under its
own name, building on a foundation of the brands it has acquired or developed
previously.

EnzoThe original 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 provides
recognition 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.

Biomol
InternationalThe Biomol International brand provides global
recognition in 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 brand emphasizes 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.

Enzo Life Sciences through its new product development programs is now
entering new markets in the fields of Cellular Analysis and Protein Aggregation
detection. As part of this introduction, we are establishing new product lines
to increase recognition of our products, such as the Cellestial® range of
fluorescent dyes and kits, and ProteoStat® protein aggregation detection line
of products.

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.

Autoimmune
Uveitis.Autoimmune uveitis, which results from inflammation of a part of the
eye known as the uvea, is believed to result from an immune reaction to
antigens in the eye, specifically the S-antigen and the interphotoreceptor
retinoid-binding protein (IRBP).

There is no
known cure for uveitis, which in the United States, according to the American
Uveitis Society, is newly diagnosed in approximately 38,000 people every year.

10

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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 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), for further study of our candidate compound Optiquel for the
treatment of autoimmune uveitis. In October 2010, we announced the initiation
of a human clinical trial to be conducted at the NIH. 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 may apply for the
same in the U.S. since Orphan status designation can confer both financial and
marketing benefits.

Inflammatorybowel
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 have
completed a double-blind, placebo-controlled study at Hadassah Hospital in
Jerusalem designed to investigate the effects of EGS-21, a glycolipid, as an
immune modulator for the alleviation of NASH. We presented results at the 2009
American Association for Liver Disease Meeting. The study concluded that oral
administration of EGS21 appears to be safe and biologically active in patients
with insulin resistance and NASH, leading to decreased hepatic steatosis, and
improved insulin resistance.

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 no plans at the present time to expand this
trial.

Clinical
Laboratory Services

We operate
a regional clinical laboratory that offers extensive diagnostic services to the
New York, New Jersey and Eastern Pennsylvania medical communities. 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 approximately
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.

Patient
specimens are delivered to our laboratory facilities primarily 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 in most instances utilizing EnzoDirect, our
proprietary computer-based ordering and results delivery system. Once the
information is entered into the laboratory computer system the tests are
performed on certain laboratory testing equipment 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.

12

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These test
results are either reported electronically via our 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 by our customer service personnel.

For fiscal
years ended July 31, 2010, 2009 and 2008, respectively, 46%, 44% and 54% of the
Companys revenues were derived from the clinical laboratory. At July 31, 2010
and 2009, respectively, approximately 45% and 40%, 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.

Revenues,
net of contractual adjustment, from direct billings under the Federal Medicare
program during the years ended July 31, 2010, 2009 and 2008 were approximately
25%, 23% and 22%, 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%, 25% and 26% of the Clinical Labs segments net revenue for the
fiscal year ended July 31, 2010, 2009 and 2008, 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 both New York and New Jersey, 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 inaccurate billing
information on requisitions received from the ordering physician. In addition,
the bad debts 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.
We perform the requested tests and report test results regardless of whether
the billing or diagnostic coding information is inaccurate or missing. We
subsequently attempt to contact the ordering physician to obtain and rectify
incorrect billing information.

Missing or
inaccurate information on the requisitions adds complexity to and may slow the
billing process, creates backlogs of unbilled requisitions, and generally
increases the collectability and the aging of accounts receivable. When all
issues relating to the missing or inaccurate information are not resolved in a
timely manner, the related receivables are fully reserved to the allowance for
doubtful accounts or written off.

We incur
significant additional costs as a result of our participation in Medicare, as
billing and reimbursement for clinical laboratory testing is subject to
considerable and complex federal and state regulations.

13

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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. In March 2010, U.S. federal legislation was enacted to reform
healthcare. The legislation provides for reductions in the Medicare clinical
laboratory fee schedule of 1.9% for five years beginning in 2010 and also
includes a productivity adjustment which reduces the Consumer Price Index
(CPI) market basket update beginning in 2011. In 2010, approximately 25% of
our Clinical Labs segment revenues were reimbursed by Medicare under the
clinical laboratory fee schedule. The legislation imposes an excise tax on the
seller for the sale of certain medical devices in the United States, including
those purchased and used by laboratories, beginning in 2013. The legislation
establishes the Independent Payment Advisory Board, which will be responsible,
beginning in 2014, annually to submit proposals aimed at reducing Medicare cost
growth while preserving quality. These proposals automatically will be
implemented unless Congress enacts alternative proposals that achieve the same
savings targets.
We could experience a significant decrease in revenue from Medicare as a result
of this legislation, 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 International, and Assay Designs,
as well as developing innovative new clinical diagnostic and 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, 2010, 2009 and 2008, the Company incurred costs of
approximately $9,704,000, $9,220,000 and $8,637,000, respectively, for research
and development activities.

Internal
Research Programs

Our
professional staff of 82 scientists, including 76 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 large numbers of 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. We also have a number of external collaborations
around the world to enhance our ongoing therapeutic development program.

Sales
and Marketing

Our sales and marketing strategy for Enzo Life Sciences is to sell our
  life science products through: (i) direct sales to end-users under the Enzo
  Life Sciences name, with direct recognition to our acquired brands (ii) direct
  sales to end users under the Axxora electronic market place name (iii) supply
  agreements with manufacturers and (iv) 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 who recognize the brands (Alexis, Assay Designs, Biomol, Enzo
  and Stressgen) now receive products directly from Enzo Life Sciences where we
  are recognized for innovative high quality products, supported directly by our
  qualified technical staff. We sell the same products through our Axxora
  electronic market place which is also the source for life science research
  reagents from over 40 original manufacturers. Our direct marketing and sales
  network includes fully-owned subsidiaries (USA, Switzerland, Germany, Benelux,
  and UK), direct presence in France 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, New Jersey and Eastern Pennsylvania 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 ordering physician 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 2010 we owned or licensed over 70 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 their sugar and phosphate
sites. The claims contained in these patents cover products that incorporate a
signaling moiety into a nucleic acid attached to a sugar or phosphate for the
purpose of nucleic acid detection or quantification, including sequencing and
real time nucleic acid amplification. Enzo also has patents directed to
proprietary dyes that may be used to label the sugar, base or phosphate
positions of nucleic acids.

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.

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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.

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 twelve months, but it
can last longer. The process of obtaining PMA approval is much more costly,
lengthy and uncertain. It generally takes from one to three years or even
longer. We cannot be sure that 510(k) clearance or PMA approval will ever be
obtained for any product we propose to market.

The FDA
decides whether a device must undergo either the 510(k) clearance or PMA
approval process based upon statutory criteria. These criteria include the
level of risk that the agency perceives is associated with the device and a determination
whether the product is a type of device that is similar to devices that are
already legally marketed. Devices deemed to pose relatively less risk are
placed in either class I or II, which requires the manufacturer to submit a
premarket notification requesting 510(k) clearance, unless an exemption
applies. The pre-market notification must demonstrate that the proposed device
is substantially equivalent in intended use and in safety and effectiveness
to a legally marketed predicate device that is either in class I, class II,
or is a pre-amendment class III device (i.e., one that was in commercial
distribution before May 28, 1976) for which the FDA has not yet called for
submission of a PMA application.

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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.

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.

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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.

Under
health care in January 2010, the Medicare Fee Schedule was reduced by 1.9% and
future reductions are expected to continue (See Item 1A Risk Factors).

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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 team 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.

20

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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 included 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. Regulations have been adopted for
electronic transaction, privacy and security standards and include the
requirement to use a National Provider Identifier in electronic health care
transactions. These provisions have very broad applicability and they
specifically apply to health care providers, which include physicians and
clinical laboratories. The National Provider Identifier is an identifier that
replaced all other identifiers that are currently used for healthcare
transactions (e.g., UPIN, Medicaid provider numbers; identifiers assigned by
commercial insurers).

The
electronic transaction standards regulations created 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 established standard data content and
format for submitting electronic claims and other administrative health
transactions. All health care providers are able to use the electronic format
to bill for their services and all health plans and providers are required to
accept standard electronic claims, referrals, authorizations, and other
transactions. The Company believes it is in compliance with these standards.

The
privacy regulations, which have been in effect since 2003, created 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 are 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 in 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. 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 requires significant
effort and expense for virtually all entities that conduct health care
transactions electronically and handle patient health information.

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.

Occupational
Safety

In
addition to its comprehensive regulation of safety in the workplace, the U.S.
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.

21

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Other
Regulation

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

We
believe that we are in compliance with applicable environmental, safety and
health laws 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 adjacent facilities in
Farmingdale, New York. A major part of one facility is 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 logistics operations in Lausen, Switzerland
and in San Diego, California. In connection with the Biomol International
acquisition, the Life Sciences segment added manufacturing and research
operations in Plymouth Meeting, Pa. and a manufacturing and research facility
in Exeter, United Kingdom. In connection with the Assay Designs acquisition,
the Life Sciences segment 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, 2010, we employed 527 full-time and 62 part-time employees. Of the
full-time employees, 178 were engaged in research, development, manufacturing,
and marketing of research products, 6 in therapeutics research, 353 in
performing testing, marketing and billing our clinical laboratories services
and 52 in finance, legal, administrative and executive functions. Our
scientific staff, including 76 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
we have established good relationships with our employees.

Information
Systems

Information
systems are used extensively in virtually all aspects of our businesses. In our
clinical laboratory business, our information systems are critical with respect
to laboratory testing, billing, accounts receivable, customer service,
logistics, and management of medical data. Our success depends, in part, on the
continued and uninterrupted performance of our information technology systems.
Computer systems are vulnerable to damage from a variety of sources, including
telecommunications or network failures, malicious human acts and natural
disasters.

Moreover,
despite network security measures, some of our servers are potentially
vulnerable to physical or electronic break-ins, computer viruses and similar
disruptive problems. We have invested heavily in the upgrade of our information
and telecommunications systems to improve the quality, efficiency and security
of our businesses. In addition, to complement our proprietary physician
connectivity solution, EnzoDirect we have 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.

22

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Quality
Assurance

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

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

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

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 assumes no obligation to
revise or update any forward-looking statements for any reason, except as
required by law.

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 five fiscal years and quarter
to quarter over such periods and our losses have resulted in the use of cash in
operations. If such losses and cash uses continue the value of your investment
could decline significantly.

We
incurred a net loss of $22.2 million and $23.6 million for the fiscal years
ended July 31, 2010 and 2009, 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 and use cash in operations 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:                                                                                
| |   |                                                                                                                                                          
| |  | health care reform regulations affecting
 providers and plan sponsors;                                                                                   
| |   |                                                                                                                                                          
| |  | 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 offerings, 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;                                                          
| |   |                                                                                                                                                          
| |  | general worldwide economic conditions
 affecting funding of research and;                                                                                
| |   |                                                                                                                                                          
| |  | seasonal fluctuations affected by weather
 and holiday periods.                                                                                          

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 four fiscal years we have made significant acquisitions in our Life
Sciences segment. 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 an aggressive marketing program designed to
more directly service its end users, while simultaneously promoting numerous
brands. We will continue to expand the reach of companies by our direct field
sales force, the on-going enhancement of our interactive websites, continued
attendance at top industry trade meetings, and publications in leading
scientific journals. In addition to our direct sales, we operate worldwide
through wholly-owned subsidiaries (in USA, Switzerland, Belgium, Germany, and
the UK) and a network of third-party distributors in most other significant
markets. If we are unable to successfully continue 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 governmental 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.

25

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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 ASC 350,
Intangibles, Goodwill and Other (ASC 350) 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, 2010, goodwill and other intangible assets with indefinite lives
represented approximately 29% 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.

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.

27

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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.

U.S.
healthcare reform legislation may result in significant change and our business
could be adversely impacted if we fail to adapt.

Government
oversight of and attention to the healthcare industry in the United States is
significant and increasing. In March 2010, U.S. federal legislation was enacted
to reform healthcare. The legislation provides for reductions in the Medicare
clinical laboratory fee schedule of 1.9% for five years beginning in 2010 and
also includes a productivity adjustment which reduces the CPI market basket
update beginning in 2011. In 2010, approximately 25% of our Clinical Labs
segment revenues were reimbursed by Medicare under the clinical laboratory fee
schedule. The legislation imposes an excise tax on the seller for the sale of
certain medical devices in the United States, including those purchased and
used by laboratories, beginning in 2013. The legislation establishes the Independent
Payment Advisory Board, which will be responsible, beginning in 2014, annually
to submit proposals aimed at reducing Medicare cost growth while preserving
quality. These proposals automatically will be implemented unless Congress
enacts alternative proposals that achieve the same savings targets.

Further,
the legislation calls for a Center for Medicare and Medicaid Innovation that
will examine alternative payment methodologies and conduct demonstration
programs. The legislation provides for extensive health insurance reforms,
including the elimination of pre-existing condition exclusions and other
limitations on coverage, fixed percentages on medical loss ratios, expansion in
Medicaid and other programs, employer mandates, individual mandates, creation
of state and regional health insurance exchanges, and tax subsidies for
individuals to help cover the cost of individual insurance coverage. The
legislation also permits the establishment of accountable care organizations, a
new healthcare delivery model. While the ultimate impact of the legislation on
the healthcare industry is unknown, it is likely to be extensive and may result
in significant change. Our failure to adapt to these changes could have a
material adverse effect on our business.

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, impacts of the economy on patient traffic at our
customers 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, reduced patient traffic, 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

28

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attract new customers or the loss of existing
customers or a reduction in business from those customers could significantly
reduce our revenues and impede our ability to grow.

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

Containment
of health care costs, including reimbursement for clinical laboratory services,
has been a focus of ongoing governmental activity. Clinical laboratories must
bill Medicare directly for the services provided to Medicare beneficiaries and
may only collect the amounts permitted under this fee schedule. Reimbursement
to clinical laboratories under the Medicare Fee Schedule has been steadily
declining since its inception. Furthermore, Medicare has mandated use of the
Physicians Current Procedural Terminology, or CPT, for coding of laboratory
services which has altered the way we bill these programs for some of our
services, thereby reducing the reimbursement that we receive.

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

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

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

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

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

The
HIPAA privacy and security regulations established 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.                                                                                                                                                                                  

29

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

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

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

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

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

If
we fail to maintain or monitor our information systems our businesses could be
adversely affected.

We
depend on information systems throughout our Company to control our Life
Science manufacturing, inventory, 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.

30

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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 we have successfully recruited and hired
qualified key employees. Any failure on our part to hire, train, and retain a
sufficient number of qualified professionals would seriously damage our business.

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

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

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

Risks
relating to our international operations

Foreign
currency exchange rate fluctuations may adversely affect our business.

Since
we operate as a multinational corporation that sells and sources products in
many different countries, changes in exchange rates could in the future,
adversely affect our cash flows and results of operations.


Furthermore,
reported sales and purchases made in non-U.S. currencies by our international
businesses, when translated into U.S. dollars for financial reporting purposes,
fluctuate due to exchange rate movement. Due to the number of currencies
involved, the variability of currency exposures and the potential volatility of
currency exchange rates, we cannot predict the effect of exchange rate
fluctuations on future sales and operating results.


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

We
operate internationally primarily through wholly-owned subsidiaries located in
North America and Europe. Revenues outside the United States were approximately
15% of total revenues in fiscal 2010. 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.

31

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Risks
Relating to our Common Stock

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

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

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

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

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

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

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

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.

32

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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

33

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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 office                 |  | Life Sciences, Other        |  | Owned        |  | 22,000        
|                                 |  |                                                                          |  |                             |  |              |  |               
|New York, NY
 (Note 2)           |  | Corporate headquarters                                                   |  | Other                       |  | Leased       |  | 11,300        
|                                 |  |                                                                          |  |                             |  |              |  |               
|San Diego, CA
 (Note 3)          |  | Sales, administration and distribution                                   |  | Life Sciences               |  | Leased       |  | 8,800         
|                                 |  |                                                                          |  |                             |  |              |  |               
|Lausen, Switzerland
 (Note 3)    |  | Operational headquarters in 
 Europe, including sales and 
 distribution |  | Life Sciences               |  | Leased       |  | 15,400        
|                                 |  |                                                                          |  |                             |  |              |  |               
|Plymouth Meeting, Pa
 (Note 4)   |  | Sales, manufacturing, research, 
 administration and distribution        |  | Life Sciences               |  | Leased       |  | 19,500        
|                                 |  |                                                                          |  |                             |  |              |  |               
|Exeter, United Kingdom
 (Note 4) |  | Sales, manufacturing, research, 
 administration and distribution        |  | Life Sciences               |  | Leased       |  | 3,642         
|                                 |  |                                                                          |  |                             |  |              |  |               
|Ann Arbor, Michigan
 (Note 5)    |  | 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
 (See Note 15 to the Consolidated Financial Statements).
| |        |                                                                                                                                                                              
| | Note 2 |  In February 2010, the lease, which
 includes 4,100 square feet under a sublease rental agreement through December
 31, 2011, was extended through May 2020.                
| |        |                                                                                                                                                                              
| | Note 3 |  The lease for this property was acquired
 in connection with the Axxora acquisition in May 2007.                                                                           
| |        |                                                                                                                                                                              
| | Note 4 |  The leases for these properties were
 acquired in connection with the Biomol International acquisition in May 2008
 and expire through 2017.                               
| |        |                                                                                                                                                                              
| | Note 5 | - The lease for this property, which
 expires in 2013, 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.

34

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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), Sigma Chemical Company, Inc., Molecular Probes, Inc. and Orchid
Biosciences, 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. In January 2007, the remaining
defendants moved for summary judgment. On March 13, 2009, the court denied
defendants summary judgment motion and stayed the cases pending resolution of
an appeal to the United States Court of Appeals for the Federal Circuit in
Enzos Connecticut litigation against Applera Corporation and Tropix, Inc. On
March 26, 2010, the United States Court of Appeals for the Federal Circuit
reversed the District of Connecticuts grant of summary judgment of invalidity
as to various patents at issue in the Applera case, and remanded the Applera
case for further proceedings consistent with the Federal Circuits opinion. In
light of the Federal Circuits remand of the Applera case to the District of
Connecticut and the impending trial, on May 27, 2010, the court maintained its
stay of the cases until further notice. 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.

