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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, 2011                         
|                                                                  |                                                                                          
|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 $175,269,000 as of January 31, 2011

The number of shares of the
Companys common stock, $.01 par value, outstanding at October 1, 2011 was
38,596,448.

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 12, 2012 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                                                                                                  | 23  
|Item 1B. | Unresolved
 Staff Comments                                                                                    | 32  
|Item 2.  | Properties                                                                                                    | 33  
|Item 3.  | Legal
 Proceedings                                                                                            | 33  
|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 | 37  
|Item 6.  | Selected
 Financial Data                                                                                      | 38  
|Item 7.  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                        | 38  
|Item 7A. | Quantitative
 and Qualitative Disclosures About Market Risk                                                   | 52  
|Item 8.  | Financial
 Statements and Supplementary Data                                                                  | 52  
|Item 9.  | Changes in and
 Disagreements with Accountants on Accounting and Financial Disclosure                         | 52  
|Item 9A. | Controls and
 Procedures                                                                                      | 53  
|Item 9B. | Other Information                                                                                             | 55  
|         |                                                                                                               |     
|Part III |                                                                                                               |     
|         |                                                                                                               |     
|Item 10. | Directors,
 Executive Officers and Corporate Governance                                                       | 55  
|Item 11. | Executive
 Compensation                                                                                       | 55  
|Item 12. | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters              | 55  
|Item 13. | Certain
 Relationships and Related Transactions, and Director Independence                                    | 55  
|Item 14. | Principal
 Accountant Fees and Services                                                                       | 55  
|         |                                                                                                               |     
|Part IV  |                                                                                                               |     
|         |                                                                                                               |     
|Item 15. | Exhibits and
 Financial Statement Schedules                                                                   | 55  
|         | 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 107 key issued patents
worldwide, and over 300 pending patent applications, along with extensive
enabling technologies and platforms.

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 and augmented by the acquisition of a number of related companies. Information concerning sales by geographic area and business
segments for the years ended July 31, 2011, 2010 and 2009 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 life sciences, pharmaceutical  and clinical research 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.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 45 patents and patent applications.                                                                                                                                                                                                                                                                                                                                                   

2

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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, 2011, 2010 and 2009 (in $000s and
percentages):

|                               |  |      |         |      |     |      |   |        |  |     |   |   |        |  |     |  
|------------------------------ |  | ---- | ------- | ---- | --- | ---- | - | ------ |  | --- | - | - | ------ |  | --- | -
|Fiscal year
 ended July 31,    |  | 2011 |         | 2010 |     | 2009 |  
|                               |  |      |         |      |     |      |  
|                               |  |      |         |      |     |      |  
|Product revenues               |  | $    | 41,830  |      | 41  | %    | $ | 43,111 |  | 44  | % | $ | 40,592 |  | 45  | %
|Royalty and license fee income |  |      | 7,437   |      | 7   |      |   | 9,793  |  | 10  |   |   | 9,376  |  | 11  |  
|Clinical laboratory services   |  |      | 52,762  |      | 52  |      |   | 44,178 |  | 46  |   |   | 39,604 |  | 44  |  
|                               |  |      |         |      |     |      |   |        |  |     |   |   |        |  |     |  
|Total                          |  | $    | 102,029 |      | 100 | %    | $ | 97,082 |  | 100 | % | $ | 89,572 |  | 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.

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.

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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.

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

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

Advances
in gene analysis have provided the information and tools necessary to develop
drugs that interfere with the disease process at the genetic level. For a broad
spectrum of diseases, this approach can be more precise and effective than interfering
with downstream events such as protein synthesis or enzyme activation.
Therapies targeting genetic processes are called gene medicines. There are two
fundamental approaches to gene medicines, synthetic and genetic.

Synthetic
gene medicine involves the administration of synthetic nucleic acid sequences
called oligos that are designed to bind to, and thus deactivate, ribonucleic
acid (RNA) produced by a specific gene.

To
date, this approach has demonstrated limited success. Since a single cell may
contain thousands of strands of RNA, large amounts of oligos are necessary to
shut down the production of unwanted proteins. Also, they are quickly
metabolized or eliminated by the body. Consequently, large quantities of oligos
must be delivered in multiple treatments, which can be both toxic to the body
as well as costly.

4

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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.

We enter into research collaborations with leading academic and other research centers to augment our core expertise on specific
programs.  Our clinical trial of Optiquel® is a direct result of such a research collaboration.  We acquired the rights and
intellectual property to this candidate drug and technology intended for use in the treatment of autoimmune uveitis.  Working with
scientists and physicians in the United States and abroad, Enzo continued drug development to the stage of a clinical trial now being
conducted in collaboration with the National Eye Institute of the National Institutes of Health in Washington DC.

We have research and clinical collaborations with other institutions including, Hadassah University Medical Center in Jerusalem,
Israel relating to our immune regulation technology. Through collaborations such as these 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. There can be no assurance that any of these collaborative projects will be successful.

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

Apply our biomedical research technology
to the clinical diagnostics market

We
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), a branch office in France 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.

5

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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.

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 2011, we were issued 28
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.                 

6

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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

One area of Enzos therapeutic platform development is related to the development of pharmaceutical agents that affect
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 can then become targets for Enzos proprietary technology generating system. Our technology is capable of
generating active compounds that range from orally delivered small molecules to
peptides, oligonucleotides or antibodies. We have performed pioneering work on
the structure and function of LRP and its ligands, developed a screening
technology to identify active compounds, and have synthesized proprietary
molecules capable of producing biological effects in cell-based systems and
animal models of disease. Specifically, this system allows the Company to
successfully:

| |                                                                                                                                                                                                                                                                             |                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                            | generate
 biological, genetic, and structural information concerning LRP;           
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | determine the
 structure of LRP docking sites of its ligands;                       
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | identify the
 functionally important residues via site-directed mutagenesis;        
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | build the fine
 structure map and employ it as the basis for virtual screening;     
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | show that
 compounds specifically bind to wild type LRP5, but not to mutated LRP5;  
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | generate a
 cell-based assay capable of identifying active compounds and;           
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | synthesize
 proprietary molecules that are active in animal models of disease.      
| |                                                                                                                                                                                                                                                                             |                                                                                     
| | Through this
 novel, proprietary, functional screening system, we have identified small
 molecules capable of reversing sclerostin-mediated inhibition of Wnt
 signaling. Preclinical animal studies with several candidate lead compounds
 produced the following results:
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | significant
 increases in total and femoral bone density through new bone formation;
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | significant
 reduction in alveolar bone loss and;                                   
| |                                                                                                                                                                                                                                                                             |                                                                                     
| |                                                                                                                                                                                                                                                                            | significant
 reduction in bone resorption.                                          

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

7

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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 continue to explore 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. This platform technology is being developed as a means to manage
immune-mediated diseases, such as 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.                                            

We have
developed an immunomodulator agent EGS21 as a potential therapeutic for
treating immune mediated disorders. EGS 21 is a glycolipid 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.

8

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| |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

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 platform technologies. Our therapeutic programs are described below.

9

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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.

Enzo acquired the 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.

Based on the results from the German study, we entered into a Cooperative Research and Development Agreement (CRADA) with the
National Eye Institute (NEI), part of the National Institutes of Health (NIH), for further development of our candidate compound
Optiquel® for the treatment of autoimmune uveitis. In October 2010, we announced the initiation of a human clinical trial. Currently,
patients are being enrolled and treated. Under the terms of the CRADA, the NEI and Enzo will share the development costs of the
studies and Enzo will supply its proprietary compound, Optiquel. 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. The clinical trial is currently
ongoing at the NEI to assess the safety and efficacy of Optiquel®. The study is designed as a randomized, double-masked,
placebo-controlled proof-of-concept study with a long-term follow-up.

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 Alequel, Enzos proprietary candidate drug based on  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 extracted during a routine colonoscopy. The
Enzo protein extract is administered to the patient orally. Clinical results indicated that the study met its primary and secondary
endpoints. Although not statistically significant, the results 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 conclude that Alequel may be a safe
and effective method for treatment of patients with moderate to severe Crohns disease.

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.

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.

10

---



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.

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.

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, 2011, 2010, and 2009, respectively, approximately 52%, 46% and 44% of the Companys revenues were
derived from the clinical laboratory. At July 31, 2011 and 2010, respectively, approximately 51% and 45% 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,
2011, 2010 and 2009 were approximately 22%, 25% and 23%, respectively, of the clinical laboratory segments total
revenue. We estimate contractual adjustment based on significant assumptions
and judgments, such as the interpretation of payer reimbursement policies which
bears the risk of change. The estimation process is based on the experience of
amounts approved as reimbursable and ultimately settled by payers, versus the
corresponding gross amount billed to the respective payers. The contractual
adjustment is an estimate that reduces gross revenue, based on gross billing
rates, to amounts expected to be approved and reimbursed.

11

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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 approximately 22%, 25% and 25% of the
Clinical Labs segments net revenue for the fiscal year ended July 31, 2011, 2010 and 2009, 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.

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 2011 and 2010,
approximately 22% and 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.

12

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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, 2011, 2010 and 2009, the Company incurred
    costs of approximately $7,806,000, $9,704,000 and $9,220,000, respectively,
    for research and development activities.

Internal
Research Programs

Our
professional staff, including 84 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), a branch office 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.

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.

13

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Intellectual
Property

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

At the end
of fiscal 2011 we owned or licensed over 100 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.

In such
cases, we will seek to secure exclusive licenses. In other instances, we might
have an obligation to pay royalties to, or reach a royalty arrangement with, a
third party in consideration of our use of developments of such third party.

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REGULATION
AFFECTING OUR BUSINESSES

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.

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

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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.

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.

Privacy
regulations and 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 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.

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We believe
that we are in compliance with these OSHA requirements. Our failure to comply
with those regulations and requirements could subject us to tort liability,
civil fines, criminal penalties and/or other enforcement actions.

Other
Regulation

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

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

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.

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.

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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.

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.

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Pre-clinical
safety tests must be conducted by laboratories that comply with FDA regulations
governing Good Laboratory Practices (GLP). The results of those studies are
submitted with information characterizing the product and its manufacturing process
and controls as a part of an investigational new drug (IND) application,
which the FDA must satisfactorily review before human clinical trials of an
investigational drug can start. The IND application includes a detailed
description of the clinical investigations to be undertaken in addition to
other pertinent information about the product, including descriptions of any
previous human experience and the companys future plans for studying the drug.

In order to
commercialize any products, we (as the sponsor) file an IND and will be
responsible for initiating and overseeing the clinical studies to demonstrate
the safety and efficacy necessary to obtain FDA marketing approval of any such
products. For INDs that we sponsor, we will be required to select qualified
clinical sites (usually physicians affiliated with medical institutions) to
supervise the administration of the investigational product. It is the
sponsors responsibility to ensure that the investigations are conducted and
monitored in accordance with FDA regulations, Good Clinical Practices (GCP) and
the general investigational plan and protocols contained in the IND. This may
be done using in-house trained personnel or an outside contract research
organization (CRO).

Each
clinical study is reviewed and approved by an Institutional Review Board (IRB).
The IRB will consider, among other things, ethical factors and the safety of
human subjects. Clinical trials are normally conducted in three phases,
although the phases might overlap. Phase I trials, concerned primarily with the
safety and tolerance of the drug, and its pharmacokinetics (or how it behaves
in the body including its absorption and distribution) involve fewer than 100
subjects. Phase II trials normally involve a few hundred patients and are
designed primarily to demonstrate preliminary effectiveness and the most
suitable dose or exposure level for treating or diagnosing the disease or
condition for which the drug is intended, although short-term side effects and
risks in people whose health is impaired may also be examined. Phase III trials
are expanded, adequate and well-controlled clinical trials with larger numbers
of patients and are intended to gather the additional information for proper
dosage and labeling of the drug. Clinical trials generally take two to five
years, but the period may vary. Certain regulations promulgated by the FDA may
shorten the time periods and reduce the number of patients required to be
tested in the case of certain life-threatening diseases, which lack available
alternative treatments.

The FDA
receives reports on the progress of each phase of clinical testing, and it may
require the modification, suspension or termination of clinical trials if an
unwarranted risk is presented to patients. Human gene medicine products are a
new category of therapeutics.

There can
be no assurance regarding the length of the clinical trial period, the number
of patients that the FDA will require to be enrolled in the clinical trials in
order to establish the safety, purity and potency of human gene medicine
products, or that the clinical and other data generated will be acceptable to
the FDA to support marketing approval.

After
completion of clinical trials of a new product, FDA marketing approval must be
obtained before the product can be sold in the United States. If the product is
regulated as a new biologic, CBER requires the submission and approval of a
Biologics License Application (BLA) before commercial marketing of the biologic
product. If the product is classified as a new drug, we must file a New Drug
Application (NDA) with CDER and receive approval before commercial marketing
of the drug. The NDA or BLA must include results of product development,
pre-clinical studies and clinical trials. The testing and approval processes
require substantial time and effort and there can be no assurance that any
approval will be granted on a timely basis, if at all. The median time to
obtain new product approvals after submission to the FDA is approximately 12
months. If questions arise during the FDA review process, approval can take
longer. Before completing its review, the FDA may seek guidance from an
Advisory Panel of outside experts at a public or closed meeting. While the advice
of these committees is not binding on the FDA, it is often followed.
Notwithstanding the submission of relevant data, the FDA might ultimately
decide that the NDA or BLA does not satisfy its regulatory criteria for
approval and, thus, reject the application, refuse to approve it, or require
additional clinical, preclinical or chemistry studies. Even after FDA
regulatory approval or licensure, a marketed drug product is subject to
continual review by the FDA.

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.

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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.

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 The Life Sciences segment has logistics
operations in Lausen, Switzerland and in San Diego, and a reagent and kit
manufacturing facility 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, 2011, we employed 535 full-time and 71 part-time employees. Of the
full-time employees, 170 were engaged in research, development, manufacturing,
and marketing of research products, 6 in therapeutics research, 307 in
performing testing, marketing and billing our clinical laboratories services
and 52 in finance, legal, administrative and executive functions. Our
scientific staff, including 84 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.

21

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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

22

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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 $12.9 million, $22.2 million and $23.6 million for the fiscal
years ended July 31, 2011, 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
five 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), a branch office in France 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.

24

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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, 2011, goodwill and other intangible assets with indefinite lives
represented approximately 34% 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.

25

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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.

26

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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 2011, approximately 22% 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.

27

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

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

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

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

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

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

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

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.                                                                                                                                                                                  

28

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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.

29

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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 26%
of total revenues in fiscal 2011. 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.

30

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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.

31

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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

32

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Item 2. Properties

The
following are the principal facilities of the Company:

|                     |  |                                           |  |                |  |              |  |               
|-------------------- |  | ----------------------------------------- |  | -------------- |  | ------------ |  | --------------
|Location             |  | Primary use                               |  | Segments       |  | Leased/owned |  | Square footage
|                     |  |                                           |  |                |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|Farmingdale, NY      |  | Clinical
 laboratory and research         |  | Clinical Labs, |  | Leased       |  | 43,000        
|(Note 1)             |  |                                           |  | Therapeutics   |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|Farmingdale, NY      |  | Manufacturing,
 research, sales           |  | Life Sciences, |  | Owned        |  | 22,000        
|                     |  | and administrative
 office                |  | Other          |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|New York, NY         |  | Corporate
 headquarters                   |  | Other          |  | Leased       |  | 11,300        
|(Note 2)             |  |                                           |  |                |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|San Diego, CA        |  | Sales,
 administration and distribution   |  | Life Sciences  |  | Leased       |  | 6,400         
|(Note 3)             |  |                                           |  |                |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|Lausen,
 Switzerland |  | Operational
 headquarters in              |  | Life Sciences  |  | Leased       |  | 18,829        
|(Note 4)             |  | Europe, including
 sales and distribution |  |                |  |              |  |               
|                     |  |                                           |  |                |  |              |  |               
|Ann Arbor,
 Michigan |  | Sales,
 manufacturing, research,          |  | Life Sciences  |  | Leased       |  | 26,820        
|(Note 5)             |  | administration and
 distribution          |  |                |  |              |  |               

| |                                                                                                                                                                                                                                                                                     |                                                                                                                                                                              
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 and was amended and extended through February 2014.                       
| |                                                                                                                                                                                                                                                                                     |                                                                                                                                                                              
| | Note 4                                                                                                                                                                                                                                                                              |  The lease for
 this property was acquired in connection with the Axxora acquisition in May
 2007 and was amended and extended through April 2013.                          
| |                                                                                                                                                                                                                                                                                     |                                                                                                                                                                              
| | Note 5                                                                                                                                                                                                                                                                              |  The lease for
 this property was acquired in connection with the
 Assay Designs acquisition in March 2009 and was amended and extended through
 April 2016.                
| |                                                                                                                                                                                                                                                                                     |                                                                                                                                                                              
| | We
 believe the current facilities are suitable and adequate for the Companys
 current operating needs for its clinical laboratories, life science and
 therapeutics segments and that the production capacity in various locations
 is sufficient to manage product requirements.

