UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|                                                 |                                                                                          
|------------------------------------------------ | -----------------------------------------------------------------------------------------
|Mark one                                        
|                                                
|x                                                | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934 
|                                                 |                                                                                          
|For the quarterly period ended
 January 31, 2010
|                                                 |                                                                                          
|                                                 | or                                                                                       
|                                                 |                                                                                          
|o                                                | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to
___________________

Commission File Number 001-09974

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

|                                                      |  |                    
|----------------------------------------------------- |  | -------------------
|New York                                              |  | 13-2866202         
|                                                      |  |                    
|(State or Other Jurisdiction                          |  | (IRS. Employer     
|of Incorporation or
 Organization)                    |  | Identification No.)
|                                                      |  |                    
|527 Madison Ave, New York, New
 York                  |  | 10022              
|                                                      |  |                    
|(Address of Principal Executive
 office)              |  | (Zip Code)         
|                                                      |  |                    
|212-583-0100                                          |  |                    
|                                                      |  |                    
|(Registrants telephone number,
 including area code) |  |                    

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 has
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes xNoo

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 45 of Regulation S-T (§232.405 of that
chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).

Yes oNoo

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

|                          |                     |                         |                            
|------------------------- | ------------------- | ----------------------- | ---------------------------
|Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.)

Yes oNox

As of
March 1, 2010 the Registrant had approximately 37,984,500 shares of common
stock outstanding.

---



ENZO BIOCHEM, INC. 
FORM 10-Q 
January 31, 2010

INDEX

|                               |                                                                                                                               |  |   
|------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I - FINANCIAL INFORMATION
|                               |                                                                                                                               |  |   
|Item 1.                        | Financial
 Statements                                                                                                         |  |   
|                               |                                                                                                                               |  |   
|                               | Consolidated
 Balance Sheets - January 31, 2010 (unaudited) and July 31, 2009 (audited)                                       |  | 3 
|                               |                                                                                                                               |  |   
|                               | Consolidated
 Statements of Operations for the three and six months ended January 31, 2010
 and 2009 (unaudited)              |  | 4 
|                               |                                                                                                                               |  |   
|                               | Consolidated
 Statement of Stockholders Equity and Comprehensive Loss for the six months
 ended January 31, 2010 (unaudited) |  | 5 
|                               |                                                                                                                               |  |   
|                               | Consolidated
 Statements of Cash Flows for the six months ended January 31, 2010 and 2009
 (unaudited)                        |  | 6 
|                               |                                                                                                                               |  |   
|                               | Notes
 to Consolidated Financial Statements                                                                                   |  | 7 
|                               |                                                                                                                               |  |   
|Item 2.                        | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 19
|                               |                                                                                                                               |  |   
|Item 3.                        | Quantitative
 and Qualitative Disclosures About Market Risk                                                                   |  | 34
|                               |                                                                                                                               |  |   
|Item 4.                        | Controls
 and Procedures                                                                                                      |  | 35
|                               |                                                                                                                               |  |   
|Part II  OTHER INFORMATION   
|                               |                                                                                                                               |  |   
|Item 1.                        | Legal
 Proceedings                                                                                                            |  | 35
|                               |                                                                                                                               |  |   
|Item
 1A.                      | Risk
 Factors                                                                                                                 |  | 35
|                               |                                                                                                                               |  |   
|Item 5                         | Other
 Information                                                                                                            |  | 36
|                               |                                                                                                                               |  |   
|Signatures                     |                                                                                                                               |  | 36

2

---



Part 1Financial Information Item 1
Financial Statements

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

|                                                                                                                                            |  |                                |          |                           |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | -------- | ------------------------- | - | -------- | -
|                                                                                                                                            |  | January 31,
 2010
 (unaudited) |          | July 31,
 2009
 (audited) |  
|                                                                                                                                            |  |                                |          |                           |  
|ASSETS                                                                                                                                      |  |                                |          |                           |   |          |  
|Current assets:                                                                                                                             |  |                                |          |                           |   |          |  
|Cash and cash equivalents                                                                                                                   |  | $                              | 8,157    |                           | $ | 6,929    |  
|Short term investments                                                                                                                      |  |                                | 36,309   |                           |   | 43,306   |  
|Accounts receivable, net of allowances                                                                                                      |  |                                | 12,006   |                           |   | 12,480   |  
|Inventories                                                                                                                                 |  |                                | 10,048   |                           |   | 9,264    |  
|Prepaid expenses and other                                                                                                                  |  |                                | 2,188    |                           |   | 2,482    |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Total current
 assets                                                                                                                       |  |                                | 68,708   |                           |   | 74,461   |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Property, plant
 and equipment, net                                                                                                         |  |                                | 12,069   |                           |   | 11,323   |  
|Goodwill                                                                                                                                    |  |                                | 24,740   |                           |   | 24,896   |  
|Intangible assets,
 net                                                                                                                     |  |                                | 21,152   |                           |   | 22,009   |  
|Other                                                                                                                                       |  |                                | 430      |                           |   | 439      |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Total assets                                                                                                                                |  | $                              | 127,099  |                           | $ | 133,128  |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|LIABILITIES AND
 STOCKHOLDERS EQUITY                                                                                                       |  |                                |          |                           |   |          |  
|Current
 liabilities:                                                                                                                       |  |                                |          |                           |   |          |  
|Accounts payable  trade                                                                                                                    |  | $                              | 4,833    |                           | $ | 4,242    |  
|Accrued liabilities                                                                                                                         |  |                                | 13,516   |                           |   | 8,426    |  
|Other current liabilities                                                                                                                   |  |                                | 854      |                           |   | 1,062    |  
|Deferred taxes                                                                                                                              |  |                                | 210      |                           |   | 213      |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Total current
 liabilities                                                                                                                  |  |                                | 19,413   |                           |   | 13,943   |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Deferred revenue                                                                                                                            |  |                                |         |                           |   | 38       |  
|Deferred taxes                                                                                                                              |  |                                | 2,206    |                           |   | 2,366    |  
|Commitments and
 contingencies                                                                                                              |  |                                |          |                           |   |          |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Stockholders
 equity:                                                                                                                      |  |                                |          |                           |   |          |  
|Preferred Stock, $.01 par value; authorized
 25,000,000 shares; no shares issued or outstanding                                             |  |                                |         |                           |   |         |  
|Common Stock, $.01 par value; authorized
 75,000,000 shares; shares issued: 38,717,900 at January 31, 2010 and
 38,589,880 at July 31, 2009 |  |                                | 387      |                           |   | 386      |  
|Additional paid-in capital                                                                                                                  |  |                                | 306,860  |                           |   | 306,280  |  
|Less treasury stock at cost: 735,554 shares
 at January 31, 2010 and at July 31, 2009                                                       |  |                                | (10,440  | )                         |   | (10,440  | )
|Accumulated deficit                                                                                                                         |  |                                | (191,863 | )                         |   | (179,721 | )
|Accumulated other comprehensive income                                                                                                      |  |                                | 536      |                           |   | 276      |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Total stockholders equity                                                                                                                  |  |                                | 105,480  |                           |   | 116,781  |  
|                                                                                                                                            |  |                                |          |                           |   |          |  
|Total liabilities and stockholders equity                                                                                                  |  | $                              | 127,099  |                           | $ | 133,128  |  
|                                                                                                                                            |  |                                |          |                           |   |          |  