In October
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 In November 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. In
January 2007, Affymetrix moved for summary judgment. In March 2009, the court
denied Affymetrixs motion and stayed the case pending resolution of an appeal
in the United States Court of Appeals for the Federal Circuit in Enzos
Connecticut litigation against Applera Corporation and Tropix, Inc. On March
26, 2010, the United States Court of Appeals for the Federal Circuit reversed
the District of Connecticuts grant of summary judgment of invalidity as to
various patents at issue in the Applera case, and remanded the Applera case for
further proceedings consistent with the Federal Circuits opinion. In light of
the Federal Circuits remand of the Applera case to the District of Connecticut
and the impending trial, on May 27, 2010, the court maintained its stay of the
Affymetrix case until further notice.

35

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In June
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, among other things, 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.
On January 3, 2007, Roche moved for summary judgment. In March 2009, the court
denied Roches motion and stayed the cases pending resolution of an appeal to
the United States Court of Appeals for the Federal Circuit in Enzos
Connecticut litigation against Applera Corporation and Tropix, Inc. On March
26, 2010, the United States Court of Appeals for the Federal Circuit reversed
the District of Connecticuts grant of summary judgment of invalidity as to
various patents at issue in the Applera case, and remanded the Applera case for
further proceedings consistent with the Federal Circuits opinion. In light of
the Federal Circuits remand of the Applera case to the District of Connecticut
and the impending trial, on May 27, 2010, the court maintained its stay of the
Roche case until further notice.

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 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. On March 26, 2010, the Federal
Circuit issued an order concluding that the claims of U.S. Patent Nos.
5,328,824 and 5,449,767 were not indefinite and that there were genuine issues
of material fact as to anticipation. The Court reversed the district courts
summary judgment of invalidity of those two patents and remanded the case back
to the Connecticut Court. Applera and Tropix then filed a combined petition for
panel rehearing and rehearing en banc. On May 26, 2010, the Federal Circuit
issued an order denying both petitions. The Defendants then filed a motion to
stay the case in Connecticut pending resolution of its impending petition for
writ of certiorari to the U.S. Supreme Court. Judge Arterton has not yet ruled
on the stay motion. Applera filed its petition for certiorari on September 23,
2010. If the petition is not 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.

36

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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. On
June 5, 2009, the Court granted the defendants motion and dismissed all the
Amended Complaints. The remaining Plaintiffs then filed a notice of appeal to
the Second Circuit Court of Appeals. The appeal is still pending. The Company believes
that the latest complaints in these actions have no merit and that the appeal
also lacks merit. The Company will continue to defend these actions vigorously.

On or about
September 22, 2010, Mayflower Partners, L.P. f/k/a Biomol International, L.P.
(Mayflower) filed an action against Enzo Biochem, Inc. and Enzo Life
Sciences, Inc. (together Enzo) in the United States District Court for the
Southern District of New York, alleging breach of the stock and asset purchase
agreement dated as of May 8, 2008 between Enzo and Mayflower (the Agreement).
Pursuant to the Agreement, the Company acquired the assets of Mayflower, and
agreed, among other things, to make certain contingent earn-out payments to
Mayflower, accounted for as additional purchase price consideration, if certain
performance thresholds were met for each of the two annual periods following
the closing. Mayflower alleges that Enzo breached the Agreement by allegedly
failing to operate the acquired business in good faith during the second
earn-out period and engaging in conduct the primary purpose of which was to
avoid making a second earn-out period payment under the Agreement. In addition,
Mayflower claims that Enzo breached the Agreement by allegedly failing to
provide the documentation appropriate to support the calculation of defined
financial criteria for the second earn-out period as required under the
Agreement. Enzo denies that it is in breach of the Agreement and will
vigorously defend the suit.

As part of
the litigation, Mayflower moved by Order to Show cause to enjoin the accounting
procedure specified under the Agreement. Mayflowers motion was heard by a
District Court Judge on September 27, 2010, who directed that the parties first
go forward with the accounting as provided under the Agreement before moving
further with the litigation. As provided under the Agreement, Mayflowers
maximum recovery in the event that it is successful on either the accounting or
in litigation is settlement of the $2.5 million contingent earn-out in either
Enzo common stock or cash, as set forth in the Agreement, plus attorneys fees.

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. (Removed and Reserved)

37

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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.

|                                                     |  |      |      |     |   |      | 
|---------------------------------------------------- |  | ---- | ---- | --- | - | ---- | 
|2010 Fiscal Year
 (August 1, 2009 to July 31, 2010): |  |      |      |     |  
|                                                     |  |      |      |     |  
|                                                     |  | High |      | Low |  
|                                                     |  |      |      |     |  
|                                                     |  |      |      |     |  
|1st Quarter                                          |  | $    | 7.66 |     | $ | 4.51 | 
|2nd Quarter                                          |  | $    | 6.24 |     | $ | 4.52 | 
|3rd Quarter                                          |  | $    | 6.67 |     | $ | 4.66 | 
|4th Quarter                                          |  | $    | 6.18 |     | $ | 3.90 | 

|                                                     |  |      |       |     |   |      | 
|---------------------------------------------------- |  | ---- | ----- | --- | - | ---- | 
|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 | 

As of
September 30, 2010, the Company had approximately 1,009 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, 2010.

|                                                            |  |                                                                                                      |           |                                                                                     |   |                                                                                                                                                         |  |  |         | 
|----------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- | --------- | ----------------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|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     |  |                                                                                                      | 1,132,450 |                                                                                     | $ | 14.30                                                                                                                                                   |  |  | 169,000 | 
|Equity compensation plans not approved by
 security holders |  |                                                                                                      |          |                                                                                     |   |                                                                                                                                                        |  |  |        | 
|                                                            |  |                                                                                                      |           |                                                                                     |   |                                                                                                                                                         |  |  |         | 
|Total                                                       |  |                                                                                                      | 1,132,450 |                                                                                     | $ | 14.30                                                                                                                                                   |  |  | 169,000 | 
|                                                            |  |                                                                                                      |           |                                                                                     |   |                                                                                                                                                         |  |  |         | 

38

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Item 6. Selected Financial Data

The
following table, which is derived from the audited consolidated financial
statements of the Company for the fiscal years 2006 through 2010 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)                |  | 2010                                                                         |         | 2009 |   | 2008    |   | 2007 |         | 2006 |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |  
|Operating revenues                    |  | $                                                                            | 97,082  |      | $ | 89,572  |   | $    | 77,795  |      | $ | 52,908  |   | $ | 39,826  |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Other income                          |  |                                                                              | 44      |      |   | 74      |   |      | 171     |      |   | 2,699   |   |   |        |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Interest income                       |  |                                                                              | 19      |      |   | 581     |   |      | 3,696   |      |   | 5,092   |   |   | 3,144   |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Loss before income
 taxes             |  |                                                                              | (22,261 | )    |   | (23,477 | ) |      | (10,892 | )    |   | (13,175 | ) |   | (17,009 | )
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Benefit
 (provision) for income taxes |  |                                                                              | 28      |      |   | (87     | ) |      | 239     |      |   | (85     | ) |   | 1,342   |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Net loss                              |  | $                                                                            | (22,233 | )    | $ | (23,564 | ) | $    | (10,653 | )    | $ | (13,260 | ) | $ | (15,667 | )
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Basic net loss per
 common share:     |  | $                                                                            | (0.59   | )    | $ | (0.63   | ) | $    | (0.29   | )    | $ | (0.38   | ) | $ | (0.49   | )
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Diluted net loss
 per common share:   |  | $                                                                            | (0.59   | )    | $ | (0.63   | ) | $    | (0.29   | )    | $ | (0.38   | ) | $ | (0.49   | )
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|                                      |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Weighted average common shares        |  |                                                                              |         |      |   |         |   |      |         |      |   |         |   |   |         |  
|Basic                                 |  |                                                                              | 38,001  |      |   | 37,511  |   |      | 36,883  |      |   | 35,017  |   |   | 32,215  |  
|Diluted                               |  |                                                                              | 38,001  |      |   | 37,511  |   |      | 36,883  |      |   | 35,017  |   |   | 32,215  |  

|                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|---------------------- |  | ------------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                       |  | July 31,
 (in thousands) |        
|                       |  |                          |        
|Financial
 Position:   |  | 2010                     |         | 2009 |   | 2008    |  | 2007 |         | 2006 |  
|                       |  |                          |         |      |   |         |  |      |         |      |  
|                      
|Working capital        |  | $                        | 42,181  |      | $ | 60,518  |  | $    | 92,392  |      | $ | 113,850 |  | $ | 80,161  | 
|                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Total assets           |  |                          | 115,245 |      |   | 133,128 |  |      | 154,522 |      |   | 159,002 |  |   | 101,524 | 
|                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Long term
 obligations |  |                          |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Stockholders
 equity  |  |                          | 97,016  |      |   | 116,781 |  |      | 138,289 |      |   | 141,894 |  |   | 95,587  | 

Notes to Selected Financial Data

|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 2 in the Notes to Consolidated
 Financial Statements regarding the acquisitions and cash paid for
 acquisitions in Fiscal 2009, 2008 and 2007.

39

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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
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 research, development,
manufacture, licensing and marketing of innovative health care products,
platforms and services based on molecular and cellular technologies. 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.

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. Enzo Life Sciences, Inc. is a recognized leader in
labeling and detection technologies across research and diagnostic markets. Our
portfolio of proteins, antibodies, peptides, small molecules, labeling probes,
dyes and kits provides life science researchers tools for target
identification/validation, high content analysis, gene expression analysis,
nucleic acid detection, protein biochemistry and detection, and cellular
analysis. We are internationally recognized and acknowledged as
a leader in manufacturing, in-licensing, and commercialization of over 9,000 of
our own products and in addition distribute over 30,000 products made by over
40 other original manufacturers. Our strategic focus is directed to innovative
high quality research reagents and kits in the primary key research areas of
protein homeostasis, epigenetics, live cell analysis, molecular biology and
immunoassays. The segment is an established source for a comprehensive panel of
products to scientific experts in the fields of Natural Products/Antibiotics,
Autophagy, Cancer, Cell Cycle, Cell Death, Cell Signaling, Cellular Analysis,
Endocrinology/Hormones, DNA regulation, Compound Screening, Genomics/Molecular
Biology, GPCRs, Immunology, Inflammation, Metabolism, Neuroscience, Nitric
Oxide pathway, Obesity/Adipokines, Oxidative Stress, Proteases and Proteosomes,
Protein Expression and modification, Signal Transduction, Stress/Heat Shock
proteins and Ubiquitin/Ubl signaling.

Enzo
Clinical Labsis a regional clinical laboratory serving the
greater New York, New Jersey and Eastern Pennsylvania medical communities. 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, New Jersey and
Eastern Pennsylvania, a stand alone stat or rapid response laboratory in New
York City, and a full-service phlebotomy and logistics department. Payments for
clinical laboratory testing services are made by the Medicare program,
healthcare insurers and patients.

Enzo Therapeutics is a
biopharmaceutical company that has developed multiple novel approaches in the
areas of gastrointestinal, infectious, ophthalmic and metabolic diseases, many
of which are derived from the pioneering work of Enzo Life Sciences. 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.

40

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The following
table summarizes the sources of revenues for the fiscal years ended July 31,
2010, 2009 and 2008, (in $000s and percentages):

|                                |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|------------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
|Fiscal year
 ended July 31,     |  | 2010 |        | 2009 |  | 2008 |  
|                                |  |      |        |      |  |      |  
|Product revenues                |  | $    | 43,111 |      |  | 44   | % | $ | 40,592 |  |  | 45  | % | $ | 28,087 |  |  | 36  | %
|Royalty and
 license fee income |  |      | 9,793  |      |  | 10   |   |   | 9,376  |  |  | 11  |   |   | 7,630  |  |  | 10  |  
|Clinical
 laboratory services   |  |      | 44,178 |      |  | 46   |   |   | 39,604 |  |  | 44  |   |   | 42,078 |  |  | 54  |  
|                                |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|Total                           |  | $    | 97,082 |      |  | 100  | % | $ | 89,572 |  |  | 100 | % | $ | 77,795 |  |  | 100 | %
|                                |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  

Recent Events

In
September 2010, the Company announced that it had streamlined its operations,
which is expected to result in a reduction in annualized operating expenses
beginning in the fiscal 2011 first quarter. These initiatives are also expected
to result in increased gross margins. The operating cost reductions affect all
of its operating businesses as well as corporate overhead. The overall
improvements are primarily a result of streamlining operations at Enzo Life
Sciences, where the Company completed a series of acquisitions over the past
three years, and Enzo Clinical Labs, where Enzo has invested significantly over
the past year in technology and process improvements.

At
Enzo Clinical Labs, the Company expects gross margin improvements and expense
reductions, primarily through selective work force rationalization and process
improvements, including customer service and billing designed to reduce
processing and collection costs of receivables, improved laboratory service
operations and lower reagent costs. At Enzo Life Sciences, as a result of the
acquisitions that the Company has completed, certain operations have become
redundant, which provided opportunities to reduce costs through realignment or
centralization of R&D, customer service and manufacturing activities. Enzo
Life Sciences has also undertaken a repositioning of its product offerings,
refocusing its marketing efforts on higher-margin, higher volume products. As a
result, the Company recorded a charge in the fiscal 2010 fourth quarter of $1.3
million as certain low-volume products were rationalized. Enzo expects the
benefits of the operational improvements to occur commencing with the Companys
fiscal 2011 first quarter ending October 31, 2010. In connection with the
streamlining, the Company also recorded a one-time charge of approximately
$500,000 in its fiscal 2010 fourth quarter to reflect severance payments to
terminated employees.

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. 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. 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 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 consolidated financial statements include the
results of operations for Assay Designs from the date of acquisition.

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 and
$750,000 escrow amounts.

41

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Results of Operations

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

|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------------------- | - | -------- | ------ | - |  | --- | -
|                                                 |  | 2010 |         | 2009 |   | Increase
 (Decrease) |   | % Change |       
|                                                 |  |      |         |      |   |                      |   |          |       
|Revenues:                                        |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Product revenues                                 |  | $    | 43,111  |      | $ | 40,592               |   | $        | 2,519  |   |  | 6   |  
|Royalty and
 license fee income                  |  |      | 9,793   |      |   | 9,376                |   |          | 417    |   |  | 4   |  
|Clinical
 laboratory services                    |  |      | 44,178  |      |   | 39,604               |   |          | 4,574  |   |  | 12  |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Total revenues                                   |  |      | 97,082  |      |   | 89,572               |   |          | 7,510  |   |  | 8   |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Operating
 expenses:                             |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Cost of product
 revenues                        |  |      | 22,547  |      |   | 26,766               |   |          | (4,219 | ) |  | (16 | )
|Cost of clinical
 laboratory services            |  |      | 29,570  |      |   | 26,295               |   |          | 3,275  |   |  | 12  |  
|Research and
 development                        |  |      | 9,704   |      |   | 9,220                |   |          | 484    |   |  | 5   |  
|Selling, general,
 and administrative            |  |      | 48,395  |      |   | 41,314               |   |          | 7,081  |   |  | 17  |  
|Provision for
 uncollectible accounts receivable |  |      | 3,480   |      |   | 5,189                |   |          | (1,709 | ) |  | (33 | )
|Legal                                            |  |      | 1,746   |      |   | 4,195                |   |          | (2,449 | ) |  | (58 | )
|Litigation
 settlement and related legal costs   |  |      | 3,698   |      |   |                     |   |          | 3,698  |   |  |    |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Total operating
 expenses                        |  |      | 119,140 |      |   | 112,979              |   |          | 6,161  |   |  | 5.5 |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Operating loss                                   |  |      | (22,058 | )    |   | (23,407              | ) |          | 1,349  |   |  | (6  | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Other income
 (expense):                         |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Interest                                         |  |      | 19      |      |   | 581                  |   |          | (562   | ) |  | (97 | )
|Other                                            |  |      | 44      |      |   | 74                   |   |          | (30    | ) |  | (41 | )
|Foreign currency                                 |  |      | (266    | )    |   | (725                 | ) |          | 459    |   |  | (63 | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Loss before income
 taxes                        |  | $    | (22,261 | )    | $ | (23,477              | ) | $        | 1,216  |   |  | (5  | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  

Fiscal 2010 compared to Fiscal 2009

Consolidated Results:

The 2010
period and the 2009 period refer to the fiscal years ended July 31, 2010 and
2009, respectively. The 2010 period includes the twelve months results of ADI
which was acquired on March 12, 2009. The 2009 period includes the results of
ADI from March 12, 2009 to July 31, 2009.

Product
revenues increased overall by $2.5 million in the 2010 period to $43.1 million
as compared to the 2009 period. Acquisition growth from the acquired ADI
business was $6.5 million or 16% which was partially offset by a net organic decline
of $4.4 million or 11% due to a $5.2 million decline in low margin, third-party
distribution business. Our core product revenues demonstrated organic growth of
$0.8 million or 2%. Foreign currency fluctuation positively affected revenues
by $0.4 million or 1%.

Royalty and
license fee income during the 2010 period was $9.8 million compared to $9.4
million in the 2009 period, an increase of $0.4 million or 4%. Royalties are
primarily earned from the reported net sales of Qiagen products subject to a
license agreement and from a license agreement with Abbott. During the 2010 and
2009 periods, the Company recognized royalties of approximately $6.8 million
and $6.7 million, respectively from Qiagen and royalties and license fees under
the Abbott License Agreement of approximately $3.0 million and $2.7 million
respectively, an increase of $0.3 million in the 2010 period. There are no
direct expenses relating to royalty and license fee income.