Item 3. Legal
Proceedings

In
October 2002, the Company filed suit in the United States District Court of the
Southern District of New York against Amersham plc, Amersham Biosciences,
Perkin Elmer, Inc., Perkin Elmer Life Sciences, Inc., Sigma-Aldrich
Corporation, Sigma Chemical Company, Inc., Molecular Probes, Inc. and Orchid
Biosciences, Inc. In January 2003, the Company amended its complaint to include
defendants Sigma Aldrich Co. and Sigma Aldrich, Inc. The counts set forth in
the suit are for breach of contract; patent infringement; unfair competition
under state law; unfair competition under federal law; tortious interference
with business relations; and fraud in the inducement of contract. The complaint
alleges that these counts arise out of the defendants breach of
distributorship agreements with the Company concerning labeled nucleotide
products and technology, and the defendants infringement of patents covering
the same. In April, 2003, the court directed that individual complaints be
filed separately against each defendant. The defendants have answered the
individual complaints and asserted a variety of affirmative defenses and
counterclaims. Fact discovery is ongoing. The court issued a claim construction
opinion on July 10, 2006. The Company and Sigma Aldrich (Sigma) entered into
a Settlement Agreement and Release effective September 15, 2006 (the
Agreement). Pursuant to the Agreement, the Companys litigation with Sigma
was dismissed and the Company recognized $2 million on settlement in the
quarter ending October 31, 2006. 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.

33

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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. On
September 23, 2010, Applera petitioned the Supreme Court of the United States
for a writ of certiorari, seeking review of the Federal Circuits ruling. On
June 21, 2011, the Supreme Court denied Appleras petition for certiorari.
Consequently, on August 16, 2011, the court lifted the stay in the Amersham
action. On August 26, 2011, the court allowed the defendants to renew their
motions for summary judgment related only to alleged non-infringement of some
of the patents in suit. Defendants initial brief is to be filed by October 11,
2011, and all briefing is to be completed by December 16, 2011. The Company
does not believe the defendants motion has merit, and will oppose it
vigorously.

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. On September 23, 2010, Applera petitioned the Supreme Court of the
United States for a writ of certiorari, seeking review of the Federal Circuits
ruling. On June 21, 2011, the Supreme Court denied Appleras petition for
certiorari. Consequently, on August 16, 2011, the court lifted the stay in the
Affymetrix action. On August 26, 2011, the court allowed Affymetrix to renew
its motion for summary judgment related only to alleged non-infringement of one
patent in suit. Affymetrixs initial brief is to be filed by October 11, 2011,
and all briefing is to be completed by December 16, 2011. The Company does not
believe Affymetrixs motion has merit, and will oppose it vigorously.

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 patents. 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. During a two-day
hearing held on July 17 through July 18, 2007, Roche subsequently withdrew its
invalidity portion of its summary judgment motion.

34

---



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. On September
23, 2010, Applera petitioned the Supreme Court of the United States for a writ
of certiorari, seeking review of the Federal Circuits ruling. On June 21,
2011, the Supreme Court denied Appleras petition for certiorari. Consequently,
on August 16, 2011, the court lifted the stay in the Roche action. On August 26,
2011, the court allowed Roche to renew its motion for summary judgment related
only to alleged non-infringement of some of the patents in suit. Roches
initial brief is to be filed by October 11, 2011, and all briefing is to be
completed by December 16, 2011. The Company does not believe Roches motion has
merit, and will oppose it vigorously.

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. Applera filed a petition with the U.S.
Supreme Court for a writ of certiorari on September 23, 2010. On June 19,
2011, the Court denied that petition. The case is currently scheduled for trial
in February of 2012. 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.

On
or about March 6, 2002, an action was commenced against the Company and certain
officers and directors, by an investor in the Company, Lawrence Glazer and on
behalf of others, who had filed for bankruptcy protection. The complaint
alleged securities and common law fraud and breach of fiduciary duty and sought
in excess of $150 million in damages. On August 22, 2002, the complaint was
voluntarily dismissed; however a new substantially similar complaint was filed
at the same time. On October 21, 2002, the Company and the other defendants
filed a motion to dismiss the complaint, and the plaintiffs responded by
amending the complaint and dropping their claims against defendants Keating and
Yates. On November 18, 2002, the Company and the other defendants again moved
to dismiss the Amended Complaint. On July 16, 2003, the Court issued a
Memorandum Opinion dismissing the Amended Complaint in its entirety with
prejudice. Plaintiffs thereafter moved for reconsideration but the Court denied
the motion on September 8, 2003. Plaintiffs thereafter appealed the decision to
the United States Court of Appeals for the Fourth Circuit. On March 21, 2005,
the Fourth Circuit affirmed the lower Courts prior dismissal of all claims
asserted in the action with the sole exception of a portion of the claim for
common law fraud and remanded that remaining portion of the action to the U.S.
District Court for the Eastern District of Virginia. On May 20, 2005,
defendants again moved the District Court to dismiss the sole remaining claim
before it.

35

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On
July 14, 2005, the District Court granted defendants renewed motion to
dismiss. On July 29, 2005, Plaintiffs moved to amend their Complaint and for
reconsideration. On August 19, 2005, the Court denied Plaintiffs motion to
amend and entered final judgment dismissing the Complaint. Plaintiffs then
appealed the order and judgment to the Fourth Circuit. On September 21, 2006,
the United States Court of Appeals for the Fourth Circuit affirmed the
dismissal of the Complaint. Thereafter, in March 2007, the United States
Supreme Court denied the Glasers Petition for Certiorari. Nevertheless, on
January 14, 2011, many years after it was finally dismissed, Glaser filed a
motion for reconsideration of the dismissal of his case with the United States
District Court for the Eastern District of Virginia, along with a motion for
sanctions, claiming in pertinent part that the Court was defrauded. The Company
filed papers in opposition to the motion and, on April 1, 2011, the Court
denied Glasers motion. Glaser subsequently appealed that dismissal to the
Fourth Circuit. On October 4, 2011, his appeal was denied. The Company intends
to defend vigorously any further effort by Glaser to re-open this long ago
dismissed action.

In
January 2006, three actions were filed against the Company and certain of its
officers and directors by Francis Scott Hunt and others. These actions were
filed by the same attorney who had previously filed a virtually identical claim
against the Company and certain of its officers and directors in the Eastern
District of Virginia. These actions are in many respects identical to the Glaser
action. The first action (Hunt) was filed on or about January 10, 2006,
on behalf of seven alleged shareholders. The second action (Roberts) was filed
on or about January 11, 2006, and was ultimately consolidated at the Companys
request with the Hunt Action before Judge Scheindlin. One of the plaintiffs in
the first action, Paul Lewicki, subsequently withdrew his claim for procedural
reasons and re-filed a separate virtually identical complaint (the third action
listed above) on or about August 21, 2006, and the Lewicki Action was also
consolidated before Judge Scheindlin. The pleadings in all three actions are
virtually identical and seek to set forth only a claim for common law fraud,
based on the same essential allegations set forth in the Glaser Action, i.e.,
that there was a fraudulent scheme approximately ten years ago to pump and dump
Enzo securities. The Company and the other defendants moved to dismiss all of
the Complaints and that motion was granted by Judge Scheindlin. The Plaintiffs
then amended their Complaints and the Hunts moved for reconsideration. The
Company and the other defendants opposed the motion for reconsideration and
moved again to dismiss the Amended Complaints that were filed. The Hunts
motion for reconsideration was denied and two of the other Plaintiffs (the
McMahons) thereafter withdrew their complaint with prejudice voluntarily. After
further delays during which the remaining Plaintiffs hired new counsel,
Plaintiffs proposed yet another revised Complaint. The defendants motions to
dismiss the latest version of the Complaints of the remaining Plaintiffs was
granted in part and denied in part. The remaining plaintiffs and defendants,
including Enzo Biochem, Inc., then proceeded with discovery. Following the
completion of discovery, the defendants moved for summary judgment. On June 15,
2009, Judge Scheindlin granted the remaining defendants motion for summary judgment
and dismissed the complaints. The remaining Plaintiffs then filed a notice of
appeal to the Second Circuit Court of Appeals. On August 30, 2011, the Second
Circuit denied the appeal. The remaining Plaintiffs then moved for a rehearing,
and that motion is currently pending. The Company continues to believe that
these actions have no merit whatsoever and expects the Second Circuit to
reaffirm the denial of their appeal. In any event, 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. 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 U.S. District Court Judge on
September 27, 2010, who directed that the parties first go forward with the
accounting procedure, as provided under the Agreement, before moving further
with the litigation. The parties were unable to resolve the dispute through the
accounting procedure. On January 27, 2011, Mayflower filed an amended
complaint. On February 25, 2011, Enzo filed an answer to the amended complaint
and on March 4, 2011 filed an amended counterclaim seeking fees and expense of
the suit as provided under the Agreement. As provided under the Agreement,
Mayflowers maximum contingent earn-out was $2.5 million payable in either Enzo
common stock or cash. The Company and Mayflower are currently negotiating a
resolution to the second and final earn-out dispute and based on such
negotiation the Company has accrued a $1.15 million settlement, expected to be
in cash, which has been recorded in Goodwill as additional purchase price
consideration. The Company recorded the liability in Other Current Liabilities.

36

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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.

Item 4. (Removed and Reserved)

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.

|                                                     |  |      |      |     |   |      | 
|---------------------------------------------------- |  | ---- | ---- | --- | - | ---- | 
|2011 Fiscal Year
 (August 1, 2010 to July 31, 2011): |  |      |      |     |   |      | 
|                                                     |  | High |      | Low |  
|                                                     |  |      |      |     |  
|                                                     |  |      |      |     |   |      | 
|1st Quarter                                          |  | $    | 4.62 |     | $ | 3.37 | 
|2nd Quarter                                          |  | $    | 5.80 |     | $ | 4.16 | 
|3rd Quarter                                          |  | $    | 5.09 |     | $ | 3.46 | 
|4th Quarter                                          |  | $    | 4.74 |     | $ | 3.52 | 
|                                                     |  |      |      |     |   |      | 
|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 | 

As of
September 30, 2011, the Company had approximately 946 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, 2011.

|                                                            |  |                                                                                                      |         |                                                                             |   |                                                                                                                                                         |  |  |           | 
|----------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- | ------- | --------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --------- | 
|Plan Category                                               |  | Number of securities
 to be issued upon
 exercise of
 outstanding options,
 warrants and rights
 (a) |         | Weighted-averageexercise price ofoutstanding 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     |  |                                                                                                      | 785,124 |                                                                             | $ | 14.53                                                                                                                                                   |  |  | 2,818,300 | 
|Equity compensation plans not approved by
 security holders |  |                                                                                                      |        |                                                                             |   |                                                                                                                                                        |  |  |          | 
|                                                            |  |                                                                                                      |         |                                                                             |   |                                                                                                                                                         |  |  |           | 
|Total                                                       |  |                                                                                                      | 785,124 |                                                                             | $ | 14.53                                                                                                                                                   |  |  | 2,818,300 | 
|                                                            |  |                                                                                                      |         |                                                                             |   |                                                                                                                                                         |  |  |           | 

37

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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 2007 through 2011 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                            |  |                                                                                 | 2011    |   |   | 2010    |   |   | (1)
        
    2009 |   |   | (2)
        
    2008 |   |   | (3)
        
    2007
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Revenues                                     |  | $                                                                               | 102,029 |   | $ | 97,082  |   | $ | 89,572                |   | $ | 77,795                |   | $ | 52,908               
|Operating loss                               |  | $                                                                               | (12,928 | ) | $ | (22,058 | ) | $ | (23,407               | ) | $ | (14,786               | ) | $ | (20,966              
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Net loss                                     |  | $                                                                               | (12,960 | ) | $ | (22,233 | ) | $ | (23,564               | ) | $ | (10,653               | ) | $ | (13,260              
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Basic and diluted net loss per common share: |  | $                                                                               | (0.34   | ) | $ | (0.59   | ) | $ | (0.63                 | ) | $ | (0.29                 | ) | $ | (0.38                
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|                                             |  | July 31,
    (in thousands)                                                     |        
|Financial
    Position                       |  |                                                                                 | 2011    |   |   | 2010    |   |   | (4)
        
    2009 |   |   | (4)
        
    2008 |   |   | (4)
        
    2007
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Working capital                              |  | $                                                                               | 33,670  |   | $ | 42,181  |   | $ | 60,518                |   | $ | 92,392                |   | $ | 113,850              
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Total assets                                 |  | $                                                                               | 109,474 |   | $ | 115,245 |   | $ | 133,128               |   | $ | 154,522               |   | $ | 159,002              
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Long term obligations                        |  | $                                                                               | 96      |   |   | —       |   |   | —                     |   |   | —                     |   |   | —                    
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      
|Stockholders’ equity                         |  | $                                                                               | 88,715  |   | $ | 97,016  |   | $ | 116,781               |   | $ | 138,289               |   | $ | 141,894              
|                                             |  |                                                                                 |         |   |   |         |   |   |                       |   |   |                       |   |   |                      

Notes to Selected Financial Data

(1)On March 12, 2009, Enzo Life Sciences Inc. acquired Assay Designs,
Inc. (“ADI”). As such, the operating results of ADI are included in the consolidated operating results beginning March
12, 2009.

(2)On May 8, 2008, Enzo Life Sciences Inc. acquired Biomol International,
LP. (“Biomol”). As such, the operating results of Biomol are included in the consolidated operating results beginning
May 8, 2008.

(3)On May 29, 2007, Enzo Life Sciences Inc. acquired Axxora Life Sciences,
Inc. (“Axxora”). As such, the operating results of Axxora are included in the consolidated operating results beginning
May 29, 2007.

(4)The above acquisitions
were primarily paid using cash.

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.

38

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

The
following table summarizes the sources of revenues for the fiscal years ended
July 31, 2011, 2010 and 2009, (in $000s and percentages):

|                               |  |      |         |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|------------------------------ |  | ---- | ------- | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
|Fiscal year
 ended July 31,    |  | 2011 |         | 2010 |  | 2009 |  
|                               |  |      |         |      |  |      |  
|Product revenues               |  | $    | 41,830  |      |  | 41   | % | $ | 43,111 |  |  | 44  | % | $ | 40,592 |  |  | 45  | %
|Royalty and license fee income |  |      | 7,437   |      |  | 7    |   |   | 9,793  |  |  | 10  |   |   | 9,376  |  |  | 11  |  
|Clinical laboratory services   |  |      | 52,762  |      |  | 52   |   |   | 44,178 |  |  | 46  |   |   | 39,604 |  |  | 44  |  
|                               |  |      |         |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
|Total                          |  | $    | 102,029 |      |  | 100  | % | $ | 97,082 |  |  | 100 | % | $ | 89,572 |  |  | 100 | %
|                               |  |      |         |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  

39

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Results of Operations

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

|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------------------- | - | -------- | ------ | - |  | ---- | -
|                                                 |  | 2011 |         | 2010 |   | Increase
 (Decrease) |   | % Change |       
|                                                 |  |      |         |      |   |                      |   |          |       
|Revenues:                                        |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Product revenues                                 |  | $    | 41,830  |      | $ | 43,111               |   | $        | (1,281 | ) |  | (3   | )
|Royalty and
 license fee income                  |  |      | 7,437   |      |   | 9,793                |   |          | (2,356 | ) |  | (24  | )
|Clinical
 laboratory services                    |  |      | 52,762  |      |   | 44,178               |   |          | 8,584  |   |  | 19   |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Total revenues                                   |  |      | 102,029 |      |   | 97,082               |   |          | 4,947  |   |  | 5    |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Operating
 expenses:                             |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Cost of product
 revenues                        |  |      | 22,137  |      |   | 22,547               |   |          | (410   | ) |  | (2   | )
|Cost of clinical
 laboratory services            |  |      | 31,682  |      |   | 29,570               |   |          | 2,112  |   |  | 7    |  
|Research and
 development                        |  |      | 7,806   |      |   | 9,704                |   |          | (1,898 | ) |  | (20  | )
|Selling, general,
 and administrative            |  |      | 45,191  |      |   | 48,395               |   |          | (3,204 | ) |  | (7   | )
|Provision for
 uncollectible accounts receivable |  |      | 4,431   |      |   | 3,480                |   |          | 951    |   |  | 27   |  
|Legal                                            |  |      | 3,710   |      |   | 1,746                |   |          | 1,964  |   |  | 112  |  
|Litigation
 settlement and related legal costs   |  |      |        |      |   | 3,698                |   |          | (3,698 | ) |  | (100 | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Total operating
 expenses                        |  |      | 114,957 |      |   | 119,140              |   |          | (4,183 | ) |  | (4   | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Operating loss                                   |  |      | (12,928 | )    |   | (22,058              | ) |          | 9,130  |   |  | 41   |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Other income
 (expense):                         |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Interest                                         |  |      | 11      |      |   | 19                   |   |          | (8     | ) |  | (42  | )
|Other                                            |  |      | 45      |      |   | 44                   |   |          | 1      |   |  | 2    |  
|Foreign exchange
 gain (loss)                    |  |      | 49      |      |   | (266                 | ) |          | 315    |   |  | 118  |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  
|Loss before income
 taxes                        |  | $    | (12,823 | )    | $ | (22,261              | ) | $        | 9,438  |   |  | 42   |  
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |      |  

Consolidated
Results:

The 2011
period and the 2010 period refer to the fiscal year ended July 31, 2011 and
2010, respectively.