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

3

---



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

|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|------------------------------------------------ |  | -------------------------------- | ------- | ------------------------------ | - | ------ | - | ---- | ------- | - | - | ------- | -
|                                                 |  | Three Months Ended 
 January 31, |         | Six Months Ended 
 January 31, |  
|                                                 |  | 2010                             |         | 2009                           |   | 2010   |   | 2009 |        
|                                                 |  |                                  |         |                                |   |        |   |      |        
|Revenues:                                        |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Product revenues                                 |  | $                                | 10,767  |                                | $ | 9,497  |   | $    | 21,511  |   | $ | 19,474  |  
|Royalty and license fee income                   |  |                                  | 1,839   |                                |   | 1,904  |   |      | 5,150   |   |   | 4,820   |  
|Clinical laboratory services                     |  |                                  | 10,580  |                                |   | 9,515  |   |      | 21,690  |   |   | 17,687  |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|                                                 |  |                                  | 23,186  |                                |   | 20,916 |   |      | 48,351  |   |   | 41,981  |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Operating
 expenses:                             |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Cost of product revenues                         |  |                                  | 5,322   |                                |   | 6,591  |   |      | 10,377  |   |   | 13,396  |  
|Cost of clinical laboratory services             |  |                                  | 6,979   |                                |   | 6,314  |   |      | 13,759  |   |   | 12,337  |  
|Research and development                         |  |                                  | 2,350   |                                |   | 2,218  |   |      | 4,794   |   |   | 4,220   |  
|Selling, general, and administrative             |  |                                  | 13,542  |                                |   | 10,583 |   |      | 25,122  |   |   | 19,842  |  
|Provision for uncollectible accounts
 receivable |  |                                  | 510     |                                |   | 1,376  |   |      | 1,422   |   |   | 3,235   |  
|Legal                                            |  |                                  | 826     |                                |   | 1,288  |   |      | 1,082   |   |   | 2,498   |  
|Litigation settlement and related legal
 costs   |  |                                  | 3,698   |                                |   |       |   |      | 3,698   |   |   |        |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Total operating expenses                         |  |                                  | 33,227  |                                |   | 28,370 |   |      | 60,254  |   |   | 55,528  |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Operating loss                                   |  |                                  | (10,041 | )                              |   | (7,454 | ) |      | (11,903 | ) |   | (13,547 | )
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Other income
 (expense):                         |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Interest income                                  |  |                                  | 5       |                                |   | 142    |   |      | 14      |   |   | 552     |  
|Other                                            |  |                                  | (64     | )                              |   | 118    |   |      | (45     | ) |   | 151     |  
|Foreign currency loss                            |  |                                  | (110    | )                              |   | (373   | ) |      | (168    | ) |   | (955    | )
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Loss before income
 taxes                        |  |                                  | (10,210 | )                              |   | (7,567 | ) |      | (12,102 | ) |   | (13,799 | )
|Provision for
 income taxes                      |  |                                  | (118    | )                              |   | (106   | ) |      | (40     | ) |   | (243    | )
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Net loss                                         |  | $                                | (10,328 | )                              | $ | (7,673 | ) | $    | (12,142 | ) | $ | (14,042 | )
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Net loss per
 common share:                      |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Basic and Diluted                                |  | $                                | (0.27   | )                              | $ | (0.20  | ) | $    | (0.32   | ) | $ | (0.38   | )
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Weighted average
 common shares outstanding:     |  |                                  |         |                                |   |        |   |      |         |   |   |         |  
|Basic and Diluted                                |  |                                  | 37,899  |                                |   | 37,449 |   |      | 37,877  |   |   | 37,393  |  
|                                                 |  |                                  |         |                                |   |        |   |      |         |   |   |         |  

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

4

---



ENZO BIOCHEM, INC
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE LOSS
Six months ended January 31, 2010 
(UNAUDITED) 
(In thousands, except share data)

|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   |   |         |  
|----------------------------------------------- |  | ----------------- |  | ------------------- |  | --------------------- | --- | ---------------------------- | - | ----------------------- |  | -------------------- | ------- | ----------------------------------------- | - | ---------------------------- | - | ------------------- | --- |  | - | ------- | - | - | ------- | -
|                                                |  | CommonStockShares |  | TreasuryStockShares |  | Common
 Stock
 Amount |     | Additional
 Paid-in
 Capital |   | Treasury
 Stock
 Amount |  | Accumulated
 Deficit |         | Accumulated
 Other
 Comprehensive
 Income |   | Total
 Stockholders
 Equity |   | Comprehensive
 Loss |    
|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |    
|Balance at
 July 31, 2009                       |  | 38,589,880        |  | 735,554             |  | $                     | 386 |                              | $ | 306,280                 |  | $                    | (10,440 | )                                         | $ | (179,721                     | ) | $                   | 276 |  | $ | 116,781 |   |   |         |  
|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   |   |         |  
|Net loss
 for the period ended January 31, 2010 |  |                  |  |                    |  |                       |    |                              |   |                        |  |                      |        |                                           |   | (12,142                      | ) |                     |    |  |   | (12,142 | ) | $ | (12,142 | )
|Vesting of
 restricted stock                    |  | 128,020           |  |                    |  |                       | 1   |                              |   |                        |  |                      |        |                                           |   |                             |   |                     |    |  |   | 1       |   |   |        |  
|Stock based
 compensation charges               |  |                  |  |                    |  |                       |    |                              |   | 580                     |  |                      |        |                                           |   |                             |   |                     |    |  |   | 580     |   |   |        |  
|Foreign
 currency translation adjustments       |  |                  |  |                    |  |                       |    |                              |   |                        |  |                      |        |                                           |   |                             |   |                     | 260 |  |   | 260     |   |   | 260     |  
|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   |   |         |  
|Comprehensive
 loss                             |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   | $ | (11,882 | )
|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   |   |         |  
|Balance at
 January 31, 2010                    |  | 38,717,900        |  | 735,554             |  | $                     | 387 |                              | $ | 306,860                 |  | $                    | (10,440 | )                                         | $ | (191,863                     | ) | $                   | 536 |  | $ | 105,480 |   |   |         |  
|                                                |  |                   |  |                     |  |                       |     |                              |   |                         |  |                      |         |                                           |   |                              |   |                     |     |  |   |         |   |   |         |  