Clinical
laboratory revenues during the 2010 period were $44.2 million compared to $39.6
million in the 2009 period. The 2010 periods increase over the 2009 period was
$4.6 million or 12%. During the 2010 period, revenue increased due to organic
growth of 5.4% after giving consideration to the 2009 period contractual
adjustment of $2.3 million.

42

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The
2010 increase resulted from increased service volume, including higher priced
testing volume, despite a noted general slowdown in physician office visits due
to the slowed economy and a 1.9% decrease in Medicare reimbursement rates
effective January 1, 2010. During the 2009 period, revenues were negatively
affected by contractual adjustments of $2.3 million. These immaterial
contractual adjustments in 2009 related to computational errors that affected
the calculated expected reimbursement rate in fiscal 2008, and for periods
prior to August 1, 2008 for the majority of payers, and credits issued which
were not accrued for timely.

The cost of
product revenues during the 2010 period was $22.5 million compared to $26.7
million in the 2009 period, a decrease of $4.2 million or 16%. The decrease is
primarily due to the impact of $4.7 million in lower costs from low margin
third-party distribution business, reduced fair value accounting adjustments of
$1.8 million in accordance with purchase accounting rules and reclassification
of $1.6 million in costs relating to the realignment of manufacturing
facilities and personnel. Such decreases in 2010 were partially offset by
product cost relating to ADI of $2.8 million, by the cost of sales from organic
growth, and $1.0 million of higher inventory reserves for excess and obsolete
inventory due primarily to a strategic realignment of marketing efforts for
core products. We believe that cost of product revenues for future periods will
be affected by, among other things, competitive conditions and foreign currency
rates.

The
cost of clinical laboratory services during the 2010 period was $29.6 million
as compared to $26.3 million in the 2009 period, an increase of $3.3 million or
12%. The Company incurred increased costs due to increased reagent costs and
supplies of $1.3 million, laboratory personnel and related costs of $1.6
million and outside reference lab costs of $0.4 million, partially due to
increased service volumes. Laboratory personnel and related costs increased
primarily due to additional headcounts in phlebotomists to expand patient
collection sites and other personnel to manage expanded operations.

Research
and development expenses were approximately $9.7 million during the 2010
period, compared to $9.2 million in the 2009 period, an increase of $0.5
million or 5%. The increase was principally attributed to higher costs of $1.4
million at Enzo Life Sciences primarily related to Assay Designs offset by $0.9
million in lower clinical trial and related activities and payroll costs at the
Therapeutics segment.

Selling,
general and administrative expenses were approximately $48.4 million during the
2010 period as compared to $41.3 million in the 2009 period, an increase of
$7.1 million or 17%. The increase was primarily due to the net increase at the
Enzo Life Sciences segment of $5.4 million in the 2010 period which included
approximately $2.3 million of selling, general and administrative expenses
related to Assay Designs operations, the impact of realigning manufacturing
facilities and certain personnel of $1.6 million, $1.1 million in payroll and
benefit costs, and increased depreciation and amortization of $0.7 million, which
    were offset by a decrease in marketing costs of $0.3 million. The Clinical
    Lab segments selling
general and administrative increased $3.1 million primarily due to increased
payroll and related benefits of $2.2 million attributed to increases in
headcounts in our sales force and management personnel partially related to
increased service volume and the marketing and development of esoteric and gene
based testing capabilities, information technology costs of $0.2 million, and
other overhead expenses of $0.7 million. These increases were offset by a
decrease in the Other segments selling general and administrative of
approximately $1.4 million, primarily due to decreases in professional fees of
$0.3 million, outside consulting costs of $0.7 million, payroll and payroll
related costs of $0.2 million, and other operating cost of $0.2 million.

The
provision for uncollectible accounts receivable, primarily relating to the
Clinical Labs segment was $3.5 million for the 2010 period as compared to $5.2
million in the 2009 period, a decrease of $1.7 million or 33%. The decrease is
attributed to a charge in 2009 attributed to 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, the
correction of an immaterial error relating to fiscal 2008, and increased
provisions required based on changes in payer mix, offset by a reduced
requirement under the new billing system.

Legal
expense was $1.7 million during the 2010 period compared to $4.2 million in the
2009 period, a decrease of $2.5 million, due to overall reduction in legal
services provided relating to certain patent litigation matters and general
matters of $2.1 million, the reimbursement of $0.5 million in legal costs under
our insurance policy, reductions in fees due to negotiated fee settlements and
other adjustments of $0.5 million offset by approximately $0.6 million in
incremental legal costs incurred for proxy related costs for the January 2010
annual meeting.

In
connection with the litigation settlement with Mr. Shahram K. Rabbani to settle
all of his claims against the Company, and certain of its executive officers,
the Company paid a lump sum payment of $2.7 million. The Company recorded a
settlement expense of approximately $3.7 million in the fiscal quarter ending
January 31, 2010, consisting of the lump sum payment of $2.7 million and
approximately $1.0 million of legal expenses incurred in connection with the
claims (See Note 16 in Notes to Consolidated Financial Statements).

43

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Interest
income was $19,000 during the 2010 period as compared to $0.6 million during
the 2009 period. The interest income decrease during the 2010 period is
attributed to the decline in interest rates. Furthermore, the Company had
higher average invested balances during the 2009 period. The Company earns
interest by investing in short term U.S. Treasury bills and money market
accounts.

The loss on
foreign currency was $0.3 million during the 2010 period, due to a $0.1 million
non-cash loss on an intercompany term loan denominated in British pounds
sterling and the fluctuations of other foreign currencies relative to the US
dollar during the period and the impact that had on settled transactions during
the period. During the 2009 period, the loss on foreign currency transactions
was $0.7 million primarily due to a non-cash loss on the intercompany term loan
denominated in British pounds sterling. The British currency depreciated more
significantly against the US dollar during the 2009 period than in the 2010
period.

The
Companys effective income tax rate benefit (provision) for the 2010 period was
0.1% compared to (0.4%) during the 2009 period. The tax benefit (provision) for
the 2010 and 2009 periods were based on state and local taxes, domestic and
foreign tax for tax deductible goodwill and indefinite lived intangibles, and
book to tax differences for acquired inventory 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. In the 2010
period, the Company recognized a benefit of $0.1 million primarily as a result
of the expiration of the statute of limitations for an uncertain tax position.

Segment Results

The
    Life Sciences segments income before taxes was $2.9 million for the
    2010 period as compared to $1.7 million for the 2009 period. Product revenues
    increased by $2.5 million in the 2010 period primarily due to the contribution
    of product revenues from the March 2009 acquisition of Assay Designs and
    organic growth from our core products which replaced low margin, high volume
    distribution product revenues principally to one customer. Royalty and license
    fee income increased $0.4 million from the Qiagen agreement and the Abbott
    license agreement. The segments gross margin of $30.4 million increased
    by $7.2 million in 2010. Gross profit margins increased to 57% from 47% due
    to favorable impact from ADIs higher margin, which replaced lower margin
    revenue in 2009, lower inventory fair value adjustments and realignment of
    personnel from manufacturing to trading activity. The segments other
    operating expenses, including selling, general and administrative, legal
    and research and development, increased by approximately $6.4 million during
    the 2010 period primarily due to the inclusion of Assay Designs expenses
    of $3.3 million, the impact of the aforementioned realignment of personnel
    of payroll and related costs of $1.6 million, increased payroll and other
    costs of $1.2 million, and depreciation and amortization of $0.7 million,
    offset by lower legal costs of $0.3 million and lower marketing costs of
    $0.3 million. The segment experienced a foreign currency loss of
    $0.3 million during the 2010 period resulting from the impact that fluctuations
    in foreign currencies had on settled transactions and on an intercompany
    loan denominated in pounds sterling. In aggregate, the inventory fair value
    adjustment and amortization of intangibles negatively impacted the segment
    operating results in the 2010 period by $1.9 million.

The
Clinical Laboratory segments loss before taxes was $7.5 million for the 2010
period as compared to a loss of $7.3 million in the 2009 period. The revenue
from laboratory services increased in the 2010 period by $4.6 million due to
increased service volume, despite a general slowdown in physician office visits
since the fiscal third quarter, a decrease in Medicare reimbursement rates effective
January 1, 2010 and during the 2009 period revenues were negatively impacted by
contractual adjustments of $2.3 million. The 2010 period gross profit of $14.6
million increased $1.3 million over the 2009 period due to service volume
increases, offset by increased headcount and other costs to perform increased
testing, and the impact the aforementioned $2.3 million contractual adjustment
had on the 2009 period gross profit. In the 2010 period, the selling, general
and administrative and legal costs increased by approximately $3.2 million
primarily due to increases in payroll and payroll related costs of $2.2 million
attributed to increases in headcount in our sales force and management
personnel partially related to increased service volume and the marketing and
development of esoteric and gene-based testing capabilities, information
technology costs of $0.2 million, and other operating costs of $0.7 million.
The provision for uncollectible accounts receivables decreased by $1.8 million
as compared to the 2009 period. During the 2009 period, the Company recorded a
charge attributed to 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 and the correction of an immaterial error
relating to fiscal 2008.

The
Therapeutics segments loss before income taxes was approximately $2.5 million
for the 2010 period as compared to a loss of $3.4 million for the 2009 period.
The decrease in the segment loss of $0.9 million was primarily due to decreases
in clinical trial activities of $0.6 million and decreases in salaries and
related costs of $0.3 million.

44

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The
Other segments loss before taxes for the 2010 period was approximately $15.1
million as compared to $14.5 million in the 2009 period, an increase of $0.6
million. The Other segments 2010 period loss reflects the litigation
settlement of $3.7 million, offset by a decrease in professional fees,
consulting costs and public relations expenses of $1.0 million, payroll and
payroll related costs of $0.2 million, and $0.3 million in other costs. Legal
expenses decreased $2.1 million due to the reimbursement of $0.5 million in
legal fees; reduced services provided relating to certain patent litigation
activity and general matters of $1.7 million and reductions in fees recorded
due to negotiated fee settlements and other adjustments of $0.5 million offset
by $0.6 million incremental legal costs incurred for proxy related matters in
2010. Interest income declined $0.5 million due to the decline in interest
rates. The Company earns interest by investing in short term U.S. Treasury
bills and money market accounts.

45

---



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  |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Operating
 expenses:                             |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Cost of product
 revenues                        |  |      | 26,766  |      |   | 19,159               |   |          | 7,607   |   |  | 40  |  
|Cost of clinical
 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                                            |  |      | 4,195   |      |   | 5,588                |   |          | (1,393  | ) |  | (25 | )
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Total operating
 expenses                        |  |      | 112,979 |      |   | 92,581               |   |          | 20,398  |   |  | 22  |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Operating loss                                   |  |      | (23,407 | )    |   | (14,786              | ) |          | (8,621  | ) |  | 58  |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Other income
 (expense):                         |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Interest                                         |  |      | 581     |      |   | 3,696                |   |          | (3,115  | ) |  | (84 | )
|Other                                            |  |      | 74      |      |   | 171                  |   |          | (97     | ) |  | (57 | )
|Foreign currency                                 |  |      | (725    | )    |   | 27                   |   |          | (752    | ) |  |    |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  
|Loss before income
 taxes                        |  | $    | (23,477 | )    | $ | (10,892              | ) | $        | (12,585 | ) |  | 116 |  
|                                                 |  |      |         |      |   |                      |   |          |         |   |  |     |  

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.

46

---



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.

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.

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.

47

---



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 and lower
levels of cash available for investment.

Liquidity and Capital Resources

At
July 31, 2010, the Company had cash and cash equivalents of $8.8 million and
short-term investments of $24.8 million, or $33.6 million in aggregate as
compared to $50.2 million at July 31, 2009. Short term investments are in US
Treasury bills. The Company had working capital of $42.2 million at July 31,
2010 compared to $60.5 million at July 31, 2009. The decrease in working
capital of $18.3 million was primarily the result of the 2010 period net loss,
which included the litigation settlement to a former officer and related legal
costs of $3.7 million, and funding for capital expenditures of $3.3 million.

Net cash
used in operating activities for the year ended July 31, 2010 was approximately
$13.5 million as compared to $11.5 million for the year ended July 31, 2009.
The increase in net cash used in operating activities in the 2010 period over
the 2009 period of approximately $2.0 million was primarily due to a decrease
in changes in operating assets and liabilities of $3.0 million, relating
primarily to increases in accounts receivable and inventory, offset by an
increase in accounts payable  trade, and the effect of lower non-cash
adjustments in the 2010 period over the 2009 period of $0.3 million, partially
offset by the decrease in the period net loss of $1.3 million.

Net cash
provided by investing activities was approximately $15.3 million as compared to
a use of cash of $60.2 million in the year ago period. The change from 2009 to
2010 of $75.5 million is primarily due to the net increase in short term
investments in US Treasury bills of $43.3 million in 2009 as compared to a
decrease due to net maturities of short-term investments of $18.5 million in
2010 and cash used in acquisitions of $14.5 million in the 2009 period. In the
2010 and the 2009 periods cash used for capital expenditures was $3.3 million
and $2.7 million, respectively.

There were
no financing activities in 2010. Net cash provided by financing activities was
approximately $0.3 million in the 2009 period, attributed primarily to stock
option exercise proceeds. There were no stock option exercises in the 2010
period.

We believe
that our current cash and cash equivalents are sufficient for our foreseeable
liquidity and capital resource needs, including any requirement to satisfy the
earnout relating to the Biomol International acquisition which is currently in
dispute (See Notes 2 and 16 to the Consolidated Financial Statements) over the
next twelve months, although there can be no assurance that future events will
not alter such view.

48

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Effect of New Accounting Pronouncements

In
October 2009, the FASB issued a
Consensus of the FASB Emerging Issues Task Force relating to Multiple Deliverable Revenue Arrangements.This standard provides
application guidance on whether multiple deliverables exist, how the
deliverables should be separated and how the consideration should be allocated
to one or more units of accounting. This update establishes a selling price
hierarchy for determining the selling price of a deliverable. The selling price
used for each deliverable will be based on vendor-specific objective evidence,
if available, third-party evidence if vendor-specific objective evidence is not
available, or estimated selling price if neither vendor-specific or third-party
evidence is available. This guidance is effective for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15,
2010. Early adoption is permitted. The Company will adopt this guidance
effective August 1, 2010. The Company has assessed the impact of adoption and
it is not expected to have a material effect on our consolidated results of
operations and financial condition.

In
August 2009, the Company adopted the provisions of the accounting standard on
fair value measurements that apply to nonfinancial assets and liabilities that
are recognized or disclosed at fair value on a non-recurring basis. The adoption
of these provisions did not have an impact on the consolidated financial
statements or disclosures.

In
June 2009, the FASB issued authoritative guidance to establish 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. This guidance only impacted references for accounting guidance.

On August
1, 2009, the Company adopted the revised authoritative guidance on business
combinations which changed existing practice, in part, as follows: (1)
contingent consideration arrangements are now fair valued at the acquisition
date and included on that basis in the purchase price consideration; (2)
transaction costs are now expensed as incurred, rather than capitalized as part
of the purchase price; (3) reversal of valuation allowances created in purchase
accounting are now recorded through the income tax provision; and (4) in order
to accrue for a restructuring plan in purchase accounting, all authoritative
guidance would have to be met at the acquisition date. While the adoption of this
standard did not have a material impact on the Companys financial statements,
it could materially change the accounting for business combinations consummated
in the future and for tax matters relating to prior acquisitions settled
subsequent to July 31, 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, 2010:

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   |  | $     | 23,838 |                   | $ | 4,718     |  | $         | 7,107 |              | $ | 5,373 |  | $ | 6,640 | 
|Employment
 agreements              |  |       | 2,741  |                   |   | 1,530     |  |           | 1,211 |              |   |      |  |   |      | 
|                                    |  |       |        |                   |   |           |  |           |       |              |   |       |  |   |       | 
|Total contractual
 cash obligations |  | $     | 26,579 |                   | $ | 6,248     |  | $         | 8,318 |              | $ | 5,373 |  | $ | 6,640 | 
|                                    |  |       |        |                   |   |           |  |           |       |              |   |       |  |   |       | 

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.

49

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Critical
Accounting Policies

General

The
Companys discussion and analysis of its financial condition and results of
operations are based upon Enzo Biochem, Inc. consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses; these estimates and
judgments also affect related disclosure of contingent assets and liabilities.

On an
on-going basis, we evaluate our estimates, including those related to
contractual expense, allowance for uncollectible accounts, inventory,
intangible assets and income taxes. The Company bases its estimates on
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Product
revenues

Revenues
from product sales are recognized when the products are shipped and title
transfers, the sales price is fixed or determinable and collectibility is
reasonably assured.

Royalties

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

License
fees and multiple element arrangements

When
evaluating multiple element arrangements, the Company considers whether the
components of the arrangement represent separate units of accounting. The
evaluation 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.
License fees received in advance of being earned are recorded as deferred
revenues.