Product
revenues were $41.8 million in the 2011 period compared to $43.1 million in the
2010 period, a decrease of $1.3 million or 3% due to a decline of $1.5 million
or 3.5% in organic sales. The decline is attributed to the ongoing strategy to
increase direct sales and rationalize certain distribution business and
negative impact from the Japanese market. The decline is offset by a 0.5% positive impact from foreign
currency transactions.

Royalty
and license fee income was $7.4 million in the 2011 period compared to $9.8
million in the 2010 period, a decrease of $2.4 million or 24%. Royalties are
primarily earned from the reported sales of Qiagen products subject to a
license agreement. During both the 2011 and 2010 periods, the Company
recognized royalties of approximately $6.8 million from Qiagen. The 2011 period
decrease is due to Abbotts notification that they had made a final payment
under a license agreement since they are not aware of any non-expired patents
covered under the license agreement. Abbott and the Company are in
communication as to patents covered under the license agreement which remains
in full force. During the 2011 period, the Company recognized royalties and license
fees from the Abbott agreement of approximately $0.4 compared to $3.0 million
in the 2010 period. There are no direct expenses relating to royalty and licensing
income.

Clinical
laboratory revenues during the 2011 period were $52.8 million compared to $44.2
million in the 2010 period. The 2011 periods increase over the 2010 period
was $8.6 million or 19% due to organic growth of 11% and an increase of
8% in revenue related to a new payer contract with Empire Blue Cross of New
York.

40

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The cost
of product revenues during the 2011 period was $22.1 million compared to $22.5
million in the 2010 period, a decrease of $0.4 million or approximately 2%.
Although product sales declined during the 2011 period, cost of product
revenues was negatively impacted by compensation costs, foreign exchange, other inventory adjustments
and changes in cost allocations to the cost of production of
$1.7 million, offset by a charge in
the prior year for excess and obsolete inventory that arose primarily from the
strategic realignment of marketing efforts for core products of $1.3 million.

The cost
of clinical laboratory services during the 2011 period was $31.7 million as
compared to $29.6 million in the 2010 period, an increase of $2.1 million or
7%. The Company incurred increased costs due to higher reagent costs and
supplies of $1.7 million, primarily due to increased service volume and reagent
costs for certain tests that were previously sent to outside reference labs,
higher laboratory personnel and related costs of $0.2 million primarily due to
incremental increases in service volume and increases in the other lab
operating costs of $0.3 million offset by a decrease of outside reference lab
costs of $0.1 million. In the 2011 period the gross profit margin improved from
33% to 40% due to increased revenues, process improvements and the positive
impact of greater service volume on fixed costs coverage.

Research
and development expenses were approximately $7.8 million during the 2011
period, compared to $9.7 million in the 2010 period, a decrease of $1.9 million
or 20%. The decrease was principally attributed to lower costs of $1.4 million
at Enzo Life Sciences primarily due the realignment of the R&D workforce
that occurred in July 2010. There was a $0.2 million decline in clinical trial
and related activities and $0.3 million in payroll costs at the Therapeutics
segment.

Selling,
general and administrative expenses were approximately $45.2 million during the
2011 period as compared to $48.4 million in the 2010 period, a decrease of $3.2
million or 7%. The Enzo Life Sciences segment decreased by $1.9 million
principally comprised of a decline of approximately $1.1 million of
discretionary marketing costs due to refocused spending and decreases of $1.0
million related to reallocation and realignment of personnel offset by
increases in payroll and related costs of $0.2 million. The Clinical Lab
segments selling general and administrative decreased by $0.1 million
primarily due to a decline in payroll and related benefits of $0.8 million
offset by an increase in sales commission of $0.5 million as a result of
increased service revenues and an increase in other expenses of $0.2 million.
The Other segments selling general and administrative decreased by $1.2
million, primarily due to decreases in outside consulting costs of $0.8
million, professional fees of $0.4 million and other operating expenses of $0.1
million, directly related to planned cost reductions effective August 1, 2010
and other expense improvements, offset by increases of $0.1 million in payroll
and payroll related costs.

The
provision for uncollectible accounts receivable, primarily relating to the
Clinical Labs segment was $4.4 million for the 2011 period as compared to $3.5
million in the 2010 period, an increase of $0.9 million attributed to an
increase in patient service revenue. As a percentage of Clinical Lab revenues,
bad debts approximated 8% in both the 2011 and 2010 periods.

Legal
expense was $3.7 million during the 2011 period compared to $1.7 million in the
2010 period, an increase of $2.0 million due to overall increases in legal
services in the 2011 period for general, litigation and proxy related matters
of $1.0 million and the impact of $0.5 million in insurance reimbursements
and $0.5 million in negotiation and settlement adjustments in the 2010 period.

During the
2010 period, 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 agreed to pay a lump sum payment of $2.7
million. 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.

The
    2011 period foreign exchange benefit was approximately $0.1 million compared
    to a loss of $0.2 million in the 2010 period. The foreign exchange benefit
    or loss is determined on two factors, an intercompany loan denominated in
British pounds sterling and transactions denominated in foreign currencies other than
the functional currency.

41

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Segment
Results

The Life
Sciences segments income before taxes was $2.8 million for the 2011 period as
compared to $2.9 million for the 2010 period with the positive impact of the
on-going integration of our businesses and related operational improvements and
cost reductions offset by a decline in revenues. Product revenues decreased by
$1.3 million or 3% in the 2011 period primarily due to a decline of organic
sales of 3.5% partially attributed to the on-going strategy to increase direct
sales and rationalize certain distribution business and softness in the Japan
market offset by a positive impact of foreign exchange of 0.5%. Further, royalty
and license fee income decreased by $2.4 million in the 2011 period principally
attributed to no royalty payments received under the Abbott license agreement
after the first quarter of the 2011 period. The segments gross profit of $27.1
million in the 2011 period was negatively impacted by the previously discussed
changes in revenues and cost of product revenues. The segments other operating expenses,
including selling, general and administrative, legal and research and
development, decreased by approximately $2.8 million during the 2011 period
primarily due to the lower marketing and selling expenses attributed to
refocused and lower planned spending, a decline in payroll and payroll related
costs, changes in expense allocations and reduced research and development
expenses principally due to the realignment of research and development
workforce that occurred in July 2010 offset by increased legal of $0.6 million.

The
Clinical Labs segments loss before taxes was $2.1 million for the 2011
period as compared to $7.5 million in the 2010 period an improvement of $5.4
million arising from revenue growth, process improvements and cost
containment. The revenue from laboratory services increased in the 2011 period
by $8.6 million due to organic growth of 11% and the 8% increase in revenue due
to the new payer contract with Empire Blue Cross of New York. The 2011 period
gross profit of $21.1 million improved the gross profit margin from 33% to 40%
over the 2010 period due to the previously discussed changes in service revenues
and favorable impacts on costs from process improvements and benefits resulting
from greater service volume on fixed costs coverage. Selling, general and administrative
expense decreased by approximately $0.1 million primarily due to decreases in
benefits and other costs, partially offset by increases in sales commissions
directly the result of increased service revenues. The provision for uncollectible
accounts receivables increased by $1.0 million as compared to the 2010 period
due to the increase in patient service volume.

The
Therapeutics segments loss before income taxes was approximately $2.0 million
for the 2011 period as compared to a loss of $2.5 million for the 2010 period.
The decrease in the segment loss of $0.5 million was primarily due to decreases
in clinical trial activities, impacted by timing of activities, of $0.2 million
and a $0.3 million decrease in payroll related expenses.

The
    Other segments loss before taxes for the 2011 period was approximately
    $11.5 million as compared to $15.1 million in the 2010 period, a decrease
    of $3.6 million. During the 2011 period, a decrease of $1.2 million in selling,
    general and administrative primarily due to lower consulting costs and professional
    fees, partially attributed to the July 2010 planned cost reductions was offset
    by an increase of $1.2 million in legal fees for general, litigation and
    proxy related costs and the impact of the recording $0.5 million in insurance
reimbursements and $0.5 million in negotiation and settlement adjustments in
the 2010 period. Further, the 2010 period loss included a litigation settlement
and related legal costs of $3.7 million.

42

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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 exchange loss                            |  |      | (266    | )    |   | (725                 | ) |          | 459    |   |  | (63 | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  
|Loss before income taxes                         |  | $    | (22,261 | )    | $ | (23,477              | ) | $        | 1,216  |   |  | (5  | )
|                                                 |  |      |         |      |   |                      |   |          |        |   |  |     |  

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.

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.

43

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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).

44

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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.

45

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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.

Liquidity and Capital Resources

At July 31,
2011, the Company had cash and cash equivalents of $14.2 million and short-term
investments of $10.0 million, or $24.2 million in aggregate as compared to
$33.6 million at July 31, 2010. Short term investments are in US Treasury
bills. The Company had working capital of $33.7 million at July 31, 2011
compared to $42.2 million at July 31, 2010. The decrease in working capital of
$8.5 million was primarily the result of the 2011 period net loss and funding
for capital expenditures of $1.2 million.

Net cash
used in operating activities for the year ended July 31, 2011 was approximately
$8.3 million as compared to $13.4 million for the year ended July 31, 2010. The
decrease in net cash used in operating activities in the 2011 period over the
2010 period of approximately $5.1 million was primarily due to a decrease in
net loss of $9.3 million, and an increase in non-cash expenses of $0.8 million,
offset by changes in operating assets and liabilities of $5.0 million, relating
primarily to increases in accounts receivable, inventory and prepaid expenses
and a decrease in accounts payable - trade.

Net
    cash provided by investing activities was approximately $13.5 million as
    compared to cash provided of $15.3 million in the year ago period. The decrease
    in 2011 of $1.8 million is primarily due to the decrease in purchases of short-
    term investments (US Treasury bills) and maturities of short-term investments
    over 2010 of $3.7 million offset by the decrease in cash used for capital
    expenditures in 2011 of $2.0 million.

Net cash
used in financing activities in 2011 was $0.1 million. There were no financing
activities in 2010.

We believe
that our current cash and cash equivalents and short-term investments are
sufficient for our foreseeable liquidity and capital resource needs over the
next twelve months, although there can be no assurance that future events will
not alter such view.

Effect of New Accounting Pronouncements

In
May 2011, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which
amends the current fair value measurement and disclosure guidance of Accounting
Standards Codification (ASC) Topic 820 Fair Value Measurement to include
increased transparency around valuation inputs and investment categorization.
The guidance provided in ASU No. 2011-04 is effective for interim and
annual periods beginning after December 15, 2011 and is applied
prospectively. The Company does not expect the adoption of these
provisions to have a material impact on the its consolidated financial
statements or on future operating results.

In
June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive
Income,
updating ASC Topic 220, Comprehensive
Income.Under the amended ASC Topic
220, an entity has the option to present the total of comprehensive
income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in
two separate but consecutive statements. The guidance eliminates the current
option to present other comprehensive income and its components in the
Statement of Stockholders Equity. This guidance does not change the components
that are recognized in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. This guidance is
effective for fiscal years, and interim periods within those years, beginning
after December 15, 2011, and is to be applied retrospectively. The Company
does not believe the adoption of this guidance in the first quarter of fiscal
2013 will have an impact on its consolidated financial statements or on future
operating results.

In
July 2011, the FASB issued ASU No. 2011-07: Health Care Entities
(Topic 954)  Presentation and Disclosure of Patient Service Revenue, Provision
for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care
Entities. This update was issued to provide greater transparency relating to
accounting practices used for net patient service revenue and related bad debt
allowances by health care entities. Some health care entities recognize patient
service revenue at the time the services are rendered regardless of whether the
entity expects to collect that amount or has assessed the patients ability to
pay.

46

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These
prior accounting practices used by some health care entities resulted in a
gross-up of patient service revenue and the provision for bad debts, causing
difficulty for outside users of financial statements to make accurate
comparisons and analyses of financial statements among entities. ASU
No. 2011-07 requires certain healthcare entities to change the
presentation of the statement of operations, reclassifying the provision for
bad debts associated with patient service revenue from an operating expense to
a deduction from patient service revenue and also requires enhanced
quantitative and qualitative disclosures relevant to the entitys policies
for recognizing revenue and assessing bad debts. This update is not designed
and will not change the net income reported by healthcare entities. This update
is effective for fiscal years beginning after December 15, 2011, with early
adoption permitted. The Company does not expect that this update will have any
material impact on its consolidated financial statements. The Company is
currently evaluating if the update will have any impact on the presentation of
its statement of operations.

Contractual Obligations

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

The
following is a summary of future payments under the Companys contractual
obligations as of July 31, 2011:

Payments Due by Period

|                                    |  |   |        |  |                   |       |           |   |           |  |              |       |  |   |       |  | 
|----------------------------------- |  | - | ------ |  | ----------------- | ----- | --------- | - | --------- |  | ------------ | ----- |  | - | ----- |  | 
|In 000s                            |  |   | Total  |  | Less than
 1 year |       | 1-3 years |   | 4-5 years |  | Over 5 years |      
|                                    |  |   |        |  |                   |       |           |   |           |  |              |      
|Real estate and
 equipment leases   |  | $ | 20,592 |  | $                 | 4,520 |           | $ | 6,685     |  | $            | 5,217 |  | $ | 4,170 | 
|Employment
 agreements              |  |   | 1,223  |  |                   | 1,223 |           |   |          |  |              |      |  |   |      | 
|                                    |  |   |        |  |                   |       |           |   |           |  |              |       |  |   |       | 
|Total contractual
 cash obligations |  | $ | 21,815 |  | $                 | 5,743 |           | $ | 6,685     |  | $            | 5,217 |  | $ | 4,170 | 
|                                    |  |   |        |  |                   |       |           |   |           |  |              |       |  |   |       | 

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.

Off-Balance Sheet Arrangements

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

Critical
Accounting Policies

General

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

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

Product
revenues

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

Royalties

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

47

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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
 2011 |  | Year ended July 31
 2010 |     | Year ended July 31
 2009 |  
|                   |  |   |                          |  |                          |     |                          |  
|Revenue category   |  |   | (In 000s)               |  | (in %)                   |     | (In 000s)               |   | (in %) |  | (In 000s) |     | (in %) |  
|                   |  |   |                          |  |                          |     |                          |   |        |  |            |     |        |  
|Medicare           |  | $ | 11,856                   |  |                          | 22  |                          | $ | 11,158 |  |            | 25  |        | $ | 9,138  |  |  | 23  |  
|Third-party payers |  |   | 24,335                   |  |                          | 46  |                          |   | 19,534 |  |            | 44  |        |   | 20,073 |  |  | 51  |  
|Patient self-pay   |  |   | 11,554                   |  |                          | 22  |                          |   | 8,758  |  |            | 20  |        |   | 6,056  |  |  | 15  |  
|HMOs              |  |   | 5,017                    |  |                          | 10  |                          |   | 4,728  |  |            | 11  |        |   | 4,337  |  |  | 11  |  
|                   |  |   |                          |  |                          |     |                          |   |        |  |            |     |        |   |        |  |  |     |  
|Total              |  | $ | 52,762                   |  |                          | 100 | %                        | $ | 44,178 |  |            | 100 | %      | $ | 39,604 |  |  | 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 represent approximately 22%, 25% and 25%, of the Clinical
Labs segments services net revenues for the fiscal years ended July 31, 2011,
2010 and 2009 respectively.

Contractual
Adjustment

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

The other
relevant factors that affect our contractual adjustment include the monthly and
quarterly review of: 1) current gross billings and receivables and
reimbursement by payer, 2) current changes in third party arrangements and 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, 2011, 2010 and 2009, the contractual adjustment
percentages, determined using current and historical reimbursement statistics, were
approximately 84%, 83% and 81% 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.

48

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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 $3,298,000, $2,589,000, and
$2,040,000 for the years ended July 31, 2011, 2010, and 2009, respectively, and
a change in the net accounts receivable of approximately $507,000 and $339,000
as of July 31, 2011 and 2010, 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, 2011 and 2010,
approximately 51% and 45%, 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 $2.5 million or 33% and $1.9 million
or 27% represents foreign receivables as of July 31, 2011 and 2010 respectively,
includes royalty receivables of $2.0 million and $2.5 million, as of July 31,
2011 and 2010, of which approximately $2.0 million and $1.8 million,
respectively is from Qiagen Corporation.

