---

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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, 2007                                 
|or                                                                      
|o                                                                        | TRANSITION REPORT PURSUANT
  TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                         |                                                                                           
|For the transition period from ________________ to
  ___________________

Commission File
Number 001-09974

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

|                                                                   |  |                                       
|------------------------------------------------------------------ |  | --------------------------------------
|New York                                                           |  | 13-2866202                            
|                                                                   |  |                                       
|(State or other
  jurisdiction
  of incorporation or organization) |  | (I.R.S. Employer
  Identification No.)
|                                                                   |  |                                       
|527 Madison Ave.                                                   |  |                                       
|New York, New York                                                 |  | 10022                                 
|                                                                   |  |                                       
|(Address of principal
  executive offices)                         |  | (Zip Code)                            
|                                                                  
|(212) 583-0100                                                    
|                                                                  
|(Registrants telephone
  number, including area code)            

|                                                              |                              |  |                                            
|------------------------------------------------------------- | ---------------------------- |  | -------------------------------------------
|Securities registered pursuant to
  Section 12(b) of the Act:
|                                                             
|                                                              | (Title of Each Class)        |  | (Name of Each Exchange on Which Registered)
|                                                              |                              |  |                                            
|                                                              | Common Stock, $.01 par value |  | The New York Stock Exchange                

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
                    Yes
o   No x

Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.
                    Yes o   No x

Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. 
                    Yes
x   No o

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

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

Large accelerated filer o  Accelerated
filer x  Non-accelerated
filer o

Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Securities Exchange 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 $443,017,000
as of January 31, 2007.

The number of shares of the Companys common stock,
$.01 par value, outstanding at October 5, 2007 was approximately 36,718,600.

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 23, 2008
are incorporated by reference into Part III of this annual report.

---

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TABLE OF CONTENTS

|         |                                                                                         |  |     
|-------- | --------------------------------------------------------------------------------------- |  | ----
|         | Description                                                                             |  | Page
|Part I   |                                                                                         |  |     
|         |                                                                                         |  |     
|Item 1.  | Business                                                                                |  | 2   
|Item 1A. | Risk Factors                                                                            |  | 24  
|Item 1B. | Unresolved Staff Comments                                                               |  | 34  
|Item 2.  | Properties                                                                              |  | 34  
|Item 3.  | Legal Proceedings                                                                       |  | 35  
|Item 4.  | Submission of Matters to a Vote of
  Security Holders                                   |  | 36  
|         |                                                                                         |  |     
|Part II  |                                                                                         |  |     
|         |                                                                                         |  |     
|Item 5.  | Market for Registrants Common Stock and
  Related Stockholder Matters                  |  | 37  
|Item 6.  | Selected Financial Data                                                                 |  | 38  
|Item 7.  | Managements Discussion and Analysis of
  Financial Condition and Results of Operations |  | 39  
|Item 7A. | Quantitative and Qualitative Disclosures
  About Market Risk                            |  | 51  
|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                                                                 |  | 52  
|Item 9B. | Other Information                                                                       |  | 55  
|         |                                                                                         |  |     
|Part III |                                                                                         |  |     
|         |                                                                                         |  |     
|Item 10. | Directors and Executive Officers                                                        |  | 55  
|Item 11. | Executive Compensation                                                                  |  | 55  
|Item 12. | Security Ownership of Certain Beneficial
  Owners and Management                        |  | 55  
|Item 13. | Certain Relationships and Related
  Transactions                                        |  | 55  
|Item 14. | Principal Accounting Fees and Services                                                  |  | 55  
|         |                                                                                         |  |     
|Part IV  |                                                                                         |  |     
|         |                                                                                         |  |     
|Item 15. | Exhibits, Financial Statement Schedules,
  and Reports on Form 8-K                      |  | 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 

i

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PART I

Item 1.  Business

Overview

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

In the
course of our research and development activities, we have built a substantial
portfolio of intellectual property assets, with approximately 220 issued
patents worldwide, and approximately 180 pending patent applications, along
with extensive enabling technologies and platforms.

Recent
Developments

Effective
May 31, 2007, Enzo Life Sciences (Enzo Life Sciences), our wholly-owned
subsidiary, completed the acquisition of all of the issued and
outstanding capital stock of Axxora Life Sciences, Inc. (Axxora)
for an aggregate purchase price of $16.3 million, exclusive of acquisition
costs of approximately $1 million, previously advanced amounts of approximately
$0.5 million and acquired cash of approximately $0.9 million. Upon consummation
of the acquisition Axxora became a wholly-owned subsidiary of Enzo Life Sciences
(See Item 7 (Recent Developments) and Note 2 in the notes
to consolidated financial statements).

We
    are comprised of three operating segments, of which the Therapeutics and
    Life Sciences segments have evolved out of our core competencies: the use
    of nucleic acids as informational molecules and the use of compounds for
    immune modulation. Information concerning sales by geographic area and business
segments for the years ended July 31, 2007, 2006 and 2005 is located in Note
    17 in the notes to consolidated financial statements.

Operating
Segments

Below are
brief descriptions of each of our operating segments:

Enzo
Life Sciencesis a company that manufactures, develops
and markets biomedical research products and tools to research and pharmaceutical
customers world-wide and has amassed a large patent and technology
portfolio. The pioneering platforms developed by Enzo Life Sciences
enable the development of a wide range of products in the research products
marketplace. We are internationally recognized and acknowledged as a leader in
manufacturing, in-licensing, and commercialization of over 5,000 innovative
high quality research reagents in key research areas. The division is an
established source for a comprehensive panel of products to scientific experts
in the fields of gene expression, non-radioactive labeling and detection,
adipokines & obesity, apoptosis, cell cycle, cytoskeletal research, DNA
damage & repair, immunology & cancer research, inflammation,
neurobiology, nitric oxide & oxidative stress, and signal transduction.

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

Enzo
Clinical Labsis a regional clinical laboratory to the
New York Metropolitan and New Jersey areas. The Company believes this allows
us to capitalize firsthand on our extensive advanced molecular and cytogenetic
capabilities and the broader trends in predictive diagnostics. Enzo Clinical
Labs offers a menu of routine and esoteric clinical laboratory tests or
procedures used in general patient care by physicians to establish or support
a diagnosis, monitor treatment or medication, and search for an otherwise
undiagnosed condition. We operate a full-service clinical laboratory in
Farmingdale, New York, a network of 19 patient
service centers, a stand alone stat or rapid response laboratory
in New York City, and a full-service phlebotomy department.

The
Companys primary sources of revenue have historically been from sales,
royalties, and licensing of Life Sciences products utilized in
life science research and from the clinical laboratory services provided to the
healthcare

2

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community. The following table summarizes the sources of revenues for
the fiscal years ended July 31, 2007, 2006 and 2005, (in $000s and
percentages):

| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
| | ----------------------------- |  | ---- | ------ | ---- |  | ---- | - | - | ------ |  |  | --- | - | - | ------ |  |  | --- | -
| | Fiscal year ended July 31,    |  | 2007 |        | 2006 |  | 2005 |  
| |                               |  |      |        |      |  |      |  
| | Product revenues              |  | $    | 6,658  |      |  | 13   | % | $ | 4,750  |  |  | 12  | % | $ | 8,905  |  |  | 20  | %
| | Royalty and
 license fees     |  |      | 5,820  |      |  | 11   |   |   | 3,150  |  |  | 8   |   |   | 1,641  |  |  | 4   |  
| | Clinical
 laboratory services |  |      | 40,430 |      |  | 76   |   |   | 31,926 |  |  | 80  |   |   | 32,857 |  |  | 76  |  
| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  
| | Total                         |  | $    | 52,908 |      |  | 100  | % | $ | 39,826 |  |  | 100 | % | $ | 43,403 |  |  | 100 | %
| |                               |  |      |        |      |  |      |   |   |        |  |  |     |   |   |        |  |  |     |  

Markets

Background

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

Tools
for biomedical and pharmaceutical research

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

We believe
this market will grow as a result of:

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

Clinical diagnostics

The
    clinical diagnostics market has been reported by industry sources to be greater
    than $22 billion annually. It is comprised of a broad range of tests based
    on clinical chemistry, microbiology, immunoassay, blood banking and cancer
    screening assays. Many of these tests employ traditional technologies, such
    as immunoassays and cell culture technologies, for the detection of diseases.
    Immunoassays are based on the use of antibodies directed against a specific
    target, or antigen, to detect that antigen in a patient sample. Cell culturing
    techniques involve the growth, isolation and visual detection of the presence
of a microorganism.

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

3

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

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 $3 billion per year, and is
acknowledged as one of the fastest growing segments in the in-vitro diagnostic
industry. Contributing to this growth are, among other factors:

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

Therapeutics

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

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

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

Genetic
medicine or gene 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 inserted to enable a beneficial
effect or to disable a pathological mechanism within the cell. For example, the
gene may be inserted to replace a missing or malfunctioning gene responsible
for synthesizing an essential protein 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.

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, 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.

4

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Strategy

Our
objective is to be a leading developer and provider of the tools and
diagnostics used to study and detect disease at the molecular level and to be a provider of therapeutic
approaches to manage specific diseases.
There can be no assurance that our objective will be met. Key elements of our
strategy include:

Apply
our innovative technology to the infectious and immune mediated disease markets

We believe
our core technologies have broad diagnostic and therapeutic applications. We
have focused our efforts on the infectious and immune mediated disease markets.
Infectious diseases are among the largest contributors to healthcare costs
worldwide. Generally, there are no long-term effective treatments for viral
pathogens as there are for bacterial pathogens. Many viral diseases such as
hepatitis have an immune component. It is known that the cytopathic effect on
the liver in patients infected with hepatitis is caused, not by the virus
itself, but by a reaction of the immune system against the virus. Although the
cause of disorders such as Crohns disease, certain forms of uveitis and
non-alcoholic steatohepatitis (NASH) remains unknown, various features suggest
immune system involvement in their pathogenesis.

We
    continue to develop novel technologies we believe can serve as enabling platforms
    for developing medicines that genetically target and inhibit viral functions,
    as well as medicines that regulate the immune response. In addition to such
therapeutic products, we continue to capitalize on our nucleic acid labeling,
amplification and detection technologies and intellectual property to develop
    diagnostic and monitoring tests for infectious agents.

Maximize
our resources by collaborating with others in research and commercialization
activities

We enter into research collaborations with leading academic and other
research centers to augment our core expertise on specific programs. We have
research collaborations with, among others, Hadassah University Hospital in
Jerusalem, Israel relating to our immune regulation technology and the
University of California at San Francisco for the application of our genetic
antisense technology against HIV.

During
fiscal 2005, we acquired the rights and intellectual property to a candidate
drug and technology intended for use in the treatment of autoimmune uveitis. We are collaborating with scientists and
physicians in the United States and abroad to develop this candidate drug into
a product for treating uveitis. Through collaboration and licensing agreements
with the University of Connecticut Health Center at Farmington, CT, we continue
to develop novel therapeutics for the stimulation and enhancement of bone
formation. Such products, if any, emanating from this technology could provide
potential therapy for bone disorders, including bone loss, bone fractures,
periodontitis and other applications. 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 areas in order to act on opportunities that can
be accretive to our efforts in accelerating our development program.

Apply
our biomedical research products to the clinical diagnostics market

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

Leverage
marketing and distribution infrastructure of leading life sciences companies

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

5

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Expand
our collaborations with major life sciences companies

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

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

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

Expand
and protect our intellectual property estate

Since
    our inception, we have followed a strategy of
creating a broad encompassing patent position in the life sciences and
therapeutics areas. We have made obtaining patent protection a central
strategic policy, both with respect to our proprietary platform technologies
and products, as well as broadly in the areas of our research activities.
During fiscal 2007, we were awarded four new patents covering nucleotide
labeling, chemiluminescense, dyes for processing unusual reactive groups, and
    novel cyanine dyes.

Core
Technologies

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

Gene
analysis technology

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

| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | amplification of the target DNA sequence (a process that is essential
 for the detection of very small amounts of nucleic acid);
|
| |  | labeling the probe with a marker that generates a detectable signal
 upon hybridization;                                        
|
| |  | addition of the probe to the sample containing the DNA; and                                                                     
|
| |  | binding or hybridization of the probe to the target DNA sequence, if
 present, to generate a detectable signal.                 
|

We have
developed a broad technology base for the labeling, detection, amplification
and formatting of nucleic acids for gene analysis which is supported by our
significant proprietary position in these fields.

6

---



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-radioactivelabeling 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
Technology Platforms

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

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

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

 Immunologically
Quiet. Transduced or
engineered cells (cells
containing the gene that was delivered by the vector) often produce
non-essential proteins that may trigger an immune response, causing such cells
to be cleared from the body before they can produce a therapeutic effect. Cells
transduced with our Stealth Vectors have not expressed extraneous proteins.

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

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

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

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

7

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Immune
Regulation

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

We
    have filed patent applications relating to this technology as well as to
    our therapeutics platforms and protocols under development,
relating to areas of infectious diseases and immunological adjustments and
enhancements. There can be no assurance that we will be able to secure patents
or that these programs will be successful. We are applying our expertise in
immune regulation to develop proprietary therapies for the
treatment of a variety of diseases, including chronic active hepatitis, autoimmune
    uveitis, and inflammatory bowel disease, including Crohns Disease and
    ulcerative colitis.

Small
Molecule Development

EGS21.We
      have developed a new
immunomodulator agent, EGS21 as a potential therapeutic for treating immune
mediated disorders. EGS21 is a
glycolipid that has been shown by Enzo scientists and collaborators to act as
an anti-inflammatory agent in animal model systems, and therefore is being
evaluated as an important candidate drug in the treatment of various immune
mediated diseases.  We believe that EGS21 has the potential to function either
      as a separate therapeutic or as an adjunct or combination treatment with
our other platforms for the management of immune mediated disorders.

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

Products
and Services

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

Research
Products

We are
organized to lead in the development, production, marketing and sales of
innovative life science research reagents worldwide based on over 30 years of
experience in building strong international market recognition, implementing
outstanding operational capabilities, and establishing a state of the art
electronic information and ordering marketplace. We in-license and manufacture
over 5,000 products that may be sold individually or combined in a kit to meet
the specific needs of researchers. We market these products to biomedical and
pharmaceutical firms as well as academic and government research institutions
worldwide. Our comprehensive portfolio of high quality reagents and kits in key
research areas are sold to scientific experts in the following fields:

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

8

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

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

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

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

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

Therapeutic
Development Programs

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

Human
Immunodeficiency Virus (HIV-1)

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

According
to the World Health Organization, there were more than 60 million individuals
worldwide living with HIV infection during 2006. There were over 5 million new
infections and 3 million deaths from HIV during that same year. Over 20 million
have died since the first cases of AIDS were identified in 1981. At present, several classes of products have
received FDA marketing approval for HIV-1 infection: reverse transcriptase
inhibitors protease inhibitors, fusion
inhibitors and binding inhibitors. HIVs rapid rate of mutation results
in the development of viral strains that may no longer respond to these medications. This problem is often
exacerbated by interruptions in dosing, as non-compliance is common in patients
on combination therapies. Moreover, many
currently approved drugs produce toxic side-effects in many patients, affecting
a variety of organs and tissues, including the peripheral nervous system and
gastrointestinal tract, which side-effects also often result in patients
interrupting or discontinuing therapy.

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

Preclinical
in vitro
studies, performed in conjunction with our academic collaborators, demonstrated
resistance to HIV-1 in human immune cells into which the antisense genes had
been inserted. Our Phase I clinical trial of the HIV-1 gene medicine is in the
long-term safety follow up phase. In this study, white blood cell precursors,
known as stem cells, were collected from the subjects. These stem cells were
then treated ex vivo with our Stealth Vector® HGTV43 transducing
vector and infused into the subject. Results of the trial showed that all subjects
tolerated the procedure and that:

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

9

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       CD34+
cells from the bone marrow of all subjects were tested for the presence of anti
HIV-1 antisense RNA between 6 months and 20 months after infusion and these
cells contained the antisense RNA, indicating
engraftment of the engineered cells;

       Anti
HIV-1 antisense RNA-containing immune
cellswere detected in
the circulation of subjects, the longest at 72 months;

       cells
contained the antisense RNA.

Based on
these Phase I trial results demonstrating long-term survival and functioning of
antisense RNA in white blood cells, including CD4+ cells, we have begun the Phase I/II study at University of California San
Francisco (UCSF)
the site of the Phase I study. This study will focus on a strategy designed to
increase the percentage of engineered CD4+ cells that contain the anti-HIV-1 antisense genes. The first patient has
been enrolled and we are monitoring the progress.

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 diagnosed in approximately 38,000 people every
year. While there are steps that can be taken to preserve sight and slow the
progress of vision loss, individuals with uveitis also are at increased risk
of developing cataracts, glaucoma or retinal detachment.

In fiscal
2005, we acquired rights and intellectual property to a candidate drug and
technology intended for use in the treatment of uveitis. The drug is the result
of a discovery by scientists at the eye clinic of the Ludwig Maximilians
University in Munich, Germany, who found a small peptide that when fed to rats
with experimental allergic uveitis promoted their recovery. Based on favorable
preclinical studies, the developers conducted a pilot Phase I clinical trial in
Germany with encouraging results.

Using its
immune regulation platform and the recently acquired rights to the candidate
drug, B27PD, Enzo is currently developing a protocol for a multi-center Phase
II/III clinical trial to be carried out in the United States and in Europe.We have begun collaborations with scientists and
physicians in both the
US and abroad and have assembled an advisory board of consultants who are
experts in the management and treatment of uveitis. In addition we have had
discussions with the European Medicines Agency (EMEA) and the U.S. Food and
Drug Agency (FDA) in preparation for regulatory approval.

10

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Manufacturing
protocols are in development for both the bulk product and the individual dose
capsules. The
study drug has been granted orphan status in Europe and we will apply for the
same in the U.S. Orphan status designation can confer both financial and
marketing benefits.

Inflammatory
bowel diseases.We believe our immune regulation technology may be
used to treat inflammatory bowel disease (IBD), including ulcerative colitis
and Crohns Disease. According to the Crohns and Colitis Foundation,
approximately one million persons in the United States suffer from IBD.
Although the cause of these disorders remains unknown, various features suggest
immune system involvement in their pathogenesis.

Patients
are managed during short-term episodes through the use of anti-inflammatory
medications, or immunosuppressants, which provide symptomatic relief over short
periods of time, but do not provide a cure. These drugs are all based on a
generalized suppression of the immune response and are non-specific. As such,
they have considerable side effects and cannot be used for long periods of time
because of their inherent toxicity.

We
recently completed a Phase II randomized double-blind clinical trial of Alequel our
innovative immune regulation medicine for treatment of Crohns disease.
The results of this study were presented at the annual Digestive Disease Weekly
meeting this past year. In this study, subjects were evaluated using the Crohns
Disease Activity Index (CDAI), a standard measure of the severity of the disease,
with higher scores indicating more severe disease activity. Forty-nine patients
with moderate to severe Crohns disease were randomized to receive
either placebo or Alequel Patients were monitored on an
intent-to-treat basis for remission (a decrease in CDAI to 150 or lower),
clinical response (a decrease in CDAI of 100 or greater) and quality of life
as measured by the inflammatory bowel disease questionnaire (IBDQ). The results,
although not statistically significant, indicated that patients receiving Alequel achieved
improved rates of clinical remission compared with the placebo group (39% vs.
22%), clinical response (50% vs. 30%) and improved quality of life in the drug
study group compared to placebo. No treatment-related adverse events were noted.
Thus, we believe that Alequel may be a
safe and effective method for treatment of patients with moderate to severe
Crohns disease.

An expanded
study to broaden the diversity of the patient population is currently ongoing at Hadassah
Hospital. We plan to continue the study at additional sites in the United
States and are currently conducting a selection review process to determine the
appropriate site(s) at which to conduct the study. We are preparing to apply to the US FDA for
regulatory approval. We have begun collaborations with scientists and
physicians and have assembled an advisory board of consultants who are experts
in the management and treatment of inflammatory bowel disease.

Non-alcoholic
steatohepatitis (NASH)

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

Following
the successful safety study of EGS21, an open label pilot study was conducted
at Hadassah-Hebrew University Medical Center. The results suggested that EGS21
may be efficacious in treating NASH and its associated metabolic syndrome in
human subjects. A Phase II double blind study was approved by the regulatory
authorities in Israel and is currently ongoing.
This study is being partially funded by a $1.0 million grant from the
Israel-U.S. Binational Industrial Research and Development Foundation (BIRD).

Osteoporosis
and certain bone disorders.

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.

11

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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. Our preliminary
    results which were recently presented at the annual meeting of the American
    Society for Bone and Mineral Research suggest that Enzo-D58 may be effective
    in preventing alveolar bone loss. We were recently awarded a grant of $100,000
    from the National Institute of Dental and Craniofacial Research for development
    of a small molecular compound-based method to induce new bone formation to
    prevent bone loss in periodontitis.

Hepatitis
      B Virus (HBV).We are developing a HBV therapeutic
utilizing our proprietary immune regulation technology.

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

EHT899
        immune regulation product.EHT899 is a proprietary
        formulation of an HBV viral protein designed to eliminate the undesirable
        immune response elicited by the HBV infection. It may enhance a secondary
        immune response to clear the viral infection, resulting in reduction
        in liver damage and decrease in viral load.

In
    a previous clinical trial conducted at the Liver Unit of Hadassah-Hebrew
    University Medical Center, in Jerusalem, Israel, a formulation of EHT899
    was administered orally to a total of 42 subjects with chronic active hepatitis.
    Results indicated that the candidate drug might be developed as an effective
    therapeutic treatment against hepatitis.

| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | the drug was well tolerated in
          all subjects;                                                    
|
| |  | 46% of subjects showed a decrease
          in HBV viral load and improvement in liver function tests; and
|
| |  | 33% of subjects showed a decrease
          in inflammation seen on liver biopsy.                         

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

Based
    on both the preclinical and clinical results, the Company began exploring
    several options for development of the candidate drug. Our current strategy
    is to seek a commercial partner to continue the drug development. To this
    end pharmaceutical partnerships are being explored and evaluated.

Clinical
Laboratory Services

We operate
a regional clinical laboratory that offers full diagnostic services to the New
York Metropolitan and New Jersey medical community. Our clinical laboratory
testing is utilized by physicians as an essential element in the delivery of
healthcare services. Physicians use laboratory tests to assist in the
detection, diagnoses, evaluation, monitoring and treatment of diseases and
other medical conditions. Clinical laboratory testing is generally categorized
as clinical testing and anatomic pathology testing. Clinical testing is
performed on body fluids, such as blood and urine. Anatomic pathology testing
is performed on tissues and other samples, such as human cells. Most clinical
laboratory tests are considered routine and can be performed by most commercial
clinical laboratories. Tests that are not routine and that require more
sophisticated equipment and highly skilled personnel are considered esoteric
tests and may be performed less frequently than routine tests. We do not
perform certain low-volume esoteric tests in-house; generally many of these
tests are referred to an esoteric clinical testing laboratory that specializes
in performing these more complex tests.

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

Our full
service clinical laboratory in Farmingdale, NY contains infrastructure that
includes a comprehensive information technology, logistics, client service and
billing departments. Also, we have a network of nineteen patient service
centers and a full service phlebotomy department. Patient service centers
collect the specimens as requested by physicians. We also operate a STAT
laboratory in New York City. A STAT lab is a laboratory that has the ability
to perform certain routine tests quickly and report results to the physician
immediately.

Patient
specimens are delivered to our laboratory facilities by our logistics
department accompanied by a test requisition form. These forms, which are
completed by the ordering physician, indicate the tests to be performed and
demographic patient information. Once this information is entered into the
laboratory computer system the tests are performed and the results are entered
primarily through an interface from the laboratory testing equipment or in some
instances, manually into the laboratory computer system. Most routine testing
is completed by early the next morning, and test results are reported to the
ordering physician. These test results are either delivered electronically via
our EnzoDirect system or delivered by the logistic department directly to the
ordering physicians offices. Physicians who request that they be called with a
result are so notified.