Revenues
- Clinical laboratory services

Revenues
from the Clinical Labs segment 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
 2010 |        | Year ended July 31
 2009 |  | Year ended July 31
 2008 |  
|                   |  |                          |        |                          |  |                          |  
|Revenue category   |  | (In 000s)               |        | (in %)                   |  | (In 000s)               |   | (in %) |        | (In 000s) |  | (in %) |  
|                   |  |                          |        |                          |  |                          |   |        |        |            |  |        |  
|Medicare           |  | $                        | 11,158 |                          |  | 25                       |   | $      | 9,138  |            |  | 23     |   | $ | 9,078  |  |  | 22  |  
|Third-party payers |  |                          | 19,534 |                          |  | 44                       |   |        | 20,073 |            |  | 51     |   |   | 24,768 |  |  | 59  |  
|Patient self-pay   |  |                          | 8,758  |                          |  | 20                       |   |        | 6,056  |            |  | 15     |   |   | 3,582  |  |  | 8   |  
|HMOs              |  |                          | 4,728  |                          |  | 11                       |   |        | 4,337  |            |  | 11     |   |   | 4,650  |  |  | 11  |  
|                   |  |                          |        |                          |  |                          |   |        |        |            |  |        |   |   |        |  |  |     |  
|Total              |  | $                        | 44,178 |                          |  | 100                      | % | $      | 39,604 |            |  | 100    | % | $ | 42,078 |  |  | 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%, 25%, and 26% of the Clinical Labs
segments services net revenues for the fiscal years ended July 31, 2010, 2009
and 2008 respectively.

50

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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.

During the
years ended July 31, 2010, 2009 and 2008, the contractual adjustment
percentages, determined using current and historical reimbursement statistics,
were 83.0%, 80.8% and 81.8%, 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 $2,589,000 and $2,040,000, for
the years ended July 31, 2010 and 2009, respectively, and a change in the net
accounts receivable of approximately $339,000 and $287,000 as of July 31, 2010
and 2009, 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 monthly 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 statistics 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, 2010 and 2009, approximately
45% and 40%, respectively, of the Companys net accounts receivable relates to
its Clinical Labs business, which operates in the New York, New Jersey and
Eastern Pennsylvania medical communities. The Life Sciences segments accounts
receivable, of which $1.9 million or 27% and $2.1 million or 28% represents
foreign receivables as of July 31, 2010 and 2009 respectively, includes royalty
receivables of $2.5 million, as of July 31, 2010 and 2009, of which
approximately $1.8 million and $1.9 million, respectively is from Qiagen
Corporation.

51

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Net
accounts receivable

|                           |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|-------------------------- |  | -------------------- | ------ | -------------------- |  | ---------- | - | ------ | ------ |  |  | --- | -
|                           |  | As of
 July 31, 2010 |        | As of
 July 31, 2009 | 
|                           |  |                      |        |                      | 
|Billing category           |  | (In 000s)           |        | (in %)               |  | (In 000s) |   | (in %) |       
|                           |  |                      |        |                      |  |            |   |        |       
|Clinical Labs              |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Medicare                   |  | $                    | 849    |                      |  | 14         |   | $      | 1,113  |  |  | 22  |  
|Third party payers         |  |                      | 2,664  |                      |  | 46         |   |        | 2,003  |  |  | 40  |  
|Patient self-pay           |  |                      | 2,024  |                      |  | 35         |   |        | 1,635  |  |  | 32  |  
|HMOs                      |  |                      | 296    |                      |  | 5          |   |        | 303    |  |  | 6   |  
|                           |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Clinical
 Labs       |  |                      | 5,833  |                      |  | 100        | % |        | 5,054  |  |  | 100 | %
|                           |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Life
 Sciences       |  |                      | 7,173  |                      |  |            |   |        | 7,426  |  |  |     |  
|                           |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total accounts
 receivable |  | $                    | 13,006 |                      |  |            |   | $      | 12,480 |  |  |     |  
|                           |  |                      |        |                      |  |            |   |        |        |  |  |     |  

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

|                                 |  |               |        |               |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- | - | ------ | -
|In 000s                         |  | July 31, 2010 |        | July 31, 2009 |  
|                                 |  |               |        |               |  
|Beginning balance                |  | $             | 4,786  |               | $ | 886    |  
|Provision for
 doubtful accounts |  |               | 3,480  |               |   | 5,189  |  
|Write-offs, net                  |  |               | (5,427 | )             |   | (1,289 | )
|                                 |  |               |        |               |   |        |  
|Ending balance                   |  | $             | 2,839  |               | $ | 4,786  |  
|                                 |  |               |        |               |   |        |  

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, 2010 and 2009, 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 accurate
information in order to bill effectively for the services provided. Should
circumstances change (e.g. shift in payer mix, decline in economic conditions
or deterioration in aging of receivables), our estimates of net realizable
value of receivables could be reduced by a material amount.

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

52

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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.

|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|----------------------- |  | ------------- | ------ | - |  | ---------------- | - | - | ----- | ---------------------------- |  | --- | - | ---------------- | ------ | - |  | ------------- | - | - | ----- |  |  | --- | - | - | ----- |  |  | --- | -
|As of July 31,
 2010    |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party
 Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |      
|1-30 days               |  | $             | 21,678 |   |  | 66               | % | $ | 2,886 |                              |  | 57  | % | $                | 10,846 |   |  | 64            | % | $ | 4,242 |  |  | 59  | % | $ | 3,704 |  |  | 99  | %
|31-60 days              |  |               | 4,256  |   |  | 13               | % |   | 439   |                              |  | 9   | % |                  | 2,458  |   |  | 15            | % |   | 1,344 |  |  | 18  | % |   | 15    |  |  | 1   | %
|61-90 days              |  |               | 2,565  |   |  | 8                | % |   | 281   |                              |  | 6   | % |                  | 1,337  |   |  | 8             | % |   | 935   |  |  | 13  | % |   | 12    |  |  |    | %
|91-120 days             |  |               | 1,771  |   |  | 5                | % |   | 248   |                              |  | 5   | % |                  | 850    |   |  | 5             | % |   | 671   |  |  | 9   | % |   | 2     |  |  |    | %
|121-150 days            |  |               | 936    |   |  | 3                | % |   | 236   |                              |  | 4   | % |                  | 696    |   |  | 4             | % |   | 2     |  |  |    | % |   | 2     |  |  |    | %
|Greater than 150 days*  |  |               | 1,733  |   |  | 5                | % |   | 967   |                              |  | 19  | % |                  | 711    |   |  | 4             | % |   | 52    |  |  | 1   | % |   | 3     |  |  |    | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 32,939 |   |  | 100              | % | $ | 5,057 |                              |  | 100 | % | $                | 16,898 |   |  | 100           | % | $ | 7,246 |  |  | 100 | % | $ | 3,738 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|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             |  |               | 1,019  |   |  | 4                | % |   | 249   |                              |  | 5   | % |                  | 483    |   |  | 4             | % |   | 280   |  |  | 5   | % |   | 7     |  |  |    | %
|121-150 days            |  |               | 340    |   |  | 1                | % |   | 134   |                              |  | 3   | % |                  | 202    |   |  | 2             | % |   |      |  |  |    | % |   | 4     |  |  |    | %
|Greater than 150 days** |  |               | 636    |   |  | 2                | % |   | 536   |                              |  | 10  | % |                  | 100    |   |  | 1             | % |   |      |  |  |    | % |   |      |  |  |    | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 27,537 |   |  | 100              | % | $ | 5,262 |                              |  | 100 | % | $                | 13,117 |   |  | 100           | % | $ | 5,633 |  |  | 100 | % | $ | 3,525 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  

* Total includes $805 fully reserved over 210 days as of July 31, 2010.

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

At July 31, 2009 the Company fully reserved and excluded from the above
table all receivables on its legacy billing system which was replaced in August
2008. During fiscal 2010 all such reserved balances were written off.

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. The Company adopted the
accounting standard related to unrecognized tax benefits on August 1, 2007. The
cumulative effect of adopting the standard did not have a material impact on
the Companys financial position or results of operations.

53

---



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, 2010 and
2009, our reserve for excess and obsolete inventory was $3,821,000 and
$2,477,000 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 weighted average multiple
of revenues and earnings before interest, taxes, depreciation and amortization.
In determining fair value, the Company makes certain judgments, including the
identification of reporting units and the selection of comparable companies.
Trademarks are considered impaired if the carrying amount exceeds their
estimated fair value. The fair value of the trademarks is estimated based on a
discounted cash flow model. 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 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.

Accrual for
Self-funded Medical

Accruals
for self-funded medical insurance are determined based on a number of assumptions
and factors, including historical payment trends, claims history
and current estimates. These estimated liabilities are not discounted. If
actual trends differ from these estimates, the financial results could be
impacted. As of July 31, 2010, the Company has established a reserve of $0.6
million, which is included in accrued liabilities, for claims that have been
reported but not paid and incurred but not reported.

54

---



Item
7A. Quantitative and Qualitative Disclosures About Market Risk

We
are exposed to market risk from changes in foreign currency exchange rates
resulting from 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, 2010,
our assets and liabilities would increase or decrease by $1.8 million and $0.9
million, respectively, and our net sales and net earnings (loss) would increase
or decrease by $1.4 million and $0.2 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, 2010, our pre-tax earnings (loss) would be favorably or unfavorably
impacted by approximately $0.3 million on an annual basis.

Interest
Rate Risk

Our
excess cash is invested in highly liquid short term U.S. Treasury Bills 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, 2010, we were
exposed to interest rate change market risk with respect to our short-term
investments in US Government instruments of $24.8 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 $0.2 million on an annual basis.

As
of July 31, 2010, 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.

55

---



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, 2010.
This evaluation was carried out under the supervision and with participation of
our Chief Executive Officer and Chief Financial Officer. There are inherent limitations
to the effectiveness of any system of disclosure controls and procedures.
Therefore, effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives.

Based upon
our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective at that
reasonable assurance level as of July 31, 2010, 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, 2010 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).

Based on
its assessment, management concluded that we maintained effective internal
control over financial reporting as of July 31, 2010. 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, 2010.
This report, in which Ernst & Young LLP has expressed an unqualified
opinion, appears in this Item 9A.

56

---



Report of Independent Registered Public
Accounting Firm

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

We have audited Enzo Biochem, Inc.s internal control over financial
reporting as of July 31, 2010, 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.

In our opinion, Enzo Biochem, Inc. maintained, in all material
respects, effective internal control over financial reporting as of July 31,
2010 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, 2010 and 2009 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, 2010 of Enzo Biochem, Inc. and our report dated October 14, 2010
expressed an unqualified opinion thereon.

|                  |                      
|----------------- | ---------------------
|                  | /s/ Ernst & Young LLP
|                 
|Jericho, New York |                      
|October 14, 2010  |                      

57

---



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 30, 2010 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 30, 2010 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 30, 2010 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 30, 2010 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 30, 2010 and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

| |     |     |                                                                                                                             
| | --- | --- | ----------------------------------------------------------------------------------------------------------------------------
| | (a) | (1) | Consolidated
 Financial Statements                                                                                          
| |     |     | Consolidated
 Balance Sheets - July 31, 2010 and 2009                                                                       
| |     |     | Consolidated
 Statements of Operations- Years ended July 31, 2010, 2009 and 2008                                            
| |     |     | Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss) - Years
 ended July 31, 2010, 2009 and 2008
| |     |     | Consolidated
 Statements of Cash Flows - Years ended July 31, 2010, 2009 and 2008                                           
| |     |     | 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.

58

---



| |  |     |         
| |  | --- | --------
| |  | (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 (1)                                                                                                                          
|            |  |                                                                                                                                                            
|3(b)        |  | Certificate of
 Incorporation, as amended on March 17, 1980. (1)                                                                                           
|            |  |                                                                                                                                                            
|3(c)        |  | Certificate of Amendment of the Certificate of Incorporation
     as amended on June 16, 1981. (2)                                                         
|            |  |                                                                                                                                                            
|3(d)        |  | Certificate of
 Amendment to the Certificate of Incorporation as of July 22, 1988. (3)                                                                     
|            |  |                                                                                                                                                            
|3(e)        |  | Amended and
 restated Bylaws. (4)                                                                                                                          
|            |  |                                                                                                                                                            
|10(a)       |  | 1994 Stock Option
 Plan. (5)                                                                                                                               
|            |  |                                                                                                                                                            
|10 (b)      |  | 1999 Stock Option
 Plan. (6)                                                                                                                               
|            |  |                                                                                                                                                            
|10 (c)      |  | 2005 Equity
 Compensation Incentive Plan (7)                                                                                                               
|            |  |                                                                                                                                                            
|10 (d)      |  | Lease agreement
 with Pari Management (8)                                                                                                                  
|            |  |                                                                                                                                                            
|10 (e)      |  | Settlement and
 Release Agreement between the Company and Sigma Aldrich (9)                                                                                
|            |  |                                                                                                                                                            
|10 (f)      |  | Stock Purchase
 Agreement By and Among Enzo Life Sciences, Inc., Axxora Life Sciences Inc.,
 and the Stock holders, Option holders and Warrant holders (10)
|            |  |                                                                                                                                                            
|10 (g)      |  | Stock Asset
 Purchase Agreement By and Among Buyer Parties and Seller Parties with respect
 to the Biomol International and affiliate acquisition (11)     
|            |  |                                                                                                                                                            
|10 (h)      |  | Asset Purchase
 Agreement By and Among Enzo Life Sciences, Acquisition, Inc. and Assay
 Designs, Inc.(12)                                                  
|            |  |                                                                                                                                                            
|10 (i)*     |  | Amended and
 Restated Employment Agreement with Elazar Rabbani                                                                                             
|            |  |                                                                                                                                                            
|10(j)*      |  | Amended and
 Restated Employment Agreement with Barry Weiner                                                                                               
|            |  |                                                                                                                                                            
|14 (a)      |  | Code of Ethics
 (10)                                                                                                                                       
|            |  |                                                                                                                                                            
|21*         |  | List of subsidiaries
 of the Company                                                                                                                       
|            |  |                                                                                                                                                            
|23*         |  | Consent of
 Independent Registered Public Accounting Firm                                                                                                  
|            |  |                                                                                                                                                            
|31 (a)*     |  | Certification of
 CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                            
|            |  |                                                                                                                                                            
|31 (b)*     |  | Certification of
 CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                            
|            |  |                                                                                                                                                            
|32 (a)*     |  | Certification of
 CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                            
|            |  |                                                                                                                                                            
|32 (b)*     |  | Certification of
 CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                            

59

---



|     |                                                                                                                                                            | 
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|     | Notes to
 exhibits                                                                                                                                         | 
|     |                                                                                                                                                            | 
|     |                                                                                                                                                           
|*    | Filed herewith                                                                                                                                            
|     |                                                                                                                                                           
|(1)  | The exhibits were
 filed as exhibits to the Companys Registration Statement on Form S-18 (File
 No. 2-67359) and are incorporated herein by reference.   
|     |                                                                                                                                                           
|(2)  | This exhibit was
 filed as an exhibit to the Companys Form 10-K for the year ended July 31,
 1981 and is incorporated herein by reference.               
|     |                                                                                                                                                           
|(3)  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 1989 and is incorporated herein by reference.          
|     |                                                                                                                                                           
|(4)  | This exhibit was
 filed with the Companys Current Report on Form 8-K May 8, 2008 and is
 incorporated herein by reference.                               
|     |                                                                                                                                                           
|(5)  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 1995 and is incorporated herein by reference.          
|     |                                                                                                                                                           
|(6)  | This exhibit was
 filed with the Companys Registration Statement on Form S-8 (333-87153) and
 is incorporated herein by reference.                       
|     |                                                                                                                                                           
|     |                                                                                                                                                           
|(7)  | 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.
|     |                                                                                                                                                           
|(8)  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2006 and is incorporated herein by reference.          
|     |                                                                                                                                                           
|(9)  | This exhibit was
 filed with the Companys Current Report on Form 8-K on September 21, 2006 and
 is incorporated herein by reference.                     
|     |                                                                                                                                                           
|(10) | This exhibit was
 filed with the Companys Current Report on Form 8-K May 30, 2007 and is
 incorporated herein by reference.                              
|     |                                                                                                                                                           
|(11) | This exhibit was
 filed with the Companys Current Report on Form 8-K May 8, 2008 and is
 incorporated herein by reference.                               
|     |                                                                                                                                                           
|(12) | This exhibit was
 filed with the Companys Current Report on Form 8-K March 13, 2009 and is
 incorporated herein by reference.                            

60

---



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, 2010 | 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, 2010
|                                                                                          |  |                 
|Elazar Rabbani,                                                                           |  |                 
|Chairman of Board
 of Directors and Secretary                                             |  |                 
|(Principal
 Executive Officer)                                                            |  |                 
|                                                                                          |  |                 
|By: /s/ Barry W.
 Weiner                                                                  |  | October 14, 2010
|                                                                                          |  |                 
|Barry W. Weiner,                                                                          |  |                 
|President, Chief Financial
 Officer, Principal Accounting Officer, Treasurer and Director |  |                 
|                                                                                          |  |                 
|By: /s/ Irwin
 Gerson                                                                     |  | October 14, 2010
|                                                                                          |  |                 
|Irwin Gerson,
 Director                                                                   |  |                 
|                                                                                          |  |                 
|By: /s/ Stephen B.
 H. Kent Ph.D.                                                         |  | October 14, 2010
|                                                                                          |  |                 
|Stephen B. H.
 Kent, Director                                                             |  |                 
|                                                                                          |  |                 
|By: /s/ Bernard L.
 Kasten MD                                                             |  | October 14, 2010
|                                                                                          |  |                 
|Bernard Kasten,
 Director                                                                 |  |                 
|                                                                                          |  |                 
|By: /s/ Melvin F.
 Lazar                                                                  |  | October 14, 2010
|                                                                                          |  |                 
|Melvin F. Lazar,
 Director                                                                |  |                 
|                                                                                          |  |                 
|By: /s/ Gregory M.
 Bortz                                                                 |  | October 14, 2010
|                                                                                          |  |                 
|Gregory M. Bortz,
 Director                                                               |  |                 

61

---



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, 2010 and 2009                                                                        |  | F-3
|                                                                                                                             |  |    
|Consolidated Statements
 of Operations  Years ended July 31, 2010, 2009 and 2008                                            |  | F-4
|                                                                                                                             |  |    
|Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss)  Years
 ended July 31, 2010, 2009 and 2008 |  | F-5
|                                                                                                                             |  |    
|Consolidated
 Statements of Cash Flows  Years ended July 31, 2010, 2009 and 2008                                            |  | F-6
|                                                                                                                             |  |    
|Notes to
 Consolidated Financial Statements                                                                                  |  | F-7
|                                                                                                                             |  |    
|Schedule II -
 Valuation and Qualifying Accounts  Years ended July 31, 2010, 2009 and 2008                                  |  | 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. as of July 31, 2010 and 2009, 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, 2010.
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, 2010 and 2009, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
July 31, 2010, 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 1 to the consolidated financial statements,
effective August 1, 2009, the Company adopted revised authoritative guidance
related to accounting for business combinations.