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

5

---



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

|                                                                             |  |                               |          |      |   |          |  
|---------------------------------------------------------------------------- |  | ----------------------------- | -------- | ---- | - | -------- | -
|                                                                             |  | Six Months Ended
 January 31, |         
|                                                                             |  | 2010                          |          | 2009 |  
|                                                                             |  |                               |          |      |  
|Cash flows from
 operating activities:                                       |  |                               |          |      |   |          |  
|Net loss                                                                     |  | $                             | (12,142  | )    | $ | (14,042  | )
|Adjustments to
 reconcile net loss to net cash used in operating activities: |  |                               |          |      |   |          |  
|Depreciation and amortization of property,
 plant and equipment              |  |                               | 1,359    |      |   | 990      |  
|Amortization of intangible assets                                            |  |                               | 828      |      |   | 532      |  
|Provision for uncollectible accounts receivable                              |  |                               | 1,422    |      |   | 3,235    |  
|Write off and/or reserve taken for obsolete
 inventory                       |  |                               | (42      | )    |   | 158      |  
|Deferred income tax benefit                                                  |  |                               | (126     | )    |   | (184     | )
|Share based compensation charges                                             |  |                               | 580      |      |   | 715      |  
|Deferred revenue recognized                                                  |  |                               | (225     | )    |   | (242     | )
|Foreign currency loss on intercompany loan                                   |  |                               | 77       |      |   | 881      |  
|Accrual for 401 (k) employer match                                           |  |                               | 735      |      |   | 643      |  
|                                                                             |  |                               |          |      |   |          |  
|Changes in
 operating assets and liabilities:                                |  |                               |          |      |   |          |  
|Accounts receivable                                                          |  |                               | (913     | )    |   | 871      |  
|Inventories                                                                  |  |                               | (666     | )    |   | 789      |  
|Prepaid expenses                                                             |  |                               | 300      |      |   | 981      |  
|Accounts payable  trade                                                     |  |                               | 621      |      |   | (796     | )
|Accrued liabilities                                                          |  |                               | 4,477    |      |   | 1,461    |  
|Other current liabilities                                                    |  |                               | (20      | )    |   | (156     | )
|Total adjustments                                                            |  |                               | 8,407    |      |   | 9,878    |  
|                                                                             |  |                               |          |      |   |          |  
|Net cash used in operating activities                                        |  |                               | (3,735   | )    |   | (4,164   | )
|                                                                             |  |                               |          |      |   |          |  
|                                                                             |  |                               |          |      |   |          |  
|Cash flows from investing
 activities:                                       |  |                               |          |      |   |          |  
|Purchases of short term investments                                          |  |                               | (118,917 | )    |   | (208,506 | )
|Maturities of short term investments                                         |  |                               | 125,914  |      |   | 144,054  |  
|Capital expenditures                                                         |  |                               | (2,044   | )    |   | (1,558   | )
|Decrease in security deposits and other
 assets                              |  |                               | 9        |      |   | 165      |  
|                                                                             |  |                               |          |      |   |          |  
|Net cash provided by (used in) investing
 activities                         |  |                               | 4,962    |      |   | (65,845  | )
|                                                                             |  |                               |          |      |   |          |  
|                                                                             |  |                               |          |      |   |          |  
|Cash flows from
 financing activities:                                       |  |                               |          |      |   |          |  
|Proceeds from the exercise of stock options                                  |  |                               |         |      |   | 348      |  
|                                                                             |  |                               |          |      |   |          |  
|Net cash provided by financing activities                                    |  |                               |         |      |   | 348      |  
|                                                                             |  |                               |          |      |   |          |  
|                                                                             |  |                               |          |      |   |          |  
|Effect of exchange
 rate changes on cash and cash equivalents                |  |                               | 1        |      |   | (181     | )
|                                                                             |  |                               |          |      |   |          |  
|                                                                             |  |                               |          |      |   |          |  
|Increase
 (decrease) in cash and cash equivalents                            |  |                               | 1,228    |      |   | (69,842  | )
|Cash and cash
 equivalents - beginning of period                             |  |                               | 6,929    |      |   | 78,322   |  
|                                                                             |  |                               |          |      |   |          |  
|Cash and cash
 equivalents - end of period                                   |  | $                             | 8,157    |      | $ | 8,480    |  
|                                                                             |  |                               |          |      |   |          |  

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

6

---



ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of January 31, 2010 
and for the six month period ended 
January 31, 2010 and 2009 
(Unaudited)

Note 1  Basis of Presentation

The
accompanying consolidated financial statements include the accounts of Enzo
Biochem, Inc. and its wholly-owned subsidiaries, Enzo Clinical Labs, Enzo Life
Sciences, Enzo Therapeutics and Enzo Realty LLC, collectively referred to as
the Company or Companies. The consolidated balance sheet as of January 31,
2010, the consolidated statement of stockholders equity and comprehensive loss
for the six months ended January 31, 2010, the consolidated statements of cash
flows for the six months ended January 31, 2010 and 2009, and the consolidated
statements of operations for the three and six months ended January 31, 2010
and 2009, are unaudited. In the opinion of management, all adjustments (which
include normal recurring adjustments) necessary to present fairly the financial
position and operating results for the interim periods have been made. Certain
information and footnote disclosure, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States, have been condensed or omitted. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements for the year ended July 31, 2009 and notes thereto contained in the
Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The consolidated balance sheet at July 31, 2009 has been derived
from the audited financial statements at that date. The results of operations
for the three and six months ended January 31, 2010 are not necessarily
indicative of the results that may be expected for the fiscal year ending July
31, 2010.