For
    fiscal years ended July 31, 2007, 2006, and 2005, respectively, 76%, 80%
    and 76% of the Companys revenues were derived from the clinical laboratory.
    At July 31, 2007 and 2006, respectively, approximately 68% and 88% 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.

12

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Revenue,
    net of contractual adjustment, from direct billings under the Federal Medicare
    program during the years ended July 31, 2007, 2006 and 2005 were approximately
    21%, 23% and 21%, respectively, of the clinical laboratory segments
    total revenue. We estimate contractual adjustment based on significant assumptions
    and judgments, such as the interpretation of payer reimbursement policies
    which bears the risk of change. The estimation process is based on the experience
    of amounts approved as reimbursable and ultimately settled by payers, versus
    the corresponding gross amount billed to the respective payers. The contractual
    adjustment is an estimate that reduces gross revenue, based on gross billing
    rates, to amounts expected to be approved and reimbursed. Gross billings
    are based on a standard fee schedule we set for all third party payers, including
    Medicare, health maintenance organizations (HMOs) and managed care
    providers. We adjust the contractual adjustment estimate quarterly, based
    on our evaluation of current and historical settlement experience with payers,
    industry reimbursement trends, and other relevant factors. The other relevant
    factors that affect our contractual adjustment include the monthly and quarterly
    review of: 1) current gross billings and receivables and reimbursement by
    payer, 2) current changes in third party arrangements. 3) the growth of in-network
    provider arrangements and managed care plans specific to our Company. The
    clinical laboratory industry is characterized by a significant amount of
    uncollectible accounts receivable related to the inability to receive accurate
    and timely billing information in order to forward it on to the third party
    payers for reimbursement, and the inaccurate information received from the
    covered individual patients for unreimbursed unpaid amounts. Our provision
for uncollectible accounts receivable is within historical expectations.

Other
    than the Medicare program, revenues from United Healthcare of New York, Inc
represented 34% of the Clinical Labs segments net revenue for the fiscal
year ended July 31, 2007. Other than the Medicare program, no other provider
exceeded 10% of Clinical Labs service revenue for the fiscal years ended July
31, 2006 and 2005.

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

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

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

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

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

Research
and Development

Our
principal research and development efforts are directed toward expanding our
research product lines given our increased distribution capability following
the acquisition of Axxora, as well as developing innovative new therapeutic
products to meet unmet market needs. We have developed our core research
expertise in the life science field as a result of 30 years of dedicated focus
in this area. We conduct our research and other product development efforts
through internal research and collaborative relationships. In the fiscal years
ended July 31, 2007, 2006 and 2005, the Company incurred costs of approximately $9,393,000, $7,896,000, and $8,452,000,
respectively, for research and development activities.

13

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Internal
Research Programs

Our
professional staff of 46 scientists, including 40 with post graduate degrees,
performs our internal research and development activities. Our product
development programs incorporate various scientific areas of expertise,
including recombinant DNA, monoclonal antibody development, enzymology,
microbiology, biochemistry, molecular biology, organic chemistry, and
fermentation. In addition, we continuously review in-licensing opportunities in
connection with new technology.

External
Research Collaborations

We have and
continue to explore collaborative relationships with prominent companies and
leading-edge research institutions in order to maximize the application of our
technology in areas where we believe such relationship will benefit the
development of our technology. Apotech Laboratories, Inc., a wholly owned
subsidiary of Axxora Inc., is involved in three EU collaborative projects aimed
at developing novel anti-cancer drugs, novel targets for the design of new
cancer therapies and developing new diagnostics to significantly improve haematopoieteic
stem cell transplants.

Sales
and Marketing

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

For Enzo
Clinical Labs, we focus our sales efforts on obtaining and retaining profitable
accounts. We market the clinical laboratory services to ordering physicians in
the metro New York and New Jersey region through our direct sales force,
customer service and patient service representatives. We also have an active
account management process to evaluate the profitability of all of our
accounts. Where appropriate, we change the service levels and terminate
accounts that are not profitable. We are focusing our efforts to attract and
retain clients who participate with the providers with whom we have regional
contracts.

Distribution
Arrangements

We also
distribute our life science products internationally through a network of
distributors. Through these arrangements, we are able to leverage the
established marketing and distribution infrastructure of these companies. Prior
to fiscal 2005, the Company distributed through leading life science companies
and is currently evaluating new relationships. See Item 3. Legal Proceedings.

Competition

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

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

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.

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At
    the end of fiscal 2007 we owned or licensed 49 U.S. and 168 foreign patents
    relating to products, methods and procedures resulting from our internal
    or sponsored research projects. Adding to our patent estate are the following
patents:

U.S. Patent
No. 7,220,854, Sugar Moiety Labeled Nucleotide, and an Oligo- or
Polynucleotide, and Other Compositions Comprising Such Sugar Moiety Labeled
Nucleotides, describes the novel use of the sugar portion of a nucleotide as a
labeling position. This patent complements the previously issued U.S. Patent
No. 6,992,180 for phosphate labeling, such that a nucleotide labeled in a
position other than the base portion should be covered by one of these two
patents. This patent will be especially useful for labeled synthetic
oligonucleotides used as primers or probes.

U.S. Patent
No. 7,163,796, Process for Detecting the Presence or Quantity of Enzymatic
Activity in a Sample, covers methods for detecting the presence or quantity of
selected enzymatic activities in a sample by measuring chemiluminescent signal
generation with novel reagents. The enzymatic activity may be intrinsic to a
sample, or it may be present by means of a nucleic acid probe.

U.S. Patent
No. 7,166,478, Labeling Reagents and Labeled Targets, Target Labeling
Processes and Other Processes for Using Same in Nucleic Acid Determinations and
Analyses, covers reagents, and targets labeled with these reagents, where
linkage of a signal is carried out through the formation of a carbon-carbon
bond. Labels for signals include ligands, as well as various fluorescent dyes
such as xanthene, cyanine, coumarin, porphyrin and composite dyes. Targets that
may be used with this invention include nucleic acids, as well as proteins.

U.S. Patent
No. 7,241,897, Process for Preparing Cyanine Dye Labeling Reagents, covers a
process for synthesizing a cyanine dye labeling reagent that has a reactive
group capable of forming a carbon-carbon bond.

In August
of 2006, the Company was granted interference against patents held by Princeton
University (now licensed to Abbott Labs) and Chiron Diagnostics (now Bayer
Diagnostics). In this action, Enzo has been designated as the senior party
because the Companys filing of its patent application preceded the others. In
addition, the relevant claims for this patent were published in Europe before
the Princeton and Chiron applications were even filed. In March 2007, Princeton
University conceded priority of inventorship to Enzo. Based on these points,
management believes that that Enzo will prevail, and as such, would have the
rights to the technology.

There
    can be no assurance that patents will be issued on pending applications or
    that any issued patents will not be challenged in court, 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. The
Company has done extensive work on the labeling of nucleic acids for the purpose
of generating a signal that dates back over twenty years. Enzo has multiple
issued patents covering the modification of nucleic acids at all three
potential modification sites (sugar, base and phosphate). The claims contained
in these patents cover any product that incorporates a signaling moiety into a
nucleic acid for the purpose of nucleic acid sequence detection or
quantification.

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Signal
Delivery

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

Nucleic
Acid Analysis Format

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

In some
instances, we may enter into royalty agreements with collaborating research
parties in consideration for the commercial use by us of the developments of
their joint research. In other instances the collaborating party might obtain a
patent, but we receive the license to use the patented subject matter. In such
cases, we will seek to secure exclusive licenses. In other instances, we might
have an obligation to pay royalties to, or reach a royalty arrangement with, a
third party in consideration of our use of developments of such third party.
The Research Foundation of the State University of New York has granted us the
exclusive rights to a genetic engineering technology using antisense nucleic
acid control methodologies. In fiscal 2006, the Enzo Life Sciences entered into
an agreement with the Childrens Mercy Hospital and Clinics (Mercy) in Kansas
City, MO whereby Enzo licensed from Mercy two patents in the area of single
copy genomic hybridization probes. The Company plans to utilize this technology
in its plans to develop a line of products and services designed specifically
for the cytogenetics market.

Regulation
of Pharmaceutical Products

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

Any
therapeutics products that we develop will require regulatory review before
clinical trials, and additional regulatory clearances before commercialization.
New human gene medicine products as well as immune regulation products, as
therapeutics, are subject to regulation by the FDA and comparable agencies in
other countries. The FDA on a case-by-case basis currently reviews each
protocol. In addition, the National Institutes of Health (NIH) is also
involved in the oversight of gene therapies and the FDA has required compliance
with certain NIH requirements.

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

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

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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. 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.

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

Regulation
of Diagnostics

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

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

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

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

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

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

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

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

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

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

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

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

Clinical
Laboratory Regulations

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

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.

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

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

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

The health
care industry has been undergoing significant change because third-party
payers, such as Medicare (serving primarily patients 65 and older), Medicaid
serving primarily indigent patients, health maintenance organizations and
commercial insurers, have increased their efforts to control the cost,
utilization and delivery of health care services. To address the problem of
increasing health care costs, legislation has been proposed or enacted at both
the Federal and state levels to regulate health care delivery in general and
clinical laboratories in particular. Additional health care reform efforts are
likely to be proposed in the future. In particular, we believe that reductions
in reimbursement for Medicare services will continue to be implemented from time
to time. Reductions in the reimbursement rates of other third-party payers,
commercial insurer and health maintenance organizations are likely to occur as
well. We cannot predict the effect that health care reform, if enacted, would
have on our business, and there can be no assurance that such reforms, if
enacted, would not have a material adverse effect on our business and
operations.

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

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

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

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Anti
Fraud and Abuse Laws

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

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

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

The Company
seeks to structure its arrangements with physicians and other customers to be
in compliance with the Anti-Kickback, Stark and state laws, and to keep
up-to-date on developments concerning their application by various means,
including consultation with legal counsel. In addition, in order to address
these various Federal and state laws, the Company has developed its own
Corporate Compliance Program based upon the OIG model program. The Companys
Program focuses on establishing clear standards, training and monitoring of the
Companys billing and coding practices. Furthermore, as part of this Program,
the Companys Corporate Compliance Committee meets on a regular basis to review
various operations and relationships as well as to adopt policies addressing
these issues.

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

Confidentiality
of Health Information

The Health
Insurance Portability and Accountability Act of 1996 (HIPAA) was signed into
law on August 21, 1996, and it includes administrative simplification
provisions designed to standardize common electronic transactions in health
care and to protect the security and privacy of health information. Congress
purpose in promulgating HIPAA was to increase the efficiency of health care
transactions while, at the same time, protecting the confidentiality of patient
information. Final regulations have been adopted for electronic transaction,
privacy and security standards. Further, final regulations adopting a National
Provider Identifier to be used in electronic health care transactions have been
finalized. These provisions have very broad applicability and they specifically
apply to health care providers, which include physicians and clinical
laboratories. The deadline for providers to obtain and implement use of the
National Provider Identifier was May 23, 2007. The National Provider Identifier
is an identifier that will replace all other identifiers that are currently
used for healthcare transactions (e.g., UPIN, Medicaid provider numbers;
identifiers assigned by commercial insurers). We received its National Provider
Identifier well in advance of the deadline.

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

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

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

Complying
with the electronic transaction, privacy and security rules will require
significant effort and expense for virtually all entities that conduct health
care transactions electronically and handle patient health information.

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

Medical
Regulated Waste

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

Occupational
Safety

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

22

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Other
Regulation

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

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

Manufacturing and
Research Facilities

Our
internal manufacturing and scientific efforts for our three segments took place
primarily at our facility in Farmingdale, New York prior to June 2007, where
    we have a completely integrated laboratory and manufacturing facility, with
    special handling capabilities and clean rooms suitable for our operations.
    In connection with the Axxora acquisition, the Life Sciences segment has
added manufacturing and research operations in Switzerland and a research facility
    in San Diego, California. The Epilanges, Switzerland site houses the research
    and development laboratories of Apotech. A portion of the San Diego, California
performs research and development activities. In June 2006, we acquired a
facility adjacent to our Farmingdale, New York facility that a major portion
will be utilized, upon completion of renovations, for Life Science and
Therapeutics research and manufacturing.

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, 2007, we employed 367 full-time and 87 part-time employees. Of the
full-time employees, 71 were engaged in research, development, manufacturing,
and marketing of research products, 10 in therapeutics research, 263 in the
clinical laboratories and 23 in finance, legal and administrative functions.
Our scientific staff, including 40 individuals with post graduate degrees, possesses
a wide range of experience and expertise in the areas of recombinant DNA,
nucleic acid chemistry, molecular biology and immunology. We believe that the
relationships we have established with our employees are good.

Information
Systems

Information
systems are used extensively in virtually all aspects of our clinical
laboratory business, including laboratory testing, billing, customer service,
logistics, and management of medical data. Our success depends, in part, on the
continued and uninterrupted performance of our information technology systems.
Computer systems are vulnerable to damage from a variety of sources, including
telecommunications or network failures, malicious human acts and natural
disasters. Moreover, despite network security measures, some of our servers are
potentially vulnerable to physical or electronic break-ins, computer viruses
and similar disruptive problems. We have invested heavily in the upgrade of our
information and telecommunications systems to improve the quality, efficiency
and security of our businesses. In addition, to complement our proprietary
physician connectivity solution, EnzoDirect  we have introduced a web portal
version which allows physicians to receive laboratory results from any personal
computer with a browser and an Internet connection.

Despite the
precautionary measures that we have taken to prevent unanticipated problems
that could affect our information technology systems, sustained or repeated
system failures that interrupt our ability to process test orders, deliver test
results or perform tests in a timely manner could adversely affect our
reputation and result in a loss of customers and net revenues.

23

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Quality
Assurance

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

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

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

FORWARD
- LOOKING AND CAUTIONARY STATEMENTS

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

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

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

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

Item
1A. Risk Factors

Risks
relating to our Company and our industries

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

We incurred
a net loss of $13.3 million and $15.7 million for the fiscal years
ended July 31, 2007 and 2006, respectively. If our revenues do not
increase, or if our operating expenses exceed expectations or cannot be
reduced, we will continue to suffer substantial losses which could have an
adverse effect on our business and adversely affect your investment in our
Company.

Our
operating results may
vary from period to period.

24

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

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

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.

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

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

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

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

These
competitive conditions could, among other things:

| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | Require us to reduce our prices to retain market share;                             
| |   |                                                                                     
| |  | Require us to increase our marketing efforts which could reduce our
 profit margins;
| |   |                                                                                     
| |  | Increase our cost of labor to attract qualified personnel;                          
| |   |                                                                                     
| |  | Render our biotechnology products uneconomical or obsolete; or                      
| |   |                                                                                     
| |  | Reduce our revenue.                                                                 

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

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

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

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

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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 the years ended
July 31, 2007, 2006 and 2005. 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.

27

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

We
are subject to Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, (SFAS 142) which requires that
goodwill and other intangible assets that have an indefinite life be tested at
least annually for impairment. Goodwill and other intangible assets with
indefinite lives must also be tested for impairment between the annual tests if
a triggering event occurs that would likely reduce the fair value of the asset
below its carrying amount. As of July 31, 2007, goodwill and other intangible
assets with indefinite lives represented approximately 15% of our total assets.
If we determine that there has been an impairment, our financial results for
the relevant period would be reduced by the amount of the impairment, net of
tax effects, if any.

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

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

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

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

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

28

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Risks
relating to our Clinical Labs services segment

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

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

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

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

The
health care industry continues to undergo significant change as third-party
payers increase their efforts to control the cost, utilization and delivery of
health care services. In an effort to address the problem of increasing health
care costs, legislation has been proposed or enacted at both the Federal and
state levels to regulate health care delivery in general and clinical
laboratories in particular. Some of the proposals include managed competition,
global budgeting and price controls. Changes that decrease reimbursement rates
or coverage, or increase administrative burdens on billing third-party payers
could reduce our revenues and increase our expenses.

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

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

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

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

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

29

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

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

30

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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.

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

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

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

31

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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 an insignificant number of key
employees have left us. Any failure on our part to hire, train, and retain
a sufficient number of qualified professionals would seriously damage our
business.

We
depend heavily on the services of our senior management. We believe that our
future success depends on the continued services of such management. We have
key man life insurance on Dr. Elazar Rabbani, our Chief Executive Officer, in
the amount of $3,000,000.Our business may be harmed
by the loss of a significant number of our senior management in a short period
of time.

Adequacy
      of insurance we
purchase to cover our potential business risk.

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. Sales outside the United States were in excess of 5% of
total sales in 2007. We expect that sales from international operations will
continue to represent a growing portion of our sales as a result of the May
2007 acquisition of Axxora. 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.

32

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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 abroad.                                       

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

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

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

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

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

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

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

| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | a staggered board
 of directors, so that it would take three successive annual meetings to
 replace all directors; and

33

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| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | advance notice
 requirements for the submission by stockholders of nominations for election
 to the board of directors and for proposing matters that can be acted upon by
 stockholders at a meeting.

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

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

Item
    1B. Unresolved
Staff Comments

None

Item 2.
Properties

The
following are the principal facilities of the Company:

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

Note 1 - In
March 2005, the Company amended and extended the lease for its Farmingdale
laboratory for a period of 12 years. 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 the Farmingdale
facility is being substantially utilized.

Note 2 - In
June 2006, we acquired a 22,000 square foot facility adjacent to our
Farmingdale, New York facility that will be utilized, upon completion of
renovations in fiscal 2008, for the Life Science and Therapeutics research and
manufacturing operations. The new
facility will be used to manage the additional space required for anticipated
growth.

34

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Item 3. Legal
Proceedings

In
    October 2002, the Company filed suit in the United States District Court
    of the Southern District of New York against Amersham plc, Amersham Biosciences,
Perkin Elmer, Inc., Perkin Elmer Life Sciences, Inc., Sigma-Aldrich
Corporation, Sigma 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. The court has yet to rule
on the pending summary judgment motions. There can be no assurance that
the Company will be successful with the remaining outstanding litigation. However,
even if the Company is not successful, management does not believe that there
will be a significant adverse monetary impact to the Company.
The Company has not recorded revenue under these distribution agreements
in fiscal 2007 and 2006. The Company recorded other income from Perkin Elmer
in fiscal 2007. (See Note 13 in the notes to consolidated financial statements).

On October
28, 2003, the Company and Enzo Life Sciences, Inc. filed suit in the United States District Court of the Eastern District
of New York against Affymetrix, Inc (Affymetrix). The Complaint alleges that Affymetrix improperly transferred or
distributed substantial business assets of the Company to third parties,
including portions of the Companys proprietary technology, reagent systems,
detection reagents and other intellectual property. The Complaint also charges that Affymetrix failed to account for
certain shortfalls in sales of the Companys products, and that Affymetrix
improperly induced collaborators and customers to use the Companys products in
unauthorized fields or otherwise in violation of the agreement. The Complaint seeks full compensation from
Affymetrix to the Company for its substantial damages, in addition to
injunctive and declaratory relief to prohibit, among other things, Affymetrixs
unauthorized use, development, manufacture, sale, distribution and transfer of
the Companys products, technology, and/or intellectual property, as well as to
prohibit Affymetrix from inducing collaborators, joint venture partners,
customers and other third parties to use the Companys products in violation of
the terms of the agreement and the Companys rights. Subsequent to the filing of the Complaint against Affymetrix,
Inc. referenced above, on or about November 10, 2003, Affymetrix, Inc. filed
its own Complaint against the Company and its subsidiary, Enzo Life Sciences,
Inc., in the United States District Court for the Southern District of New
York, seeking among other things, declaratory relief that Affymetrix, Inc., has
not breached the parties agreement, that it has not infringed certain of
Enzos Patents, and that certain of Enzos patents are invalid. The Affymetrix Complaint also seeks damages
for alleged breach of the parties agreement, unfair competition, and tortuous
interference, as well as certain injunction relief to prevent alleged unfair
competition and tortuous interference.
The Company does not believe that the Affymetrix Complaint has any merit
and intends to defend vigorously.
Affymetrix also moved to transfer venue of Enzos action to the Southern
District of New York, where other actions commenced by Enzo were pending as
well as Affymetrixs subsequently filed action. On January 30, 2004, Affymetrixs motion to transfer was granted.
Accordingly, the Enzo and Affymetrix actions
are now both pending in the Southern District of New York. Initial pleadings have been completed and
discovery has commenced. The Court
issued a Markman (claim construction) opinion on July 10, 2006. The Company did not record any revenue from
Affymetrix during the fiscal years ended July 31, 2007, 2006, or 2005.

On June 2,
2004, Roche Diagnostic GmbH and Roche Molecular Systems, Inc. (collectively
Roche) filed suit in the U.S. District Court of the Southern District of New
York against Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively
Enzo). The Complaint was filed after
Enzo rejected Roches latest cash offer to settle Enzos claims for, inter alia, alleged breach of contract and
misappropriation of Enzos assets. The
Complaint seeks declaratory judgment (i) of patent invalidity with respect to
Enzos 4,994,373 patent (the 373 patent), (ii) of no breach by Roche of its
1994 Distribution and Supply Agreement with Enzo (the 1994 Agreement), (iii)
that non-payment by Roche to Enzo for certain sales of Roche products does not
constitute a breach of the 1994 Agreement, and (iv) that Enzos claims of
ownership to proprietary inventions, technology and products developed by Roche
are without basis. In addition, the suit
claims tortious interference and unfair competition. The Company does not believe that the Complaint has merit and
intends to vigorously respond to such action with appropriate affirmative
defenses and counterclaims. Enzo filed
an Answer and Counterclaims on November 3, 2004 alleging multiple breaches of
the 1994 Agreement and related infringement of Enzos 373 patent. Discovery has commenced. The Court issued a Markman
opinion on July
10, 2006. The Company did not record
any revenue from Roche during the fiscal years ended July 31, 2007 or
2006. The Roche agreement remains in
force to date.

35

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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, labelled 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 wilful infringement). Defendants answered the complaint on July
29, 2004. The answer pleads affirmative
defences of invalidity, estoppels and laches and asserts counterclaims of
non-infringement and invalidity.  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
judgement 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 judgement for invalidity, laches and non-infringement of
the Ward patents on March 5, 2007. The
Company and other plaintiff filed a motion for summary judgement on
infringement of the Ward patents on March 5, 2007. On August 20, 2007, the district court heard oral arguments on
the motions for summary judgement. On
September 6, 2007, the court granted defendants motion for summary judgement
of invalidity of the remaining Ward patents and entered a final judgement to
that effect. The Company and other
plaintiff filed a notice of appeal to the United States Court of Appeals for
the Federal Circuit on September 7, 2007.
The Company and other plaintiff intend to vigorously pursue this appeal;
however, the outcome of the appeal cannot be anticipated at this time.  If the appeal is granted, there can be no
assurance that the Company will be successful in this litigation. Even if the Company is not successful,
management does not believe that there will be a significant adverse monetary
impact on the Company.

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

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

Item 4. Submission of
Matters to a Vote of Security Holders

No matters
were brought to a vote of the Companys stockholders in the fourth fiscal
quarter ended July 31, 2007.