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, 2010, 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, 2010 expressed an unqualified opinion thereon.

|                  |                       
|----------------- | ----------------------
|                  | /s/ Ernst &
 Young LLP
|                  |                       
|Jericho, New York |                       
|October 14, 2010  |                       

F-2

---



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

|                                                                                                                                         |  |                |          |                |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- | - | -------- | -
|                                                                                                                                         |  | July 31,
 2010 |          | July 31,
 2009 |  
|                                                                                                                                         |  |                |          |                |  
|ASSETS                                                                                                                                   |  |                |          |                |   |          |  
|Current assets:                                                                                                                          |  |                |          |                |   |          |  
|Cash and cash equivalents                                                                                                                |  | $              | 8,759    |                | $ | 6,929    |  
|Short term investments                                                                                                                   |  |                | 24,807   |                |   | 43,306   |  
|Accounts receivable, net of allowance for
 doubtful accounts of $2,839 in 2010 and $4,786 in 2009                                        |  |                | 13,006   |                |   | 12,480   |  
|Inventories                                                                                                                              |  |                | 8,882    |                |   | 9,264    |  
|Prepaid expenses                                                                                                                         |  |                | 2,284    |                |   | 2,482    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current assets                                                                                                                     |  |                | 57,738   |                |   | 74,461   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Property, plant, and equipment, net                                                                                                      |  |                | 11,858   |                |   | 11,323   |  
|Goodwill                                                                                                                                 |  |                | 24,943   |                |   | 24,896   |  
|Intangible assets, net                                                                                                                   |  |                | 20,368   |                |   | 22,009   |  
|Other                                                                                                                                    |  |                | 338      |                |   | 439      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total assets                                                                                                                             |  | $              | 115,245  |                | $ | 133,128  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Current liabilities:                                                                                                                     |  |                |          |                |   |          |  
|Accounts payable  trade                                                                                                                 |  | $              | 6,455    |                | $ | 4,242    |  
|Accrued liabilities                                                                                                                      |  |                | 8,509    |                |   | 8,426    |  
|Other current liabilities                                                                                                                |  |                | 572      |                |   | 1,062    |  
|Deferred taxes                                                                                                                           |  |                | 21       |                |   | 213      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current liabilities                                                                                                                |  |                | 15,557   |                |   | 13,943   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Deferred taxes                                                                                                                           |  |                | 2,582    |                |   | 2,366    |  
|Other                                                                                                                                    |  |                | 90       |                |   | 38       |  
|                                                                                                                                         |  |                |          |                |   |          |  
|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: 38,782,725 at July 31, 2010 and 38,589,880
 at July 31, 2009 |  |                | 388      |                |   | 386      |  
|Additional paid-in capital                                                                                                               |  |                | 306,561  |                |   | 306,280  |  
|Less treasury stock at cost: 623,848 shares
 at July 31, 2010 and 735,554 shares at July 31, 2009                                        |  |                | (8,854   | )              |   | (10,440  | )
|Accumulated deficit                                                                                                                      |  |                | (201,954 | )              |   | (179,721 | )
|Accumulated other comprehensive income                                                                                                   |  |                | 875      |                |   | 276      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total stockholders equity                                                                                                               |  |                | 97,016   |                |   | 116,781  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total liabilities and stockholders equity                                                                                               |  | $              | 115,245  |                | $ | 133,128  |  
|                                                                                                                                         |  |                |          |                |   |          |  

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, |        
|                                                 |  |                      |        
|                                                 |  | 2010                 |         | 2009 |    | 2008    |  
|                                                 |  |                      |         |      |    |         |  
|Revenues:                                        |  |                      |         |      |    |         |   |    |         |  
|Product revenues                                 |  | $                    | 43,111  |      | $  | 40,592  |   | $  | 28,087  |  
|Royalty and license fee income                   |  |                      | 9,793   |      |    | 9,376   |   |    | 7,630   |  
|Clinical laboratory services                     |  |                      | 44,178  |      |    | 39,604  |   |    | 42,078  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      | 97,082  |      |    | 89,572  |   |    | 77,795  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Operating expenses:                              |  |                      |         |      |    |         |   |    |         |  
|Cost of product revenues                         |  |                      | 22,547  |      |    | 26,766  |   |    | 19,159  |  
|Cost of clinical laboratory services             |  |                      | 29,570  |      |    | 26,295  |   |    | 22,209  |  
|Research and development                         |  |                      | 9,704   |      |    | 9,220   |   |    | 8,637   |  
|Selling, general, and administrative             |  |                      | 48,395  |      |    | 41,314  |   |    | 33,272  |  
|Provision for uncollectible accounts
 receivable |  |                      | 3,480   |      |    | 5,189   |   |    | 3,716   |  
|Legal                                            |  |                      | 1,746   |      |    | 4,195   |   |    | 5,588   |  
|Litigation settlement and related costs          |  |                      | 3,698   |      |    |        |   |    |        |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Total operating expenses                         |  |                      | 119,140 |      |    | 112,979 |   |    | 92,581  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Operating loss                                   |  |                      | (22,058 | )    |    | (23,407 | ) |    | (14,786 | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Other income (expense):                          |  |                      |         |      |    |         |   |    |         |  
|Interest                                         |  |                      | 19      |      |    | 581     |   |    | 3,696   |  
|Other                                            |  |                      | 44      |      |    | 74      |   |    | 171     |  
|Foreign exchange (loss) gain                     |  |                      | (266    | )    |    | (725    | ) |    | 27      |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Loss before income taxes                         |  |                      | (22,261 | )    |    | (23,477 | ) |    | (10,892 | )
|Benefit (provision) for income taxes             |  |                      | 28      |      |    | (87     | ) |    | 239     |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss                                         |  | ($                   | 22,233  | )    | ($ | 23,564  | ) | ($ | 10,653  | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss per common share:                       |  |                      |         |      |    |         |   |    |         |  
|Basic                                            |  | ($                   | 0.59    | )    | ($ | 0.63    | ) | ($ | 0.29    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Diluted                                          |  | ($                   | 0.59    | )    | ($ | 0.63    | ) | ($ | 0.29    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Weighted average common shares outstanding:      |  |                      |         |      |    |         |   |    |         |  
|Basic                                            |  |                      | 38,001  |      |    | 37,511  |   |    | 36,883  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Diluted                                          |  |                      | 38,001  |      |    | 37,511  |   |    | 36,883  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  

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, 2010, 2009, and 2008
(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, 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 |   |   |         |  
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|Net (loss) for the year ended July 31, 2010               |  |                       |           |                         |  |                      |   |                              |    |                         |   |                     |   |                                                  |        |                              |   | (22,233                      | ) |   |       |   |   | (22,233 | ) |   | (22,233 | )
|Vesting of restricted stock                               |  |                       | 192,845    |                         |  |                      |   |                              | 2   |                         |   |                     |   |                                                  |        |                              |   |                             |   |   |       |   |   | 2       |   |   |        |  
|Stock based compensation charges                          |  |                       |           |                         |  |                      |   |                              |    |                         |   | 1,170                |   |                                                  |        |                              |   |                             |   |   |       |   |   | 1,170   |   |   |        |  
|Issuance of treasury stock for employee 401(k) plan match |  |                       |           |                         |  | (111,706              | ) |                              |    |                         |   | (889                 | ) |                                                  | 1,586   |                              |   |                             |   |   |       |   |   | 697     |   |   |        |  
|Foreign currency translation adjustments                  |  |                       |           |                         |  |                      |   |                              |    |                         |   |                     |   |                                                  |        |                              |   |                             |   |   | 599    |   |   | 599     |   |   | 599     |  
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|Comprehensive (loss)                                      |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   | $ | (21,634 | )
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  
|Balance at July 31, 2010                                  |  |                       | 38,782,725 |                         |  | 623,848               |   | $                            | 388 |                         | $ | 306,561              |   | $                                                | ($8,854 | )                            | $ | (201,954                     | ) | $ | 875    |   | $ | 97,016  |   |   |         |  
|                                                          |  |                       |            |                         |  |                       |   |                              |     |                         |   |                      |   |                                                  |         |                              |   |                              |   |   |        |   |   |         |   |   |         |  

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, |         
|                                                                             |  |                      |         
|                                                                             |  | 2010                 |          | 2009 |    | 2008     |  
|                                                                             |  |                      |          |      |    |          |  
|Cash flows from operating activities:                                        |  |                      |          |      |    |          |   |    |         |  
|Net loss                                                                     |  | ($                   | 22,233   | )    | ($ | 23,564   | ) | ($ | 10,653  | )
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |                      |          |      |    |          |   |    |         |  
|Depreciation and amortization of property,
 plant and equipment              |  |                      | 2,727    |      |    | 2,185    |   |    | 1,488   |  
|Amortization of intangible assets                                            |  |                      | 1,542    |      |    | 1,277    |   |    | 658     |  
|Provision for uncollectible accounts
 receivable                             |  |                      | 3,480    |      |    | 5,189    |   |    | 3,716   |  
|Write-off and/or reserve for obsolete
 inventory                             |  |                      | 1,344    |      |    | 378      |   |    | 283     |  
|Deferred income tax benefit                                                  |  |                      | (45      | )    |    |         |   |    | (644    | )
|Share based compensation charges                                             |  |                      | 1,170    |      |    | 1,435    |   |    | 1,566   |  
|Issuance of common stock for 401(k)
 employer match                          |  |                      | 697      |      |    | 582      |   |    | 481     |  
|Accrual for 401(k) employer match                                            |  |                      | 418      |      |    |         |   |    |        |  
|Deferred revenue recognized                                                  |  |                      | (450     | )    |    | (475     | ) |    | (426    | )
|Gain on termination of officers life
 insurance policies                     |  |                      |         |      |    |         |   |    | (313    | )
|Foreign exchange loss on intercompany loan                                   |  |                      | 45       |      |    | 697      |   |    |        |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Changes in operating assets and
 liabilities:                                |  |                      |          |      |    |          |   |    |         |  
|Accounts receivable                                                          |  |                      | (3,844   | )    |    | (1,409   | ) |    | (2,837  | )
|Inventories                                                                  |  |                      | (663     | )    |    | 2,269    |   |    | 1,012   |  
|Prepaid expenses                                                             |  |                      | 220      |      |    | 208      |   |    | (574    | )
|Accounts payable  trade                                                     |  |                      | 2,348    |      |    | (571     | ) |    | (1,060  | )
|Accrued liabilities                                                          |  |                      | (232     | )    |    | 528      |   |    | (1,066  | )
|Other current liabilities                                                    |  |                      | (78      | )    |    | (206     | ) |    | (195    | )
|Other liabilities                                                            |  |                      | 90       |      |    |         |   |    |        |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Total adjustments                                                            |  |                      | 8,769    |      |    | 12,087   |   |    | 2,089   |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Net cash used in operating activities                                        |  |                      | (13,464  | )    |    | (11,477  | ) |    | (8,564  | )
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Cash flows from investing activities:                                        |  |                      |          |      |    |          |   |    |         |  
|Capital expenditures                                                         |  |                      | (3,251   | )    |    | (2,709   | ) |    | (3,231  | )
|Maturities of short term investments                                         |  |                      | 232,140  |      |    | 318,650  |   |    |        |  
|Purchases of short term investments                                          |  |                      | (213,643 | )    |    | (361,956 | ) |    |        |  
|Decrease (increase) in security deposits
 and other                          |  |                      | 81       |      |    | 384      |   |    | (491    | )
|Acquisitions, net of cash acquired                                           |  |                      |         |      |    | (14,541  | ) |    | (16,144 | )
|Proceeds from termination of officers life
 insurance                        |  |                      |         |      |    |         |   |    | 1,085   |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Net cash provided by (used in) investing
 activities                         |  |                      | 15,327   |      |    | (60,172  | ) |    | (18,781 | )
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Cash flows from financing activities:                                        |  |                      |          |      |    |          |   |    |         |  
|Proceeds from the exercise of stock options                                  |  |                      |         |      |    | 348      |   |    | 470     |  
|Issuance costs from issuance of common
 stock                                |  |                      |         |      |    |         |   |    | (12     | )
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Net cash provided by financing activities                                    |  |                      |         |      |    | 348      |   |    | 458     |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Effect of exchange rate changes on cash and
 cash equivalents                |  |                      | (33      | )    |    | (92      | ) |    | 60      |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Increase (decrease) in cash and cash
 equivalents                            |  |                      | 1,830    |      |    | (71,393  | ) |    | (26,827 | )
|Cash and cash equivalents - beginning of
 year                               |  |                      | 6,929    |      |    | 78,322   |   |    | 105,149 |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  
|Cash and cash equivalents - end of year                                      |  | $                    | 8,759    |      | $  | 6,929    |   | $  | 78,322  |  
|                                                                             |  |                      |          |      |    |          |   |    |         |  

F-6

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

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

Note 1 - Summary of significant accounting
policies

Nature of business

Enzo Biochem, Inc. (the Company) is an integrated life science and
biotechnology company 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 in the New York, New Jersey and Eastern Pennsylvania
medical communities. The Company operates in three segments (see Note 17).

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 amounts
reported in the financial statements and accompanying footnotes. Actual results
could differ from those estimates.

Foreign Currency Translation

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 consist of demand deposits with banks and
highly liquid money market funds.

Short term investments

Short term investments are highly liquid U.S. Government instruments
with maturities of less than ninety days.

Fair Values of Financial Instruments

The
recorded amounts of the Companys cash and equivalents, short-term investments,
receivables, accounts payable and accrued liabilities approximate their fair
values principally because of the short-term nature of these items. The fair
value of short term investments is based on quoted market prices where
available.

Concentration of credit risk

Financial instruments that potentially subject the Company to
concentrations of credit risk primarily consist of cash and cash equivalents,
short term investments, and accounts receivable. The Companys short term
investments are invested in highly liquid US Government instruments.

F-7

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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.

Accrual for Self-Funded Medical

Accruals
for self-funded medical insurance are determined based on a number of
assumptions and factors, including historical payment trends, claims
history and current estimates. These estimated liabilities are not discounted.
If actual trends differ from these estimates, the financial results could be
impacted.

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. The evaluation 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. License fees received in advance of being earned are
recorded as deferred revenues in the accompanying balance sheet.

F-8

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

Clinical laboratory services

Revenues from the Clinical Labs segment 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 tables of the Clinical Lab segments net revenues and
revenue percentages by revenue category:

|                   |  |            |        |                           |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|------------------ |  | ---------- | ------ | ------------------------- |  | ---------- | - | ------ | ------ | ---------- |  | ------ | - | - | ------ |  |  | --- | -
|                   |  | 2010       |        | Years ended July 31
 2009 |  | 2008       |  
|                   |  |            |        |                           |  |            |  
|Revenue category   |  | (In 000s) |        | (in %)                    |  | (In 000s) |   | (in %) |        | (In 000s) |  | (in %) |  
|                   |  |            |        |                           |  |            |   |        |        |            |  |        |  
|Medicare           |  | $          | 11,158 |                           |  | 25         |   | $      | 9,138  |            |  | 23     |   | $ | 9,078  |  |  | 22  |  
|Third-party payers |  |            | 19,534 |                           |  | 44         |   |        | 20,073 |            |  | 51     |   |   | 24,768 |  |  | 59  |  
|Patient self-pay   |  |            | 8,758  |                           |  | 20         |   |        | 6,056  |            |  | 15     |   |   | 3,582  |  |  | 8   |  
|HMOs              |  |            | 4,728  |                           |  | 11         |   |        | 4,337  |            |  | 11     |   |   | 4,650  |  |  | 11  |  
|                   |  |            |        |                           |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|Total              |  | $          | 44,178 |                           |  | 100        | % | $      | 39,604 |            |  | 100    | % | $ | 42,078 |  |  | 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%, 25% and 26% of the Clinical
Labs segment net revenue for the fiscal year ended July 31, 2010, 2009 and 2008
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, 2010, 2009 and 2008, the contractual
adjustment percentages, determined using current and historical reimbursement
statistics, were 83.0%, 80.8% and 81.8%, respectively, of gross billings.

F-9

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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, 2010 and 2009, 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, 2010 and
2009, approximately 45% and 40%, respectively, of the Companys net accounts
receivable relates to its Clinical Labs business, which operates in the New
York, New Jersey, and Eastern Pennsylvania medical communities.

The Life Sciences segments accounts receivable includes royalties
receivable of $2.5 million, as of July 31, 2010 and 2009, of which
approximately $1.8 million and $1.9 million, respectively is from Qiagen
Corporation (see Note 13).