Recent Accounting Pronouncements

Effective
August 1, 2009, the Company adopted The Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC or Codification) of Generally
Accepted Accounting Principles  Overall. The Codification established one
source for all U.S. GAAP and became the source of authoritative accounting
principles for nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (SEC) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. The
Codification is not intended to change existing GAAP and as such did not have
an impact on the consolidated financial statements of the Company.

The adoption
of the following accounting standards and updates during the first six months
of fiscal 2010 did not result in a significant impact to our consolidated
financial statements.

On June 15,
2009, we adopted the accounting pronouncement that amends the requirements for
disclosures about fair value of financial instruments, regarding the fair value
of financial instruments for annual, as well as interim, reporting periods.
This pronouncement was effective prospectively for all interim and annual
reporting periods ending after June 15, 2009.

Effective
August 1, 2009, we adopted the revised accounting standard relating to business
combinations, including assets acquired and liabilities assumed arising from
contingencies. This standard requires the use of the acquisition method of
accounting, defines the acquirer, establishes the acquisition date and applies
to all transactions and other events in which one entity obtains control over
one or more other businesses. Upon our adoption of this standard, we will be
required to expense certain transaction costs and related fees associated with
business combinations that were previously capitalized. In addition, with the
adoption of this standard, changes to valuation allowances for acquired
deferred income tax assets and adjustments to unrecognized tax benefits
acquired generally are to be recognized as adjustments to income tax expense
rather than goodwill.

Effective
August 1, 2009, we adopted the accounting standard regarding the determination
of the useful life of intangible assets that removes the requirement to
consider whether an intangible asset can be renewed without substantial cost or
material modifications to the existing terms and conditions, and replaces it
with a requirement that an entity consider its own historical experience in
renewing similar arrangements, or a consideration of market participant
assumptions in the absence of historical experience. This standard also
requires entities to disclose information that enables users of financial
statements to assess the extent to which the expected future cash flows
associated with the asset are affected by the entitys intent and/or ability to
renew or extend the arrangements.

7

---



Reclassifications

Certain
amounts in fiscal 2009 have been reclassified to conform to current year
presentation. In Fiscal 2009, the Company reclassified certain payroll taxes
and employee benefits included in selling, general and administrative expense
to cost of sales. The payroll taxes and benefits reclassed were approximately $325,000
and $541,000, respectively for the three and six months ended January 31, 2009.

Note 2  Short-term Investments

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

The Company
has adopted the accounting pronouncement that establishes a common definition
for fair value to be applied to existing GAAP that require the use of fair
value measurements, establishes a framework for measuring fair value and
expands disclosure about such fair value measurements. The adoption of the
pronouncement did not have an impact on the Companys financial position or
operating results, but did expand certain disclosures.

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

| |          |                                                                                                                                    
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------
| | Level 1: | Observable
 inputs such as quoted market prices in active markets for identical assets or
 liabilities.                            
| |          |                                                                                                                                    
| | Level 2: | Observable
 market-based inputs or unobservable inputs that are corroborated by market
 data.                                      
| |          |                                                                                                                                    
| | Level 3: | Unobservable
 inputs for which there is little or no market data, which require the use of
 the reporting entitys own assumptions.

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

Note 3  Acquisitions

Assay Designs, Inc.

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

The execution
of the Purchase Agreement and the closing of the transaction occurred
simultaneously on March 12, 2009. The purchase price consisted of $12,228,000
in cash, exclusive of acquisition costs of approximately $540,000, and was
subject to an upward or downward post-closing purchase price adjustment based
on Assay Designs working capital as of the closing date, $100,000 of which
was held in escrow for approximately 60-90 days to secure the payment of any
downward post-closing purchase price adjustment and $750,000 of which will be
held in escrow for 12 months to secure the payment of any indemnification
obligations of Assay Designs under the Purchase Agreement. Subsequent to the
acquisition date, the Company paid $270,000 in additional purchase price in
connection with the working capital adjustment and released the $100,000 escrow
amount. The cost of the acquisition included costs to consolidate a leased
facility and the involuntary termination of certain employees, which occurred
during the measurement period. The Assay Designs Acquisition strengthens the
Companys position as a global provider of life sciences reagents by broadening
our product offerings and manufacturing capabilities.

8

---



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

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

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

The preliminary purchase price
allocation is based on managements estimate of acquired tangible and
intangible assets and will be adjusted based on the final valuation to be
completed within one year from the acquisition date. The excess of the total
purchase price over the fair value of the net assets acquired, including the
estimated fair value of the identifiable intangible assets, has been allocated
to goodwill.

9

---



Biomol International, L.P.

On May 8, 2008, Enzo Life Sciences, Inc. acquired substantially all of
the U.S. based assets and certain liabilities of Biomol International, LP
(Biomol LP) through a newly formed US subsidiary Biomol International, Inc.
and all of the stock of Biomols wholly-owned United Kingdom subsidiary,
Affinity Limited, through Axxora UK, a wholly-owned subsidiary of Enzo Life
Sciences, collectively referred to as Biomol for approximately $18.1 million
in cash and stock, subject to adjustment, exclusive of acquisition costs of
approximately $800,000 and two contingent earn-out payments accounted for as
additional purchase consideration if and when the contingencies are resolved
beyond a reasonable doubt. At closing, the purchase price was satisfied as
follows: $12.9 million in cash was paid to Biomol LP, issuance of 352,000
shares of Enzo common stock, at fair market value, to Biomol LP, $1.5 million
in cash was paid to an escrow agent for the two-year period following the
closing to satisfy any indemnification obligations of the sellers under the
Agreement and $550,000 was paid to an escrow agent, for the 60 day period
following the closing to satisfy any specified purchase price adjustments. The
$550,000 was released by the escrow agent in August 2008. The earn-outs of $2.5
million on each of the next two anniversaries of the acquisition date will be
based on attaining certain revenue and EBITDA targets, as defined. The
Agreement provides for the delivery of the earn-out statement within 75 days of
the respective anniversary dates. Biomol was a privately owned, closely held
global manufacturer and marketer of specialty life sciences research products.
Effective May 8, 2008, Biomol became a wholly-owned subsidiary of Enzo Life
Sciences. The acquisition was financed with the Companys cash and cash
equivalents and Enzo common stock. The consolidated financial statements
include the results of operations for Biomol from the date of acquisition.
Effective February 2, 2009, the names of Biomol International, Inc. and
Affinity Limited were changed to Enzo Life Sciences International, Inc. and
Enzo Life Sciences (UK) Ltd., respectively.