36

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PART II

Item 5. Market for
Registrants Common Equity and Related
Stockholder Matters

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

| |                                                      |  |      |       |     |   |       | 
| | ---------------------------------------------------- |  | ---- | ----- | --- | - | ----- | 
| | 2006 Fiscal Year
 (August 1, 2005 to July 31, 2006): |  |      |       |     |   |       | 
|
| |                                                      |  | High |       | Low |  
| |                                                      |  |      |       |     |  
| | 1st Quarter                                          |  | $    | 17.30 |     | $ | 12.92 | 
| | 2nd Quarter                                          |  | $    | 14.10 |     | $ | 12.40 | 
| | 3rd Quarter                                          |  | $    | 13.55 |     | $ | 11.67 | 
| | 4th Quarter                                          |  | $    | 15.08 |     | $ | 9.30  | 

| |                                                      |  |      |       |     |   |       | 
| | ---------------------------------------------------- |  | ---- | ----- | --- | - | ----- | 
| | 2007 Fiscal Year
 (August 1, 2006 to July 31, 2007): |  |      |       |     |   |       | 
|
| |                                                      |  | High |       | Low |  
| |                                                      |  |      |       |     |  
| | 1st Quarter                                          |  | $    | 14.68 |     | $ | 11.14 | 
| | 2nd Quarter                                          |  | $    | 16.00 |     | $ | 13.55 | 
| | 3rd Quarter                                          |  | $    | 17.44 |     | $ | 13.76 | 
| | 4th Quarter                                          |  | $    | 17.31 |     | $ | 12.44 | 

As of
September 30, 2007, the Company had approximately 1,042 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. During fiscal 2005, the
Companys board of directors declared a 5% stock dividend on October 5, 2004
payable November 15, 2004 to shareholders of record as of October 25,
2004. The Company recorded a charge to
accumulated deficit and offsetting credits to both common stock and additional
paid-in capital of approximately $23,433,400 in fiscal 2005 which reflects the
fair value of the stock dividend on the date of declaration.

37

---



Item 6. Selected Financial
Data

The
following table, which is derived from the audited consolidated financial
statements of the Company for the fiscal years 2003 through 2007 should be read
together with the discussion in Managements Discussion and Analysis of
Financial Condition and Results of Operations and the Companys consolidated
financial statements and notes to those statements included elsewhere in this
Annual Report on Form 10-K.

|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|------------------------------------------------ |  | ----------------------------------------------------------------------------- | ------- | ---- | - | ------- | - | -------------- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                 |  | For the fiscal
 year ended July 31,
 (In thousands, except per share amounts) |        
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Operating Results (1)                            |  | 2007                                                                          |         | 2006 |   | 2005    |   | 2004           |         | 2003 |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Operating revenues                               |  | $                                                                             | 52,908  |      | $ | 39,826  |   | $              | 43,403  |      | $ | 41,644  |   | $ | 52,767  |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Other income                                     |  |                                                                               | 2,699   |      |   |        |   |                | 14,000  |      |   |        |   |   |        |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Interest income                                  |  |                                                                               | 5,092   |      |   | 3,144   |   |                | 1,523   |      |   | 1,152   |   |   | 1,355   |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|(Loss) Income before income
taxes                |  |                                                                               | (13,175 | )    |   | (17,009 | ) |                | 5,217   |      |   | (11,080 | ) |   | 5,725   |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|(Provision) benefit for income
taxes             |  |                                                                               | (85     | )    |   | 1,342   |   |                | (2,213  | )    |   | 4,848   |   |   | (1,881  | )
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Net (loss) income                                |  | $                                                                             | (13,260 | )    | $ | (15,667 | ) | $              | 3,004   |      | $ | (6,232  | ) | $ | 3,844   |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Basic net (loss) income per
 common share: (2)   |  | $                                                                             | (0.38   | )    | $ | (0.49   | ) | $              | 0.09    |      | $ | (0.20   | ) | $ | 0.12    |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Diluted net (loss) income per
 common share: (2) |  | $                                                                             | (0.38   | )    | $ | (0.49   | ) | $              | 0.09    |      | $ | (0.20   | ) | $ | 0.12    |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Weighted average common shares                   |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Basic                                            |  |                                                                               | 35,017  |      |   | 32,215  |   |                | 32,097  |      |   | 31,700  |   |   | 31,399  |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Diluted                                          |  |                                                                               | 35,017  |      |   | 32,215  |   |                | 32,763  |      |   | 31,700  |   |   | 32,175  |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   | July 31,       |         |      |   |         |   |   |        
|                                                 |  |                                                                               |         |      |   |         |   | (in thousands) |         |      |   |         |   |   |        
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |        
|Financial Position:                              |  | 2007                                                                          |         | 2006 |   | 2005    |   | 2004           |         | 2003 |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Working capital                                  |  | $                                                                             | 113,850 |      | $ | 80,161  |   | $              | 96,280  |      | $ | 92,259  |   | $ | 97,723  |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Total assets                                     |  |                                                                               | 159,002 |      |   | 101,524 |   |                | 116,466 |      |   | 110,334 |   |   | 115,878 |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Long term obligations                            |  |                                                                               |        |      |   |        |   |                | 150     |      |   | 300     |   |   |        |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Stockholders equity                             |  |                                                                               | 141,894 |      |   | 95,587  |   |                | 108,267 |      |   | 104,166 |   |   | 109,380 |  
|                                                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  
|Notes to Selected Financial Data                 |  |                                                                               |         |      |   |         |   |                |         |      |   |         |   |   |         |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 2 to the Companys notes to consolidated
 financial statements regarding the acquisition of Axxora Life Sciences, Inc.                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2) | Effective August
 1, 2005, the Company adopted the fair value recognition provisions of SFAS
 No. 123(R) using the modified prospective application method. The impact of
 the adoption, which increased basic and diluted net loss per common share by
 $0.02 and $0.05 for the fiscal years ended July 31, 2007 and July 31, 2006,
 respectively, is described in further detail in Note 1 in the notes to consolidated
    financial statements.

38

---



Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations

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

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

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

Enzo
Life Sciencesis a company that manufactures, develops and markets
biomedical research products and tools to research and pharmaceutical customers
around the world and has amassed a large patent and technology portfolio. The
companys sources of revenue have been from the direct sales of products
consisting of labeling and detection reagents for the genomics and sequencing
markets, as well as through non-exclusive distribution agreements with other
companies, and royalty and licensing income. The pioneering platforms developed
by Enzo Life Sciences enable the development of a wide range of products in the
research products marketplace. The division is internationally recognized and
acknowledged for its manufacturing, in-licensing, and commercialization of over
5,000 innovative high quality research reagents in key research areas. The
division is an established source for a comprehensive panel of products to scientific
experts in the fields of gene expression, non-radioactive labeling and
detection, adipokines and obesity, apoptosis, cell cycle, cytoskeletal
research, DNA damage and repair, immunology and cancer research, inflammation,
neurobiology, nitric oxide & oxidative stress, and signal transduction.

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

Enzo
Clinical Labsis a regional clinical laboratory to the greater New
York and New Jersey medical community. The Company believes having this
capability allows us to capitalize firsthand on our extensive advanced
molecular and cytogenetic capabilities and the broader trends in predictive
diagnostics. We offer a menu of routine and esoteric clinical laboratory tests
or procedures used in general patient care by physicians to establish or
support a diagnosis, monitor treatment or medication, or search for an
otherwise undiagnosed condition. We operate a full-service clinical laboratory
in Farmingdale, New York, a network of 19
patient service centers, a stand alone stat or rapid response
laboratory in New York City, and a full-service phlebotomy department.

The
Companys sources of revenue have been from the direct sales of products
consisting of labeling and detection reagents for the genomics and sequencing
markets, as well as through non-exclusive distribution agreements with other
companies, and royalty and license fee income. Another source of revenue has been
from the clinical laboratory service market. Payments for clinical laboratory
testing services are made by the Medicare program, healthcare insurers and
patients. Fees billed to patients, Medicare, and third party payers are billed
on the laboratorys standard gross fee schedule, subject to any limitations on
fees negotiated with the third party payers or with the ordering physicians on
behalf of their patients.

39

---



The
following table summarizes the sources of revenues for the fiscal years ended
July 31, 2007, 2006 and 2005, (in $000s and percentages):

|                               |  |      |        |      |     |      |   |        |  |     |   |   |        |  |     |  
|------------------------------ |  | ---- | ------ | ---- | --- | ---- | - | ------ |  | --- | - | - | ------ |  | --- | -
|Fiscal year ended July 31,     |  | 2007 |        | 2006 |     | 2005 |  
|                               |  |      |        |      |     |      |  
|Product revenues               |  | $    | 6,658  |      | 13  | %    | $ | 4,750  |  | 12  | % | $ | 8,905  |  | 20  | %
|Royalty and
  license fees     |  |      | 5,820  |      | 11  |      |   | 3,150  |  | 8   |   |   | 1,641  |  | 4   |  
|Clinical
  laboratory services |  |      | 40,430 |      | 76  |      |   | 31,926 |  | 80  |   |   | 32,857 |  | 76  |  
|                               |  |      |        |      |     |      |   |        |  |     |   |   |       
|Total                          |  | $    | 52,908 |      | 100 | %    | $ | 39,826 |  | 100 | % | $ | 43,403 |  | 100 | %
|                               |  |      |        |      |     |      |   |        |  |     |   |   |       

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

Information
systems are used extensively in virtually all aspects of the clinical
laboratory operations, including testing, billing, customer service, logistics,
and management of medical data. Our success depends, in part, on the continued
and uninterrupted performance of our information technology systems. Through
maintenance, staffing, and investments in our information technology system, we
expect to limit the risk associated with our heavy reliance on these systems.

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

Recent
Developments

Axxora Life
Science, Inc. Acquisition

On
    May 29, 2007, Enzo Life Sciences entered into a Stock Purchase Agreement
    (the
Agreement), by and among Enzo Life Sciences, Axxora and the stockholders,
option holders and warrant holders of Axxora who own all of the issued and
outstanding capital stock, options and warrants, respectively, of Axxora
(collectively, the Security holders). Pursuant to the Agreement,
Enzo Life Sciences purchased all of the issued and outstanding capital stock
of Axxora from the Security holders for an aggregate purchase price of $16.3
million, exclusive of acquisition costs of approximately $1.0 million, $0.5 million
previously advanced to Axxora to repay outstanding debt, and acquired cash of
approximately $0.9 million. At closing approximately $15.0 million was paid to
the Security holders, approximately $1.2 million was paid to an escrow agent
for the one-year period following the closing to satisfy any indemnification
obligations of the Security holders under the Agreement and approximately $0.1
million was paid to an escrow agent, for the one-year period following the closing
to pay certain out-of-pocket expenses of the representatives of the Security
holders in connection with the transaction. Effective May 31, 2007, Axxora became
a wholly-owned subsidiary of Enzo Life Sciences. The acquisition was financed
with our cash and cash equivalents. The consolidated financial statements presented
herein include the results of operations for Axxora from the date of acquisition.

Axxora is a
developer, manufacturer and distributor of reagents for the research and
biochemical industries and is based in the U.S. with wholly-owned subsidiaries
in the U.S., Switzerland, Germany and the United Kingdom. Axxora utilizes third-party
distributors located in other major markets throughout the world. Axxoras electronic
marketplace enables customers to purchase research reagents from
internationally recognized manufacturers covering all areas of the life
sciences research reagents field. As a result of this transaction, Enzo Life
Sciences has expanded its product offerings both through internal manufacturing
and distribution and increases its geographic distribution. The acquisition was
financed with the Companys cash and cash equivalents.

40

---



Direct
Registered Offerings

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

Results
of Operations

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

|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | ------------------ | - | -------- | - | ---- | --- | ------------------ | - | -------- | - | ---- | ------- | - | ---- | - |  | - | ------- | -
|                                                 |  | 2007 |         | Increase(Decrease) |   | % Change |   | 2006 |     | Increase(Decrease) |   | % Change |   | 2005 |        
|                                                 |  |      |        
|Revenues:                                        |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|Product revenues                                 |  | $    | 6,658   |                    | $ | 1,908    |   |      | 40  |                    | $ | 4,750    |   | $    | (4,155  | ) | (47  | ) |  | $ | 8,905   |  
|Royalty and license fee income                   |  |      | 5,820   |                    |   | 2,670    |   |      | 85  |                    |   | 3,150    |   |      | 1,509   |   | 92   |   |  |   | 1,641   |  
|Clinical laboratory services                     |  |      | 40,430  |                    |   | 8,504    |   |      | 27  |                    |   | 31,926   |   |      | (931    | ) | (3   | ) |  |   | 32,857  |  
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|Total revenue                                    |  |      | 52,908  |                    |   | 13,082   |   |      | 33  |                    |   | 39,826   |   |      | (3,577  | ) | (8   | ) |  |   | 43,403  |  
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|Costs and expenses and other (income):           |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|Cost of products                                 |  |      | 5,034   |                    |   | 2,634    |   |      | 110 |                    |   | 2,400    |   |      | (26     | ) | (1   | ) |  |   | 2,426   |  
|Cost of laboratory services                      |  |      | 18,199  |                    |   | 4,282    |   |      | 31  |                    |   | 13,917   |   |      | 1,369   |   | 11   |   |  |   | 12,548  |  
|Research and development                         |  |      | 9,393   |                    |   | 1,497    |   |      | 19  |                    |   | 7,896    |   |      | (556    | ) | (7   | ) |  |   | 8,452   |  
|Selling, general and administrative              |  |      | 26,300  |                    |   | 1,555    |   |      | 6   |                    |   | 24,745   |   |      | 4,905   |   | 25   |   |  |   | 19,840  |  
|Provision for uncollectible accounts
receivables |  |      | 4,653   |                    |   | 1,020    |   |      | 28  |                    |   | 3,633    |   |      | (1,334  | ) | (27  | ) |  |   | 4,967   |  
|Legal expenses                                   |  |      | 10,295  |                    |   | 2,907    |   |      | 39  |                    |   | 7,388    |   |      | 1,912   |   | 35   |   |  |   | 5,476   |  
|Interest income                                  |  |      | (5,092  | )                  |   | (1,948   | ) |      | 62  |                    |   | (3,144   | ) |      | (1,621  | ) | 106  |   |  |   | (1,523  | )
|Other income                                     |  |      | (2,699  | )                  |   | (2,699   | ) |      |    |                    |   |         |   |      | 14,000  |   | (100 | ) |  |   | (14,000 | )
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|Total costs and expenses                         |  |      | 66,083  |                    |   | 9,248    |   |      | 16  |                    |   | 56,835   |   |      | 18,649  |   | 49   |   |  |   | 38,186  |  
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  
|(Loss) income before income taxes                |  | $    | (13,175 | )                  | $ | 3,834    |   |      |     |                    | $ | (17,009  | ) | $    | (22,226 | ) |      |   |  | $ | 5,217   |  
|                                                 |  |      |         |                    |   |          |   |      |     |                    |   |          |   |      |         |   |      |   |  |   |         |  

Fiscal 2007
Compared to Fiscal 2006

Consolidated
Results

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

Royalty and
license fee income during fiscal 2007 was $5.8 million compared to $3.2 million
in the year ago period, an increase of $2.6 million or 85%. Royalties are
earned from net sales of Digene products subject to a license and from a
License Agreement with Abbott which was entered into in the fiscal 2007 third
quarter. During fiscal 2007, the Company recognized approximately $.9 million
in royalties under the license agreement and approximately $0.1 million of the
$1.5 million upfront payment received from the Abbott License Agreement. There
are no expenses relating to royalty and license fee income.

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

41

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

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

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

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

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

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

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

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

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

42

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

Segment
Results

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

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

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

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

Fiscal
2006 Compared to Fiscal 2005

Consolidated Results

Fiscal
    2006 product revenues were $4.8 million compared to $8.9 million in fiscal
    2005, a decrease of $4.1 million or 47%. The decrease in product revenue
    was primarily due to the decrease in the volume of shipments of research
    products of $2.6 million and a decrease in revenue from a former distributor
of $1.5 million.

Fiscal 2006
royalty and license fee income was $3.1 million compared to $1.6 million, an
increase of $1.5 million or 92% due to an increase in net sales of licensee products
subject to a license, as reported to the Company by the licensee. There are no
expenses relating to royalty income.

43

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Fiscal 2006
clinical laboratory revenues were $31.9 million compared to $32.9 million in
fiscal 2005, a decrease of approximately $0.9 million or 3%. The contractual
expense, which reduces gross billings, increased to 75.2% of gross billing as
compared to 72.5% in the prior period, due to competitive pricing throughout
the industry. In addition, the Company experienced a decrease in gross billing
due to decreased reimbursement rates on certain tests.

The cost of
products during both fiscal 2006 and fiscal 2005 was $2.4 million. The cost of
product revenues was negatively impacted in fiscal 2006 by the write-off or
reserve of approximately $0.4 million for excess or obsolete inventory due to
an evaluation made of the current and estimated demand for such product
offerings.

The cost of
clinical laboratory services during fiscal 2006 was $13.9 million compared to
$12.5 million in fiscal 2005, an increase of $1.4 million or 11%. The increase
is primarily due to an increase in the overall cost of performing testing
services, including increased reagent costs of $0.8 million and outside testing
costs for certain esoteric tests of $0.1 million, and an increase of hiring
additional phlebotomists for the New Jersey market of approximately $0.3
million.

Research
and development expenses were $7.9 million in fiscal 2006 compared to $8.5
million in fiscal 2005, a decrease of $0.6 million or 7%. The decrease was
primarily due to a reduction of $1.4 million in patent expense and the
amortization of patent costs and a decrease in compensation expense for
executive officers due to the realignment of responsibilities to other expense
categories of $0.6 million. The decrease was partially offset by an increase in
clinical trial study activities of $1.0 million and the recognition of
share-based compensation charges required by the adoption of SFAS 123(R) of
$0.2 million during the 2006 period. Research and development expenses include
costs of scientific personnel, supplies, consultants, allocated facility costs,
costs related to pre-clinical and clinical trials, amortization of patent
expense, and other patent related costs.

Selling,
general and administrative expenses were $24.7 million during fiscal 2006,
compared to $19.8 million in fiscal 2005, an increase of $4.9 million or 25%.
The increase in the 2006 period was primarily due to the recognition of
share-based compensation charges required by the adoption of SFAS 123(R) of
$1.5 million, increases in expenditures for corporate governance, consulting,
accounting and other professional fees of $1.2 million, an increase in
compensation expense of executive officers previously included in research and
development due to the realignment of responsibilities, of $0.7 million,
increases in compensation of $0.5 million and other increased costs.

The
provision for uncollectible accounts receivable relating to the clinical
laboratory segment during fiscal 2006 was $3.6 million, compared to $5.0
million during fiscal 2005, a decrease of $1.3 million or 27%. The provision
declined due to improved billing and collection procedures and an overall
increase in collections.

Legal
expense was $7.4 million during fiscal 2006 compared to $5.5 million in fiscal
2005, an increase of $1.9 million or 35%, due to an increase in ongoing patent
litigation activities.

Interest
income increased $1.6 million or 106% to $3.2 million during fiscal 2006
compared to $1.5 million during fiscal 2005, due to higher interest rates
earned offset by lower investments. The Company earns interest by investing
primarily in short term (30  90 days) commercial paper and money market funds
with high credit ratings.

For the
year ended July 31, 2006, the Companys net benefit for income taxes was $1.3
million or an effective rate of 8%, comprised of a federal tax carryback
benefit of $2.0 million for taxes paid in the fiscal year ended July 31, 2005
and other adjustments, offset by a valuation allowance charge of $0.6 million
equal to net deferred tax assets as of July 31, 2005, and by state and local
taxes of $0.1 million, based on capital. Pursuant to SFAS 109 Accounting for
Income Taxes, the Company recorded a valuation allowance charge during the
year ended July 31, 2006 equal to its net deferred tax assets at July 31, 2005
and has applied a full valuation allowance against increases in its net
deferred tax assets generated during the 2006 period. The benefit for income
taxes, at an effective rate of 8% was different from the U.S. statutory rate of
34% due to state and local taxes, net of federal tax benefit, of 5%, expenses
not deductible for income taxes of 4%, and the effect of the increase in the
valuation allowance of 28%. The Company believes that the valuation allowance
is necessary as it is not more likely than not that net 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 net deferred tax
assets. For the year ended July 31, 2005, the Companys (provision) for income
taxes was $2.2 million which was based on the effective federal, state and
local income tax rates applied to 2005 periods taxable income, which was
primarily comprised of the $14 million gain from the Digene agreement. The
provision for income taxes, at an effective rate of 42%, was different from the
U.S. federal statutory rate of 34% due to state income taxes net of federal tax
deduction, of approximately 6%, expenses not deductible for income tax return
purposes of 2%, a benefit for foreign sales of (1%) and other of 1%.

44

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Fiscal 2006
net loss was $15.7 million as compared to net income of $3.0 million in fiscal
2005. Fiscal 2005 results included the gain from the patent litigation
settlement from Digene Corp. of $14 million. Fiscal 2006s net loss was
impacted by decreased revenues and increased expenses as discussed above.

Segment
Results

The life
sciences segments loss before income taxes was approximately $0.2 million for
the year ended July 31, 2006, compared to income before income taxes of
approximately $14.6 million in the fiscal 2005 period. Fiscal 2006 product
revenues and royalty income was $7.9 million compared to $10.5 million in
fiscal 2005, a decrease of $2.6 million or 25%. The decrease in product revenue
and royalty income was primarily due to the decrease in the volume of shipments
of research products of $2.6 million and a decrease in revenue from a former
distributor of $1.5 million (see Item 3. Legal Proceedings). This decrease was
partially offset by an increase in royalty income of $1.5 million. The 2005
periods income included the $14 million gain from a settlement and license
agreement with Digene Corp. The decline in the gross profit margin on product
sales and royalties in fiscal 2006 compared to fiscal 2006 was partially due to
the write-off or reserve of approximately $0.4 million of excess or obsolete
inventory due to an evaluation made of the current and estimated demand for
such product offerings, decline in sales volumes and pricing competitiveness.
Segment operating expenses (research and development and selling, general and
administrative) decreased in the 2006 period by approximately $1.8 million
primarily due to a decrease in the amortization of deferred patent expenses of
approximately $1.2 million, and a decrease in compensation expense for
executive officers due to the realignment of responsibilities of $0.6 million.

The
therapeutics segments loss before income taxes was approximately $4.2 million
for the year ended July 31, 2006 as compared to $3.1 million in the year ago
period. The increase in the net loss was due to an increase of $1.0 million in
clinical trial studies expenditures.

The
clinical laboratory segments income before income taxes was $0.1 million for
the year ended July 31, 2006 period versus income of $2.8 million in fiscal
2005. The 2006 period was impacted by lower revenue of $0.9 million, an
increase in cost of laboratory services of $1.4 million, as previously
explained, and a net increase in operating expenses (provision for
uncollectible accounts and selling, general and administrative) of $0.5 million
primarily due to recognition of share-based compensation charges required by
the adoption of SFAS 123(R) of $0.5 million, the inclusion of compensation
expense for executive officers of $0.6 million previously included in the other
segment due to the realignment of responsibilities, and compensation and
related costs of $0.4 million relating to increased personnel, offset by a
decrease in the provision for uncollectible accounts of $1.3 million.

The other
segments loss before income taxes was $12.6 million for the year ended July
31, 2006 versus $9.1 million in fiscal 2005. The increased loss in fiscal 2006
of approximately $3.5 million was primarily due to the recognition of
share-based compensation charges required by the adoption of SFAS 123(R) of
$0.9 million, increases in expenditures for corporate governance, consulting,
accounting and other professional fees of $1.3 million, an increase in legal
fees of $1.9 million due to ongoing patent litigation, and an increase in
compensation expense for executive officers previously included in life
sciences and therapeutics segments due to the realignment of responsibilities,
of $0.7 million. These increases were partially offset by higher interest
income earned of $1.6 million.

Liquidity and Capital
Resources

At July 31,
2007, our cash and cash equivalents were $105.1 million, an increase of $35.3
million from cash and cash equivalents at July 31, 2006. We had working capital
of $113.9 million at July 31, 2007 compared to $80.2 million at July 31, 2006.
In 2007, the increase was attributed to the net proceeds from the issuance of
common stock aggregating approximately $57 million offset by the use of cash to
fund operations arising from the 2007 net loss and the use of cash for
investing activities. In 2006, the decrease was due to the use of cash to fund
operations arising from the net loss.

Net cash
used in operating activities for the year ended July 31, 2007 was approximately
$3.8 million as compared to net cash used in operating activities of $10.2
million for the year ended July 31, 2006. The decrease in net cash used in
operating activities in fiscal 2007 of $6.4 million was primarily due to the
decreased net loss of $2.4 million and by the net change in operating assets
and liabilities compared to the prior year and the impact of non cash items.