49

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Net
accounts receivable

|                           |  |   |                      |  |                      |     |            |   |        |  |  |     |   | 
|-------------------------- |  | - | -------------------- |  | -------------------- | --- | ---------- | - | ------ |  |  | --- | - | 
|                           |  |   | As of
 July 31, 2011 |  | As of
 July 31, 2010 |    
|                           |  |   |                      |  |                      |    
|Billing category           |  |   | (In 000s)           |  | (in %)               |     | (In 000s) |   | (in %) | 
|                           |  |   |                      |  |                      |     |            |   |        | 
|Clinical Labs              |  |   |                      |  |                      |     |            |   |        |  |  |     |  
|Medicare                   |  | $ | 1.434                |  |                      | 19  |            | $ | 849    |  |  | 14  |  
|Third party payers         |  |   | 3,087                |  |                      | 40  |            |   | 2,664  |  |  | 46  |  
|Patient self-pay           |  |   | 2,865                |  |                      | 37  |            |   | 2,024  |  |  | 35  |  
|HMOs                      |  |   | 314                  |  |                      | 4   |            |   | 296    |  |  | 5   |  
|                           |  |   |                      |  |                      |     |            |   |        |  |  |     |  
|Total Clinical
 Labs       |  |   | 7,700                |  |                      | 100 | %          |   | 5,833  |  |  | 100 | %
|                           |  |   |                      |  |                      |     |            |   |        |  |  |     |  
|Total Life
 Sciences       |  |   | 7,545                |  |                      |     |            |   | 7,173  |  |  |     |  
|                           |  |   |                      |  |                      |     |            |   |        |  |  |     |  
|Total accounts
 receivable |  | $ | 15,245               |  |                      |     |            | $ | 13,006 |  |  |     |  
|                           |  |   |                      |  |                      |     |            |   |        |  |  |     |  

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

|                                 |  |   |               |   |               |        |   | 
|-------------------------------- |  | - | ------------- | - | ------------- | ------ | - | 
|In 000s                         |  |   | July 31, 2011 |   | July 31, 2010 |       
|                                 |  |   |               |   |               |       
|Beginning balance                |  | $ | 2,839         |   | $             | 4,786  |  
|Provision for
 doubtful accounts |  |   | 4,431         |   |               | 3,480  |  
|Write-offs, net                  |  |   | (3,782        | ) |               | (5,427 | )
|                                 |  |   |               |   |               |        |  
|Ending balance                   |  | $ | 3,488         |   | $             | 2,839  |  
|                                 |  |   |               |   |               |        |  

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, 2011 and 2010, 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.

50

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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,
 2011     |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party
 Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |       
|                         |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |       
|1-30 days                |  | $             | 29,880 |   |  | 60               | % |   | 5,843 |                              |  | 60  | % |                  | 13,851 |   |  | 56            | % |   | 6,173  |  |  | 55  | % |   | 4,013 |  |  | 95  | %
|31-60 days               |  |               | 7,013  |   |  | 14               | % |   | 791   |                              |  | 8   | % |                  | 3,441  |   |  | 14            | % |   | 2,687  |  |  | 24  | % |   | 93    |  |  | 2   | %
|61-90 days               |  |               | 4,029  |   |  | 8                | % |   | 566   |                              |  | 6   | % |                  | 2,522  |   |  | 10            | % |   | 890    |  |  | 8   | % |   | 51    |  |  | 1   | %
|91-120 days              |  |               | 3,826  |   |  | 8                | % |   | 917   |                              |  | 9   | % |                  | 1,819  |   |  | 7             | % |   | 1,046  |  |  | 9   | % |   | 44    |  |  | 1   | %
|121-150 days             |  |               | 2,084  |   |  | 4                | % |   | 375   |                              |  | 4   | % |                  | 1,385  |   |  | 6             | % |   | 288    |  |  | 3   | % |   | 37    |  |  | 1   | %
|Greater than 150
 days*  |  |               | 3,050  |   |  | 6                | % |   | 1,234 |                              |  | 13  | % |                  | 1,717  |   |  | 7             | % |   | 94     |  |  | 1   | % |   | 5     |  |  | 0   | %
|                         |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |        |  |  |     |   |   |       |  |  |     |  
|Totals                   |  | $             | 49,882 |   |  | 100              | % |   | 9,726 |                              |  | 100 | % |                  | 24,735 |   |  | 100           | % |   | 11,178 |  |  | 100 | % |   | 4,243 |  |  | 100 | %
|                         |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |        |  |  |     |   |   |       |  |  |     |  
|                         |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |        |  |  |     |   |   |       |  |  |     |  
|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 | %
|                         |  |               |        |   |  |                  |   |   |       |                              |  |     |   |                  |        |   |  |               |   |   |        |  |  |     |   |   |       |  |  |     |  

* Total includes $800 fully reserved over 210 days as of July 31, 2011.

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

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.

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. Write downs of inventories to market value are based on
a review of inventory quantities on hand and estimated sales forecasts based on
sales history and anticipated future demand. Unanticipated changes in demand
could have a significant impact on the value of our inventory and require
additional write downs of inventory which would impact our results of
operations.

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 is
estimated using both a discounted cash flow model and market approach model.
    In determining fair value, the Company makes certain judgments on the assumptions
included in the discounted cash flow such as forecasted revenue, gross profit
margins, working capital cash flow, the identification of
reporting units and the selection of comparable companies for the market approach.
    Trademarks are considered impaired if the carrying amount exceeds their estimated
fair value. To date, there has been no impairment charges recorded.

51

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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, 2011, the Company has established a reserve of $0.4 million which is
included in accrued liabilities, for claims that have been reported but not
paid and incurred but not reported.

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, 2011, our assets and
liabilities would increase or decrease by $2.1 million and $0.9 million,
respectively, and our net sales and net earnings (loss) would increase or
decrease by $2.2 million and $0.1 million, respectively, on an annual basis.

We also
maintain intercompany balances and loans receivable with subsidiaries with
different local currencies. These amounts are at risk of foreign exchange
losses if exchange rates fluctuate. Assuming a hypothetical aggregate change of
10% in the exchange rates of foreign currencies against the U.S. dollar at July
31, 2011, 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 money market accounts and short
term investments in U.S. Treasury bills. Changes in interest rates may affect
the investment income we earn on money market funds and short term investments
and therefore affect our cash flows and results of operations. As of July 31,
2011, we were exposed to interest rate change market risk with respect to our
money market accounts and short-term investments of $14.2 million. The
short-term investments bear interest rates ranging from 0% to 0.05%. As of July
31, 2011, based on the investments held, it is determined we have no material
interest rate risk.

As of July
31, 2011, we have fixed interest rate financing on transportation and equipment
leases.

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.

52

---



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, 2011.
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, 2011, 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, 2011 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, 2011. 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, 2011.
This report, in which Ernst & Young LLP has expressed an unqualified opinion,
appears in this Item 9A.

53

---



Report of Independent Registered Public Accounting Firm

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

We have audited Enzo Biochem, Inc.s (the Company) internal control over financial
reporting as of July 31, 2011, 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,
2011 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, 2011 and 2010 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, 2011 of Enzo Biochem, Inc. and our report dated October 14, 2011
expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Jericho, New York
October 14, 2011

54

---



Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate
Governance

The
information required under this item will be set forth in the Companys proxy
statement to be filed with the Securities and Exchange Commission on or before
November 28, 2011 and is incorporated herein by reference.

Item 11. Executive Compensation

The
information required under this item will be set forth in the Companys proxy
statement to be filed with the Securities and Exchange Commission on or before
November 28, 2011 and is incorporated herein by reference.

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

The
information required under this item will be set forth in the Companys proxy
statement to be filed with the Securities and Exchange Commission on or before
November 28, 2011 and is incorporated herein by reference.

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

The
information required under this item will be set forth in the Companys proxy
statement to be filed with the Securities and Exchange Commission on or before
November 28, 2011 and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The
information required under this item will be set forth in the Companys proxy
statement expected to be filed with the Securities and Exchange Commission on
or before November 28, 2011 and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

|    |     |                                                                                                                             
|--- | --- | ----------------------------------------------------------------------------------------------------------------------------
|(a) | (1) | Consolidated
 Financial Statements                                                                                          
|    |     | Consolidated
 Balance Sheets - July 31, 2011 and 2010                                                                       
|    |     | Consolidated
 Statements of Operations- Years ended July 31, 2011, 2010 and 2009                                            
|    |     | Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss) - Years
 ended July 31, 2011, 2010 and 2009
|    |     | Consolidated
 Statements of Cash Flows - Years ended July 31, 2011, 2010 and 2009                                           
|    |     | 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.

55

---



| |     |         
| | --- | --------
| | (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)      |  | 2011 Incentive
 Plan (8)                                                                                                                                   
|            |  |                                                                                                                                                            
|10 (e)      |  | Lease agreement
 with Pari Management (9)                                                                                                                  
|            |  |                                                                                                                                                            
|10 (f)      |  | Settlement and
 Release Agreement between the Company and Sigma Aldrich (10)                                                                               
|            |  |                                                                                                                                                            
|10 (g)      |  | Stock Purchase
 Agreement By and Among Enzo Life Sciences, Inc., Axxora Life Sciences Inc.,
 and the Stock holders, Option holders and Warrant holders (12)
|            |  |                                                                                                                                                            
|10 (h)      |  | Stock Asset
 Purchase Agreement By and Among Buyer Parties and Seller Parties with respect
 to the Biomol International and affiliate acquisition (13)     
|            |  |                                                                                                                                                            
|10 (i)      |  | Asset Purchase
 Agreement By and Among Enzo Life Sciences, Acquisition, Inc. and Assay
 Designs, Inc.(14)                                                  
|            |  |                                                                                                                                                            
|10 (j)      |  | Amended and
 Restated Employment Agreement with Elazar Rabbani (15)                                                                                        
|            |  |                                                                                                                                                            
|10(k)       |  | Amended and
 Restated Employment Agreement with Barry Weiner (15)                                                                                          
|            |  |                                                                                                                                                            
|14 (a)      |  | Code of Ethics
 (11)                                                                                                                                       
|            |  |                                                                                                                                                            
|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                                                                            

56

---



|     |                                                                                                                                                                                                                                | 
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|     | 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 as appendix B to the Companys Definitive Proxy Statement on Schedule
 14A, which was filed with the Securities and Exchange Commission on November
 16, 2010 and is incorporated herein by reference.
|     |                                                                                                                                                                                                                               
|(9)  | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2006 and is incorporated herein by reference.                                                                              
|     |                                                                                                                                                                                                                               
|(10) | This exhibit was
 filed with the Companys Current Report on Form 8-K on September 21, 2006 and
 is incorporated herein by reference.                                                                                         
|     |                                                                                                                                                                                                                               
|(11) | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2003 and is incorporated here by reference.                                                                                
|     |                                                                                                                                                                                                                               
|(12) | This exhibit was
 filed with the Companys Current Report on Form 8-K May 30, 2007 and is
 incorporated herein by reference.                                                                                                  
|     |                                                                                                                                                                                                                               
|(13) | This exhibit was
 filed with the Companys Current Report on Form 8-K May 8, 2008 and is
 incorporated herein by reference.                                                                                                   
|     |                                                                                                                                                                                                                               
|(14) | This exhibit was
 filed with the Companys Current Report on Form 8-K March 13, 2009 and is
 incorporated herein by reference.                                                                                                
|     |                                                                                                                                                                                                                               
|(15) | This exhibit was
 filed with the Companys Annual Report on Form 10-K for the year ended July
 31, 2010 and is incorporated herein by reference.                                                                              

57

---



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,
 2011 | 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, 2011
|                                                                                          |  |                 
|Elazar Rabbani,                                                                           |  |                 
|Chairman of Board
 of Directors and Secretary                                             |  |                 
|(Principal
 Executive Officer)                                                            |  |                 
|                                                                                          |  |                 
|By: /s/ Barry W.
 Weiner                                                                  |  | October 14, 2011
|                                                                                          |  |                 
|Barry W. Weiner,                                                                          |  |                 
|President, Chief
 Financial Officer, Principal Accounting Officer, Treasurer and Director |  |                 
|                                                                                          |  |                 
|By: /s/ Stephen B.
 H. Kent Ph.D.                                                         |  | October 14, 2011
|                                                                                          |  |                 
|Stephen B. H.
 Kent, Director                                                             |  |                 
|                                                                                          |  |                 
|By: /s/ Bernard L.
 Kasten MD                                                             |  | October 14, 2011
|                                                                                          |  |                 
|Bernard Kasten,
 Director                                                                 |  |                 
|                                                                                          |  |                 
|By: /s/ Gregory M.
 Bortz                                                                 |  | October 14, 2011
|                                                                                          |  |                 
|Gregory M. Bortz,
 Director                                                               |  |                 

58

---



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, 2011 and 2010                                                                        |  | F-3
|                                                                                                                             |  |    
|Consolidated Statements
 of Operations  Years ended July 31, 2011, 2010 and 2009                                            |  | F-4
|                                                                                                                             |  |    
|Consolidated
 Statements of Stockholders Equity and Comprehensive Income (Loss)  Years
 ended July 31, 2011, 2010 and 2009 |  | F-5
|                                                                                                                             |  |    
|Consolidated
 Statements of Cash Flows  Years ended July 31, 2011, 2010 and 2009                                            |  | F-6
|                                                                                                                             |  |    
|Notes to
 Consolidated Financial Statements                                                                                  |  | F-7
|                                                                                                                             |  |    
|Schedule II -
 Valuation and Qualifying Accounts  Years ended July 31, 2011, 2010 and 2009                                  |  | 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, 2011 and 2010, 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, 2011. 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, 2011 and 2010, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended July 31, 2011, 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.

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,
2011, 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, 2011 expressed an unqualified opinion thereon.

|                  |                      
|----------------- | ---------------------
|                  | /s/ Ernst & Young LLP
|                  |                      
|Jericho, New York |                      
|October 14, 2011  |                      

F-2

---



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

|                                                                                                                                         |  |                |          |                |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- | - | -------- | -
|                                                                                                                                         |  | July 31,
 2011 |          | July 31,
 2010 |  
|                                                                                                                                         |  |                |          |                |  
|ASSETS                                                                                                                                   |  |                |          |                |   |          |  
|Current assets:                                                                                                                          |  |                |          |                |   |          |  
|Cash and cash equivalents                                                                                                                |  | $              | 14,161   |                | $ | 8,759    |  
|Short term investments                                                                                                                   |  |                | 10,000   |                |   | 24,807   |  
|Accounts receivable, net of allowance for
 doubtful accounts of $3,488 in 2011 and $2,839 in 2010                                        |  |                | 15,245   |                |   | 13,006   |  
|Inventories                                                                                                                              |  |                | 9,260    |                |   | 8,882    |  
|Prepaid expenses                                                                                                                         |  |                | 2,733    |                |   | 2,284    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current assets                                                                                                                     |  |                | 51,399   |                |   | 57,738   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Property, plant, and equipment, net                                                                                                      |  |                | 10,335   |                |   | 11,858   |  
|Goodwill                                                                                                                                 |  |                | 27,373   |                |   | 24,943   |  
|Intangible assets, net                                                                                                                   |  |                | 19,985   |                |   | 20,368   |  
|Other                                                                                                                                    |  |                | 382      |                |   | 338      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total assets                                                                                                                             |  | $              | 109,474  |                | $ | 115,245  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Current liabilities:                                                                                                                     |  |                |          |                |   |          |  
|Accounts payable  trade                                                                                                                 |  | $              | 7,858    |                | $ | 6,455    |  
|Accrued liabilities                                                                                                                      |  |                | 8,188    |                |   | 8,509    |  
|Other current liabilities                                                                                                                |  |                | 1,683    |                |   | 572      |  
|Deferred taxes                                                                                                                           |  |                |         |                |   | 21       |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current liabilities                                                                                                                |  |                | 17,729   |                |   | 15,557   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Deferred taxes                                                                                                                           |  |                | 2,934    |                |   | 2,582    |  
|Other                                                                                                                                    |  |                | 96       |                |   | 90       |  
|                                                                                                                                         |  |                |          |                |   |          |  
|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: 39,045,837 at July 31, 2011 and 38,782,725
 at July 31, 2010 |  |                | 390      |                |   | 388      |  
|Additional paid-in capital                                                                                                               |  |                | 305,833  |                |   | 306,561  |  
|Less treasury stock at cost: 450,014 shares
 at July 31, 2011 and 623,848 shares at July 31, 2010                                        |  |                | (6,387   | )              |   | (8,854   | )
|Accumulated deficit                                                                                                                      |  |                | (214,914 | )              |   | (201,954 | )
|Accumulated other comprehensive income                                                                                                   |  |                | 3,793    |                |   | 875      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total stockholders equity                                                                                                               |  |                | 88,715   |                |   | 97,016   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total liabilities and stockholders equity                                                                                               |  | $              | 109,474  |                | $ | 115,245  |  
|                                                                                                                                         |  |                |          |                |   |          |  