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

|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|------------------------------------ |  | -------------------- | ------ | -------------------- |  | ---------- | - | ------ | ------ |  |  | --- | -
|                                     |  | As of
 July 31, 2010 |        | As of
 July 31, 2009 | 
|                                     |  |                      |        |                      | 
|Net accounts receivable by
segment   |  | (In 000s)           |        | (in %)               |  | (In 000s) |   | (in %) |       
|                                     |  |                      |        |                      |  |            |   |        |       
|Clinical Labs
 (by billing category) |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Medicare                             |  | $                    | 849    |                      |  | 14         |   | $      | 1,113  |  |  | 22  |  
|Third party payers                   |  |                      | 2,664  |                      |  | 46         |   |        | 2,003  |  |  | 40  |  
|Patient self-pay                     |  |                      | 2,024  |                      |  | 35         |   |        | 1,635  |  |  | 32  |  
|HMOs                                |  |                      | 296    |                      |  | 5          |   |        | 303    |  |  | 6   |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Clinical
 Labs                 |  |                      | 5,833  |                      |  | 100        | % |        | 5,054  |  |  | 100 | %
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Life
 Sciences                 |  |                      | 7,173  |                      |  |            |   |        | 7,426  |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total accounts
 receivable           |  | $                    | 13,006 |                      |  |            |   | $      | 12,480 |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  

F-10

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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

|                                 |  |               |        |               |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- | - | ------ | -
|In 000s                         |  | July 31, 2010 |        | July 31, 2009 |  
|                                 |  |               |        |               |  
|Beginning balance                |  | $             | 4,786  |               | $ | 886    |  
|Provision for
 doubtful accounts |  |               | 3,480  |               |   | 5,189  |  
|Write-offs                       |  |               | (5,427 | )             |   | (1,289 | )
|                                 |  |               |        |               |   |        |  
|Ending balance                   |  | $             | 2,839  |               | $ | 4,786  |  
|                                 |  |               |        |               |   |        |  

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market. The Company evaluates its inventories to determine excess or slow
moving products based on quantities on hand and expected future demand. For
those items which the Company believes it has an excess supply or for items
that are obsolete, the Company estimates the net amount that it expects to
realize from the sale of such products.

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, 2010, 2009 or 2008.

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 weighted average
multiple of revenues and earnings before interest, taxes, depreciation and
amortization. In determining fair value, the Company makes certain judgments,
including the identification of reporting units and the selection of comparable
companies. Trademarks are considered impaired if the carrying amount exceeds their
estimated fair value. The fair value of the trademarks is estimated based on a
discounted cash flow model. 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, 2010 and 2009

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)

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. Accumulated other comprehensive income
is a separate component of stockholders equity and consists of net loss and
foreign currency translation adjustments.

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 $375,000, $634,000 and $113,000 for the years ended July 31, 2010,
2009 and 2008, 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, 2010, 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 accounting pronouncements which establish 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, 2010 and 2009

Net income (loss) 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. Diluted weighted average shares outstanding for fiscal 2010, 2009 and
2008 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 2010, 2009 and 2008.
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, 2010, 2009, and 2008 was 51,000, 105,000, and
240,000, respectively.

For the years ended July 31, 2010, 2009 and 2008, the effect of
approximately 1,132,000, 1,191,000 and 1,734,000 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 for the years ended July 31:

|                                                            |  |   |         |   |      |         |      |   |         |   | 
|----------------------------------------------------------- |  | - | ------- | - | ---- | ------- | ---- | - | ------- | - | 
|In 000s                                                    |  |   | 2010    |   | 2009 |         | 2008 |  
|                                                            |  |   |         |   |      |         |      |  
|Numerator:                                                  |  |   |         |   |      |         |      |   |         |  
|Net loss                                                    |  | $ | (22,233 | ) | $    | (23,564 | )    | $ | (10,653 | )
|                                                            |  |   |         |   |      |         |      |   |         |  
|Denominator:                                                |  |   |         |   |      |         |      |   |         |  
|Weighted-average
 common shares outstanding- Basic          |  |   | 38,001  |   |      | 37,511  |      |   | 36,883  |  
|                                                           
|Add: effect of
 dilutive stock options and restricted stock |  |   |        |   |      |        |      |   |        |  
|                                                            |  |   |         |   |      |         |      |   |         |  
|Weighted-average
 common shares outstanding - Diluted       |  |   | 38,001  |   |      | 37,511  |      |   | 36,883  |  
|                                                            |  |   |         |   |      |         |      |   |         |  
|Net loss per share                                          |  |   |         |   |      |         |      |   |         |  
|Basic                                                       |  | $ | (0.59   | ) | $    | (0.63   | )    | $ | (0.29   | )
|                                                            |  |   |         |   |      |         |      |   |         |  
|Diluted                                                     |  | $ | (0.59   | ) | $    | (0.63   | )    | $ | (0.29   | )
|                                                            |  |   |         |   |      |         |      |   |         |  

Share-Based Compensation

The Company records compensation expense associated with stock options
and restricted stock based upon the fair value of stock based awards as
measured at the grant date. The expense is recorded by amortizing the fair
values on a straight line basis over the vesting period, adjusted for estimated
forfeitures.

F-13

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

For the years ended July 31, 2010, 2009 and 2008, share-based
compensation expense relating to the fair value of restricted shares and
restricted stock units was approximately $1,170,000, $1,415,000, and $1,316,000, respectively
(see Note 11). No excess tax benefits were recognized for the year ended July
31, 2010, 2009 and 2008.

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                                                  |  |   | 2010  |  | 2009 |       | 2008 |  
|                                                          |  |   |       |  |      |       |      |  
|Cost of clinical
 laboratory services or product revenues |  | $ | 12    |  | $    | 8     |      | $ | 14    | 
|Research and
 development                                 |  |   | 14    |  |      | 13    |      |   | 97    | 
|Selling, general
 and administrative                      |  |   | 1,144 |  |      | 1,414 |      |   | 1,455 | 
|                                                          |  |   |       |  |      |       |      |   |       | 
|                                                          |  | $ | 1,170 |  | $    | 1,435 |      | $ | 1,566 | 
|                                                          |  |   |       |  |      |       |      |   |       | 

As of July 31, 2010, 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 1.25 years.

Subsequent events

In accordance with authoritative guidance, the Company evaluates
subsequent events through the date of filing.

Effect of new accounting pronouncements

In October 2009, the FASB issued a Consensus of the FASB Emerging
Issues Task Force relating to Multiple Deliverable Revenue Arrangements.This standard provides application
guidance on whether multiple deliverables exist, how the deliverables should be
separated and how the consideration should be allocated to one or more units of
accounting. This update establishes a selling price hierarchy for determining
the selling price of a deliverable. The selling price used for each deliverable
will be based on vendor-specific objective evidence, if available, third-party
evidence if vendor-specific objective evidence is not available, or estimated
selling price if neither vendor-specific or third-party evidence is available.
This guidance is effective for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company will adopt this guidance effective August 1, 2010. The
Company has assessed the impact of adoption and it is not expected to have a
material effect on our consolidated results of operations and financial
condition.

In August 2009, the Company adopted the provisions of the accounting
standard on fair value measurements that apply to nonfinancial assets and
liabilities that are recognized or disclosed at fair value on a non-recurring
basis. The adoption of these provisions did not have an impact on the
consolidated financial statements or disclosures.

In June 2009, the FASB issued authoritative guidance to establish 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. This guidance only impacted references for accounting guidance.

On August 1, 2009, the Company adopted the revised authoritative
guidance on business combinations which changed existing practice, in part, as
follows: (1) contingent consideration arrangements are now fair valued at the
acquisition date and included on that basis in the purchase price
consideration; (2) transaction costs are now expensed as incurred, rather than
capitalized as part of the purchase price; (3) reversal of valuation allowances
created in purchase accounting are now recorded through the income tax
provision; and (4) in order to accrue for a restructuring plan in purchase
accounting, all authoritative guidance would have to be met at the acquisition
date. While the adoption of this standard did not have a material impact on the
Companys financial statements, it could materially change the accounting for
business combinations consummated in the future and for tax matters relating to
prior acquisitions settled subsequent to July 31, 2009.

F-14

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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) 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. 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 and $750,000 escrow amounts.
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 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                   |  |   | 1,823  | 
|                           |  |   |        | 
|Total assets
 acquired     |  |   | 14,176 | 
|                           |  |   |        | 
|Less:                      |  |   |        | 
|Current
 liabilities       |  |   | 1,115  | 
|                           |  |   |        | 
|Total liabilities
 assumed |  |   | 1,115  | 
|                           |  |   |        | 
|Net assets
 acquired       |  | $ | 13,061 | 
|                           |  |   |        | 

The purchase price allocation is based on a valuation of acquired
tangible and intangible assets based on the final valuation completed in fiscal
2010. The Company determined the fair value of the identifiable intangible
assets based on various factors including the cost and discounted cash flow
models 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.

F-15

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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. In July
2010, the Company notified the sellers of Biomol that the conditions for the
second earn-out were not achieved. The sellers are currently disputing the
calculation (see Note 16).

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.

F-16

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

In March 2008, a wholly owned subsidiary of
Enzo Life Sciences, Inc.  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   | )

Note 3- Supplemental disclosure for statement
of cash flows

In the years ended
July 31, 2010, 2009, and 2008, net income taxes paid by the Company
approximated $186,000, $220,000, and $233,000 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.

F-17

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

Note 4  Short term investments

At July 31, 2010 and 2009 the Companys short-term investments, whose
fair value approximates cost, are in U.S. Treasury bills, which are purchased
at discounts with remaining maturities of under ninety days.

The
authoritative guidance for fair value measurements establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy under the guidance
are described below:

| |           |                                                                                                                                                                                                                                                                 
| | --------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level
 1: | Valuations based on quoted market prices in active
 markets for identical assets or liabilities.                                                                                                                                                                
| |           |                                                                                                                                                                                                                                                                 
| | Level2:   | Valuations based on quoted
 prices for similar assets or liabilities, quoted prices in markets that are
 not active, or other inputs that are observable or can be corroborated by
 observable data for substantially the full term of the assets or liabilities
| |           |                                                                                                                                                                                                                                                                 
| | Level3:   | Valuations based on inputs that
 are supported by little or no market activity and that are significant to the
 fair value of the assets or liabilities                                                                                                         

At July 31, 2010 and 2009, the Companys short-term investments are
classified as Level 1 assets.

Note 5  Accumulated Other Comprehensive
Income (Loss)

The following is a summary of accumulated other comprehensive income
(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,
 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    |  
|Fiscal 2010  gain
 on foreign currency translation |  |                                       | 599    |                           |  |                                      |  |   | 599    |  
|                                                    |  |                                       |        |                           |  |                                       |  |   |        |  
|Balance  July 31,
 2010                            |  | $                                     | 875    |                           |  |                                      |  | $ | 875    |  
|                                                    |  |                                       |        |                           |  |                                       |  |   |        |  

Note 6 - Inventories

At July 31, 2010 and 2009 inventories, net of reserves of $3,821,000
and $2,477,000, respectively, consist of:

|                  |  |      |       |      |   |       | 
|----------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s          |  | 2010 |       | 2009 |  
|                  |  |      |       |      |  
|Raw materials     |  | $    | 921   |      | $ | 1,228 | 
|Work in process   |  |      | 2,136 |      |   | 1,072 | 
|Finished products |  |      | 5,825 |      |   | 6,964 | 
|                  |  |      |       |      |   |       | 
|                  |  | $    | 8,882 |      | $ | 9,264 | 
|                  |  |      |       |      |   |       | 

F-18

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

Note 7  Property, plant, and equipment

At July 31, 2010 and 2009 property, plant, and equipment consist of:

|                                           |  |      |         |      |   |         |  
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- | -
|In 000s                                   |  | 2010 |         | 2009 |  
|                                           |  |      |         |      |  
|Building and
 building improvements        |  | $    | 4,309   |      | $ | 4,219   |  
|Machinery and
 equipment                   |  |      | 6,814   |      |   | 6,553   |  
|Office furniture
 and computer equipment   |  |      | 13,057  |      |   | 11,330  |  
|Leasehold
 improvements                    |  |      | 4,572   |      |   | 4,430   |  
|                                           |  |      |         |      |   |         |  
|                                           |  |      | 28,752  |      |   | 26,532  |  
|Accumulated
 depreciation and amortization |  |      | (17,606 | )    |   | (15,921 | )
|                                           |  |      |         |      |   |         |  
|                                           |  |      | 11,146  |      |   | 10,611  |  
|Land and land
 improvements                |  |      | 712     |      |   | 712     |  
|                                           |  |      |         |      |   |         |  
|                                           |  | $    | 11,858  |      | $ | 11,323  |  
|                                           |  |      |         |      |   |         |  

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, 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 |  
|Foreign currency
 translation |  |                     | 47     |                      |   |      |  |   | 47     |  
|                              |  |                     |        |                      |   |       |  |   |        |  
|July 31, 2010                 |  | $                   | 17,491 |                      | $ | 7,452 |  | $ | 24,943 |  
|                              |  |                     |        |                      |   |       |  |   |        |  

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

|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|------------------------------------- |  | ------------- | ------ | ------------------------- | - | ------- | - | ----- | ------ | ------------------------- | - | ------ |  | - | ------- | - | - | ------ | 
|                                      |  | July 31, 2010 |        | July 31, 2009             |  
|                                      |  |               |        |                           |  
|                                      |  | Gross         |        | Accumulated
 Amortization |   | Net     |   | Gross |        | Accumulated
 Amortization |   | Net    | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        | 
|Finite-lived intangible assets:       |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Patents                               |  | $             | 11,027 |                           | $ | (10,154 | ) | $     | 873    |                           | $ | 11,027 |  | $ | (10,030 | ) | $ | 997    | 
|Customer relationships                |  |               | 12,099 |                           |   | (2,248  | ) |       | 9,851  |                           |   | 12,125 |  |   | (1,190  | ) |   | 10,935 | 
|Non-compete and employment agreements |  |               | 478    |                           |   | (396    | ) |       | 82     |                           |   | 469    |  |   | (280    | ) |   | 189    | 
|Website and acquired content          |  |               | 1,009  |                           |   | (489    | ) |       | 520    |                           |   | 1,005  |  |   | (303    | ) |   | 702    | 
|Licensed technology and other         |  |               | 628    |                           |   | (285    | ) |       | 343    |                           |   | 588    |  |   | (83     | ) |   | 505    | 
|Indefinitely-lived intangible assets: |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Trademarks                            |  |               | 8,699  |                           |   |        |   |       | 8,699  |                           |   | 8,681  |  |   |        |   |   | 8,681  | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Total                                 |  | $             | 33,940 |                           | $ | (13,572 | ) | $     | 20,368 |                           | $ | 33,895 |  | $ | (11,886 | ) | $ | 22,009 | 
|                                      |  |               |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 

F-19

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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

|     |  |  |       | 
|---- |  |  | ----- | 
|2011 |  |  | 1,432 | 
|2012 |  |  | 1,357 | 
|2013 |  |  | 1,312 | 
|2014 |  |  | 1,187 | 
|2015 |  |  | 1,187 | 

At July 31,
2010, the weighted average useful lives of amortizable intangible assets were
approximately 9 years.

Amortization
expense for the years ended July 31, 2010, 2009, and 2008 was $1,542,000,
$1,277,000, and $658,000, respectively.

Note 9 - Income taxes

The benefit
(provision) for income taxes is as follows:

|                                       |  |      |     |      |   |      |   |   |      |  
|-------------------------------------- |  | ---- | --- | ---- | - | ---- | - | - | ---- | -
|Fiscal year
 ended July 31, (in 000s) |  | 2010 |     | 2009 |   | 2008 |  
|                                       |  |      |     |      |   |      |  
|Current benefit (provision):           |  |      |     |      |   |      |   |   |      |  
|Federal                                |  | $    | 119 |      | $ |     |   | $ |     |  
|State and local                        |  |      | (75 | )    |   | (75  | ) |   | (320 | )
|Foreign                                |  |      | (61 | )    |   | (12  | ) |   | (85  | )
|Deferred benefit                       |  |      | 45  |      |   |     |   |   | 644  |  
|                                       |  |      |     |      |   |      |   |   |      |  
|Benefit (provision) for income
 taxes  |  | $    | 28  |      | $ | (87  | ) | $ | 239  |  
|                                       |  |      |     |      |   |      |   |   |      |  

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,
2010 and 2009 are as follows:

|                                                                  |  |               |         |               |   |         |  
|----------------------------------------------------------------- |  | ------------- | ------- | ------------- | - | ------- | -
|In 000s                                                          |  | July 31, 2010 |         | July 31, 2009 |  
|                                                                  |  |               |         |               |  
|Deferred tax assets:                                              |  |               |         |               |   |         |  
|Federal tax carryforward losses                                   |  | $             | 23,100  |               | $ | 16,507  |  
|Provision for uncollectible accounts receivable                   |  |               | 1,057   |               |   | 1,763   |  
|State and local tax carry forward losses                          |  |               | 2,117   |               |   | 2,080   |  
|Accrued royalties                                                 |  |               | 103     |               |   | 279     |  
|Stock compensation                                                |  |               | 1,017   |               |   | 794     |  
|Depreciation                                                      |  |               | 183     |               |   | 152     |  
|Research and development and other tax credit
 carryforwards      |  |               | 618     |               |   | 618     |  
|Foreign tax carryforward losses                                   |  |               | 284     |               |   |        |  
|Realized and unrealized losses on marketable securities           |  |               | 138     |               |   | 138     |  
|Inventory                                                         |  |               | 1,094   |               |   | 261     |  
|Accrued expenses                                                  |  |               | 263     |               |   |        |  
|Other, net                                                        |  |               | 15      |               |   | 251     |  
|                                                                  |  |               |         |               |   |         |  
|Gross deferred tax assets                                         |  |               | 29,989  |               |   | 22,843  |  
|                                                                  |  |               |         |               |   |         |  
|                                                                  |  |               |         |               |   |         |  
|Deferred tax liabilities:                                         |  |               |         |               |   |         |  
|Deferred patent costs                                             |  |               | (204    | )             |   | (235    | )
|Intangibles                                                       |  |               | (2,797  | )             |   | (2,730  | )
|Prepaid expenses                                                  |  |               | (654    | )             |   | (657    | )
|Other, net                                                        |  |               | (36     | )             |   | (84     | )
|                                                                  |  |               |         |               |   |         |  
|Gross deferred tax liabilities                                    |  |               | (3,691  | )             |   | (3,706  | )
|                                                                  |  |               |         |               |   |         |  
|                                                                  |  |               |         |               |   |         |  
|Net deferred tax assets (liabilities) before valuation
 allowance |  |               | 26,298  |               |   | 19,137  |  
|Less: valuation allowance                                         |  |               | (28,901 | )             |   | (21,716 | )
|                                                                  |  |               |         |               |   |         |  
|Net deferred tax assets (liabilities)                             |  | $             | (2,603  | )             | $ | (2,579  | )
|                                                                  |  |               |         |               |   |         |  

F-20

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

At July 31, 2010, 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, 2010 |       | July 31, 2009 |  
|                |  |               |       |               |  
|Deferred taxes: |  |               |       |               |   |       | 
|Current         |  | $             | 21    |               | $ | 213   | 
|Non-current     |  |               | 2,582 |               |   | 2,366 | 
|                |  |               |       |               |   |       | 
|                |  | $             | 2,603 |               | $ | 2,579 | 
|                |  |               |       |               |   |       | 

The Company recorded a valuation allowance during the year ended July
31, 2010 and 2009 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, 2010, the Company had U.S. federal net operating loss
carryforwards of approximately $65.1 million. The U.S. federal tax loss
carryforwards, if not fully utilized, expire between 2011 and 2030. Utilization
is dependent on generating sufficient taxable income prior to expiration of the
tax loss carryforwards. As of July 31, 2010, the Company had state and local
tax loss carryforwards of approximately $76.1 million.As of July 31, 2010, the Company had
foreign loss carryforwards of approximately $1.0 million.