In fiscal
2007, net cash provided by investing activities decreased by approximately $21
million from fiscal 2006, primarily due to the acquisition of Axxora Life
Sciences, Inc. of $16.9 million, inclusive of acquisition costs, offset by a
decrease in capital expenditures of approximately $2.8 million and sales of
marketable securities of $6.8 million.

45

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In fiscal
2006, the Company had net cash provided from investing activities of
approximately $2.6 million primarily from the sale of marketable securities of
$6.7 million net, offset by the use of cash of approximately $4.2 million for
capital expenditure, inclusive of $3.2 million for the purchase of land and
building which will be primarily utilized as the Life Sciences and Therapeutics
research and development and manufacturing facility.

In
    fiscal 2007, net cash provided by financing activities was approximately
    $57.5 as compared to $.5 million in fiscal 2006 primarily as a result of
    the proceeds from the issuance of common stock of $57.0 million.

Accounts
receivable, net of $14.4 million and $10.4 million represented 96 days and 109
days of operating revenues at July 31, 2007 and 2006, respectively. The change
in net accounts receivable is due to an increase in accounts receivable at the
clinical laboratory of approximately $0.7 million to $9.8 million due to
increased patient volume offset by improvements in the collection process and
an increase of life science accounts receivable of approximately $3.2 million
to $4.5 million, primarily due to the receivables attributed to Axxora and
increased royalties.

We
believe that our current cash position is sufficient for our foreseeable
liquidity and capital resource needs over the next 12 months, although there
can be no assurance that future events will not alter such view.

46

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Effect of New Pronouncements

Effective
August 1, 2006, the Company adopted SFAS No. 154, Accounting Changes and Error
Corrections (SFAS 154), a replacement of APB Opinion No. 20, Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements. SFAS 154 changes the requirements for the accounting for
and reporting of a change in accounting principle. SFAS 154 requires
retrospective application to prior periods financial statements, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. The adoption of SFAS 154 did not have a material impact
on the Companys financial condition or results of operations.

In
June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109,
Accounting for Income Taxes (SFAS 109), to clarify the accounting for
uncertainty in income taxes recognized in an enterprises financial statements
in accordance with SFAS 109. This Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return.
FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The
provisions of FIN 48 are effective for fiscal years beginning after December
15, 2006. The implementation of FIN 48, effective August 1, 2007, is not
expected to be material effect on the Companys financial conditions or results
of operations.

In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements (SFAS
157). SFAS 157 establishes a common definition of fair value of financial
instruments, sets a framework for measuring fair value and expands disclosure
about such fair value measurements. The Statement applies only to fair value measurements
that are already required or permitted by other accounting standards and is
effective for fiscal years beginning after November 15, 2007. The Company
does not believe that the adoption of FAS 157 will have a material effect on
the Companys financial condition or result of operations.

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

Contractual Obligations

The
Company has entered into various real estate and equipment operating leases and
has employment agreements with certain executive officers. The real estate
lease for the Companys Farmingdale headquarters is with a related party. See
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, 2007:

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   |  | $     | 20,724 |                   | $ | 3,210     |  | $         | 5,441 |              | $
|Employment
 agreements              |  |       | 2,865  |                   |   | 1,577     |  |           | 1,288 |              |  
|                                    |  |       |        |                   |   |           |  |           |       |              |  
|Total contractual
 cash obligations |  | $     | 23,589 |                   | $ | 4,787     |  | $         | 6,729 |              | $
|                                    |  |       |        |                   |   |           |  |           |       |              |  

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

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

47

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Critical Accounting Policies

General

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

Product revenues

Revenues
from product sales are recognized when the products are shipped and title transfers,
    the sales price is fixed or determinable and collectibility is reasonably
    assured. The revenue from these non-exclusive distribution agreements are
    recognized when shipments are made to their respective customers and reported
    to the Company. The Company has certain non-exclusive distribution agreements,
    which provide for consideration to be paid to the distributors for the manufacture
    of certain products. The Company records such consideration provided to distributors
    under these non-exclusive distribution agreements as a reduction to research
    product revenues. The Company did not recognize any revenue from these distributors
during the year ended July 31, 2006. During the fiscal year ended July 31,
2005, the manufacturing and processing cost of these products sold was $0.7
million.

Royalties

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

Revenues - Clinical laboratory services

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

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

Net revenues

|                  |  |                           |        |                           |  |             |   |         |        |  |  |     |  
|----------------- |  | ------------------------- | ------ | ------------------------- |  | ----------- | - | ------- | ------ |  |  | --- | -
|                  |  | Year ended
 July 31, 2007 |        | Year ended
 July 31, 2006 | 
|                  |  |                           |        |                           | 
|Revenue category  |  | (In
 000s)               |        | (in
 %)                   |  | (In
 000s) |   | (in
 %) |       
|                  |  |                           |        |                           |  |             |   |         |       
|Medicare          |  | $                         | 8,478  |                           |  | 21          |   | $       | 7,462  |  |  | 23  |  
|Third party payer |  |                           | 25,060 |                           |  | 62          |   |         | 17,680 |  |  | 56  |  
|Patient self-pay  |  |                           | 2,951  |                           |  | 7           |   |         | 4,925  |  |  | 15  |  
|HMOs             |  |                           | 3,941  |                           |  | 10          |   |         | 1,859  |  |  | 6   |  
|                  |  |                           |        |                           |  |             |   |         |        |  |  |     |  
|Total             |  | $                         | 40,430 |                           |  | 100         | % | $       | 31,926 |  |  | 100 | %
|                  |  |                           |        |                           |  |             |   |         |        |  |  |     |  

The Company
provides services to certain patients covered by various third-party payers,
including the Federal Medicare program. Revenue, net of contractual expense,
from direct billings under the Federal Medicare program during the years ended
July 31, 2007, 2006, and 2005 were approximately 21%, 23% and 21%,
respectively, of the clinical lab segments revenue. 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.

48

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Contractual Adjustment

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

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

During the
years ended July 31, 2007, 2006 and 2005, the contractual adjustment percentages,
determined using current and historical reimbursement statistics, were
79.0%,and 75.2% and 72.5%, respectively, of gross billings. The Company
believes the negative impact on revenues from the decline in reimbursement
rates or the shift to managed care, other primary third party payers, or
similar arrangements may be offset by the positive impact of an increase in the
number of tests we perform. However, there can be no assurance that we can
increase the number of tests we perform or that if we do increase the number of
tests we perform, that we can maintain that higher number of tests performed,
or that an increase in the number of tests we perform would result in increased
revenue.

The Company
estimates (by using a sensitivity analysis) that each 1% point change in the
contractual adjustment percentage could result in a change in the net accounts
receivable of approximately $387,000 and $373,000 as of July 31, 2007 and 2006,
respectively, and a change in clinical laboratory services revenues of
approximately $1,930,000, and $1,288,000 for the years ended July 31, 2007 and
2006, respectively.

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

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

49

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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, 2006 and 2005,
approximately 69% and 88%, respectively, of the Companys net accounts
receivable relates to its Clinical Labs business, which operates in the
New York Metropolitan and New Jersey areas.



|                          |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|------------------------- |  | -------------------- | ------ | -------------------- |  | ---------- | - | ------ | ------ |  |  | --- | -
|                          |  | As of
 July 31, 2007 |        | As of
 July 31, 2006 | 
|Net accounts receivable   |  |                      |        |                      | 
|Billing
 category         |  | (In 000s)           |        | (in %)               |  | (In 000s) |   | (in %) |       
|                          |  |                      |        |                      |  |            |   |        |       
|Clinical
 Labs            |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Medicare                  |  | $                    | 1,628  |                      |  | 17         |   | $      | 1,367  |  |  | 15  |  
|Third party payers        |  |                      | 5,856  |                      |  | 60         |   |        | 4,025  |  |  | 44  |  
|Patient self-pay          |  |                      | 1,678  |                      |  | 17         |   |        | 3,294  |  |  | 36  |  
|HMOs                     |  |                      | 671    |                      |  | 6          |   |        | 475    |  |  | 5   |  
|                          |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total clinical
 labs      |  | $                    | 9,833  |                      |  | 100        | % | $      | 9,161  |  |  | 100 | %
|                          |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total life
 sciences      |  |                      | 4,520  |                      |  |            |   |        | 1,286  |  |  |     |  
|                          |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total accounts receivable |  | $                    | 14,353 |                      |  |            |   | $      | 10,447 |  |  |     |  
|                          |  |                      |        |                      |  |            |   |        |        |  |  |     |  

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

|                                 |  |               |        |               |   |        |  
|-------------------------------- |  | ------------- | ------ | ------------- | - | ------ | -
|In 000s                         |  | July 31, 2007 |        | July 31, 2006 |  
|                                 |  |               |        |               |  
|Beginning balance                |  | $             | 1,033  |               | $ | 2,292  |  
|Provision for
 doubtful accounts |  |               | 4,653  |               |   | 3,633  |  
|Write-offs                       |  |               | (4,282 | )             |   | (4,892 | )
|                                 |  |               |        |               |   |        |  
|Ending balance                   |  | $             | 1,404  |               | $ | 1,033  |  
|                                 |  |               |        |               |   |        |  

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, 2007 and 2006, 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, until the payers filing date deadline occurs. The Companys
collection experience on Medicare receivables beyond 210 days has been
insignificant. The Company adjusts the historical collection analysis for
recoveries, if any, on an ongoing basis.

The
Companys ability to collect outstanding receivables from third party payers is
critical to its operating performance and cash flows. The primary collection
risk lies with uninsured patients or patients for whom primary insurance has
paid but a patient portion remains outstanding. The Company also assesses the
current state of its billing functions in order to identify any known
collection or reimbursement issues in order to assess the impact, if any, on
the allowance estimates, which involves judgment. The Company believes that the
collectibility of its receivables is directly linked to the quality of its
billing processes, most notably, those related to obtaining the correct
information in order to bill effectively for the services provided. Should
circumstances change (e.g. shift in payer mix, decline in economic conditions
or deterioration in aging of receivables), our estimates of net realizable
value of receivables could be reduced by a material amount.

50

---



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

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

|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |          |  |  |     |   |   |       |  |  |     |  
|--------------------------- | ------ | - | ------ |  | ------ | --- | - | - | -------- |  | - | --- | ------ | - | ------------------------------------ |  | ------ | --- | - | - | -------- |  |  | --- | - | - | ----- |  |  | --- | -
|As
 of July 31, 2007        |        |   | Total  |  |        |     |   |   | Medicare |  |   |     |        |   | Third 
    Party 
    Payers         |  |        |     |   |   | Self-pay |  |  |     |   |   | HMOs |  |  |     |  
|                            | Amount |   | %      |  | Amount |     | % |   | Amount   |  | % |     | Amount |   | %                                    |  | Amount |     | % |  
|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |         
|1-30 days                   |        | $ | 18,120 |  |        | 50  |   | $ | 3,630    |  |   | 40  |        | $ | 2,309                                |  |        | 30  |   | $ | 8,561    |  |  | 59  |   | $ | 3,620 |  |  | 69  |  
|31-60 days                  |        |   | 5,306  |  |        | 15  |   |   | 614      |  |   | 7   |        |   | 1,434                                |  |        | 19  |   |   | 2,731    |  |  | 19  |   |   | 527   |  |  | 10  |  
|61-90 days                  |        |   | 3,795  |  |        | 10  |   |   | 629      |  |   | 7   |        |   | 1,222                                |  |        | 16  |   |   | 1,735    |  |  | 12  |   |   | 209   |  |  | 4   |  
|91-120 days                 |        |   | 2,811  |  |        | 8   |   |   | 530      |  |   | 6   |        |   | 732                                  |  |        | 10  |   |   | 881      |  |  | 6   |   |   | 668   |  |  | 13  |  
|121-150 days                |        |   | 1,589  |  |        | 4   |   |   | 405      |  |   | 4   |        |   | 779                                  |  |        | 10  |   |   | 263      |  |  | 2   |   |   | 142   |  |  | 2   |  
|Greater than 150 days*      |        |   | 4,760  |  |        | 13  |   |   | 3,246    |  |   | 36  |        |   | 1,173                                |  |        | 15  |   |   | 226      |  |  | 2   |   |   | 115   |  |  | 2   |  
|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |          |  |  |     |   |   |       |  |  |     |  
|Totals                      |        | $ | 36,381 |  |        | 100 | % | $ | 9,054    |  |   | 100 | %      | $ | 7,649                                |  |        | 100 | % | $ | 14,397   |  |  | 100 | % | $ | 5,281 |  |  | 100 | %
|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |          |  |  |     |   |   |       |  |  |     |  
|As of July 31, 2006         |        |   | Total  |  |        |     |   |   | Medicare |  |   |     |        |   | Third 
  Party
          
    Payers |  |        |     |   |   | Self-pay |  |  |     |   |   | HMOs |  |  |     |  
|                            | Amount |   | %      |  | Amount |     | % |   | Amount   |  | % |     | Amount |   | %                                    |  | Amount |     | % |  
|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |         
|1-30 days                   |        | $ | 12,397 |  |        | 36  | % | $ | 3,997    |  |   | 40  | %      | $ | 4,970                                |  |        | 45  | % | $ | 1,472    |  |  | 17  | % | $ | 1,958 |  |  | 42  | %
|31-60 days                  |        |   | 6,104  |  |        | 18  | % |   | 553      |  |   | 6   | %      |   | 2,023                                |  |        | 18  | % |   | 1,551    |  |  | 18  | % |   | 1,977 |  |  | 42  | %
|61-90 days                  |        |   | 3,184  |  |        | 9   | % |   | 397      |  |   | 4   | %      |   | 1,085                                |  |        | 10  | % |   | 1,424    |  |  | 17  | % |   | 278   |  |  | 6   | %
|91-120 days                 |        |   | 2,631  |  |        | 8   | % |   | 520      |  |   | 5   | %      |   | 860                                  |  |        | 7   | % |   | 1,109    |  |  | 13  | % |   | 142   |  |  | 3   | %
|121-150 days                |        |   | 1,829  |  |        | 5   | % |   | 334      |  |   | 3   | %      |   | 668                                  |  |        | 6   | % |   | 669      |  |  | 8   | % |   | 158   |  |  | 3   | %
|Greater
    than 150 days** |        |   | 8,325  |  |        | 24  | % |   | 4,243    |  |   | 42  | %      |   | 1,557                                |  |        | 14  | % |   | 2,341    |  |  | 27  | % |   | 184   |  |  | 4   | %
|                            |        |   |        |  |        |     |   |   |          |  |   |     |        |   |                                      |  |        |     |   |   |          |  |  |     |   |   |       |  |  |     |  
|Totals                      |        | $ | 34,470 |  |        | 100 | % | $ | 10,044   |  |   | 100 | %      | $ | 11,163                               |  |        | 100 | % | $ | 8,566    |  |  | 100 | % | $ | 4,697 |  |  | 100 | %

*  Total includes $2,432 fully reserved over 210 days
    as of July 31, 2007.
** Total includes $2,063 fully reserved over 210 days as of July 31, 2006.

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. On a quarterly basis, we review inventory quantities on
hand and analyze the provision for excess and obsolete inventory based on our
estimate of sales forecasts based on sales history and anticipated future demand.
Our estimate of future product demand may not be accurate and we may understate
or overstate the provision for excess and obsolete inventory. Accordingly,
unanticipated changes in demand could have a significant impact on the value of
our inventory and results of operations. At July 31, 2007 and 2006, our reserve
for excess and obsolete inventory was $379,000 and $238,000, respectively.

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk

We
    are exposed to market risk from changes in foreign currency exchange rates
resulting from the recent acquisition of Axxora (See Item 1A. Risk Factors and
Note 2 in the notes to consolidated financial statements) and, to a much lesser
    extent, interest rates on investments in short-term instruments, that could
    impact our results of operations and financial position. We do not currently
    engage in any hedging or market risk management tools. There have been no
    material changes with respect to market risk previously disclosed in our
    Annual Report on Form 10-K for our 2006 fiscal year except for the impact
    of the aforementioned Axxora acquisition.

51

---



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, 2007,
our assets and liabilities would increase or decrease by $1,212,000 and
$490,000, respectively, and our net sales and net earnings would increase or
decrease by $1,972,000 and $93,000, respectively, on an annual basis.

We also
maintain intercompany balances and loans receivable with subsidiaries with
different local currencies. These amounts are at risk of foreign exchange
losses if exchange rates fluctuate. Assuming a hypothetical aggregate change of
10% in the exchange rates of foreign currencies against the U.S. dollar at July
31, 2007, our pre-tax earnings would be favorably or unfavorably impacted by
approximately $29,000 on an annual basis.

Interest Rate Risk

Our excess
cash is invested in highly liquid, short term (30  90 days) commercial paper
and money market funds with high credit ratings. Changes in interest rates may
affect the investment income we earn on cash and cash equivalents debt and
therefore affect our cash flows and results of operations. As of July 31, 2007,
we were exposed to interest rate change market risk with respect to our
short-term investments of $98.4 million. The short-term investments bear
interest rates ranging from 5.26% to 5.35%. Each 100 basis point (or 1%)
fluctuation in interest rates will increase or decrease interest income on the
short-term investments by approximately $984,000 on an annual basis.

As of July
31, 2007, we did not maintain any fixed or variable interest rate financing.

Item 8. Financial Statements and Supplementary Data

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

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

Not
applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required
by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of July 31, 2007.
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, 2007, 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, 2007 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:

52

---



          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.

Managements
evaluation did not include assessing the effectiveness of internal controls
over financial reporting at Axxora, which was acquired effective May 31, 2007,
and whose financial statements reflect total assets and net sales of 15% and
6%, respectively, of the consolidated financial statements as of and for the
year ended July 31, 2007. Management has opted to exclude Axxora from its
assessment based upon the SECs comments in Managements Report
on Internal Control Over Financial Reporting and Certification of Disclosure
in Exchange Act Periodic Reports, Frequently Asked Questions (FAQ)
(revised October 6, 2004). The response to FAQ No. 3 states that the SEC would
not object to management referring in the report to a discussion in the registrants
Form 10-K or 10-KSB regarding the scope of the assessment and to such disclosure
noting that management excluded the acquired business from managements
report on internal control over financial reporting.

Based
    on its assessment, management concluded that we maintained effective internal
control over financial reporting as of July 31, 2007. 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, 2007. 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, 2007, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Enzo Biochem,
Inc.s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying
Managements Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the companys internal control over
financial reporting based on our audit.

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

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

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

As
indicated in the accompanying Managements Annual Report on Internal Control
over Financial Reporting, managements assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of Axxora Life Sciences, Inc. which is included in the 2007
consolidated financial statements of Enzo Biochem, Inc. and constituted
$23,282,000 and $16,949,000 of total and net assets, respectively, as of July
31, 2007 and $3,343,000 and $387,000 of revenues and net loss, respectively,
for the year then ended. Our audit of internal control over financial reporting
of Enzo Biochem, Inc. also did not include an evaluation of the internal
control over financial reporting of Axxora Life Sciences, Inc.

In our
opinion, Enzo Biochem, Inc. maintained, in all material respects, effective
internal control over financial reporting as of July 31, 2007, 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, 2007 and 2006, and the related consolidated
statements of operations, consolidated statements of shareholders equity and
comprehensive income (loss) and consolidated statements of cash flows for each
of the three years in the period ended July 31, 2007 of Enzo Biochem, Inc. and
our report dated October 12, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Melville, New YorkOctober 12, 2007

54

---



|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------- | ---------------------------- | ----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                           | ITEM 9B. OTHER INFORMATION                     
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | None                                            |                              |                                                                                                                             
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | PART III                                        |                              |                                                                                                                             
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | Item 10.                                        |                              | Directors and Executive Officers                                                                                            
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|The
  information required under this item will be set forth in the Companys proxy
  statement to be filed with the Securities and Exchange Commission on or
  before November 28, 2007 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, 2007 and is incorporated herein by reference.         
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | Item 12.                                        |                              | Security Ownership of Certain Beneficial Owners and
  Management                                                            
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|The
  information required under this item will be set forth in the Companys proxy
  statement to be filed with the Securities and Exchange Commission on or
  before November 28, 2007 and is incorporated herein by reference.         
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                           | Item 13.                                        |                              | Certain Relationships and Related Transactions                                                                              
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|The
  information required under this item will be set forth in the Companys proxy
  statement to be filed with the Securities and Exchange Commission on or
  before November 28, 2007 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, 2007 and is incorporated herein by reference.
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | PART IV                                         |                              |                                                                                                                             
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | Item 15.                                        |                              | Exhibits, Financial Statement Schedules, and Reports
  on Form 8-K                                                          
|                                                                                                                                                                                                                                           |                                                 |                              |                                                                                                                             
|                                                                                                                                                                                                                                           | (a)                                             | (1)                          | Consolidated Financial Statements                                                                                           
|                                                                                                                                                                                                                                           |                                                 |                              | Consolidated Balance Sheets - July 31, 2007 and 2006                                                                        
|                                                                                                                                                                                                                                           |                                                 |                              | Consolidated Statements of Operations- Years ended
  July 31, 2007, 2006 and 2005                                           
|                                                                                                                                                                                                                                           |                                                 |                              | Consolidated Statements of Stockholders Equity and
  Comprehensive Income (loss) - Years ended July 31, 2007, 2006 and 2005
|                                                                                                                                                                                                                                           |                                                 |                              | Consolidated Statements of Cash Flows - Years ended
  July 31, 2007, 2006 and 2005                                          
|                                                                                                                                                                                                                                           |                                                 |                              | 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, as amended March 17,
  1980. (1)                                                                                               
|            |                                                                                                                                                              
|3(b)        | June 16, 1981 Certificate of Amendment of the
  Certificate of Incorporation. (2)                                                                            
|            |                                                                                                                                                              
|3(c)        | Certificate of Amendment to the Certificate of
  Incorporation. (3)                                                                                          
|            |                                                                                                                                                              
|3(d)        | Amended and restated Bylaws. (14)                                                                                                                            
|            |                                                                                                                                                              
|10 (c)      | Employment Agreements with Elazar Rabbani. (5)                                                                                                               
|            |                                                                                                                                                              
|10(d)       | Employment Agreement with Shahram Rabbani. (5)                                                                                                               
|            |                                                                                                                                                              
|10(e)       | Employment Agreement with Barry Weiner. (5)                                                                                                                  
|            |                                                                                                                                                              
|10(f)       | 1994 Stock Option Plan. (6)                                                                                                                                  
|            |                                                                                                                                                              
|10(g)       | Agreement with Corange International Limited
  (Boehringer Mannheim) effective April 1994. (19) (7)                                                          
|            |                                                                                                                                                              
|10(h)       | Agreement with Amersham International effective
  February 1995. (7)                                                                                         
|            |                                                                                                                                                              
|10(i)       | Agreement with Dako A/S effective May 1995. (7)                                                                                                              
|            |                                                                                                                                                              
|10(j)       | Agreement with Baxter Healthcare Corporation (VWR
  Scientific Products) effective                                                                           
|            | September 1995. (7)                                                                                                                                          
|            |                                                                                                                                                              
|10(k)       | Agreement with Yale University and amendments
  thereto. (7)                                                                                                 
|            |                                                                                                                                                              
|10(l)       | Agreement with The Research Foundation of the State
  of New York effective May 1987. (7)                                                                    
|            |                                                                                                                                                              
|10(m)       | 1999 Stock Option Plan filed. (8)                                                                                                                            
|            |                                                                                                                                                              
|10 (n)      | Amendment to Elazar Rabbanis employment agreement.
  (9)                                                                                                    
|            |                                                                                                                                                              
|10 (o)      | Amendment to Shahram Rabbanis employment agreement.
  (9)                                                                                                   
|            |                                                                                                                                                              
|10 (p)      | Amendment to Barry Weiners employment agreement.
  (9)                                                                                                      
|            |                                                                                                                                                              
|10 (s)      | Settlement and License Agreement with Digene
  Corporation effective September 30, 2004 (10) (12)                                                            
|            |                                                                                                                                                              
|10 (t)      | Joint Stipulation and Order of Dismissal with
  Prejudice dated October 14, 2004 (10) (12).                                                                  
|            |                                                                                                                                                              
|10 (u)      | 2005 Equity Compensation Incentive Plan (11)                                                                                                                 
|            |                                                                                                                                                              
|10 (v)      | Lease agreement with Pari Management (13)                                                                                                                    
|            |                                                                                                                                                              
|10 (w)      | Settlement and Release Agreement between the Company
  and Sigma Aldrich (15)                                                                                
|            |                                                                                                                                                              
|10 (x)      | Stock Purchase Agreement By and Among Enzo Life
  Sciences, Inc., Axxora Life Sciences Inc., and the Stock holders, Option
  holders and Warrant holders (16)
|            |                                                                                                                                                              
|14 (a)      | Code of Ethics (10)                                                                                                                                          

56

---



|       |                                                                                                 
|------ | ------------------------------------------------------------------------------------------------
|21     | Subsidiaries of the registrant:                                                                 
|       | Enzo Clinical Labs, Inc., a New York corporation.                                               
|       | Enzo Life Sciences, Inc., a New York corporation.                                               
|       | Enzo Therapeutics, Inc., a New York corporation.                                                
|       | Enzo Realty, LLC, a New York Corporation                                                        
|       |                                                                                                 
|23     | Consent of Independent Registered Public Accounting
  Firm filed herewith.                      
|       |                                                                                                 
|31 (a) | Certification of CEO Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002 filed herewith.
|       |                                                                                                 
|31 (b) | Certification of CFO Pursuant to Section 302 of the
  Sarbanes-Oxley Act of 2002 filed herewith.
|       |                                                                                                 
|32 (a) | Certification of CEO Pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002 filed herewith.
|       |                                                                                                 
|32 (b) | Certification of CFO Pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002 filed herewith.