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, |        
|                                                 |  |                      |        
|                                                 |  | 2011                 |         | 2010 |    | 2009    |  
|                                                 |  |                      |         |      |    |         |  
|Revenues:                                        |  |                      |         |      |    |         |   |    |         |  
|Product revenues                                 |  | $                    | 41,830  |      | $  | 43,111  |   | $  | 40,592  |  
|Royalty and license fee income                   |  |                      | 7,437   |      |    | 9,793   |   |    | 9,376   |  
|Clinical laboratory services                     |  |                      | 52,762  |      |    | 44,178  |   |    | 39,604  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      | 102,029 |      |    | 97,082  |   |    | 89,572  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Operating expenses:                              |  |                      |         |      |    |         |   |    |         |  
|Cost of product revenues                         |  |                      | 22,137  |      |    | 22,547  |   |    | 26,766  |  
|Cost of clinical laboratory services             |  |                      | 31,682  |      |    | 29,570  |   |    | 26,295  |  
|Research and development                         |  |                      | 7,806   |      |    | 9,704   |   |    | 9,220   |  
|Selling, general, and administrative             |  |                      | 45,191  |      |    | 48,395  |   |    | 41,314  |  
|Provision for uncollectible accounts
 receivable |  |                      | 4,431   |      |    | 3,480   |   |    | 5,189   |  
|Legal                                            |  |                      | 3,710   |      |    | 1,746   |   |    | 4,195   |  
|Litigation settlement and related costs          |  |                      |        |      |    | 3,698   |   |    |        |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Total operating expenses                         |  |                      | 114,957 |      |    | 119,140 |   |    | 112,979 |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Operating loss                                   |  |                      | (12,928 | )    |    | (22,058 | ) |    | (23,407 | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Other income (expense):                          |  |                      |         |      |    |         |   |    |         |  
|Interest                                         |  |                      | 11      |      |    | 19      |   |    | 581     |  
|Other                                            |  |                      | 45      |      |    | 44      |   |    | 74      |  
|Foreign exchange gain (loss)                     |  |                      | 49      |      |    | (266    | ) |    | (725    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Loss before income taxes                         |  |                      | (12,823 | )    |    | (22,261 | ) |    | (23,477 | )
|(Provision) benefit for income taxes             |  |                      | (137    | )    |    | 28      |   |    | (87     | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss                                         |  | ($                   | 12,960  | )    | ($ | 22,233  | ) | ($ | 23,564  | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Net loss per common share:                       |  |                      |         |      |    |         |   |    |         |  
|Basic and diluted                                |  | ($                   | 0.34    | )    | ($ | 0.59    | ) | ($ | 0.63    | )
|                                                 |  |                      |         |      |    |         |   |    |         |  
|                                                 |  |                      |         |      |    |         |   |    |         |  
|Weighted average common shares outstanding:      |  |                      |         |      |    |         |   |    |         |  
|Basic and diluted                                |  |                      | 38,357  |      |    | 38,001  |   |    | 37,511  |  
|                                                 |  |                      |         |      |    |         |   |    |         |  

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, 2011, 2010, and 2009
(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
Income |         | Total
Stockholders
Equity |   | Comprehensive
loss |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|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 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  |   |   |         |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|Net (loss) for the year ended July 31, 2011               |  |                     |           |                       |  |                    |   |                            |    |                       |   |                    |   |                                        |        |                            |   | (12,960            | ) |   |       |   |   | (12,960 | ) |   | (12,960 | )
|Vesting of restricted stock                               |  |                     | 263,112    |                       |  |                    |   |                            | 2   |                       |   |                    |   |                                        |        |                            |   |                   |   |   |       |   |   | 2       |   |   |        |  
|Stock based compensation charges                          |  |                     |           |                       |  |                    |   |                            |    |                       |   | 1,049               |   |                                        |        |                            |   |                   |   |   |       |   |   | 1,049   |   |   |        |  
|Issuance of treasury stock for employee 401(k) plan match |  |                     |           |                       |  | (173,834            | ) |                            |    |                       |   | (1,777              | ) |                                        | 2,467   |                            |   |                   |   |   |       |   |   | 690     |   |   |        |  
|Foreign currency translation adjustments                  |  |                     |           |                       |  |                    |   |                            |    |                       |   |                    |   |                                        |        |                            |   |                   |   |   | 2,918  |   |   | 2,918   |   |   | 2,918   |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|Comprehensive loss                                        |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   | $ | (10,042 | )
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  
|Balance at July 31, 2011                                  |  |                     | 39,045,837 |                       |  | 450,014             |   | $                          | 390 |                       | $ | 305,833             |   | $                                      | (6,387  | )                          | $ | (214,914           | ) | $ | 3,793  |   | $ | 88,715  |   |   |         |  
|                                                          |  |                     |            |                       |  |                     |   |                            |     |                       |   |                     |   |                                        |         |                            |   |                    |   |   |        |   |   |         |   |   |         |  

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, |         
|                                                                             |  |                      |         
|                                                                             |  | 2011                 |          | 2010 |    | 2009     |  
|                                                                             |  |                      |          |      |    |          |  
|Cash flows from
 operating activities:                                       |  |                      |          |      |    |          |   |    |          |  
|Net loss                                                                     |  | ($                   | 12,960   | )    | ($ | 22,233   | ) | ($ | 23,564   | )
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Adjustments to
 reconcile net loss to net cash used in operating activities: |  |                      |          |      |    |          |   |    |          |  
|Depreciation and amortization of property,
 plant and equipment              |  |                      | 2,962    |      |    | 2,727    |   |    | 2,185    |  
|Amortization of intangible assets                                            |  |                      | 1,507    |      |    | 1,542    |   |    | 1,277    |  
|Provision for uncollectible accounts
 receivable                             |  |                      | 4,431    |      |    | 3,480    |   |    | 5,189    |  
|Deferred
     income tax provision (benefit)                                 |  |                      | 17       |      |    | (45      | ) |    |         |  
|Share based compensation charges                                             |  |                      | 1,049    |      |    | 1,170    |   |    | 1,435    |  
|Share based 401(k) employer match expense                                    |  |                      | 690      |      |    | 1,115    |   |    | 582      |  
|Deferred revenue recognized                                                  |  |                      | (38      | )    |    | (450     | ) |    | (475     | )
|Foreign exchange (gain) loss on intercompany
 loan                           |  |                      | (131     | )    |    | 45       |   |    | 697      |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Changes in operating assets and
 liabilities:                                |  |                      |          |      |    |          |   |    |          |  
|Accounts receivable                                                          |  |                      | (6,537   | )    |    | (3,844   | ) |    | (1,409   | )
|Inventories                                                                  |  |                      | (178     | )    |    | 681      |   |    | 2,647    |  
|Prepaid expenses                                                             |  |                      | (432     | )    |    | 220      |   |    | 208      |  
|Accounts payable  trade                                                     |  |                      | 1,462    |      |    | 2,348    |   |    | (571     | )
|Accrued liabilities                                                          |  |                      | (208     | )    |    | (232     | ) |    | 528      |  
|Other current liabilities                                                    |  |                      | 34       |      |    | (78      | ) |    | (206     | )
|Other liabilities                                                            |  |                      | 6        |      |    | 90       |   |    |         |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Total adjustments                                                            |  |                      | 4,634    |      |    | 8,769    |   |    | 12,087   |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Net cash used in operating activities                                        |  |                      | (8,326   | )    |    | (13,464  | ) |    | (11,477  | )
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Cash flows from
 investing activities:                                       |  |                      |          |      |    |          |   |    |          |  
|Capital expenditures                                                         |  |                      | (1,223   | )    |    | (3,251   | ) |    | (2,709   | )
|Maturities of short term investments                                         |  |                      | 182,453  |      |    | 232,140  |   |    | 318,650  |  
|Purchases of short term investments                                          |  |                      | (167,646 | )    |    | (213,643 | ) |    | (361,956 | )
|(Increase) decrease in security deposits
 and other                          |  |                      | (45      | )    |    | 81       |   |    | 384      |  
|Acquisitions, net of cash acquired                                           |  |                      |         |      |    |         |   |    | (14,541  | )
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Net cash provided by (used in) investing
 activities                         |  |                      | 13,539   |      |    | 15,327   |   |    | (60,172  | )
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Cash flows from
 financing activities:                                       |  |                      |          |      |    |          |   |    |          |  
|Installment loan payments                                                    |  |                      | (68      | )    |    |         |   |    |         |  
|Proceeds from the exercise of stock options                                  |  |                      |         |      |    |         |   |    | 348      |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Net cash (used) provided by financing
 activities                            |  |                      | (68      | )    |    |         |   |    | 348      |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Effect of exchange rate changes on cash and
 cash equivalents                |  |                      | 257      |      |    | (33      | ) |    | (92      | )
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Increase (decrease) in cash and cash
 equivalents                            |  |                      | 5,402    |      |    | 1,830    |   |    | (71,393  | )
|Cash and cash equivalents - beginning of
 year                               |  |                      | 8,759    |      |    | 6,929    |   |    | 78,322   |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  
|Cash and cash equivalents - end of year                                      |  | $                    | 14,161   |      | $  | 8,759    |   | $  | 6,929    |  
|                                                                             |  |                      |          |      |    |          |   |    |          |  

F-6

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

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

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/Transactions

The Company has determined that the functional currency
    for its foreign subsidiaries is the local currency. For financial reporting
    purposes, 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. Gains or losses resulting from transactions
    entered into in other than the functional currency are recorded as foreign
    exchange gains and losses in the consolidated statements of operations.

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, 2011 and 2010
(Dollars in thousands except share data)

The Company believes the fair value of the aforementioned financial
instruments approximates the cost 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.

F-8

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

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:

|                   |  |            |        |                           |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|------------------ |  | ---------- | ------ | ------------------------- |  | ---------- | - | ------ | ------ | ---------- |  | ------ | - | - | ------ |  |  | --- | -
|                   |  | 2011       |        | Years ended July 31
 2010 |  | 2009       |  
|                   |  |            |        |                           |  |            |  
|Revenue category   |  | (In 000s) |        | (in %)                    |  | (In 000s) |   | (in %) |        | (In 000s) |  | (in %) |  
|                   |  |            |        |                           |  |            |   |        |        |            |  |        |  
|Medicare           |  | $          | 11,856 |                           |  | 22         |   | $      | 11,158 |            |  | 25     |   | $ | 9,138  |  |  | 23  |  
|Third-party payers |  |            | 24,335 |                           |  | 46         |   |        | 19,534 |            |  | 44     |   |   | 20,073 |  |  | 51  |  
|Patient self-pay   |  |            | 11,554 |                           |  | 22         |   |        | 8,758  |            |  | 20     |   |   | 6,056  |  |  | 15  |  
|HMOs              |  |            | 5,017  |                           |  | 10         |   |        | 4,728  |            |  | 11     |   |   | 4,337  |  |  | 11  |  
|                   |  |            |        |                           |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|Total              |  | $          | 52,762 |                           |  | 100        | % | $      | 44,178 |            |  | 100    | % | $ | 39,604 |  |  | 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 represent
    approximately 22%, 25% and 25% of the Clinical Labs segment net revenue for
    the years ended July 31, 2011, 2010 and 2009 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, 2011, 2010 and 2009, the contractual
adjustment percentages, determined using current and historical reimbursement
statistics, were approximately 84%, 83% and 81%, respectively, of gross
billings.

F-9

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

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, 2011 and 2010, 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, 2011 and
2010, approximately 51% and 45%, 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 $2.0 million and $2.5 million, as of July 31, 2011 and 2010,
respectively, of which approximately $2.0 million and $1.8 million,
respectively is from QIAGEN Gaithersburg Inc. (Qiagen) (see Note 13).

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

|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|------------------------------------ |  | -------------------- | ------ | -------------------- |  | ---------- | - | ------ | ------ |  |  | --- | -
|                                     |  | As of
 July 31, 2011 |        | As of
 July 31, 2010 | 
|                                     |  |                      |        |                      | 
|Net accounts
 receivable by segment  |  | (In 000s)           |        | (in %)               |  | (In 000s) |   | (in %) |       
|                                     |  |                      |        |                      |  |            |   |        |       
|Clinical Labs (by
 billing category) |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Medicare                             |  | $                    | 1,434  |                      |  | 19         |   | $      | 849    |  |  | 14  |  
|Third party payers                   |  |                      | 3,087  |                      |  | 40         |   |        | 2,664  |  |  | 46  |  
|Patient self-pay                     |  |                      | 2,865  |                      |  | 37         |   |        | 2,024  |  |  | 35  |  
|HMOs                                |  |                      | 314    |                      |  | 4          |   |        | 296    |  |  | 5   |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Clinical
 Labs                 |  |                      | 7,700  |                      |  | 100        | % |        | 5,833  |  |  | 100 | %
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Life
 Sciences                 |  |                      | 7,545  |                      |  |            |   |        | 7,173  |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total accounts
 receivable           |  | $                    | 15,245 |                      |  |            |   | $      | 13,006 |  |  |     |  
|                                     |  |                      |        |                      |  |            |   |        |        |  |  |     |  

F-10

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

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

|                                 |  |               |        |               |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- | - | ------ | -
|                                 |  | July 31, 2011 |        | July 31, 2010 |  
|                                 |  |               |        |               |  
|Beginning balance                |  | $             | 2,839  |               | $ | 4,786  |  
|Provision for
 doubtful accounts |  |               | 4,431  |               |   | 3,480  |  
|Write-offs                       |  |               | (3,782 | )             |   | (5,427 | )
|                                 |  |               |        |               |   |        |  
|Ending balance                   |  | $             | 3,488  |               | $ | 2,839  |  
|                                 |  |               |        |               |   |        |  

Inventories

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. Write downs of inventories to market value
are based on a review of inventory quantities on hand and estimated sales
forecasts based on sales history and anticipated future demand. Unanticipated
changes in demand could have a significant impact on the value of our inventory
and require additional write downs of inventory which would impact our results
of operations.

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, 2011, 2010 or 2009.

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 is estimated using both a discounted cash flow model
    and market approach model. In determining fair value, the Company makes certain
    judgments on the assumptions included in the discounted cash flow such as
    forecasted revenue, gross profit margins, working capital cash flow, the identification of reporting units and the selection of comparable
    companies for the market approach. 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, 2011 and 2010
(Dollars in thousands except share data)

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 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 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 $235, $375 and $634 for the years ended July 31, 2011, 2010 and
2009, 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, 2011, 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, 2011 and 2010
(Dollars in thousands except share data)

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 2011, 2010 and
2009 do not include the potential common shares from stock options and unvested
restricted stock because to do so would have been antidilutive and as such is
the same as basic weighted average shares outstanding. 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, 2011, 2010, and 2009 was 27,000, 51,000, and 105,000, respectively.

For the years ended July 31, 2011, 2010 and 2009, the effect of
approximately 785,000, 1,132,000 and 1,191,000 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:

|                                                            |  |      |         |      |   |         |   |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                            |  | 2011 |         | 2010 |   | 2009    |  
|                                                            |  |      |         |      |   |         |  
|Numerator:                                                  |  |      |         |      |   |         |   |   |         |  
|Net loss                                                    |  | $    | (12,960 | )    | $ | (22,233 | ) | $ | (23,564 | )
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Denominator:                                                |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding- Basic          |  |      | 38,357  |      |   | 38,001  |   |   | 37,511  |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Add: effect of
 dilutive stock options and restricted stock |  |      |        |      |   |        |   |   |        |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Weighted-average
 common shares outstanding - Diluted       |  |      | 38,357  |      |   | 38,001  |   |   | 37,511  |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|                                                            |  |      |         |      |   |         |   |   |         |  
|Net loss per share                                          |  |      |         |      |   |         |   |   |         |  
|Basic and diluted                                           |  | $    | (0.34   | )    | $ | (0.59   | ) | $ | (0.63   | )
|                                                            |  |      |         |      |   |         |   |   |         |  

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.

For the years ended July 31, 2011, 2010 and 2009, share-based
compensation expense relating to the fair value of restricted shares and
restricted stock units was approximately $1,049, $1,170, and $1,435,
respectively (see Note 11). No excess tax benefits were recognized for the year
ended July 31, 2011, 2010 and 2009.

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:

|                                      |  |      |       |      |   |       |  |   |       |  | 
|------------------------------------- |  | ---- | ----- | ---- | - | ----- |  | - | ----- |  | 
|                                      |  | 2011 |       | 2010 |   | 2009  | 
|                                      |  |      |       |      |   |       |  |  
|Cost of clinical
 laboratory services |  | $    | 10    |      | $ | 12    |  | $ | 8     | 
|Research and
 development             |  |      | 14    |      |   | 14    |  |   | 13    | 
|Selling, general
 and administrative  |  |      | 1,025 |      |   | 1,144 |  |   | 1,414 | 
|                                      |  |      |       |      |   |       |  |   |       | 
|                                      |  | $    | 1,049 |      | $ | 1,170 |  | $ | 1,435 | 
|                                      |  |      |       |      |   |       |  |   |       | 

As of July 31, 2011, there was $1.1 million of total
    unrecognized compensation cost related to nonvested share-based payment arrangements
    granted under the Companys incentive stock plans, which will be recognized
    over a weighted average remaining life of approximately eight months.

F-13

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

Subsequent events

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

Effect of new accounting pronouncements

In May
2011, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which amends
the current fair value measurement and disclosure guidance of Accounting
Standards Codification (ASC) Topic 820 Fair Value Measurement to include
increased transparency around valuation inputs and investment categorization.
The guidance provided in ASU No. 2011-04 is effective for interim and annual
periods beginning after December 15, 2011 and is applied prospectively. The
Company does not expect the adoption of these provisions to have a material
impact on the its consolidated financial statements or on future operating
results.