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

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

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

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

For financial reporting purposes, useful lives for the intangibles
acquired in the acquisitions have been assigned as follows:

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

10

---



The following unaudited pro forma financial information presents the
combined results of operations of the Company and the acquisition completed in
fiscal 2009 as if the acquisition had occurred as of August 1, 2008. The pro
forma financial information reflects appropriate adjustments primarily 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 acquisitions been completed at the
beginning of each period or future operating results of the consolidated
entities.

|                                                |  |                                       |        |                                       |   |         |  
|----------------------------------------------- |  | ------------------------------------- | ------ | ------------------------------------- | - | ------- | -
|In thousands (except per share amounts)         |  | Three months ended 
 January 31, 2009 |        | Six months 
 ended 
 January 31, 2009 |  
|                                                |  |                                       |        |                                       |  
|Net revenues                                    |  | $                                     | 23,365 |                                       | $ | 47,253  |  
|Net loss                                        |  |                                       | (8,018 | )                                     |   | (14,541 | )
|                                                |  |                                       |        |                                       |   |         |  
|Net loss per common share  basic and
 diluted: |  | $                                     | (0.21  | )                                     | $ | (0.39   | )
|                                                |  |                                       |        |                                       |   |         |  

Note 4  Net loss per share

Basic net income (loss) per share represents net income (loss) divided
by the weighted average number of common shares outstanding during the period.
The dilutive effect of potential common shares, consisting of outstanding stock
options and unvested restricted stock, is determined using the treasury stock
method. Diluted weighted average shares outstanding for the three and six
months ended January 31, 2010 and 2009 do not include the potential common
shares from stock options and unvested restricted stock because to do so would
have been antidilutive. Accordingly, basic and diluted net loss per share is
the same during these periods.

The following table summarizes the potential number of shares issued
from exercise of in the money stock options, net of shares repurchased with
the option exercise proceeds and potential shares from restricted stock awards,
which are excluded from the computation of diluted net loss per share.

|                                                                                                                                                                                     |  |                                  |   |                                |  |      |  |      |    |  |  |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | - | ------------------------------ |  | ---- |  | ---- | -- |  |  | -- | 
|                                                                                                                                                                                     |  | Three months ended 
 January 31, |   | Six months ended 
 January 31, | 
|(In thousands)                                                                                                                                                                       |  | 2010                             |   | 2009                           |  | 2010 |  | 2009 |   
|                                                                                                                                                                                     |  |                                  |   |                                |  |      |  |      |   
|Potential net shares, issued from exercise
 of in the money employee and director stock options and restricted stock
 awards, excluded from diluted net loss per share calculation |  |                                  |  |                                |  |     |  |      | 67 |  |  | 59 | 
|                                                                                                                                                                                     |  |                                  |   |                                |  |      |  |      |    |  |  |    | 

The following table summarizes the number of out of the money options
excluded from the computation of diluted net loss per share because the effect
of their potential exercise is anti-dilutive.

|                                                        |  |                                  |       |                                |  |       |  |      |       |  |  |       | 
|------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------ |  | ----- |  | ---- | ----- |  |  | ----- | 
|                                                        |  | Three months ended 
 January 31, |       | Six months ended 
 January 31, | 
|(In thousands)                                          |  | 2010                             |       | 2009                           |  | 2010  |  | 2009 |      
|                                                        |  |                                  |       |                                |  |       |  |      |      
|Out of the money employee and director
 stock options |  |                                  | 1,177 |                                |  | 1,783 |  |      | 1,177 |  |  | 1,907 | 
|                                                        |  |                                  |       |                                |  |       |  |      |       |  |  |       | 

Note 5  Share-based compensation

The following table
sets forth the amount of expense related to share-based payment arrangements
included in specific line items in the accompanying statements of operations:

|                                    |  |                                 |     |                               |   |      |  |      |     |  |   |     | 
|----------------------------------- |  | ------------------------------- | --- | ----------------------------- | - | ---- |  | ---- | --- |  | - | --- | 
|                                    |  | Three months ended
 January 31, |     | Six months ended
 January 31, |  
|In thousands                        |  | 2010                            |     | 2009                          |   | 2010 |  | 2009 |    
|                                    |  |                                 |     |                               |   |      |  |      |    
|Cost of product revenues            |  | $                               | 2   |                               | $ | 3    |  | $    | 5   |  | $ | 3   | 
|Research and development            |  |                                 | 3   |                               |   | 6    |  |      | 6   |  |   | 28  | 
|Selling, general and administrative |  |                                 | 253 |                               |   | 312  |  |      | 569 |  |   | 684 | 
|                                    |  |                                 |     |                               |   |      |  |      |     |  |   |     | 
|                                    |  | $                               | 258 |                               | $ | 321  |  | $    | 580 |  | $ | 715 | 
|                                    |  |                                 |     |                               |   |      |  |      |     |  |   |     | 

No excess tax benefits were recognized during the three and six month
periods ended January 31, 2010 and 2009.