Notes to exhibits

|     |                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | The exhibits were filed as exhibits to the Companys
  Registration Statement on Form S-18 (File No. 2-67359) and are incorporated
  herein by reference.                               
|     |                                                                                                                                                                                         
|(2)  | This exhibit was filed as an exhibit to the
  Companys Form 10-K for the year ended July 31, 1981 and is incorporated
  herein by reference.                                           
|     |                                                                                                                                                                                         
|(3)  | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 1989 and is incorporated
  herein by reference.                                      
|     |                                                                                                                                                                                         
|(5)  | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 1994 and is incorporated
  herein by reference.                                      
|     |                                                                                                                                                                                         
|(6)  | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 1995 and is incorporated
  herein by reference.                                      
|     |                                                                                                                                                                                         
|(7)  | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 1996 or previously filed
  amendment thereto and is incorporated herein by reference.
|     |                                                                                                                                                                                         
|(8)  | This exhibit was filed with the Companys Registration
  Statement on Form S-8 (333-87153) and is incorporated herein by reference.                                                     
|     |                                                                                                                                                                                         
|(9)  | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 2000 and is incorporated
  herein by reference.                                      
|     |                                                                                                                                                                                         
|(10) | This exhibit was filed with the Companys Annual
  Report on Form 10-K for the year ended July 31, 2004 and is incorporated
  herein by reference.                                      
|     |                                                                                                                                                                                         
|(11) | 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.                            
|     |                                                                                                                                                                                         
|(12) | These exhibits are subject to a confidential
  treatment request pursuant to securities exchange act rules.                                                                             
|     |                                                                                                                                                                                         
|(13) | 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.                                      
|     |                                                                                                                                                                                         
|(14) | This exhibit was filed with the Companys Current
  Report on Form 8-K dated November 13, 2006                                                                                          
|     |                                                                                                                                                                                         
|(15) | This exhibit was filed with the Companys Current
  Report on Form 8-K on September 21, 2006 and is incorporated herein by
  reference.                                                 
|     |                                                                                                                                                                                         
|(16) | This exhibit was filed with the Companys Current
  Report on Form 8-K May 30, 2007 and is incorporated  herein by reference.                                                           
|     |                                                                                                                                                                                         
|(b)  | See Item 15(a) (3), above.                                                                                                                                                              

57

---



|    |                           
|--- | --------------------------
|(c) | See Item 15(a) (2), above.

58

---



SIGNATURES

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

| |                        |                    |                         
| | ---------------------- | ------------------ | ------------------------
| |                        | ENZO BIOCHEM, INC.
|
| | Date: October 12, 2007 | 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 12, 2007
| |                                                  |  |                 
| | Elazar Rabbani,                                  |  |                 
| | Chairman of Board of Directors                   |  |                 
| | (Principal Executive Officer)                    |  |                 
| |                                                  |  |                 
| | By: /s/ Barry W. Weiner                          |  | October 12, 2007
| |                                                  |  |                 
| | Barry W. Weiner,                                 |  |                 
| | President, Chief Financial Officer, and Director |  |                 
| |                                                  |  |                 
| | By: /s/ Shahram K. Rabbani                       |  | October 12, 2007
| |                                                  |  |                 
| | Shahram K. Rabbani,                              |  |                 
| | Secretary, Treasurer and Director                |  |                 
| |                                                  |  |                 
| | By: /s/ John J. Delucca                          |  | October 12, 2007
| |                                                  |  |                 
| | John J. Delucca, Director                        |  |                 
| |                                                  |  |                 
| | By: /s/ Irwin Gerson                             |  | October 12, 2007
| |                                                  |  |                 
| | Irwin Gerson, Director                           |  |                 
| |                                                  |  |                 
| | By:/s/ Stephen B. H. Kent Ph.D.                  |  | October 12, 2007
| |                                                  |  |                 
| | Stephen B. H. Kent, Director                     |  |                 
| |                                                  |  |                 
| | By: /s/ Melvin F. Lazar                          |  | October 12, 2007
| |                                                  |  |                 
| | Melvin F. Lazar, Director                        |  |                 
| |                                                  |  |                 
| | By: /s/ John B. Sias                             |  | October 12, 2007
| |                                                  |  |                 
| | John B. Sias, Director                           |  |                 

59

---



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

LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND 
FINANCIAL STATEMENT SCHEDULE

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

|                                                                                    |                                            |    
|----------------------------------------------------------------------------------- | ------------------------------------------ | ---
|Report of Independent Registered
  Public Accounting Firm                           | F-2                                       
|                                                                                    |                                            |    
|Consolidated Balance Sheets  July
  31, 2007 and 2006                              | F-3                                       
|                                                                                    |                                            |    
|Consolidated Statements of
  Operations                                            |                                           
|                                                                                    | Years ended July 31, 2007, 2006 and
  2005 | F-4
|                                                                                    |                                            |    
|Consolidated Statements of Stockholders
  Equity and Comprehensive Income (Loss)  |                                           
|                                                                                    | Years ended July 31, 2007, 2006 and
  2005 | F-5
|                                                                                    |                                            |    
|Consolidated Statements of Cash
  Flows                                            |                                           
|                                                                                    | Years ended July 31, 2007, 2006 and
  2005 | F-6
|                                                                                    |                                            |    
|Notes to Consolidated Financial
  Statements                                        | F-7                                       
|                                                                                    |                                            |    
|Schedule II - Valuation and
  Qualifying Accounts                                  |                                           
|                                                                                    | Years ended July 31, 2007, 2006 and
  2005 | S-1

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

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Enzo Biochem, Inc

We have audited the accompanying consolidated balance
sheets of Enzo Biochem, Inc. (the Company) as of July 31, 2007, and 2006, and
the related consolidated statements of operations, consolidated statements of
stockholders equity and comprehensive income (loss) and consolidated
statements of cash flows for each of the three years in the period ended July
31, 2007. 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, 2007 and 2006, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended July 31, 2007, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.

As discussed in Note 1 to the consolidated financial
statements, effective August 1, 2005, the Company adopted Statement of
Financial Accounting Standards No. 123(R), Share-Based Payment.

We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the
effectiveness of Enzo Biochem, Inc.s internal control over financial reporting
as of July 31, 2007, 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 12, 2007, expressed an
unqualified opinion thereon.

/s/ Ernst & Young LLP

Melville, New York
October 12, 2007

F-2

---



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

|                                                                                                                                         |  |                |          |                |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | -------------- | - | -------- | -
|                                                                                                                                         |  | July 31,
 2007 |          | July 31,
 2006 |  
|                                                                                                                                         |  |                |          |                |  
|ASSETS                                                                                                                                   |  |                |          |                |   |          |  
|Current assets:                                                                                                                          |  |                |          |                |   |          |  
|Cash and cash equivalents                                                                                                                |  | $              | 105,149  |                | $ | 69,854   |  
|Accounts receivable, net of allowance for
 doubtful accounts of $1,404 in 2007 and $1,033 in 2006                                        |  |                | 14,353   |                |   | 10,447   |  
|Inventories                                                                                                                              |  |                | 7,022    |                |   | 2,401    |  
|Prepaid expenses                                                                                                                         |  |                | 1,767    |                |   | 1,465    |  
|Recoverable and prepaid income taxes                                                                                                     |  |                |         |                |   | 1,931    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current
 assets                                                                                                                    |  |                | 128,291  |                |   | 86,098   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Property, plant,
 and equipment, net                                                                                                     |  |                | 6,621    |                |   | 5,848    |  
|Goodwill                                                                                                                                 |  |                | 13,676   |                |   | 7,452    |  
|Intangible assets,
 net                                                                                                                  |  |                | 9,338    |                |   | 1,257    |  
|Other                                                                                                                                    |  |                | 1,076    |                |   | 869      |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total assets                                                                                                                             |  | $              | 159,002  |                | $ | 101,524  |  
|                                                                                                                                         |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|LIABILITIES AND
 STOCKHOLDERS EQUITY                                                                                                    |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Current
 liabilities:                                                                                                                    |  |                |          |                |   |          |  
|Accounts payable - trade                                                                                                                 |  | $              | 4,111    |                | $ | 1,304    |  
|Accrued liabilities                                                                                                                      |  |                | 8,446    |                |   | 4,403    |  
|Other current liabilities                                                                                                                |  |                | 1,287    |                |   | 230      |  
|Deferred taxes                                                                                                                           |  |                | 597      |                |   |         |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total current
 liabilities                                                                                                               |  |                | 14,441   |                |   | 5,937    |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Deferred revenue                                                                                                                         |  |                | 938      |                |   |         |  
|Deferred taxes                                                                                                                           |  |                | 1,729    |                |   |         |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Commitments and
 contingencies                                                                                                           |  |                |          |                |   |          |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Stockholders
 equity:                                                                                                                   |  |                |          |                |   |          |  
|Preferred Stock, $.01 par value; authorized
 25,000,000 shares; no shares issued or outstanding                                          |  |                |         |                |   |         |  
|Common Stock, $.01 par value; authorized
 75,000,000 shares; shares issued: 37,280,723 at July 31, 2007 and 32,844,200
 at July 31, 2006 |  |                | 372      |                |   | 328      |  
|Additional paid-in capital                                                                                                               |  |                | 295,899  |                |   | 236,002  |  
|Less treasury stock at cost: 596,456 shares
 at July 31, 2007and 569,700 shares at July 31, 2006                                         |  |                | (8,915   | )              |   | (8,499   | )
|Accumulated deficit                                                                                                                      |  |                | (145,504 | )              |   | (132,244 | )
|Accumulated other comprehensive income                                                                                                   |  |                | 42       |                |   |         |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total
 stockholders equity                                                                                                              |  |                | 141,894  |                |   | 95,587   |  
|                                                                                                                                         |  |                |          |                |   |          |  
|Total liabilities
 and stockholders equity                                                                                              |  | $              | 159,002  |                | $ | 101,524  |  
|                                                                                                                                         |  |                |          |                |   |          |  

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, |        
|                                                 |  |                      |        
|                                                 |  | 2007                 |         | 2006 |    | 2005    |  
|                                                 |  |                      |         |      |    |         |  
|Revenues:                                        |  |                      |         |      |    |         |   |   |         |  
|Product revenues                                 |  | $                    | 6,658   |      | $  | 4,750   |   | $ | 8,905   |  
|Royalty and license fee income                   |  |                      | 5,820   |      |    | 3,150   |   |   | 1,641   |  
|Clinical laboratory services                     |  |                      | 40,430  |      |    | 31,926  |   |   | 32,857  |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|                                                 |  |                      | 52,908  |      |    | 39,826  |   |   | 43,403  |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Costs and expenses
 and other (income):          |  |                      |         |      |    |         |   |   |         |  
|Cost of product revenues                         |  |                      | 5,034   |      |    | 2,400   |   |   | 2,426   |  
|Cost of clinical laboratory services             |  |                      | 18,199  |      |    | 13,917  |   |   | 12,548  |  
|Research and development expense                 |  |                      | 9,393   |      |    | 7,896   |   |   | 8,452   |  
|Selling, general, and administrative
 expense    |  |                      | 26,300  |      |    | 24,745  |   |   | 19,840  |  
|Provision for uncollectible accounts
 receivable |  |                      | 4,653   |      |    | 3,633   |   |   | 4,967   |  
|Legal expense                                    |  |                      | 10,295  |      |    | 7,388   |   |   | 5,476   |  
|Interest income                                  |  |                      | (5,092  | )    |    | (3,144  | ) |   | (1,523  | )
|Other income                                     |  |                      | (2,699  | )    |    |        |   |   | (14,000 | )
|                                                 |  |                      |         |      |    |         |   |   |         |  
|                                                 |  |                      | 66,083  |      |    | 56,835  |   |   | 38,186  |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|(Loss) income
 before income taxes               |  |                      | (13,175 | )    |    | (17,009 | ) |   | 5,217   |  
|(Provision)
 benefit for income taxes            |  |                      | (85     | )    |    | 1,342   |   |   | (2,213  | )
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Net (loss) income                                |  | ($                   | 13,260  | )    | ($ | 15,667  | ) | $ | 3,004   |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Net (loss) income
 per common share:             |  |                      |         |      |    |         |   |   |         |  
|Basic                                            |  | ($                   | 0.38    | )    | ($ | 0.49    | ) | $ | 0.09    |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Diluted                                          |  | ($                   | 0.38    | )    | ($ | 0.49    | ) | $ | 0.09    |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Weighted average
 common shares outstanding:     |  |                      |         |      |    |         |   |   |         |  
|Basic                                            |  |                      | 35,017  |      |    | 32,215  |   |   | 32,097  |  
|                                                 |  |                      |         |      |    |         |   |   |         |  
|Diluted                                          |  |                      | 35,017  |      |    | 32,215  |   |   | 32,763  |  
|                                                 |  |                      |         |      |    |         |   |   |         |  

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, 2007, 2006, and 2005 
(In thousands, except share data)

|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|----------------------------------------------------------------------------- |  | --------------------- | ---------- | ----------------------- |  | --------------------- |  | ---------------------------- | --- | ----------------------- | - | -------------------- |  | ------------------------------------------------ | ------ | ---------------------------- | -- | ---------------------------- | - | -- | ---- | - | - | ------- | - | -- | ------- | -
|                                                                              |  | Common
 Stock
 Shares |            | Treasury
 Stock
 Shares |  | Common
 Stock
 Amount |  | Additional
 Paid-in
 Capital |     | Treasury
 Stock
 Amount |   | Accumulated
 Deficit |  | Accumulated
 Other
 Comprehensive
 (Loss) Income |        | Total
 Stockholders
 Equity |    | Comprehensive
 income (loss) |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |  
|Balance at July 31, 2004                                                      |  |                       | 30,864,800 |                         |  | 349,900               |  | $                            | 309 |                         | $ | 205,920              |  | ($                                               | 5,669  | )                            | ($ | 96,148                       | ) | ($ | 246  | ) | $ | 104,166 |   |    |         |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Net income for the year ended July 31, 2005                                   |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              | $  | 3,004                        |   |    |     |   |   | 3,004   |   | $  | 3,004   |  
|Unrealized gain on available for-sale securities, net of
 tax                 |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    | 43   |   |   |        |   |    |        |  
|Reclassification adjustment for net loss realized and
 reported in net income |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    | 122  |   |   |        |   |    |        |  
|Valuation reserve                                                             |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    | (50  | ) |   | 115     |   |    | 115     |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|5% stock dividend (fair value on date declared)                               |  |                       | 1,543,600  |                         |  | 17,500                |  |                              | 15  |                         |   | 23,418               |  |                                                  |       |                              |    | (23,433                      | ) |    |     |   |   |        |   |    |        |  
|Purchase of treasury stock                                                    |  |                       |           |                         |  | 17,000                |  |                              |     |                         |   |                      |  |                                                  | (325   | )                            |    |                             |   |    |     |   |   | (325    | ) |    |        |  
|Tax benefit for stock options exercised                                       |  |                       |           |                         |  |                      |  |                              |    |                         |   | 124                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 124     |   |    |        |  
|Exercise of stock options                                                     |  |                       | 100,300    |                         |  |                      |  |                              | 1   |                         |   | 830                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 831     |   |    |        |  
|Issuance of stock for employee 401(k) plan match                              |  |                       | 18,100     |                         |  |                       |  |                              | 0   |                         |   | 352                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 352     |   |    |        |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Comprehensive income                                                          |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    |     |   |   |        |   | $  | 3,119   |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Balance at July 31, 2005                                                      |  |                       | 32,526,800 |                         |  | 384,400               |  |                              | 325 |                         |   | 230,644              |  |                                                  | (5,994 | )                            |    | (116,577                     | ) |    | (131 | ) |   | 108,267 |   |    |         |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Net (loss) for the year ended July 31, 2006                                   |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    | (15,667                      | ) |    |      |   |   | (15,667 | ) | $  | (15,667 | )
|Realized loss on available for-sale securities, net of tax                    |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    | 131  |   |   | 131     |   |    | 131     |  
|Purchase of treasury stock                                                    |  |                       |            |                         |  | 185,300               |  |                              |    |                         |   |                     |  |                                                  | (2,505 | )                            |    |                             |   |    |     |   |   | (2,505  | ) |    |        |  
|Exercise of stock options                                                     |  |                       | 285,030    |                         |  |                      |  |                              | 3   |                         |   | 3,113                |  |                                                  |       |                              |    |                             |   |    |     |   |   | 3,116   |   |    |        |  
|Issuance of stock for employee 401(k) plan match                              |  |                       | 32,370     |                         |  |                      |  |                              |    |                         |   | 402                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 402     |   |    |        |  
|Stock based compensation charges                                              |  |                       |           |                         |  |                      |  |                              |    |                         |   | 1,763                |  |                                                  |       |                              |    |                             |   |    |     |   |   | 1,763   |   |    |        |  
|Stock based compensation for consulting services                              |  |                       |           |                         |  |                      |  |                              |    |                         |   | 80                   |  |                                                  |       |                              |    |                             |   |    |     |   |   | 80      |   |    |        |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Comprehensive (loss)                                                          |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    |     |   |   |        |   | $  | (15,536 | )
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Balance at July 31, 2006                                                      |  |                       | 32,844,200 |                         |  | 569,700               |  |                              | 328 |                         |   | 236,002              |  |                                                  | (8,499 | )                            |    | (132,244                     | ) |    |     |   |   | 95,587  |   |    |         |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Net (loss) for the year ended July 31, 2007                                   |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    | (13,260                      | ) |    |     |   |   | (13,260 | ) | $  | (13,260 | )
|Net proceeds from issuance of common stock                                    |  |                       | 4,285,715  |                         |  |                      |  |                              | 43  |                         |   | 56,954               |  |                                                  |       |                              |    |                             |   |    |     |   |   | 56,997  |   |    |        |  
|Purchase of treasury stock                                                    |  |                       |           |                         |  | 26,756                |  |                              |     |                         |   |                      |  |                                                  | (416   | )                            |    |                             |   |    |     |   |   | (416    | ) |    |        |  
|Exercise of stock options                                                     |  |                       | 95,525     |                         |  |                       |  |                              | 1   |                         |   | 915                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 916     |   |    |        |  
|Issuance of stock for employee 401(k) plan match                              |  |                       | 29,370     |                         |  |                      |  |                              |    |                         |   | 421                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 421     |   |    |        |  
|Vesting of restricted stock                                                   |  |                       | 25,913     |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    |     |   |   |        |   |    |        |  
|Stock based compensation charges                                              |  |                       |           |                         |  |                      |  |                              |    |                         |   | 1,477                |  |                                                  |       |                              |    |                             |   |    |     |   |   | 1,477   |   |    |        |  
|Stock based compensation for consulting services                              |  |                       |           |                         |  |                      |  |                              |    |                         |   | 130                  |  |                                                  |       |                              |    |                             |   |    |     |   |   | 130     |   |    |        |  
|Foreign currency translation adjustments                                      |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    | 42   |   |   | 42      |   |    | 42      |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Comprehensive (loss)                                                          |  |                       |           |                         |  |                      |  |                              |    |                         |   |                     |  |                                                  |       |                              |    |                             |   |    |     |   |   |        |   | ($ | 13,218  | )
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  
|Balance at July 31, 2007                                                      |  |                       | 37,280,723 |                         |  | 596,456               |  | $                            | 372 |                         | $ | 295,899              |  | ($                                               | 8,915  | )                            | ($ | 145,504                      | ) | $  | 42   |   | $ | 141,894 |   |    |         |  
|                                                                              |  |                       |            |                         |  |                       |  |                              |     |                         |   |                      |  |                                                  |        |                              |    |                              |   |    |      |   |   |         |   |    |         |  

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, |        
|                                                                                                    |  | 2007                 |         | 2006 |    | 2005    |  
|                                                                                                    |  |                      |         |      |    |         |  
|Cash flows from operating
 activities:                                                              |  |                      |         |      |    |         |   |   |        |  
|Net (loss) income                                                                                   |  | ($                   | 13,260  | )    | ($ | 15,667  | ) | $ | 3,004  |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Adjustments to reconcile net (loss) income to net cash
 (used in) provided by operating activities: |  |                      |         |      |    |         |   |   |        |  
|Depreciation and amortization of property, plant and
 equipment                                     |  |                      | 1,038   |      |    | 1,049   |   |   | 1,020  |  
|Amortization of other intangible assets                                                             |  |                      | 151     |      |    | 75      |   |   | 1,312  |  
|Provision for uncollectible accounts receivable                                                     |  |                      | 4,653   |      |    | 3,633   |   |   | 4,967  |  
|Write-off and/or reserve for obsolete inventory                                                     |  |                      | 360     |      |    | 596     |   |   |       |  
|Deferred income tax (benefit) provision                                                             |  |                      | (178    | )    |    | 640     |   |   | 891    |  
|Share based compensation charges                                                                    |  |                      | 1,477   |      |    | 1,763   |   |   |       |  
|Issuance of common stock for 401(k) employer match                                                  |  |                      | 421     |      |    | 402     |   |   | 352    |  
|Options issued to consultants                                                                       |  |                      | 130     |      |    | 80      |   |   |       |  
|Loss on marketable securities                                                                       |  |                      |        |      |    | 154     |   |   | 200    |  
|Tax benefit on stock option exercises                                                               |  |                      |        |      |    |        |   |   | 124    |  
|Other                                                                                               |  |                      | 10      |      |    |        |   |   | (138   | )
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Changes in operating assets and liabilities:                                                        |  |                      |         |      |    |         |   |   |        |  
|Accounts receivable                                                                                 |  |                      | (6,086  | )    |    | (659    | ) |   | (3,593 | )
|Inventories                                                                                         |  |                      | 533     |      |    | (120    | ) |   | 558    |  
|Prepaid expenses                                                                                    |  |                      | 31      |      |    | 332     |   |   | (606   | )
|Recoverable and prepaid income taxes                                                                |  |                      | 1,931   |      |    | (602    | ) |   | 2,578  |  
|Accounts payable - trade                                                                            |  |                      | 429     |      |    | (1,110  | ) |   | 322    |  
|Accrued liabilities                                                                                 |  |                      | 2,892   |      |    | (463    | ) |   | 1,620  |  
|Other current liabilities                                                                           |  |                      | 74      |      |    | (279    | ) |   | 509    |  
|Deferred revenue                                                                                    |  |                      | 1,628   |      |    |        |   |   |       |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Adjustments                                                                                         |  |                      | 9,494   |      |    | 5,491   |   |   | 10,116 |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Net cash (used in) provided by operating activities                                                 |  |                      | (3,766  | )    |    | (10,176 | ) |   | 13,120 |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Cash flows from investing activities:                                                               |  |                      |         |      |    |         |   |   |        |  
|Capital expenditures                                                                                |  |                      | (1,448  | )    |    | (4,227  | ) |   | (1,276 | )
|Sales of marketable securities                                                                      |  |                      |        |      |    | 6,760   |   |   | 10,692 |  
|Purchases of marketable securities                                                                  |  |                      |        |      |    | (69     | ) |   | (249   | )
|(Increase) decrease in cash surrender values                                                        |  |                      | (75     | )    |    | 51      |   |   | (141   | )
|Increase in security deposits and other                                                             |  |                      | (14     | )    |    | 73      |   |   | (20    | )
|Purchase of Axxora, net of cash acquired                                                            |  |                      | (16,888 | )    |    |        |   |   |       |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Net cash (used in) provided by investing activities                                                 |  |                      | (18,425 | )    |    | 2,588   |   |   | 9,006  |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Cash flows from financing activities:                                                               |  |                      |         |      |    |         |   |   |        |  
|Net proceeds from issuance of common stock                                                          |  |                      | 56,997  |      |    |        |   |   |       |  
|Proceeds from the exercise of stock options                                                         |  |                      | 500     |      |    | 611     |   |   | 506    |  
|Payment of long term installment payable                                                            |  |                      |        |      |    | (150    | ) |   | (150   | )
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Net cash provided by financing activities                                                           |  |                      | 57,497  |      |    | 461     |   |   | 356    |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Effect of exchange rate changes on cash and cash
 equivalents                                       |  |                      | (11     | )    |    |        |   |   |       |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Increase (decrease) in cash and cash equivalents                                                    |  |                      | 35,295  |      |    | (7,127  | ) |   | 22,482 |  
|Cash and cash equivalents - beginning of year                                                       |  |                      | 69,854  |      |    | 76,981  |   |   | 54,499 |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  
|Cash and cash equivalents - end of year                                                             |  | $                    | 105,149 |      | $  | 69,854  |   | $ | 76,981 |  
|                                                                                                    |  |                      |         |      |    |         |   |   |        |  

F-6

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

---



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

Note 1 - Summary of significant accounting
policies

Nature of business

Enzo Biochem, Inc. (the Company) is engaged
    in research, development, manufacturing and marketing of diagnostic and research
    products based on genetic engineering, biotechnology and molecular biology.
    These products are designed for the diagnosis of and/or screening for infectious
    diseases, cancers, genetic defects and other medically pertinent diagnostic
    information and are distributed in the United States and internationally.
    The Company is conducting research and development activities in the development
    of therapeutic products based on the Companys technology platform of
    genetic modulation and immune modulation. The Company also operates a clinical
laboratory that offers and provides diagnostic medical testing services to the
health care community in the  New York Metropolitan and New Jersey areas. The Company
operates in three segments (see Note 17).