In June 2011, the FASB issued ASU 2011-05, Presentation
      of Comprehensive Income,
updating ASC Topic 220, Comprehensive
Income.Under the amended ASC Topic
220, an entity has the option to present the total of comprehensive
income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in
two separate but consecutive statements. The guidance eliminates the current
option to present other comprehensive income and its components in the
Statement of Stockholders Equity. This guidance does not change the components
that are recognized in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. This guidance is
effective for fiscal years, and interim periods within those years, beginning
after December 15, 2011, and is to be applied retrospectively. The Company does
not believe the adoption of this guidance in the first quarter of fiscal 2013
will have an impact on its consolidated financial statements or on future operating
results.

In July
2011, the FASB issued ASU No. 2011-07: Health Care Entities (Topic 954) 
Presentation and Disclosure of Patient Service Revenue, Provision for Bad
Debts, and the Allowance for Doubtful Accounts for Certain Health Care
Entities. This update was issued to provide greater transparency relating to
accounting practices used for net patient service revenue and related bad debt
allowances by health care entities. Some health care entities recognize patient
service revenue at the time the services are rendered regardless of whether the
entity expects to collect that amount or has assessed the patients ability
to pay. These prior accounting practices used by some health care entities
resulted in a gross-up of patient service revenue and the provision for bad
debts, causing difficulty for outside users of financial statements to make
accurate comparisons and analyses of financial statements among entities. ASU
No. 2011-07 requires certain healthcare entities to change the presentation of
the statement of operations, reclassifying the provision for bad debts
associated with patient service revenue from an operating expense to a
deduction from patient service revenue and also requires enhanced quantitative
and qualitative disclosures relevant to the entitys policies for recognizing
revenue and assessing bad debts. This update is not designed and will not change
the net income reported by healthcare entities. This update is effective for
fiscal years beginning after December 15, 2011, with early adoption permitted.
The Company does not expect that this update will have any material impact on
its consolidated financial statements. The Company is currently evaluating if
the update will have any impact on the presentation of its statement of
operations.

Reclassifications

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

F-14

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

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 was
$13,061 including acquisition costs of approximately $540. 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 for the Assay Designs 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, 2011 and 2010
(Dollars in thousands except share data)

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 the acquisition completed in
2009 as if the acquisition had occurred as of August 1, 2008. 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   |  | 2009 |        
|                            |  |      |        
|Net revenues                |  | $    | 96,227  |  
|Net loss                    |  | $    | (24,098 | )
|Net loss per
 common share: |  |      |         |  
|Basic and diluted           |  | $    | (0.64   | )

Note 3- Supplemental disclosure for statement
of cash flows

In the years ended July 31, 2011, 2010, and 2009, income taxes paid by
the Company approximated $107, $186, and $220 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.

F-16

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

Note 4  Short term investments

At July 31, 2011 and 2010 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, 2011 and 2010, 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:

|                                                               |  |                                      |        |                          |  |                                      |  |   |        |   | 
|-------------------------------------------------------------- |  | ------------------------------------ | ------ | ------------------------ |  | ------------------------------------ |  | - | ------ | - | 
|                                                               |  | Accumulated income
(loss) before tax |        | Tax (expense)
or benefit |  | Accumulated income
(loss) net of tax | 
|                                                               |  |                                      |        |                          |  |                                      |  |  
|Balance - July 31,
 2008                                       |  | $                                    | 1,586  |                          |  |                                     |  | $ | 1,586  |  
|Fiscal 2009 
 unrealized loss on foreign currency translation |  |                                      | (1,310 | )                        |  |                                     |  |   | (1,310 | )
|                                                               |  |                                      |        |                          |  |                                      |  |   |        |  
|Balance  July 31,
 2009                                       |  |                                      | 276    |                          |  |                                     |  |   | 276    |  
|Fiscal 2010 
 unrealized gain on foreign currency translation |  |                                      | 599    |                          |  |                                     |  |   | 599    |  
|                                                               |  |                                      |        |                          |  |                                      |  |   |        |  
|Balance  July 31,
 2010                                       |  |                                      | 875    |                          |  |                                     |  |   | 875    |  
|Fiscal 2011 
 unrealized gain on foreign currency translation |  |                                      | 2,918  |                          |  |                                     |  |   | 2,918  |  
|                                                               |  |                                      |        |                          |  |                                      |  |   |        |  
|Balance  July 31,
 2011                                       |  | $                                    | 3,793  |                          |  |                                     |  | $ | 3,793  |  
|                                                               |  |                                      |        |                          |  |                                      |  |   |        |  

Note 6 - Inventories

Inventories consisted of the following at July 31:

|                  |  |      |       |      |   |       |  | 
|----------------- |  | ---- | ----- | ---- | - | ----- |  | 
|                  |  | 2011 |       | 2010 |  
|                  |  |      |       |      |   |      
|Raw materials     |  | $    | 1,063 |      | $ | 921   | 
|Work in process   |  |      | 2,517 |      |   | 2,136 | 
|Finished products |  |      | 5,680 |      |   | 5,825 | 
|                  |  |      |       |      |   |       | 
|                  |  | $    | 9,260 |      | $ | 8,882 | 
|                  |  |      |       |      |   |       | 

F-17

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

Note 7  Property, plant, and equipment

At July 31, 2011 and 2010 property, plant, and equipment consist of:

|                                           |  |   |         |   |      |        
|------------------------------------------ |  | - | ------- | - | ---- | -------
|                                           |  |   | 2011    |   | 2010 |        
|                                           |  |   |         |   |      |        
|Building and
 building improvements        |  | $ | 4,320   |   | $    | 4,309  
|Machinery and
 equipment                   |  |   | 6,916   |   |      | 6,814  
|Office furniture
 and computer equipment   |  |   | 14,551  |   |      | 13,057 
|Leasehold
 improvements                    |  |   | 4,694   |   |      | 4,572  
|                                           |  |   |         |   |      |        
|                                           |  |   | 30,481  |   |      | 28,752 
|Accumulated
 depreciation and amortization |  |   | (20,858 | ) |      | (17,606
|                                           |  |   |         |   |      |        
|                                           |  |   | 9,623   |   |      | 11,146 
|Land and land
 improvements                |  |   | 712     |   |      | 712    
|                                           |  |   |         |   |      |        
|                                           |  | $ | 10,335  |   | $    | 11,858 
|                                           |  |   |         |   |      |        

Note 8  Goodwill and intangible assets

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

|                                                       |  |                    |        |                    |   |       |  |   |        | 
|------------------------------------------------------ |  | ------------------ | ------ | ------------------ | - | ----- |  | - | ------ | 
|                                                       |  | Enzo Life
Sciences |        | Enzo
Clinical
Labs |   | Total | 
|                                                       |  |                    |        |                    |   |       | 
|August 1, 2009                                         |  | $                  | 17,444 |                    | $ | 7,452 |  | $ | 24,896 | 
|Foreign currency
 translation                          |  |                    | 47     |                    |   |      |  |   | 47     | 
|                                                       |  |                    |        |                    |   |       |  |   |        | 
|July 31, 2010                                          |  |                    | 17,491 |                    |   | 7,452 |  |   | 24,943 | 
|Additional
 purchase price consideration  see Note 16 |  |                    | 1,150  |                    |   |      |  |   | 1,150  | 
|Foreign currency
 translation                          |  |                    | 1,280  |                    |   |      |  |   | 1,280  | 
|                                                       |  |                    |        |                    |   |       |  |   |        | 
|July 31, 2011                                          |  | $                  | 19,921 |                    | $ | 7,452 |  | $ | 27,373 | 
|                                                       |  |                    |        |                    |   |       |  |   |        | 

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

|                                      |  |               |        |                          |   |         |   |       |        |                          |   |        |  |   |         |   |   |        | 
|------------------------------------- |  | ------------- | ------ | ------------------------ | - | ------- | - | ----- | ------ | ------------------------ | - | ------ |  | - | ------- | - | - | ------ | 
|                                      |  | July 31, 2011 |        | July 31, 2010            |  
|                                      |  |               |        |                          |  
|                                      |  | Gross         |        | Accumulated
Amortization |   | Net     |   | Gross |        | Accumulated
Amortization |   | Net    | 
|                                      |  |               |        |                          |   |         |   |       |        |                          |   |        | 
|Finite-lived intangible assets:       |  |               |        |                          |   |         |   |       |        |                          |   |        |  |   |         |   |   |        | 
|Patents                               |  | $             | 11,027 |                          | $ | (10,278 | ) | $     | 749    |                          | $ | 11,027 |  | $ | (10,154 | ) | $ | 873    | 
|Customer relationships                |  |               | 12,789 |                          |   | (3,472  | ) |       | 9,317  |                          |   | 12,099 |  |   | (2,248  | ) |   | 9,851  | 
|Non-compete and employment agreements |  |               | 547    |                          |   | (547    | ) |       |       |                          |   | 478    |  |   | (396    | ) |   | 82     | 
|Website and acquired content          |  |               | 1,063  |                          |   | (748    | ) |       | 315    |                          |   | 1,009  |  |   | (489    | ) |   | 520    | 
|Licensed technology and other         |  |               | 649    |                          |   | (355    | ) |       | 294    |                          |   | 628    |  |   | (285    | ) |   | 343    | 
|Indefinitely-lived intangible assets: |  |               |        |                          |   |         |   |       |        |                          |   |        |  |   |         |   |   |        | 
|Trademarks                            |  |               | 9,310  |                          |   |        |   |       | 9,310  |                          |   | 8,699  |  |   |        |   |   | 8,699  | 
|                                      |  |               |        |                          |   |         |   |       |        |                          |   |        |  |   |         |   |   |        | 
|Total                                 |  | $             | 35,385 |                          | $ | (15,400 | ) | $     | 19,985 |                          | $ | 33,940 |  | $ | (13,572 | ) | $ | 20,368 | 
|                                      |  |               |        |                          |   |         |   |       |        |                          |   |        |  |   |         |   |   |        | 

F-18

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

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

|     |  |   |       |  |  |  |  |  |  | 
|---- |  | - | ----- |  |  |  |  |  |  | 
|2012 |  | $ | 1,367 | 
|2013 |  |   | 1,311 | 
|2014 |  |   | 1,196 | 
|2015 |  |   | 1,154 | 
|2016 |  |   | 1,143 | 

At July 31, 2011, the weighted average useful lives
of amortizable intangible assets were approximately eight years.

Amortization expense for the years ended July 31, 2011, 2010, and 2009
was $1,507, $1,542, and $1,277, respectively.

Note 9 - Income taxes

The benefit (provision) for income taxes for fiscal
    years ended July 31 is as follows:

|                                     |  |      |      |      |   |      |   |   |     |  
|------------------------------------ |  | ---- | ---- | ---- | - | ---- | - | - | --- | -
|                                     |  | 2011 |      | 2010 |   | 2009 |  
|                                     |  |      |      |      |   |      |  
|Current (provision) benefit:         |  |      |      |      |   |      |   |   |     |  
|Federal                              |  | $    | 8    |      | $ | 119  |   | $ |    |  
|State and local                      |  |      | (161 | )    |   | (75  | ) |   | (75 | )
|Foreign                              |  |      | 33   |      |   | (61  | ) |   | (12 | )
|Deferred (provision) benefit         |  |      | (17  | )    |   | 45   |   |   |    |  
|                                     |  |      |      |      |   |      |   |   |     |  
|(Provision) benefit for income taxes |  | $    | (137 | )    | $ | 28   |   | $ | (87 | )
|                                     |  |      |      |      |   |      |   |   |     |  

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 are as follows:

|                                                                  |  |      |         |      |   |         |  
|----------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                  |  | 2011 |         | 2010 |  
|                                                                  |  |      |         |      |  
|Deferred tax assets:                                              |  |      |         |      |   |         |  
|Federal tax carryforward losses                                   |  | $    | 25,504  |      | $ | 23,100  |  
|Provision for uncollectible accounts
 receivable                  |  |      | 1,340   |      |   | 1,057   |  
|State and local tax carry forward losses                          |  |      | 2,419   |      |   | 2,117   |  
|Accrued royalties                                                 |  |      | 143     |      |   | 103     |  
|Stock compensation                                                |  |      | 1,218   |      |   | 1,017   |  
|Depreciation                                                      |  |      |        |      |   | 183     |  
|Research and development and other tax
 credit carryforwards      |  |      | 633     |      |   | 618     |  
|Foreign tax carryforward losses                                   |  |      | 381     |      |   | 284     |  
|Realized and unrealized losses on
 marketable securities          |  |      |        |      |   | 138     |  
|Inventory                                                         |  |      | 1,515   |      |   | 1,094   |  
|Accrued expenses                                                  |  |      | 736     |      |   | 263     |  
|Other, net                                                        |  |      | 23      |      |   | 15      |  
|                                                                  |  |      |         |      |   |         |  
|Gross deferred tax assets                                         |  |      | 33,912  |      |   | 29,989  |  
|                                                                  |  |      |         |      |   |         |  
|                                                                  |  |      |         |      |   |         |  
|Deferred tax liabilities:                                         |  |      |         |      |   |         |  
|Deferred patent costs                                             |  |      | (170    | )    |   | (204    | )
|Intangibles                                                       |  |      | (2,983  | )    |   | (2,797  | )
|Depreciation                                                      |  |      | (27     | )    |   |         |  
|Prepaid expenses                                                  |  |      | (691    | )    |   | (654    | )
|Other, net                                                        |  |      | (55     | )    |   | (36     | )
|                                                                  |  |      |         |      |   |         |  
|Gross deferred tax liabilities                                    |  |      | (3,926  | )    |   | (3,691  | )
|                                                                  |  |      |         |      |   |         |  
|                                                                  |  |      |         |      |   |         |  
|Net deferred tax assets (liabilities)
 before valuation allowance |  |      | 29,986  |      |   | 26,298  |  
|Less: valuation allowance                                         |  |      | (32,920 | )    |   | (28,901 | )
|                                                                  |  |      |         |      |   |         |  
|Net deferred tax liabilities                                      |  | $    | (2,934  | )    | $ | (2,603  | )
|                                                                  |  |      |         |      |   |         |  

F-19

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

At July 31, 2011, the Company had net deferred tax liabilities of
approximately $2.9 million which consists primarily of identifiable intangible
assets and cumulative tax deductions in excess of book expenses recognized by
foreign subsidiaries.

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

|                |  |               |       |               |   |       | 
|--------------- |  | ------------- | ----- | ------------- | - | ----- | 
|                |  | July 31, 2011 |       | July 31, 2010 |  
|                |  |               |       |               |  
|Deferred taxes: |  |               |       |               |   |       | 
|Current         |  | $             |      |               | $ | 21    | 
|Non-current     |  |               | 2,934 |               |   | 2,582 | 
|                |  |               |       |               |   |       | 
|                |  | $             | 2,934 |               | $ | 2,603 | 
|                |  |               |       |               |   |       | 

The Company recorded a valuation allowance during the year ended July
31, 2011 and 2010 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, 2011, the Company had U.S. federal
    net operating loss carryforwards of approximately $75.0 million. The U.S.
    federal tax loss carryforwards, if not fully utilized, expire between 2012
    and 2031. Utilization is dependent on generating sufficient taxable income
    prior to expiration of the tax loss carryforwards. As of July 31, 2011, the
Company had foreign loss carryforwards of approximately $1.5 million.

As a result of certain acquisitions approximately $1.5 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:

|                          |  |      |         |      |   |         |   |   |         |  
|------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|                          |  | 2011 |         | 2010 |   | 2009    |  
|                          |  |      |         |      |   |         |  
|United States
 operations |  | $    | (12,284 | )    | $ | (19,642 | ) | $ | (21,221 | )
|International operations  |  |      | (539    | )    |   | (2,619  | ) |   | (2,256  | )
|                          |  |      |         |      |   |         |   |   |         |  
|Loss before taxes         |  | $    | (12,823 | )    | $ | (22,261 | ) | $ | (23,477 | )
|                          |  |      |         |      |   |         |   |   |         |  

The (provision) benefit for income taxes were at rates
    different from U.S. federal statutory rates for the following reasons for
    the years ended July 31:

|                                                               |  |      |       |      |  |       |    |  |       |   
|-------------------------------------------------------------- |  | ---- | ----- | ---- |  | ----- | -- |  | ----- | --
|                                                               |  | 2011 |       | 2010 |  | 2009  |   
|                                                               |  |      |       |      |  |       |   
|Federal statutory
 rate                                        |  |      | 34    | %    |  | 34    | %  |  | 34    | % 
|Expenses not
 deductible for income tax return purposes        |  |      | (2.3  | )%   |  | (1.5  | )% |  | (0.4  | )%
|State income
 taxes, net of (benefit) of federal tax deduction |  |      | 1.0   | %    |  | 0.1   | %  |  | 2.5   | % 
|Change in
 valuation allowance                                 |  |      | (34.6 | )%   |  | (32.3 | )% |  | (37.8 | )%
|Reversal of tax
 reserve                                       |  |      | 0.1   | %    |  | 0.5   |    |  |      |   
|Other                                                          |  |      | 0.7   | %    |  | (0.7  | )% |  | 1.3   |   
|                                                               |  |      |       |      |  |       |    |  |       |   
|                                                               |  |      | (1.1  | )%   |  | 0.1   | %  |  | (0.4  | )%
|                                                               |  |      |       |      |  |       |    |  |       |   

U.S. federal income
taxes have not been provided on the undistributed earnings of approximately
$230 at July 31, 2011 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-20

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

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 years
July 31, 2008 through 2010.