As a result of certain acquisitions 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                  |  | 2010 |         | 2009 |   | 2008    |  
|                          |  |      |         |      |   |         |  
|United States
 operations |  | $    | (19,642 | )    | $ | (21,221 | ) | $ | (9,605  | )
|International
 operations |  |      | (2,619  | )    |   | (2,256  | ) |   | (1,287  | )
|                          |  |      |         |      |   |         |   |   |         |  
|Loss before taxes         |  | $    | (22,261 | )    | $ | (23,477 | ) | $ | (10,892 | )
|                          |  |      |         |      |   |         |   |   |         |  

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

|                                                               |  |      |       |      |  |       |    |  |       |   
|-------------------------------------------------------------- |  | ---- | ----- | ---- |  | ----- | -- |  | ----- | --
|Year ended July
 31,                                           |  | 2010 |       | 2009 |  | 2008  |   
|                                                               |  |      |       |      |  |       |   
|Federal statutory
 rate                                        |  |      | 34    | %    |  | 34    | %  |  | 34    | % 
|Expenses not
 deductible for income tax return purposes        |  |      | (1.5  | )%   |  | (0.4  | )% |  | (1.1  | )%
|State income
 taxes, net of (benefit) of federal tax deduction |  |      | 0.1   | %    |  | 2.5   | %  |  | 1.4   | % 
|Change in
 valuation allowance                                 |  |      | (32.3 | )%   |  | (37.8 | )% |  | (32.9 | )%
|Reversal of tax
 reserve                                       |  |      | 0.5   | %    |  |      |    |  |      |   
|Other                                                          |  |      | (0.7  | )%   |  | 1.3   | %  |  | 0.8   |   
|                                                               |  |      |       |      |  |       |    |  |       |   
|                                                               |  |      | 0.1   | %    |  | (0.4  | )% |  | 2.2   | % 
|                                                               |  |      |       |      |  |       |    |  |       |   

U.S. federal income taxes have not been provided on the undistributed
earnings of approximately $156,000 at July 31, 2010 of the Companys foreign
subsidiaries, because the determination of the amount of unrecognized US
federal income tax liability with respect to such earnings is not material.

F-21

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

The Company adopted the accounting standard related to unrecognized tax
benefits on August 1, 2007. The cumulative effect of adopting the standard 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, 2009                           |  | $ | 110 |  
|Additions for tax
 positions related to prior years  |  |   |    |  
|Additions for tax
 positions related to current year |  |   |    |  
|Reductions for
 lapse of statute of limitations      |  |   | (97 | )
|Tax audit
 settlements                               |  |   | (6  | )
|                                                     |  |   |     |  
|Balance at July
 31, 2010                            |  | $ | 7   |  
|                                                     |  |   |     |  

Interest and penalties related to income tax liabilities are included
in income tax expense. During the fiscal year ended July 31, 2010, the Company
recognized a net decrease of approximately $22,000. The Company has accrued
approximately $1,000 for the payment of interest and penalties as of July 31,
2010 and had accrued approximately $24,000 as of July 31, 2009.

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,
2007 through fiscal 2009.

Note 10  Accrued Liabilities and Other
Current Liabilities

At July 31, 2010 and 2009, accrued liabilities consist of:

|                                              |  |      |       |      |   |       | 
|--------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s                                      |  | 2010 |       | 2009 |  
|                                              |  |      |       |      |  
|Legal                                         |  | $    | 877   |      | $ | 1,095 | 
|Payroll, benefits,
 severance and commissions |  |      | 4,012 |      |   | 2,737 | 
|Research and
 development                     |  |      | 716   |      |   | 656   | 
|Professional fees                             |  |      | 963   |      |   | 1,752 | 
|Outside reference
 lab testing                |  |      | 194   |      |   | 65    | 
|Other                                         |  |      | 1,747 |      |   | 2,121 | 
|                                              |  |      |       |      |   |       | 
|                                              |  | $    | 8,509 |      | $ | 8,426 | 
|                                              |  |      |       |      |   |       | 

At July 31, 2010 and 2009, other current liabilities consist of:

|                 |  |      |     |      |   |       | 
|---------------- |  | ---- | --- | ---- | - | ----- | 
|In 000s         |  | 2010 |     | 2009 |  
|                 |  |      |     |      |  
|Deferred revenue |  | $    | 496 |      | $ | 850   | 
|Other            |  |      | 76  |      |   | 212   | 
|                 |  |      |     |      |   |       | 
|                 |  | $    | 572 |      | $ | 1,062 | 
|                 |  |      |     |      |   |       | 

Self-Insured Medical Plan

Beginning
in February 2010 in an attempt to offset the cost of rising health care
expenses, the Company began self-funding medical insurance coverage for certain
of its U.S. based employees. The risk to the Company is being limited through
the use of individual and aggregate stop loss insurance. As of July 31, 2010,
the Company has established a reserve of $0.6 million, which is included in
accrued liabilities, for claims that have been reported but not paid and
incurred but not reported. The reserve is based upon the Companys historical
payment trends, claim history and current estimates.

F-22

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

Note 11  Stockholders equity

Common stock

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, and in May 2008 issued 352,000 shares of common stock at a fair value
of $3.0 million in connection with the acquisition of Biomol (see Note 2).

Treasury stock

In fiscal 2010, the Company issued 111,706 shares from treasury stock
for its employees 401(k) matched contributions obligation. The Company
recorded approximately $1.6 million, the average acquisition cost of the
shares, as a reduction of 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.

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 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.

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, 2010, there were approximately 169,000 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, 2010, 2009, and 2008 is as follows:

|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|----------------------------------------------------------- |  | ------- | --------- | ------------------------------------ | - | ------- |  | ------------------------------------ | --------- | ------- | - | ------------------------------------ |  |  | --------- | - | - | ----- | 
|                                                            |  | 2010    |           | 2009                                 |   | 2008    | 
|                                                            |  |         |           |                                      |   |         | 
|                                                            |  | Options |           | Weighted -
 Average
 Exercise
 Price |   | Options |  | Weighted -
 Average
 Exercise
 Price |           | Options |   | Weighted -
 Average
 Exercise
 Price | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      | 
|Outstanding at beginning of year                            |  |         | 1,191,519 |                                      | $ | 14.41   |  |                                      | 2,275,415 |         | $ | 13.13                                |  |  | 2,700,457 |   | $ | 13.32 | 
|Granted                                                     |  |         |          |                                      | $ |        |  |                                      |          |         | $ |                                     |  |  |          |   | $ |      | 
|Exercised                                                   |  |         |          |                                      | $ |        |  |                                      | (251,162  | )       | $ | 5.87                                 |  |  | (267,345  | ) | $ | 10.80 | 
|Cancelled                                                   |  |         | (59,069   | )                                    | $ | 16.14   |  |                                      | (832,734  | )       | $ | 13.87                                |  |  | (157,697  | ) | $ | 20.42 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Outstanding at end of year                                  |  |         | 1,132,450 |                                      | $ | 14.30   |  |                                      | 1,191,519 |         | $ | 14.41                                |  |  | 2,275,415 |   | $ | 13.13 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Exercisable at end of year                                  |  |         | 1,132,450 |                                      | $ | 14.30   |  |                                      | 1,191,519 |         | $ | 14.41                                |  |  | 2,250,483 |   | $ | 13.12 | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 
|Weighted average fair value of options
 granted during year |  |         |           |                                      | $ |        |  |                                      |           |         |   |                                     |  |  |           |   | $ |      | 
|                                                            |  |         |           |                                      |   |         |  |                                      |           |         |   |                                      |  |  |           |   |   |       | 

F-23

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

The aggregate intrinsic value of stock
options exercised during the years ended July 31, 2010, 2009 and 2008,
including the non-cash transactions (see Note 3) was $0, $1.4 million and $0.7
million, respectively. There is no aggregate intrinsic value of options both
outstanding and exercisable at July 31, 2010.

The following table summarizes information
for stock options outstanding at July 31, 2010:

|                          |  |                                     |           |                                                          |  |                                    |  |   |       | 
|------------------------- |  | ----------------------------------- | --------- | -------------------------------------------------------- |  | ---------------------------------- |  | - | ----- | 
|                          |  | Options outstanding and exercisable |          
|                          |  |                                     |          
|Range of
 Exercise prices |  | Shares                              |           | Weighted- Average
 Remaining
 Contractual Life in
 years |  | Weighted-
 Average Exercise
 Price | 
|                          |  |                                     |           |                                                          |  |                                    | 
|$8.33-12.25               |  |                                     | 611,684   |                                                          |  | 1.75                               |  | $ | 11.90 | 
|$12.93-19.02              |  |                                     | 494,718   |                                                          |  | 4.0                                |  | $ | 16.90 | 
|$20.20-24.84              |  |                                     | 26,048    |                                                          |  | 1.25                               |  | $ | 21.54 | 
|                          |  |                                     |           |                                                          |  |                                    |  |   |      
|                          |  |                                     | 1,132,450 |                                                          |  |                                    |  |   |       | 
|                          |  |                                     |           |                                                          |  |                                    |  |   |      

Restricted Stock Awards

During fiscal 2010, 2009 and 2008, the
compensation committee of the Companys board of directors approved grants 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 based on the fair value of the award as measured on the grant date and 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, 2010, 417,578
shares were unvested.

A summary of the information pursuant to the
Companys Restricted Stock Awards for the years ended July 31, 2010, 2009 and
2008 is as follows:

|                                                             |  |        |          |                                  |   |        |  |                                  |          |        |   |                                  |  |  |         |   |   |       | 
|------------------------------------------------------------ |  | ------ | -------- | -------------------------------- | - | ------ |  | -------------------------------- | -------- | ------ | - | -------------------------------- |  |  | ------- | - | - | ----- | 
|                                                             |  | 2010   |          | 2008                             |   | 2007   | 
|                                                             |  |        |          |                                  |   |        | 
|                                                             |  | Awards |          | Weighted -
 Average
 Award Price |   | Awards |  | Weighted -
 Average
 Award Price |          | Awards |   | Weighted -
 Average
 Award Price | 
|                                                             |  |        |          |                                  |   |        |  |                                  |          |        |   |                                  | 
|Outstanding at beginning of year                             |  |        | 377,400  |                                  | $ | 6.05   |  |                                  | 220,240  |        | $ | 12.34                            |  |  | 141,062 |   |   | 14.15 | 
|Awarded                                                      |  |        | 241,610  |                                  | $ | 5.54   |  |                                  | 291,801  |        | $ | 4.05                             |  |  | 160,140 |   | $ | 11.42 | 
|Vested                                                       |  |        | (192,845 | )                                | $ | 6.46   |  |                                  | (128,941 | )      | $ | 12.11                            |  |  | (70,962 | ) |   | 13.55 | 
|Forfeited                                                    |  |        | (8,587   | )                                | $ | 9.29   |  |                                  | (5,700   | )      | $ | 10.18                            |  |  | (10,000 | ) | $ | 14.73 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |          |        |   |                                  | 
|Outstanding at end of year                                   |  |        | 417,578  |                                  | $ | 5.50   |  |                                  | 377,400  |        | $ | 6.05                             |  |  | 220,240 |   | $ | 12.34 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |          |        |   |                                  | 
|Weighted average market value of awards
 granted during year |  |        |          |                                  | $ | 5.54   |  |                                  |          |        | $ | 4.05                             |  |  |         |   | $ | 11.42 | 
|                                                             |  |        |          |                                  |   |        |  |                                  |          |        |   |                                  | 

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, 2010, 2009, and
2008, 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 and
accrued expense was approximately $1,115,000, $582,000, and $481,000, in fiscal
years 2010, 2009, and 2008, respectively.

F-24

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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, 2010, 2009 and 2008, the
employer contributions related to the Swiss benefit pension plan was
approximately $408,000, $399,000 and $325,000, respectively.

Pension expense at the other international
operations was approximately $36,000, $36,000 and $3,000 for the years ended
July 31, 2010, 2009 and 2008, respectively.

Note 13  Royalty and other income

The Company, has a license agreement with QIAGEN Gaithersburg Inc.
(Qiagen) formerly Digene Corporation that began in 2005, whereby the Company
earns quarterly running royalties on the net sales of Qiagen products subject
to the license until the expiration of the patent on April 24, 2018. During the years ended July 31,
2010, 2009 and 2008, the Company recorded royalty income under the Agreement of
approximately $6.8 million, $6.7 million and $5.5 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
through August 31, 2010 representing the longest expected patent life of the
related patents. At July 31, 2010 and 2009, the Companys balance sheet
includes current deferred revenue of approximately $0.1 million and $0.5
million, respectively relating to the one-time fee. During the years ended July
31, 2010, 2009 and 2008, the Company recorded approximately $3.0 million, $2.7
million and $2.1 million, respectively, in royalties and license fee income under
the Licensing Agreement.

F-25

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

Note 15  Commitments

Leases

The Company leases equipment, office and
laboratory space under several non-cancelable operating leases that expire
between August 2010 and May 2020. 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 $1,470,000, $1,424,000, and $1,395,000 during fiscal years 2010,
2009, and 2008.

Total rent expense incurred by the Company
during fiscal 2010, 2009 and 2008 was approximately $4,076,000, $3,818,000, and
$2,885,000, respectively. Minimum future annual rentals under non-cancelable
operating leases, net of sublease rental income of $398,000 as of July 31,
2010, are as follows:

|                     |  |          |        | 
|-------------------- |  | -------- | ------ | 
|Years ended July 31, |  | In 000s |       
|                     |  |          |       
|2011                 |  | $        | 4,718  | 
|2012                 |  |          | 3,836  | 
|2013                 |  |          | 3,271  | 
|2014                 |  |          | 2,780  | 
|2015                 |  |          | 2,593  | 
|Thereafter           |  |          | 6,640  | 
|                     |  |          |       
|                     |  | $        | 23,838 | 
|                     |  |          |       

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
2012. Aggregate minimum compensation commitments, exclusive of any severance
provisions, for the years ending July 31, 2011 and 2012 are $1,530,000 and
$1,211,000, respectively.

Note 16 Contingencies

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. 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. On March 13, 2009, the court denied defendants summary
judgment motion and stayed the cases pending resolution of an appeal to the
United States Court of Appeals for the Federal Circuit in Enzos Connecticut
litigation against Applera Corporation and Tropix, Inc. On March 26, 2010, the
United States Court of Appeals for the Federal Circuit reversed the District of
Connecticuts grant of summary judgment of invalidity as to various patents at
issue in the Applera case, and remanded the Applera case for further
proceedings consistent with the Federal Circuits opinion.

F-26

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

In light of the Federal Circuits remand of
the Applera case to the District of Connecticut and the impending trial, on May
27, 2010, the court maintained its stay of the cases until further notice.
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 the past five fiscal years. The Company
recorded other income from Perkin Elmer in fiscal 2007.

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. On January 3, 2007, Affymetrix moved for summary
judgment on all counts of the Complaint. A two-day hearing on Affymetrixs
summary judgment motion was held on July 17 through July 18, 2007. On March 13,
2009, the court denied Affymetrixs motion and stayed the case pending
resolution of an appeal in the United States Court of Appeals for the Federal
Circuit in Enzos Connecticut litigation against Applera Corporation and
Tropix, Inc. On March 26, 2010, the United States Court of Appeals for the
Federal Circuit reversed the District of Connecticuts grant of summary
judgment of invalidity as to various patents at issue in the Applera case, and
remanded the Applera case for further proceedings consistent with the Federal
Circuits opinion. In light of the Federal Circuits remand of the Applera case
to the District of Connecticut and the impending trial, on May 27, 2010, the
court maintained its stay of the Affymetrix case until further notice. The
Company has not recorded any revenue from Affymetrix since fiscal 2003.

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. On January
3, 2007, Roche moved for summary judgment on all counts of the Complaint.

F-27

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

During a two-day hearing held on July 17
through July 18, 2007, Roche subsequently withdrew its invalidity portion of
its summary judgment motion. On March 13, 2009, the court denied Roches motion
and stayed the cases pending resolution of an appeal to the United States Court
of Appeals for the Federal Circuit in Enzos Connecticut litigation against
Applera Corporation and Tropix, Inc. On March 26, 2010, the United States Court
of Appeals for the Federal Circuit reversed the District of Connecticuts grant
of summary judgment of invalidity as to various patents at issue in the Applera
case, and remanded the Applera case for further proceedings consistent with the
Federal Circuits opinion.