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

Principles of consolidation

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

Use of Estimates

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

Foreign Currency Translation

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

F-7

---



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

Concentration of credit risk

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

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

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

Revenue Recognition

Product revenues

Revenues from product sales are recognized when the products are
shipped and title transfers, the sales price is fixed or determinable and
collectibility is reasonably assured.
Revenues from non-exclusive distribution agreements are recognized when
shipments are made to their respective customers and reported to the Company.
The Company has certain non-exclusive distribution agreements, which provide
for consideration to be paid to the distributors for the manufacture of certain
products. The Company records such
consideration provided to distributors under these non-exclusive distribution
agreements as a reduction to product revenues. The Company did not recognize
any revenue from these distributors during the years ended July 31, 2007 and
2006. During the year ended July 31, 2005, the manufacturing and processing
cost of these products sold was $0.7 million.

Royalties

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

License Fees and Multiple Element
Arrangements

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

F-8

---



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

Clinical laboratory services

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

The following are tables of the Clinical Lab segments net
revenues and revenue percentages by revenue category for the years ended July
31, 2007, 2006 and 2005:

|                    |  |                     |        |        |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|------------------- |  | ------------------- | ------ | ------ |  | ---------- | - | ------ | ------ | ---------- |  | ------ | - | - | ------ |  |  | --- | -
|                    |  | Years ended July 31 |       
|                    |  | 2007                |        | 2006   |  | 2005       |  
|                    |  |                     |        |        |  |            |  
|Revenue
 category   |  | (In 000s)          |        | (in %) |  | (In 000s) |   | (in %) |        | (In 000s) |  | (in %) |  
|                    |  |                     |        |        |  |            |   |        |        |            |  |        |  
|Medicare            |  | $                   | 8,478  |        |  | 21         |   | $      | 7,462  |            |  | 23     |   | $ | 6,906  |  |  | 21  |  
|Third-party
 payers |  |                     | 25,060 |        |  | 62         |   |        | 17,680 |            |  | 56     |   |   | 17,528 |  |  | 53  |  
|Patient self-pay    |  |                     | 2,952  |        |  | 7          |   |        | 4,925  |            |  | 15     |   |   | 6,904  |  |  | 21  |  
|HMOs               |  |                     | 3,940  |        |  | 10         |   |        | 1,859  |            |  | 6      |   |   | 1,519  |  |  | 5   |  
|                    |  |                     |        |        |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  
|Total               |  | $                   | 40,430 |        |  | 100        | % | $      | 31,926 |            |  | 100    | % | $ | 32,857 |  |  | 100 | %
|                    |  |                     |        |        |  |            |   |        |        |            |  |        |   |   |        |  |  |     |  

The Company provides services to certain patients covered by various
third-party payers, including the Federal Medicare program. Revenue, net of
contractual adjustment, from direct billings under the Federal Medicare program
during the years ended July 31, 2007, 2006 and 2005 were approximately 21%, 23%
and 21%, respectively, of the Clinical Lab segments net revenue. Laws and
regulations governing Medicare are complex and subject to interpretation for
which action for noncompliance includes fines, penalties and exclusion from the
Medicare programs. The Company believes that it is in compliance with all
applicable laws and regulations and is not aware of any pending or threatened
investigations involving allegations of potential wrongdoing.

Other than the Medicare program, United Healthcare of New York whose programs are
included in the Third-party payers and Health Maintenance Organizations
(HMOs) categories, represents 34% of the Clinical labs segment net revenue
for the fiscal year ended July 31, 2007. Other than the Medicare program, no
other provider included in the Third party payers and HMOs categories
exceeded 10% of Clinical labs service revenue for the fiscal years ended July
31, 2006 and 2005.

Contractual Adjustment

The Companys estimate of contractual adjustment 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, 2007, 2006 and 2005, the contractual
adjustment percentages, determined using current and historical reimbursement
statistics, were 79.0%, 75.2% and 72.5%, respectively, of gross billings.

F-9

---



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

Cash and cash equivalents

Cash and cash equivalents include highly liquid corporate debt
instruments with maturities of three months or less at the time acquired by the
Company.

Accounts Receivable and Allowance for
Doubtful Accounts

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

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

During the years ended July 31, 2007 and 2006, 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, until the payers filing date deadline occurs. 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 in order to assess the impact, if any, on
the allowance estimates which involves judgment. The Company believes that the
collectibility of its receivables is directly linked to the quality of its
billing processes, most notably, those related to obtaining the correct
information in order to bill effectively for the services provided. Should
circumstances change (e.g. shift in payer mix, decline in economic conditions
or deterioration in aging of receivables), our estimates of net realizable
value of receivables could be reduced by a material amount.

The following is a table of the Companys net accounts receivable by
segment. The Clinical Labs segments net receivables are detailed by billing
category and as a percent to its total net receivables: At July 31, 2007 and
2006, approximately 69% and 88%, respectively, of the Companys net accounts
receivable relates to its Clinical Labs business, which operates in the New
York Metropolitan and New Jersey areas.

|                            |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|--------------------------- |  | -------------------- | ------ | -------------------- |  | ---------- | - | ------ | ------ |  |  | --- | -
|                            |  | As of
 July 31, 2007 |        | As of
 July 31, 2006 | 
|Net accounts
    receivable |  |                      |        |                      | 
|Billing
 category           |  | (In 000s)           |        | (in %)               |  | (In 000s) |   | (in %) |       
|                            |  |                      |        |                      |  |            |   |        |       
|Clinical Labs               |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Medicare                    |  | $                    | 1,628  |                      |  | 16         |   | $      | 1,367  |  |  | 15  |  
|Third party payers          |  |                      | 5,856  |                      |  | 60         |   |        | 4,025  |  |  | 44  |  
|Patient self-pay            |  |                      | 1,678  |                      |  | 17         |   |        | 3,294  |  |  | 36  |  
|HMOs                       |  |                      | 671    |                      |  | 7          |   |        | 475    |  |  | 5   |  
|                            |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Clinical
 Labs        |  |                      | 9,833  |                      |  | 100        | % |        | 9,161  |  |  | 100 | %
|                            |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total Life
 Sciences        |  |                      | 4,520  |                      |  |            |   |        | 1,286  |  |  |     |  
|                            |  |                      |        |                      |  |            |   |        |        |  |  |     |  
|Total accounts
 receivable  |  | $                    | 14,353 |                      |  |            |   | $      | 10,447 |  |  |     |  
|                            |  |                      |        |                      |  |            |   |        |        |  |  |     |  

The Life Sciences segments accounts receivable
    includes royalties and license fee income receivable of $1.8 million and
    $0.9 million, as of July 31, 2007 and 2006, respectively, of which approximately
    $1.5 million and $0.9, respectively is from Digene Corporation (see Note
    13).

F-10

---



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

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

|                                 |  |                |   |                |   |  |  |   |        |   | 
|-------------------------------- |  | -------------- | - | -------------- | - |  |  | - | ------ | - | 
|In 000s                         |  | July 31,
 2007 |   | July 31,
 2006 |  
|                                 |  |                |   |                |  
|Beginning balance                |  |                | $ | 1,033          |   |  |  | $ | 2,292  |   | 
|Provision for
 doubtful accounts |  |                |   | 4,653          |   |  |  |   | 3,633  |   | 
|Write-offs                       |  |                |   | (4,282         | ) |  |  |   | (4,892 | ) | 
|                                 |  |                |   |                |   |  |  |   |        |   | 
|Ending balance                   |  |                | $ | 1,404          |   |  |  | $ | 1,033  |   | 
|                                 |  |                |   |                |   |  |  |   |        |   | 

Marketable securities

Investments with a maturity greater than three months at the date of
purchase are designated as marketable securities. During the year ended July
31, 2006, the Company sold all investments designated as marketable securities
and had no investments in marketable securities as of July 31, 2007 or 2006.

Inventories

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

Property, plant and equipment

Property, plant and equipment is stated at cost, and depreciated on the
straight-line basis over the estimated useful lives of the various asset
classes as follows: building and building improvements - 30 years and laboratory
machinery and equipment and office furniture and computer equipment - ranges
from 3-5 years. Leasehold improvements are amortized over the term of the
related leases or estimated useful lives of the assets, whichever is shorter.

Impairment of Long-Lived Assets

The Company reviews the recoverability of the carrying value of
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable.
Should indicators of impairment exist, the carrying values of the assets are
evaluated in relation to the operating performance and future undiscounted cash
flows of the underlying business. The net book value of an asset is adjusted to
fair value if its expected future undiscounted cash flow is less than its book
value. No impairment losses were identified during the years ended July 31,
2007, 2006 or 2005.

Goodwill

Goodwill represents the cost of acquired businesses in excess of the
fair value of assets acquired, including separately recognized intangible
assets, less the fair value of liabilities assumed in the business acquisition.
Goodwill is not amortized, but instead is reviewed for impairment on an annual
basis.

Intangible Assets

Intangible assets (exclusive of patents), arose primarily from the
acquisition of Axxora (See Note 2), and consist of customer relationships,
trademarks, 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, 2007 and 2006

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

Comprehensive income (loss)

SFAS No. 130, Reporting Comprehensive Income (SFAS 130), requires
reporting and displaying of comprehensive income (loss) and its components. In
accordance with SFAS 130, the Accumulated Other Comprehensive Income (Loss),
which is comprised of foreign currency translation adjustments, is disclosed as a
separate component of stockholders equity.

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 $12,000, $128,000 and $57,000 for the years ended July 31, 2007,
2006 and 2005, 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.

Segment Reporting

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

F-12

---



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

Net (loss) income per share

The Company applies SFAS No. 128, Earnings per
    Share (SFAS 128).
SFAS 128 establishes standards for computing and presenting earnings per share.
Basic net income (loss) per share represents net income (loss) divided by the
weighted average number of common shares outstanding during the period. The
dilutive effect of potential common shares, consisting of outstanding stock
options and unvested restricted stock, is determined using the treasury stock
    method in accordance with SFAS 128. Diluted weighted average shares outstanding
    for fiscal 2007 and 2006 do not include the potential common shares from
    stock options and unvested restricted stock because to do so would have been
    antidilutive. Accordingly, basic and diluted net loss per share is the same
    in fiscal 2007 and 2006. The number of potential common shares (in
    the money options) and unvested
restricted stock excluded from the calculation of diluted earnings per share
during the years ended July 31, 2007, 2006, and 2005 was 619,000, 423,000, and
0, respectively.

For the years ended July 31, 2007, 2006 and 2005, the effect of
approximately 873,000, 1,916,000 and 818,000 respectively, of outstanding out of the money options to purchase common
shares were excluded from the calculation of diluted net (loss) income per
share because their effect would be anti-dilutive.

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

|                                                      |  |      |         |      |   |         |   |   |        | 
|----------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ------ | 
|In 000s                                              |  | 2007 |         | 2006 |   | 2005    |  
|                                                      |  |      |         |      |   |         |  
|Numerator: Net
 (loss) income                         |  | $    | (13,260 | )    | $ | (15,667 | ) | $ | 3,004  | 
|                                                      |  |      |         |      |   |         |   |   |        | 
|Denominator:                                          |  |      |         |      |   |         |   |   |        | 
|Weighted-average
 common shares outstanding- Basic    |  |      | 35,017  |      |   | 32,215  |   |   | 32,097 | 
|                                                      |  |      |         |      |   |         |   |   |        | 
|Effect of dilutive stock
options                      |  |      |        |      |   |        |   |   | 666    | 
|                                                      |  |      |         |      |   |         |   |   |        | 
|Weighted-average
 common shares outstanding - Diluted |  |      |         |      |   |         |   |   |        | 
|                                                      |  |      | 35,017  |      |   | 32,215  |   |   | 32,763 | 
|                                                      |  |      |         |      |   |         |   |   |        | 
|Net (loss) income
 per share                          |  |      |         |      |   |         |   |   |        | 
|Basic                                                 |  | $    | (0.38   | )    | $ | (0.49   | ) | $ | 0.09   | 
|                                                      |  |      |         |      |   |         |   |   |        | 
|                                                     
|Diluted                                               |  | $    | (0.38   | )    | $ | (0.49   | ) | $ | 0.09   | 
|                                                      |  |      |         |      |   |         |   |   |        | 

Share-Based Compensation

Effective August 1, 2005, the Company adopted SFAS No. 123(R),
Share-Based Payment (SFAS 123(R)) and related interpretations which
superseded the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations. SFAS 123(R) requires that all share-based compensation be
recognized as an expense in the financial statements and that such cost be
measured at the fair value of the award. SFAS 123(R) was adopted using the
modified prospective method, which requires the Company to recognize
compensation expense on a prospective basis. Therefore, prior period financial
statements have not been restated. Under this method, in addition to reflecting
compensation expense for new share-based awards, expense is also recognized to
reflect the remaining service period of awards that had been included in
pro-forma disclosures in prior periods.

F-13

---



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

With the adoption of SFAS 123(R), the Company records the fair value of
share-based compensation awards as an expense. In order to determine the fair
value of stock options on the date of grant, the Company utilizes the
Black-Scholes option-pricing model. Inherent in this model are assumptions
related to expected stock-price volatility, option life, risk-free interest
rate and dividend yield. While the risk-free interest rate and dividend yield
are less subjective assumptions, typically based on factual data derived from
public sources, the expected stock-price volatility and option life assumptions
require a greater level of judgment which make them critical accounting
estimates. The Company uses an expected stock-price volatility assumption that
is primarily based on historical realized volatility of the underlying stock
during a period of time. No employee or director stock options were granted
during the years ended July 31, 2007 and 2006.

Prior to August 1, 2005, the Company accounted for employee stock
option plans under the intrinsic value method in accordance with APB 25. Under
APB 25, generally no compensation expense is recorded when terms of the award
are fixed and the exercise price of employee and director stock options equals
or exceeds the fair value of the underlying stock on the date of the grant.

As a result of adopting SFAS 123(R), the Companys net loss for the
years ended July 31, 2007 and 2006 was approximately $0.8 million and $1.6
million higher, respectively, than if the Company had continued to account for
share-based compensation under APB No. 25. Basic and diluted loss per share for
the years ended July 31, 2007 and 2006 were increased by $0.02 and $0.05 per
share, respectively, as a result of adopting SFAS 123(R). SFAS 123(R) also
requires that excess tax benefits related to stock option exercises be
reflected as financing cash inflows instead of operating cash inflows. For the
years ended July 31, 2007 and 2006, no excess tax benefits were recognized.
Other share-based compensation expense relating to the fair value of restricted
shares and restricted stock units vested during the years ended July 31, 2007
and 2006 was approximately $649,000 and $172,000, respectively (see Note 11).

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

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

As of July 31, 2007, there was $1.9 million of total unrecognized
compensation cost related to nonvested share-based payment arrangements
granted under the Companys stock option and restricted stock plans, which will
be recognized over a weighted average remaining life of approximately one and a
half years.

During the year ended July 31, 2005, the Company followed the
provisions of FASB Statement No. 148 (SFAS 148), Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS 148 amended SFAS No. 123,
Accounting for Stock-Based Compensation, (SFAS 123) to provide alternative
methods of transition to SFAS 123s fair value method of accounting for
stock-based employee compensation. SFAS 148 also amended the disclosure
provisions of SFAS 123 to require disclosure in the summary of significant
accounting policies of the effects of an entitys accounting policy with
respect to stock-based employee compensation on reported net income. While SFAS
148 did not amend SFAS 123 to require companies to account for employee stock
options using the fair value method, as SFAS 123(R) did, the disclosure
provisions of SFAS 148 are applicable to all companies with share-based
employee compensation method of SFAS 123 or the intrinsic value method of APB
25.

F-14

---



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

On June 3, 2005, the Board of Directors approved the acceleration of
vesting of unvested out of the money stock options held by employees,
including executive officers and directors. The stock options considered as out
of the money were those with an exercise price that was $1.50 or more than the
closing price of the Companys common stock on June 3, 2005 of $14.82. All
other terms and conditions of these out of the money options remain
unchanged. As a result of the acceleration, options to purchase approximately
666,000 shares of the Companys common stock (which represented approximately
21% of the Companys then outstanding stock options) became exercisable
immediately. The accelerated options ranged in exercise prices from $16.39 to
$19.02 and the weighted average exercise price of the accelerated options was
$17.55 per share. The total number of options subject to acceleration included
options to purchase 575,000 shares held by executive officers and directors of
the Company. This action was taken to avoid expense recognition in future
financial statements upon adoption of SFAS 123(R). The accelerated vesting of
the out of the money options did not result in a charge in the Companys
statement of operations for the year ended July 31, 2005 based on U.S.
generally accepted accounting principles. The Company reported approximately
$10.1 million of pro forma compensation expense for the year ended July 31,
2005, of which $6.0 million was applicable to the accelerated out of the
money options.

Prior to the adoptions of SFAS 123(R), the Company reported pro forma
information regarding net income (loss) applicable to common stockholders under
SFAS 123. For purposes of pro forma disclosures, the estimated fair value of
the options was amortized to expense over the options vesting period. The fair
value for these options was estimated using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for all grants in
the year ended July 31, 2005: no dividend yield, weighted-average expected life
of the option of seven years, risk-free interest rate ranges of 3% to 6.88% and
a volatility of 71% and 74%, respectively, for all grants.

The following table illustrates the effect on net income (loss) if the
Company had applied the fair value recognition provisions of SFAS 123 during
the fiscal year ended July 31, 2005 (in 000s, except per share):

|                                 |  |   |         |  
|-------------------------------- |  | - | ------- | -
|Reported net
 income             |  | $ | 3,004   |  
|Pro forma
 compensation expense  |  |   | (10,129 | )
|                                 |  |   |         |  
|Pro forma net
 (loss)            |  | $ | (7,125  | )
|                                 |  |   |         |  
|Pro forma net
 (loss) per share: |  |   |         |  
|Basic                            |  | $ | (0.22   | )
|                                 |  |   |         |  
|Diluted                          |  | $ | (0.22   | )
|                                 |  |   |         |  

Effect of new accounting pronouncements

Effective August 1, 2006, the Company adopted SFAS No. 154, Accounting
Changes and Error Corrections (SFAS 154), a replacement of APB Opinion No.
20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes
in Interim Financial Statements. SFAS 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. SFAS 154
requires retrospective application to prior periods financial statements,
unless it is impracticable to determine either the period-specific effects or
the cumulative effect of the change. The adoption of SFAS 154 did not have a
material impact on the Companys financial condition or results of operations.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109, Accounting for Income Taxes (SFAS 109), to clarify the
accounting for uncertainty in income taxes recognized in an enterprises
financial statements in accordance with SFAS 109. This Interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after
December 15, 2006. The implementation of FIN 48, effective August 1, 2007, is
not expected to have a material effect on the Companys financial conditions or
results of operations.

F-15

---



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

In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 establishes a common definition of fair value of financial
instruments, sets a framework for measuring fair value and expands disclosure
about such fair value measurements. The Statement applies only to fair value
measurements that are already required or permitted by other accounting
standards and is effective for fiscal years beginning after November 15, 2007.
The Company does not believe that the adoption of FAS 157 will have a material
effect on the Companys financial statement disclosures.

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

Reclassifications

Certain amounts in prior years have been reclassified
    to conform to current year presentation. In Fiscal 2007, the Company reclassified
    shipping and handling cost previously included in selling, general and administrative
    expense to cost of sales. The shipping and handling costs reclassed were
    approximately $226,000 and $229,000 for the years ended July 31, 2006 and
    2005, respectively.

NOTE 2ACQUISITION

On May 29, 2007, Enzo Life Sciences entered into
    a Stock Purchase Agreement (the Agreement), by and among Enzo
    Life Sciences, Axxora  and the stockholders,
    option holders and warrant holders of Axxora who own all of the issued and
    outstanding capital stock, options and warrants, respectively, of Axxora
    (collectively, the Security holders). Pursuant to the
Agreement, Enzo Life Sciences purchased all of the issued and outstanding
capital stock of Axxora from the Security holders for an aggregate purchase
price of $16,322,000, exclusive of acquisition costs of $972,000, $475,000 previously
    advanced to Axxora to repay outstanding debt, and acquired cash of $881,000,
    which is included in current assets below. At closing $14,992,000
    was paid to the Security holders, $1,280,000 was paid to an escrow agent
    for the one-year period following the closing to satisfy any indemnification
    obligations of the Security holders under the Agreement and $50,000 was paid
    to an escrow agent, for the one-year period following the closing to pay
    certain out-of-pocket expenses of the representatives of the Security holders
    in connection with the transaction. Effective May 31, 2007, Axxora became
    a wholly-owned subsidiary of Enzo Life Sciences. The acquisition was financed
    with the Companys
    cash and cash equivalents. The consolidated financial statements presented
    herein include the results of operations for Axxora from the date of acquisition.