11

---



Stock option plans

A summary of the activity relating to the Companys stock option plans
for the six month period ended January 31, 2010 is as follows:

|                                              |  |         |           |                                   |   |                            |  |   |   | 
|--------------------------------------------- |  | ------- | --------- | --------------------------------- | - | -------------------------- |  | - | - | 
|                                              |  | Options |           | Weighted
 Average
 Exercise Price |   | Aggregate
 Intrinsic Value | 
|                                              |  |         |           |                                   |   |                            | 
|Outstanding at August 1, 2009                 |  |         | 1,191,519 |                                   | $ | 14.41                      |  | $ |  | 
|                                              |  |         |           |                                   |   |                            |  |   |   | 
|Exercised                                     |  |         |          |                                   | $ |                            |  |   |   | 
|Cancelled                                     |  |         | (14,841   | )                                 | $ | 11.86                      |  |   |   | 
|                                              |  |         |           |                                   |   |                            |  |   |   | 
|Outstanding and exercisable at end of
 period |  |         | 1,176,678 |                                   | $ | 14.45                      |  | $ |  | 
|                                              |  |         |           |                                   |   |                            |  |   |   | 

As of January 31, 2010, there was no unrecognized compensation cost
related to unvested stock option-based compensation.

During the six months ended January 31, 2009, the Company received cash
proceeds of approximately $348,000 from the exercise of 44,586 stock options.
The aggregate intrinsic value of stock options exercised during the six months
ended January 31, 2009, including the non-cash transactions (Note 6) was
approximately $1.4 million.

Restricted Stock Awards

A summary of the activity pursuant to the Companys restricted stock
awards for the six months ended January 31, 2010 is as follows:

|                            |  |        |          |                                |   |       |  
|--------------------------- |  | ------ | -------- | ------------------------------ | - | ----- | -
|                            |  | Awards |          | Weighted
 Average
 Award Price |  
|                            |  |        |          |                                |  
|Unvested at August
 1, 2009 |  |        | 377,400  |                                | $ | 6.05  |  
|Awarded                     |  |        | 61,000   |                                | $ | 5.03  |  
|Vested                      |  |        | (128,020 | )                              | $ | (7.33 | )
|Forfeited                   |  |        | (2,100   | )                              | $ | (5.01 | )
|                            |  |        |          |                                |   |       |  
|Unvested at end of
 period  |  |        | 308,280  |                                | $ | 5.33  |  
|                            |  |        |          |                                |   |       |  

The fair value of a restricted stock award is determined based on the
closing stock price on the award date. As of January 31, 2010, there was
approximately $1.3 million of total unrecognized compensation cost related to
unvested restricted stock-based compensation to be recognized over a weighted
average remaining period of one and half years.

The total number of shares available for grant as stock options or
award as restricted stock is approximately 343,300 as of January 31, 2010.

Note 6  Supplemental disclosure for statement of cash flows

Supplemental information with respect to the Companys consolidated
statements of cash flows is as follows (In thousands):

|                 |  |                               |     |      |   |     | 
|---------------- |  | ----------------------------- | --- | ---- | - | --- | 
|                 |  | Six months ended
 January 31, |    
|                 |  | 2010                          |     | 2008 |  
|                 |  |                               |     |      |  
|Taxes paid  net |  | $                             | 147 |      | $ | 112 | 
|                 |  |                               |     |      |   |     | 

During the six
months ended January 31, 2009, certain officers of the Company exercised
206,576 stock options in a non-cash transaction. The officers surrendered
99,985 shares of previously acquired common stock to exercise the stock
options. The Company recorded approximately $1.1 million, the market value of
the surrendered shares, as treasury stock. There were no stock options
exercises during the six months ended January 31, 2010.

12

---



Note 7  Comprehensive loss and Accumulated Other Comprehensive Income

During the three months ended January 31, 2010 and 2009, total
comprehensive loss was approximately $11.0 million and $8.2 million,
respectively. During the six months ended January 31, 2010 and 2009, total
comprehensive loss was approximately $11.9 million and $16.1 million,
respectively.

Note 8- Inventories

At January 31, 2010 and July 31, 2009 inventories, net of reserves of
$1.0 million consist of:

|                  |  |                   |        |                |   |       | 
|----------------- |  | ----------------- | ------ | -------------- | - | ----- | 
|In 000s          |  | January 31,
 2010 |        | July 31,
 2009 |  
|                  |  |                   |        |                |  
|Raw materials     |  | $                 | 607    |                | $ | 499   | 
|Work in process   |  |                   | 2,260  |                |   | 1,801 | 
|Finished products |  |                   | 7,181  |                |   | 6,964 | 
|                  |  |                   |        |                |   |       | 
|                  |  | $                 | 10,048 |                | $ | 9,264 | 
|                  |  |                   |        |                |   |       | 

Note 9  Goodwill and intangible assets

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

|                              |  |                     |        |                      |   |       |  |   |        |  
|----------------------------- |  | ------------------- | ------ | -------------------- | - | ----- |  | - | ------ | -
|                              |  | Enzo Life
 Sciences |        | Enzo
 Clinical
 Labs |   | Total | 
|                              |  |                     |        |                      |   |       | 
|Balance August 1,
 2009       |  | $                   | 17,444 |                      | $ | 7,452 |  | $ | 24,896 |  
|Other                         |  |                     | 7      |                      |   |      |  |   | 7      |  
|Foreign currency
 translation |  |                     | (163   | )                    |   |      |  |   | (163   | )
|                              |  |                     |        |                      |   |       |  |   |        |  
|Balance January
 31, 2010     |  | $                   | 17,288 |                      | $ | 7,452 |  | $ | 24,740 |  
|                              |  |                     |        |                      |   |       |  |   |        |  

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

|                                      |  |                  |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|------------------------------------- |  | ---------------- | ------ | ------------------------- | - | ------- | - | ----- | ------ | ------------------------- | - | ------ |  | - | ------- | - | - | ------ | 
|                                      |  | January 31, 2010 |        | July 31, 2009             |  
|                                      |  |                  |        |                           |  
|                                      |  | Gross            |        | Accumulated
 Amortization |   | Net     |   | Gross |        | Accumulated
 Amortization |   | Net    | 
|                                      |  |                  |        |                           |   |         |   |       |        |                           |   |        | 
|Finite-lived intangible assets:       |  |                  |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Patents                               |  | $                | 11,027 |                           | $ | (10,091 | ) | $     | 936    |                           | $ | 11,027 |  |   | (10,030 | ) | $ | 997    | 
|Customer relationships                |  |                  | 12,072 |                           |   | (1,675  | ) |       | 10,397 |                           |   | 12,125 |  |   | (1,190  | ) |   | 10,935 | 
|Non-compete and employment agreements |  |                  | 474    |                           |   | (359    | ) |       | 115    |                           |   | 469    |  |   | (280    | ) |   | 189    | 
|Website and acquired content          |  |                  | 1,007  |                           |   | (419    | ) |       | 588    |                           |   | 1,005  |  |   | (303    | ) |   | 702    | 
|Licensed technology and other         |  |                  | 637    |                           |   | (229    | ) |       | 408    |                           |   | 588    |  |   | (83     | ) |   | 505    | 
|Indefinitely-lived intangible assets: |  |                  |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Trademarks                            |  |                  | 8,708  |                           |   |        |   |       | 8,708  |                           |   | 8,681  |  |   |        |   |   | 8,681  | 
|                                      |  |                  |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 
|Total                                 |  | $                | 33,925 |                           | $ | (12,773 | ) | $     | 21,152 |                           | $ | 33,895 |  | $ | (11,886 | ) | $ | 22,009 | 
|                                      |  |                  |        |                           |   |         |   |       |        |                           |   |        |  |   |         |   |   |        | 