In light of the Federal Circuits remand of
the Applera case to the District of Connecticut and the impending trial, on May
27, 2010, the court maintained its stay of the Roche case until further notice.
The Company did not record any revenue from Roche since fiscal 2004. 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. 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. On March 26, 2010, the Federal
Circuit issued an order concluding that the claims of U.S. Patent Nos. 5,328,824
and 5,449,767 were not indefinite and that there were genuine issues of material
fact as to anticipation. The Court reversed the district courts summary
judgment of invalidity of those two patents and remanded the case back to the
Connecticut Court. Applera and Tropix then filed a combined petition for panel
rehearing and rehearing en banc. On May 26, 2010, the Federal Circuit issued
an order denying both petitions. The Defendants then filed a motion to stay the
case in Connecticut pending resolution of its impending petition for writ of
certiorari to the U.S. Supreme Court. Judge Arterton has not yet ruled on the
stay motion. Applera filed its petition for certiorari on September 23, 2010.
If the petition is not 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.

F-28

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

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. On
June 5, 2009, the Court granted the defendants motion and dismissed all the
Amended Complaints. The remaining Plaintiffs then filed a notice of appeal to
the Second Circuit Court of Appeals. The appeal is still pending. The Company
believes that the latest complaints in these actions have no merit and that the
appeal also lacks merit. The Company will continue to defend these actions
vigorously.

On April 30, 2009, Shahram K. Rabbani (Mr.
Rabbani), former Secretary, Treasurer and 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 a demand for arbitration and
related statement of claim to the American Arbitration Association. The
statement of claim named the Company, Dr. Elazar Rabbani, the Chairman of the
Board and Chief Executive Officer of the Company, and Barry W. Weiner, the
President, Chief Financial Officer of the Company and a member of the Board.
Mr. Rabbani sought damages of no less than $10 million consisting of
contractually prescribed severance payments (approximately $2.5 million), plus
additional base salary and bonus going forward for several years, compensatory
damages, and punitive damages, including attorneys fees and costs in
connection with these proceedings. 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
January 28, 2010, the Company reached an agreement with Mr. Rabbani, to settle
all of the Claims as well as all of his claims against Dr. Rabbani and Mr.
Weiner. Under the terms of the agreement, Mr. Rabbani discontinued all actions
he commenced against the Company, Dr. Rabbani and Mr. Weiner. In exchange, the
Company paid Mr. Rabbani a lump sum payment of $2.7 million, inclusive of the
aforementioned contractually prescribed severance payment. The parties also
agreed to execute mutual general releases. On February 7, 2010, the parties
executed the mutual general releases and the Company paid the aforementioned
settlement of $2.7 million. During the three months ended January 31,
2010 the Company
recorded a settlement expense of approximately $3.7 million, consisting of the
lump sum payment of $2.7 million and approximately $1.0 million of legal
expenses incurred in connection with the Claims.

On January 8, 2010, Mr. Rabbani commenced, as
plaintiff, an action (the Action) in the Supreme Court of the State of New
York, County of New York, seeking a temporary restraining order and a
preliminary and permanent injunction to enjoin the Company from convening the
Annual Meeting on January 29, 2010. On January 11, 2010, the Company petitioned
to remove the Action to the U.S. District Court for the Southern District of
New York (the Court), which petition was granted. A hearing on the matter was
held on January 12, 2010. On January 27, 2010, the Court entered an order
denying Mr. Rabbanis motion for a preliminary injunction to enjoin the Company
from convening the Annual Meeting on January 29, 2010.

On or about September 22, 2010, Mayflower
Partners, L.P. f/k/a Biomol International, L.P. (Mayflower) filed an action
against Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (together Enzo) in
the United States District Court for the Southern District of New York,
alleging breach of the stock and asset purchase agreement dated as of May 8,
2008 between Enzo and Mayflower (the Agreement). Pursuant to the Agreement,
the Company acquired the assets of Mayflower, and agreed, among other things,
to make certain contingent earn-out payments to Mayflower, accounted for as
additional purchase price consideration, if certain performance thresholds were
met for each of the two annual periods following the closing. Mayflower alleges
that Enzo breached the Agreement by allegedly failing to operate the acquired
business in good faith during the second earn-out period and engaging in
conduct the primary purpose of which was to avoid making a second earn-out
period payment under the Agreement.

F-29

---



ENZO
BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

In addition, Mayflower claims that Enzo
breached the Agreement by allegedly failing to provide the documentation
appropriate to support the calculation of defined financial criteria for the
second earn-out period as required under the Agreement. Enzo denies that it is
in breach of the Agreement and will vigorously defend the suit.

As part of the litigation, Mayflower moved by
Order to Show cause to enjoin the accounting procedure specified under the
Agreement. Mayflowers motion was heard by a District Court Judge on September
27, 2010, who directed that the parties first go forward with the accounting as
provided under the Agreement before moving further with the litigation. As
provided under the Agreement, Mayflowers maximum recovery in the event that it
is successful on either the accounting or in litigation is settlement of the
$2.5 million contingent earn-out in either Enzo common stock or cash, as set
forth in the Agreement, plus attorneys fees.

The Company is party to other claims, legal
actions, complaints, and contractual disputes 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.

F-30

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010 and 2009

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
Therapeutics 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.

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

|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|Year
 ended July 31, 2010                        |  |                |        |              |   |                |   |       |        |              |  
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Product revenues                                 |  | $              | 43,111 |              |   |               |   |       |       |              |   |        |   | $ | 43,111  |  
|Royalty and
 license fee income                  |  |                | 9,793  |              |   |               |   |       |       |              |   |        |   |   | 9,793   |  
|Clinical laboratory
 services                    |  |                |       |              |   |               |   | $     | 44,178 |              |   |        |   |   | 44,178  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                | 52,904 |              |   |               |   |       | 44,178 |              |   |        |   |   | 97,082  |  
|Operating
 expenses:                             |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of product
 revenues                        |  |                | 22,547 |              |   |               |   |       |       |              |   |        |   |   | 22,547  |  
|Cost of clinical
 laboratory services            |  |                |       |              |   |               |   |       | 29,570 |              |   |        |   |   | 29,570  |  
|Research and
 development                        |  |                | 7,202  |              | $ | 2,502          |   |       |       |              |   |        |   |   | 9,704   |  
|Provision for
 uncollectible accounts receivable |  |                | 48     |              |   |               |   |       | 3,432  |              |   |        |   |   | 3,480   |  
|Selling, general
 and administrative and legal   |  |                | 19,945 |              |   |               |   |       | 18,725 |              | $ | 11,471  |   |   | 50,141  |  
|Litigation
 settlement                           |  |                |       |              |   |               |   |       |       |              |   | 3,698   |   |   | 3,698   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total operating
 expenses                        |  |                | 49,742 |              |   | 2,502          |   |       | 51,727 |              |   | 15,169  |   |   | 119,140 |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Operating income
 (loss)                         |  |                | 3,162  |              |   | (2,502         | ) |       | (7,549 | )            |   | (15,169 | ) |   | (22,058 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Other income
 (expense)                          |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Interest                                         |  |                | (5     | )            |   |               |   |       |       |              |   | 24      |   |   | 19      |  
|Other                                            |  |                | (8     | )            |   |               |   |       | 46     |              |   | 6       |   |   | 44      |  
|Foreign exchange
 loss                           |  |                | (266   | )            |   |               |   |       |       |              |   |        |   |   | (266    | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Income (loss)
 before income taxes               |  | $              | 2,883  |              | $ | (2,502         | ) | $     | (7,503 | )            | $ | (15,139 | ) | $ | (22,261 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Depreciation and
 amortization included above    |  | $              | 3,110  |              | $ | 52             |   | $     | 982    |              | $ | 125     |   | $ | 4,269   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Share-based
 compensation included in above:     |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of clinical laboratory services             |  | $              |       |              |   |               |   | $     | 12     |              |   |        |   | $ | 12      |  
|Research and development                         |  |                | 14     |              |   |               |   |       |       |              |   |        |   |   | 14      |  
|Selling, general and administrative and
 legal   |  |                | 114    |              |   |               |   |       | 78     |              | $ | 952     |   |   | 1,144   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total                                            |  | $              | 128    |              |   |               |   | $     | 90     |              | $ | 952     |   | $ | 1,170   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Capital
 expenditures                            |  | $              | 1,450  |              | $ | 11             |   | $     | 1,728  |              | $ | 62      |   | $ | 3,251   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  

F-31

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|Year ended July
 31, 2009                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Product revenues                                 |  | $              | 40,592 |              |   |               |   |       |       |              |   |        |   | $ | 40,592  |  
|Royalty and license fee income                   |  |                | 9,376  |              |   |               |   |       |       |              |   |        |   |   | 9,376   |  
|Clinical laboratory services                     |  |                |       |              |   |               |   | $     | 39,604 |              |   |        |   |   | 39,604  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                | 49,968 |              |   |               |   |       | 39,604 |              |   |        |   |   | 89,572  |  
|Operating expenses:                              |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|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 receivable |  |                |       |              |   |               |   |       | 5,189  |              |   |        |   |   | 5,189   |  
|Selling, general and
 administrative and legal   |  |                | 14,938 |              |   |               |   |       | 15,498 |              | $ | 15,073  |   |   | 45,509  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total operating expenses                         |  |                | 47,559 |              |   | 3,365          |   |       | 46,982 |              |   | 15,073  |   |   | 112,979 |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Operating income (loss)                          |  |                | 2,409  |              |   | (3,365         | ) |       | (7,378 | )            |   | (15,073 | ) |   | (23,407 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Other income (expense)                           |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Interest                                         |  |                |       |              |   |               |   |       | 57     |              |   | 524     |   |   | 581     |  
|Other                                            |  |                | 25     |              |   |               |   |       | 49     |              |   |        |   |   | 74      |  
|Foreign exchange loss                            |  |                | (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 above:     |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of clinical laboratory services             |  |                |       |              |   |               |   | $     | 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   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  

F-32

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|Year ended July
 31, 2008                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|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  |  
|Operating
 expenses:                             |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|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 receivable |  |                |       |              |   |               |   |       | 3,716  |              |   |        |   |   | 3,716   |  
|Selling, general
 and administrative and legal   |  |                | 9,779  |              |   |               |   |       | 14,349 |              | $ | 14,732  |   |   | 38,860  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total operating
 expenses                        |  |                | 32,411 |              |   | 5,164          |   |       | 40,274 |              |   | 14,732  |   |   | 92,581  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Operating income
 (loss)                         |  |                | 3,306  |              |   | (5,164         | ) |       | 1,804  |              |   | (14,732 | ) |   | (14,786 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Other income
 (expense)                          |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Interest                                         |  |                |       |              |   |               |   |       | 239    |              |   | 3,457   |   |   | 3,696   |  
|Other                                            |  |                | 71     |              |   | 100            |   |       |       |              |   |        |   |   | 171     |  
|Foreign exchange
 loss                           |  |                | 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 above:     |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of clinical laboratory services             |  | $              | 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   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  

Geographic financial information is as follows (in thousands):

|                                      |  |      |        |      |   |        |  |   |        | 
|------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|Net sales to
 unaffiliated customers: |  | 2010 |        | 2009 |   | 2008   | 
|                                      |  |      |        |      |   |        | 
|United States                         |  | $    | 82,873 |      | $ | 75,936 |  | $ | 62,243 | 
|Switzerland                           |  |      | 7,037  |      |   | 6,487  |  |   | 9,142  | 
|United Kingdom                        |  |      | 2,507  |      |   | 2,517  |  |   | 2,127  | 
|Other international countries         |  |      | 4,665  |      |   | 4,632  |  |   | 4,283  | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Total                                 |  | $    | 97,082 |      | $ | 89,572 |  | $ | 77,795 | 
|                                      |  |      |        |      |   |        |  |   |        | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Long-lived
 assets at July 31,        |  | 2010 |        | 2009 |   | 2008   | 
|                                      |  |      |        |      |   |        | 
|United States                         |  | $    | 45,439 |      | $ | 45,896 |  | $ | 34,202 | 
|Switzerland                           |  |      | 7,063  |      |   | 7,075  |  |   | 7,437  | 
|United Kingdom                        |  |      | 2,944  |      |   | 3,334  |  |   | 4,193  | 
|Other international countries         |  |      | 1,723  |      |   | 1,923  |  |   | 2,198  | 
|                                      |  |      |        |      |   |        |  |   |        | 
|Total                                 |  | $    | 57,169 |      | $ | 58,228 |  | $ | 48,030 | 
|                                      |  |      |        |      |   |        |  |   |        | 

F-33

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2010 and 2009

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 there. 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          |  | 2010 |        | 2009 |   | 2008   | 
|                  |  |      |        |      |   |        | 
|United States     |  | $    | 38,695 |      | $ | 36,332 |  | $ | 20,165 | 
|Foreign countries |  |      | 14,209 |      |   | 13,636 |  |   | 15,552 | 
|                  |  |      |        |      |   |        |  |   |        | 
|                  |  | $    | 52,904 |      | $ | 49,968 |  | $ | 35,717 | 
|                  |  |      |        |      |   |        |  |   |        | 

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, 2010 and 2009. 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 2010 and 2009 is summarized as follows:

|                               |  |                   |        |                   |   |                 |   |                |        |   |   |        |  
|------------------------------ |  | ----------------- | ------ | ----------------- | - | --------------- | - | -------------- | ------ | - | - | ------ | -
|                               |  | Quarter Ended     |       
|                               |  |                   |       
|Fiscal 2010                    |  | October 31,
 2009 |        | January 31,
 2010 |   | April 30,
 2010 |   | July 31,
 2010 |       
|                               |  |                   |        |                   |   |                 |   |                |       
|Total revenues                 |  | $                 | 25,165 |                   | $ | 23,186          |   | $              | 23,786 |   | $ | 24,945 |  
|Gross profit                   |  |                   | 13,329 |                   |   | 10,885          |   |                | 10,529 |   |   | 10,222 |  
|Loss before income
 taxes      |  |                   | (1,893 | )                 |   | (10,210         | ) |                | (4,401 | ) |   | (5,757 | )
|Net loss                       |  |                   | (1,814 | )                 |   | (10,328         | ) |                | (4,578 | ) |   | (5,513 | )
|Basic loss per
 common share   |  | $                 | (0.05  | )                 | $ | (0.27           | ) | $              | (0.12  | ) | $ | (0.15  | )
|Diluted loss per
 common share |  | $                 | (0.05  | )                 | $ | (0.27           | ) | $              | (0.12  | ) | $ | (0.15  | )
|                               |  |                   |        |                   |   |                 |   |                |        |   |   |        |  
|                               |  | Quarter Ended     |       
|                               |  |                   |       
|Fiscal 2009                    |  | October 31,
 2008 |        | January 31,
 2009 |   | April 30,
 2009 |   | July 31,
 2009 |       
|                               |  |                   |        |                   |   |                 |   |                |       
|Total revenues                 |  | $                 | 21,064 |                   | $ | 20,916          |   | $              | 23,061 |   | $ | 24,531 |  
|Gross profit                   |  |                   | 8,168  |                   |   | 8,011           |   |                | 9,539  |   |   | 10,793 |  
|Loss before income
 taxes      |  |                   | (6,232 | )                 |   | (7,567          | ) |                | (4,226 | ) |   | (5,452 | )
|Net loss                       |  |                   | (6,370 | )                 |   | (7,673          | ) |                | (4,242 | ) |   | (5,279 | )
|Basic loss per
 common share   |  | $                 | (0.17  | )                 | $ | (0.20           | ) | $              | (0.11  | ) | $ | (0.14  | )
|Diluted loss per
 common share |  | $                 | (0.17  | )                 | $ | (0.20           | ) | $              | (0.11  | ) | $ | (0.14  | )

F-34

---



ENZO BIOCHEM, INC 
SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS 
Years ended July 31, 2010, 2009 and 2008 
(in thousands)

|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|-------------------- |  | ------------------------------------------- |  | -------------------------------- |  | ------------------------------- |  | --------------------------- |  | ---------- | --- | ------------------------- | ------ | 
|Year ended
 July 31, |  | Description                                 |  | Balance at
 Beginning
 of period |  | Charged to
 costs
 and expenses |  | Charged
 to other
 accounts |  | Deductions |     | Balance at
 end of period |       
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |       
|2010                 |  | Allowance for
 doubtful accounts receivable |  | 4,786                            |  | 3,480                           |  |                            |  | 5,427      | (1) |                           | 2,839  | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|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    | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2010                 |  | Deferred tax
 valuation allowance           |  | 21,716                           |  | 7,185                           |  |                            |  |           |     |                           | 28,901 | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2009                 |  | Deferred tax
 valuation allowance           |  | 12,965                           |  | 8,751                           |  |                            |  |           |     |                           | 21,716 | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2008                 |  | Deferred tax
 valuation allowance           |  | 9,385                            |  | 3,580                           |  |                            |  |           |     |                           | 12,965 | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2010                 |  | Reserve for
 obsolete inventory             |  | 2,477                            |  | 1,344                           |  |                            |  |           |     |                           | 3,821  | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2009                 |  | Reserve for
 obsolete inventory             |  | 2,109                            |  | 378                             |  |                            |  | 10         | (2) |                           | 2,477  | 
|                     |  |                                             |  |                                  |  |                                 |  |                             |  |            |     |                           |        | 
|2008                 |  | Reserve for
 obsolete inventory             |  | 1,851                            |  | 283                             |  |                            |  | 25         | (2) |                           | 2,109  | 

| |     |                                                 
| | --- | ------------------------------------------------
| | (1) | Write-off of
 uncollectible accounts receivable.
| |     |                                                 
| | (2) | Write-off of
 obsolete inventory                

S-1

---