Note 10  Accrued Liabilities, Other Current
Liabilities and Other Liabilities

At July 31 accrued liabilities consist of:

|                                              |  |      |       |      |   |       | 
|--------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|                                              |  | 2011 |       | 2010 |  
|                                              |  |      |       |      |  
|Legal                                         |  | $    | 610   |      | $ | 877   | 
|Payroll, benefits,
 severance and commissions |  |      | 4,286 |      |   | 4,012 | 
|Research and
 development                     |  |      | 709   |      |   | 716   | 
|Professional fees                             |  |      | 782   |      |   | 963   | 
|Outside reference
 lab testing                |  |      |      |      |   | 194   | 
|Other                                         |  |      | 1,801 |      |   | 1,747 | 
|                                              |  |      |       |      |   |       | 
|                                              |  | $    | 8,188 |      | $ | 8,509 | 
|                                              |  |      |       |      |   |       | 

At July 31 other current liabilities consist of:

|                                                          |  |      |       |      |   |     | 
|--------------------------------------------------------- |  | ---- | ----- | ---- | - | --- | 
|                                                          |  | 2011 |       | 2010 |  
|                                                          |  |      |       |      |  
|Liability for
 purchase price consideration (see Note 16) |  | $    | 1,150 |      | $ |    | 
|Deferred revenue                                          |  |      | 396   |      |   | 496 | 
|Other                                                     |  |      | 137   |      |   | 76  | 
|                                                          |  |      |       |      |   |     | 
|                                                          |  | $    | 1,683 |      | $ | 572 | 
|                                                          |  |      |       |      |   |     | 

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, 2011 and July 31 2010, the Company has established a reserve of $0.4
million and $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.

Installment Loans

The Company has installment loans outstanding for
    transportation and lab equipment aggregating $0.2 million at July 31, 2011,
    which bear interest at interest rates ranging from 0% to 5.75% per annum,
    and are secured by the underlying assets. The principal payments under the
    installment loans are as follows: 2012 - $0.1 million, included in Other
    Current Liabilities, 2013 
$0.06 million and 2014 - $0.04 million totaling $0.1 million included in Other
Liabilities.

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
    International acquisition earn-out of $2.5 million.

Treasury stock

In fiscal 2011, the Company issued 173,834 shares from treasury stock for its employees 401(k) matched contributions obligation. The Company recorded an expense of $690 for the match, reducing treasury stock by $2,467 for the average acquisition cost of such shares and adjusting additional paid in capital by $1,777.

F-21

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

In fiscal 2010, the Company issued 111,706 shares from treasury stock for its employees 401(k) matched contributions obligation. The Company recorded an expense of $697 for the match, reducing treasury stock by $1,586 for the average acquisition cost of such shares and adjusting additional paid in capital by $889.

In fiscal 2009, the Company issued 142,150 shares from treasury stock for its employees 401(k) matched contributions obligation. The Company recorded an expense of $582 for the match, reducing treasury stock by $2,017 for the average acquisition cost of such shares and adjusting additional paid in capital by $1,435.

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.

Incentive stock plans

The Company has an incentive stock option plan (the 1999 Plan) and an
incentive stock option and restricted stock award plan (the 2005 Plan),under
which the Company may grant 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. On January 14, 2011, the Companys
stockholders approved the adoption of the 2011 Incentive Plan (the 2011 Plan)
which provides for the issuance of equity awards, including among others,
options, restricted stock and restricted stock units for up to 3,000,000 Common
Shares. No additional awards may be granted under the 1999 or 2005 Plans. The
exercise price of options granted under the 2011 Plan, and consistent with
other Plans, is equal to or greater than fair market value of the Common Stock
on the date of grant. Unless terminated earlier by the Board of Directors the
2011 Plan will terminate at the earliest of; (a) such time as no shares of
Common Stock remain available for issuance under the 2011 Plan or (b) tenth
anniversary of the effective date of the 2011 Plan. Awards outstanding upon
expiration of the 2011 Plan shall remain in effect until they have been
exercised, terminated, or have expired. As of July 31, 2011, there
were approximately 2,818,300 shares available for grant under the 2011 Plan.

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
2011 Plan provides for the issuance of restricted stock and restricted stock
unit awards which generally vest over a two to four year period.

A summary of the information pursuant to the Companys stock option
plans for the years ended July 31, 2011, 2010, and 2009 is as follows:

|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   |  |  |           |   |   |       | 
|----------------------------------------------------------- |  | ------- | --------- | --------------------------------- | - | ------- |  | --------------------------------- | --------- | ------- | - | --------------------------------- |  |  | --------- | - | - | ----- | 
|                                                            |  | 2011    |           | 2010                              |   | 2009    | 
|                                                            |  |         |           |                                   |   |         | 
|                                                            |  | Options |           | Weighted -
Average
Exercise
Price |   | Options |  | Weighted -
Average
Exercise
Price |           | Options |   | Weighted -
Average
Exercise
Price | 
|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   | 
|Outstanding at
 beginning of year                           |  |         | 1,132,450 |                                   | $ | 14.30   |  |                                   | 1,191,519 |         | $ | 14.41                             |  |  | 2,275,415 |   | $ | 13.13 | 
|Exercised                                                   |  |         |          |                                   | $ |        |  |                                   |          |         | $ |                                  |  |  | (251,162  | ) | $ | 5.87  | 
|Cancelled                                                   |  |         | (347,326  | )                                 | $ | 13.78   |  |                                   | (59,069   | )       | $ | 16.14                             |  |  | (832,734  | ) | $ | 13.87 | 
|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   |  |  |           |   |   |       | 
|Outstanding at end
 of year                                 |  |         | 785,124   |                                   | $ | 14.53   |  |                                   | 1,132,450 |         | $ | 14.30                             |  |  | 1,191,519 |   | $ | 14.41 | 
|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   |  |  |           |   |   |       | 
|Exercisable at end
 of year                                 |  |         | 785,124   |                                   | $ | 14.53   |  |                                   | 1,132,450 |         | $ | 14.30                             |  |  | 1,191,519 |   | $ | 14.41 | 
|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   |  |  |           |   |   |       | 
|Weighted average
 fair value of options granted during year |  |         |           |                                   | $ |        |  |                                   |           |         |   |                                  |  |  |           |   | $ |      | 
|                                                            |  |         |           |                                   |   |         |  |                                   |           |         |   |                                   |  |  |           |   |   |       | 

The aggregate
intrinsic value of stock options exercised during the years ended July 31,
2011, 2010 and 2009, including the non-cash transactions (see Note 3) was $0,
$0 and $1.4 million, respectively. There is no aggregate intrinsic value of
options both outstanding and exercisable at July 31, 2011.

F-22

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010(Dollars in thousands except share data)

The following table summarizes information for stock options
outstanding at July 31, 2011:

|                          |  |                                     |         |                                                          |  |                                    |  |   |       | 
|------------------------- |  | ----------------------------------- | ------- | -------------------------------------------------------- |  | ---------------------------------- |  | - | ----- | 
|                          |  | Options outstanding and exercisable |        
|                          |  |                                     |        
|Range of
 Exercise prices |  | Shares                              |         | Weighted- Average
 Remaining
 Contractual Life in
 years |  | Weighted-
 Average Exercise
 Price | 
|                          |  |                                     |         |                                                          |  |                                    | 
|$8.33-12.25               |  |                                     | 362,489 |                                                          |  | 1.45                               |  | $ | 11.80 | 
|$12.93-19.02              |  |                                     | 413,952 |                                                          |  | 3.0                                |  | $ | 16.80 | 
|$20.20                    |  |                                     | 8,683   |                                                          |  | 0.5                                |  | $ | 20.20 | 
|                          |  |                                     |         |                                                          |  |                                    |  |   |       | 
|                          |  |                                     | 785,124 |                                                          |  |                                    |  |   |       | 
|                          |  |                                     |         |                                                          |  |                                    |  |   |       | 

Restricted Stock Awards

During fiscal 2011, 2010 and 2009, the compensation
    committee of the Companys board of directors approved grants of restricted
    stock and restricted stock unit awards (the Awards), respectively,
    to the Companys directors,
certain officers and certain employees under the 2011 and 2005 Plans. 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 Plans terms. The Awards settle in
    shares of the Companys
common stock on a one-for-one basis. As of July 31, 2011, 311,952 shares were
unvested.

A summary of the information pursuant to the Companys Restricted Stock
Awards for the years ended July 31, 2011, 2010 and 2009 is as follows:

|                                                             |  |          |   |                                  |      |        |          |                                  |   |        |  |                                  |   |   |       | 
|------------------------------------------------------------ |  | -------- | - | -------------------------------- | ---- | ------ | -------- | -------------------------------- | - | ------ |  | -------------------------------- | - | - | ----- | 
|                                                             |  | 2011     |   | 2010                             |      | 2009   |         
|                                                             |  |          |   |                                  |      |        |         
|                                                             |  | Awards   |   | Weighted -
 Average
 Award Price |      | Awards |          | Weighted -
 Average
 Award Price |   | Awards |  | Weighted -
 Average
 Award Price |  
|                                                             |  |          |   |                                  |      |        |          |                                  |   |        |  |                                  |  
|Outstanding at beginning of year                             |  | 417,578  |   | $                                | 5.50 |        | 377,400  |                                  | $ | 6.05   |  | 220,240                          |   | $ | 12.34 | 
|Awarded                                                      |  | 181,643  |   | $                                | 3.78 |        | 241,610  |                                  | $ | 5.54   |  | 291,801                          |   | $ | 4.05  | 
|Vested                                                       |  | (263,112 | ) | $                                | 5.11 |        | (192,845 | )                                | $ | 6.46   |  | (128,941                         | ) | $ | 12.11 | 
|Forfeited                                                    |  | (24,157  | ) | $                                | 5.27 |        | (8,587   | )                                | $ | 9.29   |  | (5,700                           | ) | $ | 10.18 | 
|                                                             |  |          |   |                                  |      |        |          |                                  |   |        |  |                                  |   |   |       | 
|Outstanding at end of year                                   |  | 311,952  |   | $                                | 4.84 |        | 417,578  |                                  | $ | 5.50   |  | 377,400                          |   | $ | 6.05  | 
|                                                             |  |          |   |                                  |      |        |          |                                  |   |        |  |                                  |   |   |       | 
|Weighted average market value of awards
 granted during year |  |          |   | $                                | 3.78 |        |          |                                  | $ | 5.54   |  |                                  |   | $ | 4.05  | 
|                                                             |  |          |   |                                  |      |        |          |                                  |   |        |  |                                  |   |   |       | 

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, 2011, 2010, and 2009, 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 share-based 401(k) employer matched contributions and accrued
expense was approximately $690, $1,115, and $582 in fiscal years 2011, 2010,
and 2009, respectively.

F-23

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

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, 2011, 2010 and 2009, the employer contributions related to the
Swiss benefit pension plan was approximately $480, $408 and $399, respectively.
Pension expense at the other international operations was approximately $38,
$36 and $36 for the years ended July 31, 2011, 2010 and 2009, respectively.

Note 13  Royalty and other income

The Company has a license agreement with 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. During the years ended July 31, 2011, 2010 and 2009, the
Company recorded royalty income under the Agreement of approximately $6.8
million, $6.8 million and $6.7 million, respectively, which is included in the
Life Sciences segment.

Note 14 - Licensing and Supply Agreement

On April 27, 2007 (the Effective Date) Enzo Life Sciences, Inc.
(Life Sciences) and Abbott Molecular Inc. (Abbott) entered into a 5 year
agreement, which is still in effect, 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
non-expired 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. This one-time fee was recognized as revenue through
August 31, 2010 representing the longest expected patent life of the related
patents. Abbott has notified the Company that they have made a final royalty
payment because they are unaware of any non-expired patents. The Company is
presently reviewing its patent portfolio and Abbotts position. The Licensing
Agreement between the parties remains in full force and effect and the Company
continues its commercialization efforts under the contract terms. At July 31,
2010, the Companys balance sheet includes current deferred revenue of
approximately $0.1 million relating to the one-time fee. During the years ended
July 31, 2011, 2010, and 2009, the Company recorded approximately $0.4 million,
$3.0 million and $2.7 million, respectively, in royalties and license fee
income under the Licensing Agreement.

F-24

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

Note 15  Commitments

Leases

The Company leases equipment, office and laboratory space under several
non-cancelable operating leases that expire between August 2011 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 $1,509, $1,470, and $1,424 during fiscal years
2011, 2010 and 2009, respectively.

Total rent expense incurred by the Company during
    fiscal 2011, 2010 and 2009 was approximately $4,023, $4,076, and $3,818,
    respectively. Minimum future annual rentals under non-cancelable operating
    leases, net of sublease rental income of $117 as of July 31, 2011, are as
    follows:

|                     |  |   |        | 
|-------------------- |  | - | ------ | 
|Years ended July 31, |  |   |        | 
|                     |  |   |       
|2012                 |  | $ | 4,520  | 
|2013                 |  |   | 3,750  | 
|2014                 |  |   | 2,935  | 
|2015                 |  |   | 2,705  | 
|2016                 |  |   | 2,512  | 
|Thereafter           |  |   | 4,170  | 
|                     |  |   |        | 
|                     |  | $ | 20,592 | 
|                     |  |   |        | 

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 year
ending July 31, 2012 is $1,223.

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. On September 23, 2010, Applera petitioned the Supreme
Court of the United States for a writ of certiorari, seeking review of the
Federal Circuits ruling. On June 21, 2011, the Supreme Court denied Appleras
petition for certiorari. Consequently, on August 16, 2011, the court lifted the
stay in the Amersham action.

F-25

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

On August
26, 2011, the court allowed the defendants to renew their motions for summary
judgment related only to alleged non-infringement of some of the patents in
suit. Defendants initial brief is to be filed by October 11, 2011, and all
briefing is to be completed by December 16, 2011. The Company does not believe
the defendants motion has merit, and will oppose it vigorously.

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. On
September 23, 2010, Applera petitioned the Supreme Court of the United States
for a writ of certiorari, seeking review of the Federal Circuits ruling. On
June 21, 2011, the Supreme Court denied Appleras petition for certiorari.
Consequently, on August 16, 2011, the court lifted the stay in the Affymetrix
action. On August 26, 2011, the court allowed Affymetrix to renew its motion
for summary judgment related only to alleged non-infringement of one patent in
suit. Affymetrixs initial brief is to be filed by October 11, 2011, and all
briefing is to be completed by December 16, 2011. The Company does not believe
Affymetrixs motion has merit, and will oppose it vigorously.

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 patents. 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-26

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

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. On September 23, 2010, Applera petitioned the
Supreme Court of the United States for a writ of certiorari, seeking review of
the Federal Circuits ruling. On June 21, 2011, the Supreme Court denied
Appleras petition for certiorari. Consequently, on August 16, 2011, the court
lifted the stay in the Roche action. On August 26, 2011, the court allowed
Roche to renew its motion for summary judgment related only to alleged
non-infringement of some of the patents in suit. Roches initial brief is to be
filed by October 11, 2011, and all briefing is to be completed by December 16,
2011. The Company does not believe Roches motion has merit, and will oppose it
vigorously.

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. Applera filed a petition with the U.S. Supreme Court
for a writ of certiorari on September 23, 2010. On June 19, 2011, the
Court denied that petition. The case is currently scheduled for trial in
February of 2012. 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.

On or
about March 6, 2002, an action was commenced against the Company and certain
officers and directors, by an investor in the Company, Lawrence Glazer and on
behalf of others, who had filed for bankruptcy protection. The complaint
alleged securities and common law fraud and breach of fiduciary duty and sought
in excess of $150 million in damages. On August 22, 2002, the complaint was
voluntarily dismissed; however a new substantially similar complaint was filed
at the same time. On October 21, 2002, the Company and the other defendants
filed a motion to dismiss the complaint, and the plaintiffs responded by
amending the complaint and dropping their claims against defendants Keating and
Yates. On November 18, 2002, the Company and the other defendants again moved
to dismiss the Amended Complaint.

F-27

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

On July
16, 2003, the Court issued a Memorandum Opinion dismissing the Amended
Complaint in its entirety with prejudice. Plaintiffs thereafter moved for
reconsideration but the Court denied the motion on September 8, 2003.
Plaintiffs thereafter appealed the decision to the United States Court of
Appeals for the Fourth Circuit. On March 21, 2005, the Fourth Circuit affirmed
the lower Courts prior dismissal of all claims asserted in the action with the
sole exception of a portion of the claim for common law fraud and remanded that
remaining portion of the action to the U.S. District Court for the Eastern
District of Virginia. On May 20, 2005, defendants again moved the District
Court to dismiss the sole remaining claim before it. On July 14, 2005, the
District Court granted defendants renewed motion to dismiss. On July 29, 2005,
Plaintiffs moved to amend their Complaint and for reconsideration. On August
19, 2005, the Court denied Plaintiffs motion to amend and entered final
judgment dismissing the Complaint. Plaintiffs then appealed the order and
judgment to the Fourth Circuit. On September 21, 2006, the United States Court
of Appeals for the Fourth Circuit affirmed the dismissal of the Complaint.
Thereafter, in March 2007, the United States Supreme Court denied the Glasers
Petition for Certiorari. Nevertheless, on January 14, 2011, many years after it
was finally dismissed, Glaser filed a motion for reconsideration of the
dismissal of his case with the United States District Court for the Eastern
District of Virginia, along with a motion for sanctions, claiming in pertinent
part that the Court was defrauded. The Company filed papers in opposition to
the motion and, on April 1, 2011, the Court denied Glasers motion. Glaser
subsequently appealed that dismissal to the Fourth Circuit. On October 4, 2011,
his appeal was denied. The Company intends to defend vigorously any further
effort by Glaser to re-open this long ago dismissed action.