At January 31, 2010, the weighted average useful life of finite-lived
intangible assets was approximately ten years.

13

---



Note 10  Accrued Liabilities and Other Current Liabilities

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

|                                                                              |  |                   |        |                |   |       | 
|----------------------------------------------------------------------------- |  | ----------------- | ------ | -------------- | - | ----- | 
|In 000s                                                                      |  | January 31,
 2010 |        | July 31,
 2009 |  
|                                                                              |  |                   |        |                |  
|Legal                                                                         |  | $                 | 2,542  |                | $ | 1,095 | 
|Payroll, benefits,
 and commissions                                           |  |                   | 3,872  |                |   | 2,737 | 
|Research and
 development                                                     |  |                   | 727    |                |   | 656   | 
|Professional fees                                                             |  |                   | 1,679  |                |   | 1,752 | 
|Litigation
 settlement                                                        |  |                   | 2,700  |                |   |      | 
|Other                                                                         |  |                   | 1,996  |                |   | 2,186 | 
|                                                                              |  |                   |        |                |   |       | 
|                                                                              |  | $                 | 13,516 |                | $ | 8,426 | 
|                                                                              |  |                   |        |                |   |       | 
|                                                                              |  |                   |        |                |   |       | 
|At January 31,
 2010 and July 31, 2009, other current liabilities consist of: |  |                   |        |                |   |       | 
|                                                                              |  |                   |        |                |   |       | 
|In 000s                                                                      |  | January 31, 2010  |        | July 31,2009   |  
|                                                                              |  |                   |        |                |  
|Deferred revenue                                                              |  |                   | 669    |                |   | 850   | 
|Other                                                                         |  |                   | 185    |                |   | 212   | 
|                                                                              |  |                   |        |                |   |       | 
|                                                                              |  | $                 | 854    |                | $ | 1,062 | 
|                                                                              |  |                   |        |                |   |       | 

Note 11 - Income taxes

At the end of each interim reporting period, the Company estimates its
effective income tax rate expected to be applicable for the full year. This
estimate is used to determine the income tax provision or benefit on a
year-to-date basis and may change in subsequent interim periods.

The Companys effective tax rate provision for the three months ended January
31, 2010 was 1.2% compared to 1.4% during the three months ended January 31,
2009. The tax provision for the three months ended January 31, 2010 and 2009
was based on state and local taxes, domestic and foreign tax for tax deductible
goodwill and indefinite lived intangibles, and book to tax differences for
acquired inventory.

The Companys effective tax rate provision for the six months ended
January 31, 2010 was 0.3% compared to 1.8% during the six months ended January
31, 2009. The tax provision for the six months ended January 31, 2010 and 2009
was based on state and local taxes, domestic and foreign tax for tax deductible
goodwill and indefinite lived intangibles, and book to tax differences for
acquired inventory.

The Companys effective tax rate for both periods 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. The
carryforward benefit cannot be recognized because of uncertainties relating to
future taxable income in terms of both its timing and its sufficiency, which
would enable the Company to realize the federal carryforward benefit.

The Company files a consolidated Federal income tax
    return. The Company files a combined, California, and New York State and
    City return with certain subsidiaries. Other subsidiaries file separate state
    and foreign tax returns. With few
exceptions, the periods that remain subject to examination are fiscal years
ended July 31, 2006 through 2009. In connection with a business combination,
the Company recorded as of May 31, 2007 approximately $300,000 for an uncertain
tax position, including accrued interest of $39,000, with respect to a deemed
dividend. During the six months ended January 31, 2010, the Company reduced the
balance of this liability by approximately $106,000 and recognized a
corresponding tax benefit as a result of the expiration of the statute of
limitations. The Companys policy is to recognize interest and penalties
accrued on any uncertain tax positions as a component of income tax expense.

Note 12  Royalty and licensing income

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). Digene Corporation was acquired by
QIAGEN. The license agreement with the Company was assigned to QIAGEN
Gaithersburg Inc. (Qiagen). The Agreement provides for the Company to receive
quarterly running royalties on the net sales of Qiagen products subject to the
license until the expiration of the patent in April 2018.

During the three months ended January 31, 2010 and 2009, the Company
recorded royalties from the Agreement of approximately $1.1 million and $1.2
million, respectively, and during the six months ended January 31, 2010 and
2009 recorded approximately $3.7 million and $3.5 million, respectively.

14

---



During both three months periods ended January 31, 2010 and 2009, the
Company recorded $0.7 million of royalties and license fee income under a
licensing agreement with Abbott Molecular, Inc. (Abbott) entered into in
fiscal 2007. During the six months ended January 31, 2010 and 2009, the Company
recorded $1.4 million and $1.3 million in royalties and license fee income
respectively, from this agreement.

Note 13  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.