F-16

---



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

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

|                           |  |   |        | 
|-------------------------- |  | - | ------ | 
|Current assets             |  | $ | 9,033  | 
|Property and
  equipment   |  |   | 360    | 
|Other assets               |  |   | 82     | 
|Intangible assets          |  |   | 8,220  | 
|Goodwill                   |  |   | 6,224  | 
|                           |  |   |        | 
|Total assets acquired      |  |   | 23,919 | 
|                           |  |   |        | 
|Less:                      |  |   |        | 
|Current
  liabilities      |  |   | 3,919  | 
|Deferred tax
  liabilities |  |   | 2,231  | 
|                           |  |   |        | 
|Total liabilities assumed  |  |   | 6,150  | 
|                           |  |   |        | 
|                          
|Net assets
  acquired      |  | $ | 17,769 | 
|                           |  |   |        | 

The purchase price allocation is based on a preliminary valuation of
acquired intangible assets and will be adjusted based on the final valuation
report to be completed in fiscal 2008. The Company has engaged an independent
third-party valuation to determine the fair value of the identifiable
intangible assets. 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. The estimated fair values of the
identifiable intangible assets are based on various factors including: cost,
discounted cash flow and relief from royalty approaches in determining the
preliminary purchase price allocation and are subject to change. For financial
reporting purposes, useful lives have been assigned as follows:

|                         |           
|------------------------ | ----------
|Customer
  relationships | 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 Axxora
    as if the acquisition had occurred at the beginning of the periods presented. 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, |        
|                             |  | 2007                |         | 2006 |  
|                             |  |                     |         |      |  
|Net revenues                 |  | $                   | 67,262  |      | $ | 55,417  |  
|Net loss                     |  | $                   | (13,463 | )    | $ | (15,921 | )
|Net loss per
  common share: |  |                     |         |      |   |         |  
|Basic and diluted            |  | $                   | (.38    | )    | $ | (.49    | )

Note 3- Supplemental disclosure for statement
of cash flows

In the years ended July 31, 2007, 2006, and 2005, net income taxes
(refunded to) or paid by the Company approximated ($1,670,000), ($1,374,000),
and $3,566,000 respectively.

F-17

---



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

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

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

In fiscal 2005, a director of the Company exercised 31,660 stock
options in a non-cash transaction. The director surrendered 17,000 previously
owned shares of the Companys common stock to exercise the stock options. The
Company recorded approximately $325,000, the market value of surrendered
shares, as treasury stock.

Note 4  Marketable securities

The Company had no investments in marketable securities at July 31,
2007 or 2006.

During fiscal 2006, the Company realized proceeds of approximately $6.8
million from maturities and sales of marketable securities, on which it
realized a loss of approximately $154,000, based on average cost. During fiscal
2005, the Company realized proceeds of approximately $10.7 million from
maturities and sales of marketable securities, on which it realized a loss of
approximately $200,000, based on average cost. The Companys cost basis in
marketable securities as of July 31, 2005 was approximately $6.8 million.

Note 5  Accumulated Other Comprehensive
Income (Loss)

The following is a summary of accumulated other comprehensive
    loss, relating to the Companys investments in marketable securities,
    which were classified as available for sale securities, and the effect of
    foreign currency translation:

|                                                         |  |                                        |   |                            |   |                                        |  |   |     |   |  |  |   |      |   | 
|-------------------------------------------------------- |  | -------------------------------------- | - | -------------------------- | - | -------------------------------------- |  | - | --- | - |  |  | - | ---- | - | 
|In 000s                                                 |  | Accumulated income
  (loss) before tax |   | Tax (expense)
  or benefit |   | Accumulated income
  (loss) net of tax | 
|                                                         |  |                                        |   |                            |   |                                        | 
|Balance  July 31,
  2004                                |  |                                        | $ | (401                       | ) |                                        |  | $ | 155 |   |  |  | $ | (246 | ) | 
|Fiscal 2005 -
  realized losses                          |  |                                        |   | 200                        |   |                                        |  |   | (78 | ) |  |  |   |      |   | 
|Fiscal 2005 
  unrealized gain and valuation allowances |  |                                        |   | 70                         |   |                                        |  |   | (77 | ) |  |  |   | 115  |   | 
|                                                         |  |                                        |   |                            |   |                                        |  |   |     |   |  |  |   |      |   | 
|Balance - July 31,
  2005                                |  |                                        |   | (131                       | ) |                                        |  |   |    |   |  |  |   | (131 | ) | 
|Fiscal 2006 
  realized losses, net                     |  |                                        |   | 131                        |   |                                        |  |   |    |   |  |  |   | 131  |   | 
|                                                         |  |                                        |   |                            |   |                                        |  |   |     |   |  |  |   |      |   | 
|Balance - July 31,
  2006                                |  |                                        |   |                           |   |                                        |  |   |    |   |  |  |   |     |   | 
|Fiscal 2007  gain
  on foreign currency translation     |  |                                        |   | 42                         |   |                                        |  |   |    |   |  |  |   | 42   |   | 
|                                                         |  |                                        |   |                            |   |                                        |  |   |     |   |  |  |   |      |   | 
|Balance - July 31,
  2007                                |  |                                        | $ | 42                         |   |                                        |  | $ |    |   |  |  | $ | 42   |   | 
|                                                         |  |                                        |   |                            |   |                                        |  |   |     |   |  |  |   |      |   | 

Note 6 - Inventories

At July 31, 2007 and 2006 inventories  net of reserves of $379,000 and
$238,000, respectively, consist of:

|                  |  |      |       |      |   |       | 
|----------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s          |  | 2007 |       | 2006 |  
|                  |  |      |       |      |  
|Raw materials     |  | $    | 34    |      | $ | 38    | 
|Work in process   |  |      | 1,221 |      |   | 1,518 | 
|Finished products |  |      | 5,767 |      |   | 845   | 
|                  |  |      |       |      |   |       | 
|                  |  | $    | 7,022 |      | $ | 2,401 | 
|                  |  |      |       |      |   |       | 

F-18

---



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

Note 7  Property, plant, and equipment

At July 31, 2007 and
2006 property, plant, and equipment consist of:

|                                            |  |      |         |      |   |        |  
|------------------------------------------- |  | ---- | ------- | ---- | - | ------ | -
|In 000s                                    |  | 2007 |         | 2006 |  
|                                            |  |      |         |      |  
|Building and
  building improvements        |  | $    | 3,053   |      | $ | 2,470  |  
|Laboratory
  machinery and equipment        |  |      | 2,967   |      |   | 2,242  |  
|Office furniture
  and computer equipment   |  |      | 7,506   |      |   | 5,696  |  
|Leasehold
  improvements                    |  |      | 3,211   |      |   | 2,975  |  
|                                            |  |      |         |      |   |        |  
|                                            |  |      | 16,737  |      |   | 13,383 |  
|Accumulated
  depreciation and amortization |  |      | (10,828 | )    |   | (8,247 | )
|                                            |  |      |         |      |   |        |  
|                                            |  |      | 5,909   |      |   | 5,136  |  
|Land and land
  improvements                |  |      | 712     |      |   | 712    |  
|                                            |  |      |         |      |   |        |  
|                                            |  | $    | 6,621   |      | $ | 5,848  |  
|                                            |  |      |         |      |   |        |  

In June 2006, the Company acquired land and building
    aggregating $3,182,000, which upon completion of improvements in fiscal 2008,
    will be primarily used for Life Sciences and Therapeutics research and
development and manufacturing.

Note 8  Goodwill and intangible assets

All of the Companys goodwill as of July 31, 2006 was related to its
clinical laboratory segment. Prior to adopting SFAS No. 142, Goodwill and
Other Intangibles (SFAS 142), the Company recorded amortization of goodwill
aggregating approximately $9.8 million. The Companys goodwill as of July 31,
2007 is as follows:

|                                                                                   |  |       |        | 
|---------------------------------------------------------------------------------- |  | ----- | ------ | 
|In 000s                                                                           |  |       |        | 
|                                                                                   |  |       |        | 
|Balance  July 31,
  2006  net of amortization                                    |  | $     | 7,452  | 
|                                                                                   |  |       |        | 
|Arising from
  completed business combination in Life Science segment - See Note 2 |  | 6,224 |       
|                                                                                   |  |       |        | 
|                                                                                   |  |       |        | 
|Balance  July 31,
  2007                                                          |  | $     | 13,676 | 
|                                                                                   |  |       |        | 

Under the non-amortization provisions of SFAS 142, goodwill is subject
to at least an annual assessment for impairment by applying a fair-value based
test. The Company performs the annual impairment testing during the fourth
quarter of its fiscal year. Based on this testing, there has been no impairment
to Goodwill recorded on the accompanying balance sheets as of July 31, 2007 and
2006.

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

|                                      |  |               |        |                            |  |     |        |       |  |                            |       |     |   |        |  |  |   |        |  
|------------------------------------- |  | ------------- | ------ | -------------------------- |  | --- | ------ | ----- |  | -------------------------- | ----- | --- | - | ------ |  |  | - | ------ | -
|                                      |  | July 31, 2007 |        | July 31, 2006              | 
|                                      |  |               |        |                            | 
|                                      |  | Gross         |        | Accumulated
  Amortization |  | Net |        | Gross |  | Accumulated
  Amortization |       | Net |  
|                                      |  |               |        |                            |  |     |        |       |  |                            |       |     |  
|Finite-lived
  intangible assets:     |  |               |        |                            |  |     |        |       |  |                            |       |     |   |        |  |  |   |        |  
|Patents                               |  | $             | 11,027 |                            |  | $   | (9,849 | )     |  | $                          | 1,178 |     | $ | 11,027 |  |  | $ | (9,770 | )
|Customer relationships                |  |               | 3,890  |                            |  |     | (36    | )     |  |                            | 3,854 |     |   |       |  |  |   |       |  
|Non-compete and employment agreements |  |               | 360    |                            |  |     | (15    | )     |  |                            | 345   |     |   |       |  |  |   |       |  
|Website and acquired content          |  |               | 270    |                            |  |     | (9     | )     |  |                            | 261   |     |   |       |  |  |   |       |  
|Indefinitely-lived intangible assets: |  |               |        |                            |  |     |        |       |  |                            |       |     |   |        |  |  |   |        |  
|Trademarks                            |  | $             | 3,700  |                            |  |     |       |       |  | $                          | 3,700 |     |   |       |  |  |   |       |  
|                                      |  |               |        |                            |  |     |        |       |  |                            |       |     |   |        |  |  |   |        |  
|Total                                 |  | $             | 19,247 |                            |  | $   | (9,909 | )     |  | $                          | 9,338 |     | $ | 11,027 |  |  | $ | (9,770 | )
|                                      |  |               |        |                            |  |     |        |       |  |                            |       |     |   |        |  |  |   |        |  

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

| |      |   |    
| | ---- | - | ---
| |      |  
| | 2008 | $ | 482
| | 2009 |   | 482
| | 2010 |   | 482
| | 2011 |   | 467
| | 2012 |   | 383

Amortization expense for the years ended July 31, 2007, 2006, and 2005
was $151,000, $75,000, and $1,312,000, respectively.

F-19

---



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

Note 9 - Income taxes

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

|                                        |  |      |      |      |   |       |   |   |        |  
|--------------------------------------- |  | ---- | ---- | ---- | - | ----- | - | - | ------ | -
|Fiscal year
  ended July 31, (in 000s) |  | 2007 |      | 2006 |   | 2005  |  
|                                        |  |      |      |      |   |       |  
|Current
  (provision) benefit:          |  |      |      |      |   |       |   |   |        |  
|Federal                                 |  | $    |     |      | $ | 2,047 |   | $ | (1,386 | )
|State and local                         |  |      | (261 | )    |   | (65   | ) |   | 64     |  
|Foreign                                 |  |      | (2   | )    |   |      |   |   |       |  
|Deferred benefit
  (provision)          |  |      | 178  |      |   | (640  | ) |   | (891   | )
|                                        |  |      |      |      |   |       |   |   |        |  
|(Provision)
  benefit for income taxes  |  | $    | (85  | )    | $ | 1,342 |   | $ | (2,213 | )
|                                        |  |      |      |      |   |       |   |   |        |  

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, 2007 and 2006 are as follows:

|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|-------------------------------------------------------------------------- |  | ------------------------- | - | ------------------------- | - |  |  | - | ------ | - |  | 
|In 000s                                                                   |  | July
            31, 2007 |   | July
            31, 2006 |   |  | 
|                                                                           |  |                           |   |                           |   |  | 
|Deferred tax
          assets:                                             |  |                           |   |                           |   |  | 
|Federal
          tax carryforward losses                                  |  |                           | $ | 6,941                     |   |  |  | $ | 3,315  |   |  | 
|Provision
          for uncollectible accounts receivable                  |  |                           |   | 531                       |   |  |  |   | 404    |   |  | 
|State
          and local tax carry forward losses                         |  |                           |   | 1,543                     |   |  |  |   | 1,080  |   |  | 
|Accrued
          royalties                                                |  |                           |   | 543                       |   |  |  |   |       |   |  | 
|Stock
          compensation                                               |  |                           |   | 279                       |   |  |  |   |       |   |  | 
|Depreciation                                                               |  |                           |   | 73                        |   |  |  |   | 14     |   |  | 
|Research
          and development and other tax credit carryforwards      |  |                           |   | 460                       |   |  |  |   | 405    |   |  | 
|Realized
          and unrealized losses on marketable securities          |  |                           |   | 138                       |   |  |  |   | 138    |   |  | 
|Other,
          net                                                       |  |                           |   | 198                       |   |  |  |   |       |   |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|Gross
          deferred tax assets                                        |  |                           |   | 10,706                    |   |  |  |   | 5,356  |   |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|Deferred tax liabilities:                                                  |  |                           |   |                           |   |  |  |   |        |   |  | 
|Deferred
          patent costs                                            |  |                           |   | (271                      | ) |  |  |   | (280   | ) |  | 
|Inventory                                                                  |  |                           |   | (325                      | ) |  |  |   |       |   |  | 
|Intangibles                                                                |  |                           |   | (2,409                    | ) |  |  |   |       |   |  | 
|Prepaid
          expenses                                                 |  |                           |   | (552                      | ) |  |  |   |       |   |  | 
|Other,
          net                                                       |  |                           |   | (90                       | ) |  |  |   | (220   | ) |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|Gross
          deferred tax liabilities                                   |  |                           |   | (3,647                    | ) |  |  |   | (500   | ) |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|Net deferred
          tax assets (liabilities) before valuation allowance |  |                           |   | 7,059                     |   |  |  |   | 4,856  |   |  | 
|Less: valuation allowance                                                  |  |                           |   | (9,385                    | ) |  |  |   | (4,856 | ) |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 
|Net deferred
          tax assets (liabilities)                            |  |                           | $ | (2,326                    | ) |  |  | $ |       |   |  | 
|                                                                           |  |                           |   |                           |   |  |  |   |        |   |  | 

At July 31, 2007, the Company had net deferred tax
    liabilities of $2,326,000 which consists primarily of identifiable intangible
    assets, inventory valuation differences and cumulative tax deductions in
    excess of book expenses recognized by foreign subsidiaries attributed to
    Axxora (see Note 2).

F-20

---



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

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

|                |  |  |                         |       |  |  |                         |   | 
|--------------- |  |  | ----------------------- | ----- |  |  | ----------------------- | - | 
|                |  |  | July
          31, 2007 |       |  |  | July
          31, 2006 |  
|                |  |  |                         |       |  |  |                         |  
|Deferred taxes: |  |  |                         |       |  |  |                        
|Current         |  |  | $                       | 597   |  |  |                         |  | 
|Non-current     |  |  |                         | 1,729 |  |  |                         |  | 
|                |  |  |                         |       |  |  |                         |   | 
|                |  |  | $                       | 2,326 |  |  |                         |  | 
|                |  |  |                         |       |  |  |                         |   | 

Pursuant to SFAS 109, the Company recorded a valuation allowance during
the year ended July 31, 2007 equal to domestic and certain foreign net deferred
tax assets and for net deferred tax assets at July 31, 2006. 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. Approximately $616,000 of the
Companys valuation allowance pertains to the acquisition described in Note 2.
To the extent this portion of the valuation is subsequently reversed, the
offsetting credit will be recognized as a reduction of goodwill arising from
the acquisition.

As of July 31, 2007, the Company had U.S. federal
    net operating loss carryforwards of approximately $20.3 million. The U.S.
    federal tax loss carryforwards, if not fully utilized, expire between 2010
    and 2027. Utilization is dependent on generating sufficient taxable income
    prior to expiration of the tax loss carryforwards. As of July 31, 2007, the
    Company has state and local tax loss carryforwards of approximately $30.1
    million.

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

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

|                             |  |      |         |      |   |         |   |   |       | 
|---------------------------- |  | ---- | ------- | ---- | - | ------- | - | - | ----- | 
|                             |  | 2007 |         | 2006 |   | 2005    |  
|                             |  |      |         |      |   |         |  
|United States
  operations   |  | $    | (12,595 | )    | $ | (17,009 | ) | $ | 5,217 | 
|International
  operations   |  |      | (580    | )    |   |        |   |   |      | 
|                             |  |      |         |      |   |         |   |   |       | 
|(Loss) income
  before taxes |  | $    | (13,175 | )    | $ | (17,009 | ) | $ | 5,217 | 
|                             |  |      |         |      |   |         |   |   |       | 

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

|                                                                |  |      |  |      |    |      |  |  |     |    |  |  |  |     |    | 
|--------------------------------------------------------------- |  | ---- |  | ---- | -- | ---- |  |  | --- | -- |  |  |  | --- | -- | 
|Year ended July 31,                                             |  | 2007 |  | 2006 |    | 2005 | 
|                                                                |  |      |  |      |    |      | 
|Federal statutory
  rate                                        |  |      |  | 34   | %  |      |  |  | 34  | %  |  |  |  | (34 | %) | 
|Expenses not
  deductible for income tax return purposes        |  |      |  | (3   | %) |      |  |  | (4  | %) |  |  |  | (2  | %) | 
|State income
  taxes, net of (benefit) of federal tax deduction |  |      |  | (1   | %) |      |  |  | 5   | %  |  |  |  | (6  | %) | 
|Change in
  valuation allowance                                 |  |      |  | (30  | %) |      |  |  | (28 | %) |  |  |  |    |    | 
|Benefit of foreign
  sales                                      |  |      |  |     |    |      |  |  |    |    |  |  |  | 1   | %  | 
|Other                                                           |  |      |  | (1   | %) |      |  |  | 1   | %  |  |  |  | (1  | %) | 
|                                                                |  |      |  |      |    |      |  |  |     |    |  |  |  |     |    | 
|                                                                |  |      |  | (1   | %) |      |  |  | 8   | %  |  |  |  | (42 | %) | 
|                                                                |  |      |  |      |    |      |  |  |     |    |  |  |  |     |    | 

U.S. federal income taxes have not been provided on
    the undistributed earnings of approximately $811,000 at July 31, 2007 of
    the Companys foreign
subsidiaries, because of managements practice and intent to reinvest such
earnings in the operations of such subsidiaries.

F-21

---



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

Note 10  Accrued Liabilities and Other
Current Liabilities

At July 31, 2007 and 2006, accrued liabilities consist of:

|                                    |  |      |       |      |   |       | 
|----------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|In 000s                            |  | 2007 |       | 2006 |  
|                                    |  |      |       |      |  
|Legal                               |  | $    | 4,542 |      | $ | 1,974 | 
|Payroll, benefits,
 and commissions |  |      | 1,417 |      |   | 868   | 
|Research and
 development           |  |      | 344   |      |   | 408   | 
|Professional fees                   |  |      | 986   |      |   | 369   | 
|Outside reference
 lab testing      |  |      | 276   |      |   | 122   | 
|Other                               |  |      | 881   |      |   | 662   | 
|                                    |  |      |       |      |   |       | 
|                                    |  | $    | 8,446 |      | $ | 4,403 | 
|                                    |  |      |       |      |   |       | 

At July 31, 2007 and 2006, other current liabilities consist of:

|                 |  |      |       |      |   |    
|---------------- |  | ---- | ----- | ---- | - | ---
|In 000s         |  | 2007 |       | 2006 |  
|                 |  |      |       |      |   |    
|Deferred revenue |  | $    | 770   |      | $ | 80 
|Other            |  |      | 517   |      |   | 150
|                 |  |      |       |      |   |    
|                 |  | $    | 1,287 |      | $ | 230
|                 |  |      |       |      |   |    

Note 11  Stockholders equity

Common stock offerings

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

Treasury stock

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

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

In fiscal 2005, a director of the Company exercised 31,660 stock
options in a non-cash transaction. The director surrendered 17,000 previously
owned shares of the Companys common stock to exercise the stock options. The
Company recorded approximately $325,000, the market value of surrendered
shares, as treasury stock.

F-22

---



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

Incentive stock option plans

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

As of July 31, 2007, there were approximately 590,000 shares available
for grant under the Companys 1999 and 2005 Plans.

A summary of the information pursuant to the Companys stock option
plans for the years ended July 31, 2007, 2006, and 2005 is as follows:

|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|----------------------------------------------------------- |  | ------- | --------- | ---- | ------------------------------------ | ----- |  | ------- | --------- | ------------------------------------ | - | ----- |  |  | ------------------------------------ | - | - | ----- | 
|                                                            |  | 2007    |           | 2006 |                                      | 2005  | 
|                                                            |  |         |           |      |                                      |       | 
|                                                            |  |         |           |      | Weighted -
 Average
 Exercise
 Price |       |  |         |           | Weighted -
 Average
 Exercise
 Price |   |       |  |  | Weighted -
 Average
 Exercise
 Price |  
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                     
|                                                            |  | Options |           |      | Options                              |       |  | Options |           |                                     
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       | 
|Outstanding at
 beginning of year                           |  |         | 2,877,727 |      | $                                    | 13.20 |  |         | 3,154,125 |                                      | $ | 12.61 |  |  | 2,856,801                            |   | $ | 11.86 | 
|Granted                                                     |  |         | 27,761    |      | $                                    | 17.06 |  |         | 100,000   |                                      | $ | 24.84 |  |  | 431,975                              |   | $ | 16.57 | 
|Exercised                                                   |  |         | (95,525   | )    | $                                    | 9.60  |  |         | (285,030  | )                                    | $ | 10.93 |  |  | (100,332                             | ) | $ | 7.39  | 
|Cancelled                                                   |  |         | (109,506  | )    | $                                    | 14.36 |  |         | (91,368   | )                                    | $ | 12.61 |  |  | (34,319                              | ) | $ | 11.64 | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|Outstanding at end
 of year                                 |  |         | 2,700,457 |      | $                                    | 13.32 |  |         | 2,877,727 |                                      | $ | 13.20 |  |  | 3,154,125                            |   | $ | 12.61 | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|Exercisable at end
 of year                                 |  |         | 2,670,680 |      | $                                    | 13.32 |  |         | 2,554,148 |                                      | $ | 12.78 |  |  | 2,126,442                            |   | $ | 11.28 | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 
|Weighted average
 fair value of options granted during year |  |         |           |      | $                                    | 4.42  |  |         |           |                                      | $ | 1.01  |  |  |                                      |   | $ | 11.76 | 
|                                                            |  |         |           |      |                                      |       |  |         |           |                                      |   |       |  |  |                                      |   |   |       | 

The aggregate intrinsic value of stock options exercised during the
years ended July 31, 2007, 2006 and 2005, including the non-cash transactions
(see Note 3) was $0.7 million and $0.9 million, respectively. The aggregate
intrinsic value of options both outstanding and exercisable at July 31, 2007 is
approximately $4.3 million.