In January
2006, three actions were filed against the Company and certain of its officers
and directors by Francis Scott Hunt and others. These actions were filed by the
same attorney who had previously filed a virtually identical claim against the
Company and certain of its officers and directors in the Eastern District of
Virginia. These actions are in many respects identical to the Glaser action.
The first action (Hunt) was filed on or about January 10, 2006, on behalf of
seven alleged shareholders. The second action (Roberts) was filed on or about
January 11, 2006, and was ultimately consolidated at the Companys request with
the Hunt Action before Judge Scheindlin. One of the plaintiffs in the first
action, Paul Lewicki, subsequently withdrew his claim for procedural reasons
and re-filed a separate virtually identical complaint (the third action listed
above) on or about August 21, 2006, and the Lewicki Action was also
consolidated before Judge Scheindlin. The pleadings in all three actions are
virtually identical and seek to set forth only a claim for common law fraud,
based on the same essential allegations set forth in the Glaser Action, i.e.,
that there was a fraudulent scheme approximately ten years ago to pump and dump
Enzo securities. The Company and the other defendants moved to dismiss all of
the Complaints and that motion was granted by Judge Scheindlin. The Plaintiffs
then amended their Complaints and the Hunts moved for reconsideration. The
Company and the other defendants opposed the motion for reconsideration and
moved again to dismiss the Amended Complaints that were filed. The Hunts
motion for reconsideration was denied and two of the other Plaintiffs (the
McMahons) thereafter withdrew their complaint with prejudice voluntarily. After
further delays during which the remaining Plaintiffs hired new counsel,
Plaintiffs proposed yet another revised Complaint. The defendants motions to
dismiss the latest version of the Complaints of the remaining Plaintiffs was
granted in part and denied in part. The remaining plaintiffs and defendants,
including Enzo Biochem, Inc., then proceeded with discovery. Following the
completion of discovery, the defendants moved for summary judgment. On June 15,
2009, Judge Scheindlin granted the remaining defendants motion for summary
judgment and dismissed the complaints. The remaining Plaintiffs then filed a
notice of appeal to the Second Circuit Court of Appeals. On August 30, 2011,
the Second Circuit denied the appeal. The remaining Plaintiffs then moved for a
rehearing, and that motion is currently pending. The Company continues to
believe that these actions have no merit whatsoever and expects the Second
Circuit to reaffirm the denial of their appeal. In any event, 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.

F-28

---



ENZO BIOCHEM, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
July 31, 2011 and 2010
(Dollars in thousands except share data)

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 U.S.
District Court Judge on September 27, 2010, who directed that the parties first
go forward with the accounting procedure, as provided under the Agreement,
before moving further with the litigation. The parties were unable to resolve
the dispute through the accounting procedure. On January 27, 2011, Mayflower
filed an amended complaint. On February 25, 2011, Enzo filed an answer to the
amended complaint and on March 4, 2011 filed an amended counterclaim seeking
fees and expense of the suit as provided under the Agreement. As provided under
the Agreement, Mayflowers maximum contingent earn-out was $2.5 million payable
in either Enzo common stock or cash. The Company and Mayflower are currently
negotiating a resolution to the second and final earn-out dispute and based on
such negotiation the Company has accrued a $1.15 million settlement, expected
to be in cash, which has been recorded in Goodwill as additional purchase price
consideration. The Company recorded the liability in Other Current Liabilities.

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-29

---



ENZO
BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

Note 17  Segment
reporting

The Company has three reportable segments:
Life Sciences, Clinical Labs and Therapeutics. The Companys Life Sciences
segment develops, manufactures, and markets products to research and
pharmaceutical customers. The Clinical Labs segment provides diagnostic
services to the health care community. The Companys Therapeutics segment
conducts research and development activities for therapeutic drug candidates.
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
represents the operating results of the reportable segments of the Company:

Year ended July 31,
2011

|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | ------------- | ------ | --------------- | - | ------------ | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|                                                 |  | Life Sciences |        | Clinical 
 Labs |   | Therapeutics |   | Other |        | Consolidated |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |  
|Revenues:                                        |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Product revenues                                 |  | $             | 41,830 |                 |   |             |   |       |       |              |   |        |   | $ | 41,830  |  
|Royalty and
 license fee income                  |  |               | 7,437  |                 |   |             |   |       |       |              |   |        |   |   | 7,437   |  
|Clinical
 laboratory services                    |  |               |       |                 | $ | 52,762       |   |       |       |              |   |        |   |   | 52,762  |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               | 49,267 |                 |   | 52,762       |   |       |       |              |   |        |   |   | 102,029 |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Operating
 expenses:                             |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Cost of product
 revenues                        |  |               | 22,137 |                 |   |             |   |       |       |              |   |        |   |   | 22,137  |  
|Cost of clinical
 laboratory services            |  |               |       |                 |   | 31,682       |   |       |       |              |   |        |   |   | 31,682  |  
|Research and
 development                        |  |               | 5,784  |                 |   |             |   | $     | 2,022  |              |   |        |   |   | 7,806   |  
|Selling, general
 and administrative             |  |               | 17,855 |                 |   | 18,426       |   |       |       |              | $ | 8,910   |   |   | 45,191  |  
|Provision for
 uncollectible accounts receivable |  |               | 16     |                 |   | 4,415        |   |       |       |              |   |        |   |   | 4,431   |  
|Legal                                            |  |               | 726    |                 |   | 387          |   |       |       |              |   | 2,597   |   |   | 3,710   |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Total operating
 expenses                        |  |               | 46,518 |                 |   | 54,910       |   |       | 2,022  |              |   | 11,507  |   |   | 114,957 |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Operating income
 (loss)                         |  |               | 2,749  |                 |   | (2,148       | ) |       | (2,022 | )            |   | (11,507 | ) |   | (12,928 | )
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Other income
 (expense)                          |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Interest                                         |  |               | 2      |                 |   | (5           | ) |       |       |              |   | 14      |   |   | 11      |  
|Other                                            |  |               | (3     | )               |   | 30           |   |       |       |              |   | 18      |   |   | 45      |  
|Foreign exchange
 gain                           |  |               | 49     |                 |   |             |   |       |       |              |   |        |   |   | 49      |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Income (loss)
 before income taxes               |  | $             | 2,797  |                 | $ | (2,123       | ) | $     | (2,022 | )            | $ | (11,475 | ) | $ | (12,823 | )
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Depreciation and
 amortization included above    |  | $             | 3,282  |                 | $ | 1,012        |   | $     | 47     |              | $ | 128     |   | $ | 4,469   |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Share-based
 compensation included in above:     |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Cost of clinical
 laboratory services            |  |               |       |                 | $ | 10           |   |       |       |              |   |        |   | $ | 10      |  
|Research and
 development                        |  | $             | 14     |                 |   |             |   |       |       |              |   |        |   |   | 14      |  
|Selling, general
 and administrative             |  |               | 84     |                 |   | 61           |   |       |       |              | $ | 880     |   |   | 1,025   |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Total                                            |  | $             | 98     |                 | $ | 71           |   |       |       |              | $ | 880     |   | $ | 1,049   |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Capital
 expenditures                            |  | $             | 389    |                 | $ | 834          |   |       |       |              | $ |        |   | $ | 1,223   |  
|                                                 |  |               |        |                 |   |              |   |       |        |              |   |         |   |   |         |  

F-30

---



ENZO BIOCHEM, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2011 and 2010(Dollars in thousands except share data)

Year ended July 31, 2010

|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | --------------- | - | ------------ | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|                                                 |  | Life
 Sciences |        | Clinical 
 Labs |   | Therapeutics |   | 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   |  
|Selling, general and administrative              |  |                | 19,800 |                 |   | 18,503       |   |       |       |              | $ | 10,092  |   |   | 48,395  |  
|Provision for uncollectible accounts
 receivable |  |                | 48     |                 |   | 3,432        |   |       |       |              |   |        |   |   | 3,480   |  
|Legal                                            |  |                | 145    |                 |   | 222          |   |       |       |              |   | 1,379   |   |   | 1,746   |  
|Litigation settlement                            |  |                |       |                 |   |             |   |       |       |              |   | 3,698   |   |   | 3,698   |  
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Total operating expenses                         |  |                | 49,742 |                 |   | 51,727       |   |       | 2,502  |              |   | 15,169  |   |   | 119,140 |  
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Operating income (loss)                          |  |                | 3,162  |                 |   | (7,549       | ) |       | (2,502 | )            |   | (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  |                 | $ | (7,503       | ) | $     | (2,502 | )            | $ | (15,139 | ) | $ | (22,261 | )
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Depreciation and amortization included
 above    |  | $              | 3,110  |                 | $ | 982          |   | $     | 52     |              | $ | 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  |                 | $ | 1,728        |   | $     | 11     |              | $ | 62      |   | $ | 3,251   |  
|                                                 |  |                |        |                 |   |              |   |       |        |              |   |         |   |   |         |  

F-31

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010
(Dollars in thousands except share data)

Year ended July 31, 2009

|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | --------------- | ------ | --------------- | - | ------------ | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|                                                 |  | Life 
 Sciences |        | Clinical 
 Labs |   | Therapeutics |   | 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   |  
|Selling, general and administrative              |  |                 | 14,546 |                 |   | 15,425       |   |       |       |              | $ | 11,343  |   |   | 41,314  |  
|Provision for uncollectible accounts
 receivable |  |                 |       |                 |   | 5,189        |   |       |       |              |   |        |   |   | 5,189   |  
|Legal                                            |  |                 | 392    |                 |   | 73           |   |       |       |              |   | 3,730   |   |   | 4,195   |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Total operating expenses                         |  |                 | 47,559 |                 |   | 46,982       |   |       | 3,365  |              |   | 15,073  |   |   | 112,979 |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Operating income (loss)                          |  |                 | 2,409  |                 |   | (7,378       | ) |       | (3,365 | )            |   | (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  |                 | $ | (7,272       | ) | $     | (3,365 | )            | $ | (14,549 | ) | $ | (23,477 | )
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Depreciation and amortization included
 above    |  | $               | 2,350  |                 | $ | 946          |   | $     | 50     |              | $ | 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    |                 | $ | 135          |   | $     | 119    |              | $ | 1,032   |   |   | 1,414   |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Total                                            |  | $               | 141    |                 | $ | 143          |   | $     | 119    |              | $ | 1,032   |   | $ | 1,435   |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  
|Capital expenditures                             |  | $               | 1,334  |                 | $ | 1,253        |   | $     | 78     |              | $ | 44      |   | $ | 2,709   |  
|                                                 |  |                 |        |                 |   |              |   |       |        |              |   |         |   |   |         |  

F-32

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010(Dollars in thousands except
share data)

Geographic financial information is as follows:

|                                     |  |      |         |      |   |        |  |   |        | 
|------------------------------------ |  | ---- | ------- | ---- | - | ------ |  | - | ------ | 
|Net sales to unaffiliated customers: |  | 2011 |         | 2010 |   | 2009   | 
|                                     |  |      |         |      |   |        | 
|United States                        |  | $    | 85,691  |      | $ | 82,873 |  | $ | 75,936 | 
|Switzerland                          |  |      | 8,508   |      |   | 7,037  |  |   | 6,487  | 
|United Kingdom                       |  |      | 2,825   |      |   | 2,507  |  |   | 2,517  | 
|Other international countries        |  |      | 5,005   |      |   | 4,665  |  |   | 4,632  | 
|                                     |  |      |         |      |   |        |  |   |        | 
|Total                                |  | $    | 102,029 |      | $ | 97,082 |  | $ | 89,572 | 
|                                     |  |      |         |      |   |        |  |   |        | 
|                                     |  |      |         |      |   |        |  |   |        | 
|Long-lived assets at July 31,        |  | 2011 |         | 2010 |   | 2009   | 
|                                     |  |      |         |      |   |        | 
|United States                        |  | $    | 44,028  |      | $ | 45,439 |  | $ | 45,896 | 
|Switzerland                          |  |      | 8,958   |      |   | 7,063  |  |   | 7,075  | 
|United Kingdom                       |  |      | 2,857   |      |   | 2,944  |  |   | 3,334  | 
|Other international countries        |  |      | 1,850   |      |   | 1,723  |  |   | 1,923  | 
|                                     |  |      |         |      |   |        |  |   |        | 
|Total                                |  | $    | 57,693  |      | $ | 57,169 |  | $ | 58,228 | 
|                                     |  |      |         |      |   |        |  |   |        | 

F-33

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ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2011 and 2010(Dollars in thousands except share data)

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:

|                  |  |      |        |      |   |        |  |   |        | 
|----------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|                  |  | 2011 |        | 2010 |   | 2009   | 
|                  |  |      |        |      |   |        | 
|United States     |  | $    | 32,928 |      | $ | 38,695 |  | $ | 36,332 | 
|Foreign countries |  |      | 16,339 |      |   | 14,209 |  |   | 13,636 | 
|                  |  |      |        |      |   |        |  |   |        | 
|                  |  | $    | 49,267 |      | $ | 52,904 |  | $ | 49,968 | 
|                  |  |      |        |      |   |        |  |   |        | 

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, 2011 and 2010. 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 for fiscal 2011 and 2010 is
summarized as follows:

|                                         |  |                    |        |                    |   |                  |   |                 |        |   |   |        |  
|---------------------------------------- |  | ------------------ | ------ | ------------------ | - | ---------------- | - | --------------- | ------ | - | - | ------ | -
|                                         |  | Quarter
 Ended     |       
|                                         |  |                    |       
|Fiscal 2011                              |  | October
 31,
 2010 |        | January
 31,
 2011 |   | April
 30,
 2011 |   | July
 31,
 2011 |       
|                                         |  |                    |        |                    |   |                  |   |                 |       
|Total revenues                           |  | $                  | 25,652 |                    | $ | 23,734           |   | $               | 25,827 |   | $ | 26,816 |  
|Gross profit                             |  |                    | 13,473 |                    |   | 10,331           |   |                 | 12,364 |   |   | 12,042 |  
|Loss before income
 taxes                |  |                    | (1,060 | )                  |   | (5,562           | ) |                 | (2,002 | ) |   | (4,199 | )
|Net loss                                 |  |                    | (1,122 | )                  |   | (5,708           | ) |                 | (2,110 | ) |   | (4,020 | )
|Basic and diluted loss per
 common share |  | $                  | (0.03  | )                  | $ | (0.15            | ) | $               | (0.05  | ) | $ | (0.11  | )

|                                         |  |                    |        |                    |   |                  |   |                 |        |   |   |        |  
|---------------------------------------- |  | ------------------ | ------ | ------------------ | - | ---------------- | - | --------------- | ------ | - | - | ------ | -
|                                         |  | 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 and diluted loss per
 common share |  | $                  | (0.05  | )                  | $ | (0.27            | ) | $               | (0.12  | ) | $ | (0.15  | )

F-34

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ENZO BIOCHEM, INC
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years ended July 31, 2011, 2010 and 2009
(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 | 
|                      |  |                                             |  |  |                                   |  |  |                                  |  |  |                             |  |  |            |     |  |                            | 
|                     
|2011                  |  | Allowance for doubtful accounts
 receivable |  |  | 2,839                             |  |  | 4,431                            |  |  |                             |  |  | 3,782      | (1) |  | 3,488                      | 
|                      |  |                                             |  |  |                                   |  |  |                                  |  |  |                             |  |  |            |     |  |                            | 
|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                      | 
|                      |  |                                             |  |  |                                   |  |  |                                  |  |  |                             |  |  |            |     |  |                            | 
|2011                  |  | Deferred tax valuation allowance            |  |  | 28,901                            |  |  | 4,019                            |  |  |                             |  |  |            |     |  | 32,920                     | 
|                      |  |                                             |  |  |                                   |  |  |                                  |  |  |                             |  |  |            |     |  |                            | 
|2010                  |  | Deferred tax valuation allowance            |  |  | 21,716                            |  |  | 7,185                            |  |  |                            |  |  |           |     |  | 28,901                     | 
|                      |  |                                             |  |  |                                   |  |  |                                  |  |  |                             |  |  |            |     |  |                            | 
|2009                  |  | Deferred tax valuation allowance            |  |  | 12,965                            |  |  | 8,751                            |  |  |                            |  |  |           |     |  | 21,716                     | 

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

S-1

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