F-23

---



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

The following table summarizes information for stock options
outstanding at July 31, 2007:

|                          |  |                     |           |                     |                                               |           |                                    |   |       |  |  |                                    |  |   |       |  | 
|------------------------- |  | ------------------- | --------- | ------------------- | --------------------------------------------- | --------- | ---------------------------------- | - | ----- |  |  | ---------------------------------- |  | - | ----- |  | 
|                          |  | Options outstanding |           | Options exercisable |                                              
|                          |  |                     |           |                     |                                              
|                          |  |                     |           |                     | Weighted-Average
 Remaining
 Contractual Life |           | Weighted-
 Average Exercise
 Price |   |       |  |  | Weighted-
 Average
 Exercise Price | 
|                          |  |                     |           |                     |                                               |           |                                    |   |       | 
|Range of
 Exercise prices |  | Shares              |           |                     |                                               | Shares    |                                    |  
|                          |  |                     |           |                     |                                               |           |                                    |   |       |  | 
|$5.45-6.68                |  |                     | 259,240   |                     |                                               | 1.2 years |                                    | $ | 5.57  |  |  | 259,240                            |  | $ | 5.64  | 
|$8.33-12.25               |  |                     | 1,422,028 |                     |                                               | 3.4 years |                                    | $ | 11.10 |  |  | 1,422,028                          |  | $ | 10.91 | 
|$12.93-19.02              |  |                     | 839,312   |                     |                                               | 6.5 years |                                    | $ | 17.15 |  |  | 809,535                            |  | $ | 16.60 | 
|$20.20-24.84              |  |                     | 161,644   |                     |                                               | 1.9 years |                                    | $ | 23.54 |  |  | 161,644                            |  | $ | 21.42 | 
|$36.05                    |  |                     | 18,233    |                     |                                               | 2.4 years |                                    | $ | 36.05 |  |  | 18,233                             |  | $ | 36.05 | 
|                          |  |                     |           |                     |                                               |           |                                    |   |       |  |  |                                    |  |   |       | 
|                          |  |                     | 2,700,457 |                     |                                               |           |                                    |   |       |  |  | 2,670,680                          |  |   |       | 
|                          |  |                     |           |                     |                                               |           |                                    |   |       |  |  |                                    |  |   |       | 

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

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

Restricted Stock Awards

During fiscal 2007 and 2006, the compensation committee of the
Companys board of directors approved grants of 97,700 and 84,950 of restricted
stock and restricted stock unit awards (the Awards), respectively, under the
2005 Plan to the Companys directors, certain officers and employees. The
Awards vest upon the recipients continued employment or director service
ratably over either two, three or four years. Share-based compensation expense
is recorded over the vesting period on a straight-line basis. The Awards will
be forfeited if the recipient ceases to be employed by or serve as a director
of the Company, as defined in the Award grants. The Awards settle in shares of
the Companys common stock on a one-for-one basis. As of July 31, 2007, 141,062
shares were unvested.

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

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

F-24

---



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

Stock Dividends

During fiscal 2005, the Companys board of directors declared a 5%
stock dividend on October 5, 2004 payable November 15, 2004 to shareholders of
record as of October 25, 2004. The fiscal 2004 per share data was adjusted
retroactively to reflect the stock dividend declared on October 5, 2004. The
Company recorded a charge to accumulated deficit and offsetting credits to both
common stock and additional paid-in capital of $23,433,400 in fiscal 2005,
which reflects the fair value of the stock dividends on the dates of
declaration.

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, 2007, 2006, and 2005, the Company authorized
employer matched contributions of 50% of the employees contribution up
to 10% of the employees compensation, payable in Enzo Biochem, Inc. common
stock. The 401(k) employer matched contributions expense was approximately $420,800,
$402,300, and $351,600, in fiscal years 2007, 2006, and 2005, respectively.

The Companys Swiss operations provide a benefit
    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 two
months ended July 31, 2007, the period after the acquisition of Axxora Life
Sciences, Inc., the employer contributions related to the Swiss benefit pension
plan was approximately $58,000.

Axxora Life Sciences, Inc. maintains an employee contribution plan
under Section 401(K) of the Internal Revenue Code under which all U. S.
employees are eligible to participate. Contributions to the plan are discretionary.
No such contributions have been made for the two months ended July 31, 2007.
The Company expects to integrate this plan into the existing Salary Reduction
Profit Sharing Plan in fiscal 2008.

Note 13  Royalty and other income

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

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

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

In addition, the Agreement provides for the Company
    to receive quarterly running royalties on the net sales of Digene products
    subject to the license until the expiration of the patent on April 24, 2018.
    These quarterly running royalties are fully creditable against the minimum
    royalty payments due in the first five years of the Agreement. The balance,
    if any, of the minimum royalty payment is recognized in the final quarter
    of the applicable annual royalty period. As a result of the Digene Agreement,
the Company recorded a gain on patent litigation settlement of $14.0 million
during the year ended July 31, 2005 and deferred $2 million, which was earned
from net sales of the Companys licensed products covered by the Agreement
during the first annual period. During the years ended July 31, 2007, 2006 and
2005, the Company recorded royalty income under the Agreement of approximately
$4.7 million, $3.1 million, and $1.6 million, respectively, which is included
in the Life Sciences segment.

F-25

---



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

Note 14 - Licensing and Supply Agreement:

On April 27, 2007 (the Effective Date)
    Enzo Life Sciences, Inc. (Life Sciences) and Abbott Molecular
    Inc. (Abbott) entered into a 5 year
agreement covering the supply of certain of Enzos products to Abbott for
use in their product line. The parties also entered into a limited non-exclusive
royalty bearing cross-licensing agreement (Licensing Agreement) for
various patents. The Licensing Agreement requires each party to pay royalties,
as defined through the lives of the related covered patents. In connection with
a component of the License Agreement, Abbot paid a one-time fee of $1.5 million
relating to a fully paid-up license and sublicense, as defined. The one-time
fee will be recognized as revenue over the longest expected patent life. At
July 31, 2007, the Companys balance sheet includes current and non-current
deferred revenue of approximately $1.4 million relating to the one-time fee.
During the year ended July 31, 2007, the Company recorded approximately $1.0
million in royalties and license fee income under the Licensing Agreement.

Note 15  Commitments

Leases

The Company leases equipment, office and laboratory
    space under several non-cancelable operating leases that expire between December
    2007 and March 2017. 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 and manufacturing operations. In March 2005, the
    Company amended and extended the lease for another 12 years. In addition
    to the minimum annual rentals of space, the lease is subject to annual increases,
    based on the consumer price index. Annual increases are limited to 3% per
    year. Rent expense, inclusive of real estate taxes, under this renewed lease
    and the prior lease approximated $1,376,000, $1,337,000, and $1,289,000 during
    fiscal years 2007, 2006, and 2005.

Total rent expense incurred by the Company during
    fiscal 2007, 2006 and 2005 was approximately $2,510,000, $2,257,000, and
    $2,140,000, respectively. Minimum future annual rentals under non-cancelable
    operating leases as of July 31, 2007, are as follows:

|                     |  |          |        | 
|-------------------- |  | -------- | ------ | 
|Years ended July 31, |  | In 000s |       
|                     |  |          |       
|2008                 |  | $        | 3,210  | 
|2009                 |  |          | 2,834  | 
|2010                 |  |          | 2,607  | 
|2011                 |  |          | 2,503  | 
|2012                 |  |          | 1,832  | 
|Thereafter           |  |          | 7,738  | 
|                     |  |          |        | 
|                     |  | $        | 20,724 | 
|                     |  |          |        | 

F-26

---



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

Employment Agreements

The Company has employment agreements with certain officers that are
cancelable at any time but provide for severance pay in the event an officer is
terminated by the Company without cause, as defined in the agreements. Unless
cancelled earlier, the contracts expire through May 2010. Aggregate minimum
compensation commitments, exclusive of any severance provisions, for the years
ending July 31, 2008, 2009 and 2010 are $1,577,000, $703,000 and $585,000,
respectively

Note 16 Contingences

In October 2002, the Company filed suit in the United
    States District Court of the Southern District of New York against Amersham
    plc, Amersham Biosciences, Perkin Elmer, Inc., Perkin Elmer Life Sciences,
    Inc., Sigma-Aldrich Corporation, Sigma Chemical Company, Inc., Molecular
    Probes, Inc. and Orchid Biosciences, Inc. In January 2003, the Company amended
    its complaint to include defendants Sigma Aldrich Co. and Sigma Aldrich,
    Inc. The counts set forth in the suit are for breach of contract; patent
    infringement; unfair competition under state law; unfair competition under
    federal law; tortious interference with business relations; and fraud in
    the inducement of contract. The complaint alleges that these counts arise
    out of the defendants breach of
distributorship agreements with the Company concerning labeled nucleotide
products and technology, and the defendants infringement of patents covering
the same. In April, 2003, the court directed that individual complaints be
filed separately against each defendant. The defendants have answered the
individual complaints and asserted a variety of affirmative defenses and
counterclaims. Fact discovery is ongoing. The court issued a claim construction
opinion on July 10, 2006. The Company and Sigma Aldrich (Sigma) entered
into a Settlement Agreement and Release effective September 15, 2006 (the
Agreement). Pursuant to the Agreement, the Companys litigation
with Sigma was dismissed and the Company recognized $2 million on settlement
in the quarter ending October 31, 2006 (See Note 13). On January 3, 2007, the
remaining defendants moved for summary judgment on all counts in the individual
complaints. During a two-day hearing held on July 17 through July 18, 2007, the
defendants subsequently withdrew the invalidity portion of their summary
judgment motions. The court has yet to rule on the pending summary judgment
motions. There can be no assurance that the Company will be successful with the
remaining outstanding litigation. However, even if the Company is not
successful, management does not believe that there will be a significant
adverse monetary impact to the Company. The Company has not recorded revenue
under these distribution agreements in fiscal 2007 and 2006. The Company
recorded other income from Perkin Elmer in fiscal 2007 (See Note 13).

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

F-27

---



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

Affymetrix also moved to transfer venue of Enzos action to the
Southern District of New York, where other actions commenced by Enzo were
pending as well as Affymetrixs subsequently filed action. On January 30, 2004, Affymetrixs motion to transfer was granted. Accordingly, the
Enzo and Affymetrix actions are now both pending in the Southern District of
New York. Initial pleadings have been completed and discovery has commenced.
The Court issued a Markman (claim construction) opinion on July 10, 2006. The
Company did not record any revenue from Affymetrix during the fiscal years
ended July 31, 2007, 2006, or 2005.

On June 2, 2004, Roche Diagnostic GmbH and Roche Molecular
    Systems, Inc. (collectively Roche) filed suit in the U.S. District
    Court of the Southern District of New York against Enzo Biochem, Inc. and
    Enzo Life Sciences, Inc. (collectively Enzo). The Complaint was
    filed after Enzo rejected Roches
latest cash offer to settle Enzos claims for, inter
alia, alleged breach of contract and misappropriation of Enzos
assets. The Complaint seeks declaratory judgment (i) of patent invalidity with
respect to Enzos 4,994,373 patent (the 373 patent), (ii)
of no breach by Roche of its 1994 Distribution and Supply Agreement with Enzo
(the 1994
Agreement), (iii) that non-payment by Roche to Enzo for certain sales of
Roche products does not constitute a breach of the 1994 Agreement, and (iv) that
Enzos claims of ownership to proprietary inventions, technology and products
developed by Roche are without basis. In addition, the suit claims tortious
interference and unfair competition. The Company does not believe that the
Complaint has merit and intends to vigorously respond to such action with
appropriate affirmative defenses and counterclaims. Enzo filed an Answer and
Counterclaims on November 3, 2004 alleging multiple breaches of the 1994
Agreement and related infringement of Enzos 373 patent. Discovery
has commenced. The Court issued a Markman opinion on July 10, 2006. The Company
did not record any revenue from Roche during the fiscal years ended July 31,
2007 or 2006. The Roche agreement remains in force to date.

On June 7, 2004, the Company and Enzo Life
Sciences, Inc., filed suit in the United States District Court for the District
of Connecticut against Applera Corporation and its wholly-owned subsidiary
Tropix, Inc. The complaint alleges infringement of six patents (relating to DNA
sequencing systems, labelled 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 wilful
infringement). Defendants answered the complaint on July 29, 2004. The answer
pleads affirmative defences of invalidity, estoppels and laches and asserts
counterclaims of non-infringement and invalidity. 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 judgement 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 judgement
for invalidity, laches and non-infringement of the Ward patents on March 5, 2007.
The Company and other plaintiff filed a motion for summary judgement on
infringement of the Ward patents on March 5, 2007. On August 20, 2007, the district
court heard oral arguments on the motions for summary judgement. On September
6, 2007, the court granted defendants motion for summary judgement of
invalidity of the remaining Ward patents and entered a final judgement to that
effect. The Company and other plaintiff filed a notice of appeal to the United
States Court of Appeals for the Federal Circuit on September 7, 2007. The
Company and other plaintiff intend to vigorously pursue this appeal; however,
the outcome of the appeal cannot be anticipated at this time. If the appeal is
granted, there can be no assurance that the Company will be successful in this
litigation. Even if the Company is not successful, management does not believe
that there will be a significant adverse monetary impact on the Company.

F-28

---



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

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

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

Note 17  Segment reporting

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

Management of the Company assesses assets on a consolidated basis only
and therefore, assets by reportable segment have not been included in the
reportable segments below. The accounting policies of the reportable segments
are the same as those described in the summary of significant accounting
policies.

F-29

---



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

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

Year ended July 31, 2007

|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|---------------------------------------------- |  | ------------- | ------ | ------------ | - | ------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|Revenues:                                      |  | Life Sciences |        | Therapeutics |   | Clinical Labs |   | Other |        | Consolidated |  
|                                               |  |               |        |              |   |               |   |       |        |              |  
|Product revenues                               |  | $             | 6,658  |              |   |              |   |       |       |              |   |        |   | $ | 6,658   |  
|Royalty and license fee income                 |  |               | 5,820  |              |   |              |   |       |       |              |   |        |   |   | 5,820   |  
|Clinical laboratory services                   |  |               |       |              |   |              |   | $     | 40,430 |              |   |        |   |   | 40,430  |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|                                               |  |               | 12,478 |              |   |              |   |       | 40,430 |              |   |        |   |   | 52,908  |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Cost and expenses and other (income):          |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Cost of products                               |  |               | 5,034  |              |   |              |   |       |       |              |   |        |   |   | 5,034   |  
|Cost of clinical laboratory services           |  |               |       |              |   |              |   |       | 18,199 |              |   |        |   |   | 18,199  |  
|Research and development                       |  |               | 3,349  |              | $ | 6,044         |   |       |       |              |   |        |   |   | 9,393   |  
|Provision for uncollectible accounts           |  |               |       |              |   |              |   |       | 4,653  |              |   |        |   |   | 4,653   |  
|Selling, general and administrative and
 legal |  |               | 2,772  |              |   |              |   |       | 14,403 |              |   | 19,420  |   |   | 36,595  |  
|Interest income                                |  |               |       |              |   |              |   |       | (99    | )            |   | (4,993  | ) |   | (5,092  | )
|Other income                                   |  |               | (2,699 | )            |   |              |   |       |       |              |   |        |   |   | (2,699  | )
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Income (loss) before income taxes              |  | $             | 4,022  |              | $ | (6,044        | ) | $     | 3,274  |              | $ | (14,427 | ) | $ | (13,175 | )
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Depreciation and amortization included
 above  |  | $             | 288    |              | $ | 16            |   | $     | 838    |              | $ | 47      |   | $ | 1,189   |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Share- based compensation included in          |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Cost of products                               |  | $             | 10     |              |   |              |   |       |       |              |   |        |   | $ | 10      |  
|Research and development                       |  |               | 51     |              | $ | 111           |   |       |       |              |   |        |   |   | 162     |  
|Selling, general and administrative and        |  |               | 66     |              |   |              |   | $     | 358    |              | $ | 881     |   |   | 1,305   |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Total                                          |  | $             | 127    |              | $ | 111           |   | $     | 358    |              | $ | 8,812   |   | $ | 1,477   |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  
|Capital expenditures                           |  | $             | 106    |              | $ | 82            |   | $     | 698    |              | $ | 562     |   | $ | 1,448   |  
|                                               |  |               |        |              |   |               |   |       |        |              |   |         |   |   |         |  

Year
ended July 31, 2006

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

F-30

---



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

Year
ended July 31, 2005

|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|------------------------------------------------- |  | ------------- | ------- | ------------ | - | ------------- | - | ----- | ------ | ------------ | - | ------ | - | - | ------- | -
|Revenues:                                         |  | Life Sciences |         | Therapeutics |   | Clinical Labs |   | Other |        | Consolidated |  
|                                                  |  |               |         |              |   |               |   |       |        |              |  
|Product revenues                                  |  | $             | 8,905   |              |   |              |   |       |       |              |   |       |   | $ | 8,905   |  
|Royalty income                                    |  |               | 1,641   |              |   |              |   |       |       |              |   |       |   |   | 1,641   |  
|Clinical laboratory services                      |  |               |        |              |   |              |   | $     | 32,857 |              |   |       |   |   | 32,857  |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|                                                  |  |               | 10,546  |              |   |              |   |       | 32,857 |              |   |       |   |   | 43,403  |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|Cost and expenses and other (income):             |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|Cost of products                                  |  |               | 2,426   |              |   |              |   |       |       |              |   |       |   |   | 2,426   |  
|Cost of clinical laboratory services              |  |               |        |              |   |              |   |       | 12,548 |              |   |       |   |   | 12,548  |  
|Research and development                          |  |               | 5,340   |              | $ | 3,112         |   |       |       |              |   |       |   |   | 8,452   |  
|Provision for uncollectible accounts              |  |               |        |              |   |              |   |       | 4,967  |              |   |       |   |   | 4,967   |  
|Selling, general and administrative and legal (a) |  |               | 2,176   |              |   |              |   |       | 12,505 |              | $ | 10,635 |   |   | 25,316  |  
|Interest income                                   |  |               |        |              |   |              |   |       |       |              |   | (1,523 | ) |   | (1,523  | )
|Gain on patent litigation settlement              |  |               | (14,000 | )            |   |              |   |       |       |              |   |       |   |   | (14,000 | )
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|Income (loss) before income taxes                 |  | $             | 14,604  |              | $ | (3,112        | ) | $     | 2,837  |              | $ | (9,112 | ) | $ | 5,217   |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|Depreciation and amortization included above      |  | $             | 1,382   |              | $ | 13            |   | $     | 887    |              | $ | 50     |   | $ | 2,332   |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  
|Capital expenditures                              |  | $             | 126     |              | $ | 40            |   | $     | 1,100  |              | $ | 10     |   | $ | 1,276   |  
|                                                  |  |               |         |              |   |               |   |       |        |              |   |        |   |   |         |  

Geographic
financial information is as follows (in thousands):

|                                     |  |      |        |      |   |        |  |   |        | 
|------------------------------------ |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|Net sales to unaffiliated
 customers |  | 2007 |        | 2006 |   | 2005   | 
|                                     |  |      |        |      |   |        | 
|United States                        |  | $    | 50,051 |      | $ | 38,287 |  | $ | 40,836 | 
|Switzerland                          |  |      | 945    |      |   |       |  |   |       | 
|Other foreign countries              |  |      | 1,912  |      |   | 1,539  |  |   | 2,567  | 
|                                     |  |      |        |      |   |        |  |   |        | 
|Total                                |  | $    | 52,908 |      | $ | 39,826 |  | $ | 43,403 | 
|                                     |  |      |        |      |   |        |  |   |        | 

|                               |  |      |        |      |   |        | 
|------------------------------ |  | ---- | ------ | ---- | - | ------ | 
|Long-lived assets at July
 31, |  | 2007 |        | 2006 |  
|                               |  |      |        |     
|United States                  |  | $    | 21,438 |      | $ | 14,557 | 
|Switzerland                    |  |      | 6,652  |      |   |       | 
|Other foreign countries        |  |      | 1,545  |      |   |       | 
|                               |  |      |        |      |   |        | 
|Total                          |  | $    | 29,635 |      | $ | 14,557 | 
|                               |  |      |        |      |   |        | 

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

|                  |  |      |        |      |   |       |  |   |        | 
|----------------- |  | ---- | ------ | ---- | - | ----- |  | - | ------ | 
|In 000s          |  | 2007 |        | 2006 |   | 2005  | 
|                  |  |      |        |      |   |       | 
|United States     |  | $    | 9,621  |      | $ | 6,361 |  | $ | 7,979  | 
|Foreign countries |  |      | 2,857  |      |   | 1,539 |  |   | 2,567  | 
|                  |  |      |        |      |   |       |  |   |        | 
|                  |  | $    | 12,478 |      | $ | 7,900 |  | $ | 10,546 | 
|                  |  |      |        |      |   |       |  |   |        | 

F-31

---



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

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, 2007 and 2006. The
Company believes that the following information reflects all normal recurring
adjustments necessary for a fair presentation of the information for the
periods presented. The operating results for any quarter are not necessarily
indicative of results for any future period.

Unaudited quarterly financial data (in thousands,
except per share amounts) for fiscal 2007 and 2006 is summarized as follows:

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

|                              |  |                   |        |                   |   |                 |   |                |        |   |   |        |  
|----------------------------- |  | ----------------- | ------ | ----------------- | - | --------------- | - | -------------- | ------ | - | - | ------ | -
|                              |  | Quarter
 Ended    |       
|                              |  |                   |       
|Fiscal 2006                   |  | October 31,
 2005 |        | January 31,
 2006 |   | April 30,
 2006 |   | July 31,
 2006 |       
|                              |  |                   |        |                   |   |                 |   |                |       
|Total revenues                |  | $                 | 10,165 |                   | $ | 10,116          |   | $              | 9,630  |   | $ | 9,915  |  
|Gross profit                  |  |                   | 6,143  |                   |   | 6,300           |   |                | 5,658  |   |   | 5,408  |  
|Loss before income taxes      |  |                   | (3,163 | )                 |   | (5,098          | ) |                | (3,793 | ) |   | (4,955 | )
|Net loss                      |  |                   | (3,286 | )                 |   | (4,439          | ) |                | (3,436 | ) |   | (4,506 | )
|Basic loss per common share   |  | $                 | (0.10  | )                 | $ | (0.14           | ) | $              | (0.11  | ) | $ | (0.14  | )
|Diluted loss per common share |  | $                 | (0.10  | )                 | $ | (0.14           | ) | $              | (0.11  | ) | $ | (0.14  | )

F-32

---



ENZO
BIOCHEM, INCSCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years
ended July 31, 2007, 2006 and 2005(in thousands)

|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|-------------------- |  | ------------------------------------------ |  | ---------------------------- | - | -------------------------------------- |  | ----------------------- |  | -------------------- | ----- | ------------------------ |  | - |  |  | - | ----- |  | --- |  | - | ----- |  | 
|Year ended
 July 31, |  | Description                                |  | Balance atBeginningof period |   | Charged(credited) to costsand
expenses |  | Chargedto otheraccounts |  | Deductions-
describe |       | Balance at
end of period | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          | 
|2007                 |  | Allowance for doubtful accounts receivable |  |                              | $ | 1,033                                  |  |                         |  | $                    | 4,653 |                          |  |  |  |  | $ | 4,282 |  | (1) |  | $ | 1,404 |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2006                 |  | Allowance for doubtful accounts receivable |  |                              |   | 2,292                                  |  |                         |  |                      | 3,633 |                          |  |  |  |  |   | 4,892 |  | (1) |  |   | 1,033 |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2005                 |  | Allowance for doubtful accounts receivable |  |                              |   | 2,770                                  |  |                         |  |                      | 4,967 |                          |  |  |  |  |   | 5,445 |  | (1) |  |   | 2,292 |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2007                 |  | Deferred tax valuation allowance           |  |                              |   | 4,856                                  |  |                         |  |                      | 5,220 |                          |  |  |  |  |   | 691   |  | (2) |  |   | 9,385 |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2006                 |  | Deferred tax valuation allowance           |  |                              |   | 129                                    |  |                         |  |                      | 4,727 |                          |  |  |  |  |   |      |  |     |  |   | 4,856 |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2005                 |  | Deferred tax valuation allowance           |  |                              |   |                                       |  |                         |  |                      | 129   |                          |  |  |  |  |   |      |  |     |  |   | 129   |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2007                 |  | Reserve for obsolete inventory             |  |                              |   | 238                                    |  |                         |  |                      | 337   |                          |  |  |  |  |   | 196   |  | (3) |  |   | 379   |  | 
|                     |  |                                            |  |                              |   |                                        |  |                         |  |                      |       |                          |  |   |  |  |   |       |  |     |  |   |       |  | 
|2006                 |  | Reserve for obsolete inventory             |  |                              |   |                                       |  |                         |  |                      | 596   |                          |  |  |  |  |   | 358   |  | (3) |  |   | 238   |  | 

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

S-1

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