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

Three months ended January 31, 2010

|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------ | - | - | ------- | -
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Product revenues                                 |  | $              | 10,767 |              |   |               |   |       |       |              |   |       |   | $ | 10,767  |  
|Royalty and license fee income                   |  |                | 1,839  |              |   |               |   |       |       |              |   |       |   |   | 1,839   |  
|Clinical laboratory services                     |  |                |       |              |   |               |   | $     | 10,580 |              |   |       |   |   | 10,580  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                | 12,606 |              |   |               |   |       | 10,580 |              |   |       |   |   | 23,186  |  
|Operating expenses:                              |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Cost of product revenues                         |  |                | 5,322  |              |   |               |   |       |       |              |   |       |   |   | 5,322   |  
|Cost of clinical laboratory
 services            |  |                |       |              |   |               |   |       | 6,979  |              |   |       |   |   | 6,979   |  
|Research and development                         |  |                | 1,714  |              | $ | 636            |   |       |       |              |   |       |   |   | 2,350   |  
|Provision for uncollectible
 accounts receivable |  |                |       |              |   |               |   |       | 510    |              |   |       |   |   | 510     |  
|Selling, general and administrative
 and legal   |  |                | 5,029  |              |   |               |   |       | 5,081  |              | $ | 4,258  |   |   | 14,368  |  
|Litigation settlement and related
 legal costs   |  |                |       |              |   |               |   |       |       |              |   | 3,698  |   |   | 3,698   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Total operating expenses                         |  |                | 12,065 |              |   | 636            |   |       | 12,570 |              |   | 7,956  |   |   | 33,227  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Operating income (loss)                          |  |                | 541    |              |   | (636           | ) |       | (1,990 | )            |   | (7,956 | ) |   | (10,041 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Other income (expense)                           |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Interest income                                  |  |                |       |              |   |               |   |       |       |              |   | 5      |   |   | 5       |  
|Other                                            |  |                | (80    | )            |   |               |   |       | 16     |              |   |       |   |   | (64     | )
|Foreign exchange loss                            |  |                | (110   | )            |   |               |   |       |       |              |   |       |   |   | (110    | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Income (loss) before income taxes                |  | $              | 351    |              | $ | (636           | ) | $     | (1,974 | )            | $ | (7,951 | ) | $ | (10,210 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Depreciation and amortization
 included above    |  | $              | 943    |              | $ | 14             |   | $     | 255    |              | $ | 32     |   | $ | 1,244   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Share-based compensation included
 in above:     |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Cost of product revenues                         |  | $              |       |              |   |               |   |       | 2      |              |   |       |   | $ | 2       |  
|Research and development                         |  |                | 3      |              | $ |               |   |       |       |              |   |       |   |   | 3       |  
|Selling, general and administrative and legal    |  |                | 33     |              |   |               |   | $     | 17     |              | $ | 203    |   |   | 253     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Total                                            |  | $              | 36     |              |   |               |   | $     | 19     |              | $ | 203    |   | $ | 258     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Capital expenditures                             |  | $              | 370    |              | $ |               |   | $     | 535    |              | $ | 11     |   | $ | 916     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  

15

---



Three months ended January 31, 2009

|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------ | - | - | ------ | -
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Product revenues                                 |  | $              | 9,497  |              | $ |               |   | $     |       |              | $ |       |   | $ | 9,497  |  
|Royalty and license fee income                   |  |                | 1,904  |              |   |               |   |       |       |              |   |       |   |   | 1,904  |  
|Clinical laboratory services                     |  |                |       |              |   |               |   |       | 9,515  |              |   |       |   |   | 9,515  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|                                                 |  |                | 11,401 |              |   |               |   |       | 9,515  |              |   |       |   |   | 20,916 |  
|Operating expenses:                              |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Cost of product revenues                         |  |                | 6,591  |              |   |               |   |       |       |              |   |       |   |   | 6,591  |  
|Cost of clinical laboratory
 services            |  |                |       |              |   |               |   |       | 6,314  |              |   |       |   |   | 6,314  |  
|Research and development                         |  |                | 1,236  |              |   | 982            |   |       |       |              |   |       |   |   | 2,218  |  
|Provision for uncollectible
 accounts receivable |  |                |       |              |   |               |   |       | 1,376  |              |   |       |   |   | 1,376  |  
|Selling, general, and
 administrative and legal  |  |                | 3,187  |              |   |               |   |       | 4,161  |              |   | 4,523  |   |   | 11,871 |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Total operating expenses                         |  |                | 11,014 |              |   | 982            |   |       | 11,851 |              |   | 4,523  |   |   | 28,370 |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Operating income (loss)                          |  |                | 387    |              |   | (982           | ) |       | (2,336 | )            |   | (4,523 | ) |   | (7,454 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Other income (expense):                          |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Interest income                                  |  |                |       |              |   |               |   |       | 12     |              |   | 130    |   |   | 142    |  
|Other                                            |  |                | 97     |              |   |               |   |       | 21     |              |   |       |   |   | 118    |  
|Foreign exchange loss                            |  |                | (373   | )            |   |               |   |       |       |              |   |       |   |   | (373   | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Income (loss) before income taxes                |  | $              | 111    |              | $ | (982           | ) | $     | (2,303 | )            | $ | (4,393 | ) | $ | (7,567 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Depreciation and amortization
 included above    |  | $              | 478    |              | $ | 13             |   | $     | 247    |              | $ | 30     |   | $ | 768    |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Share-based compensation included in above:      |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Cost of product revenues                         |  | $              |       |              | $ |               |   | $     | 3      |              | $ |       |   | $ | 3      |  
|Research and development                         |  |                | 6      |              |   |               |   |       |       |              |   |       |   |   | 6      |  
|Selling, general and administrative and legal    |  |                | 50     |              |   | 16             |   |       | 18     |              |   | 228    |   |   | 312    |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Total                                            |  | $              | 56     |              | $ | 16             |   | $     | 21     |              | $ | 228    |   | $ | 321    |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  
|Capital expenditures                             |  | $              | 368    |              | $ | 49             |   | $     | 342    |              | $ |       |   | $ | 759    |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |        |  

16

---



Six months ended January 31, 2010

|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------- | - | - | ------- | -
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Product revenues                                 |  | $              | 21,511 |              | $ |               |   | $     |       |              | $ |        |   | $ | 21,511  |  
|Royalty and
 license fee income                  |  |                | 5,150  |              |   |               |   |       |       |              |   |        |   |   | 5,150   |  
|Clinical
 laboratory services                    |  |                |       |              |   |               |   |       | 21,690 |              |   |        |   |   | 21,690  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                | 26,661 |              |   |               |   |       | 21,690 |              |   |        |   |   | 48,351  |  
|Operating
 expenses:                             |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of product
 revenues                        |  |                | 10,377 |              |   |               |   |       |       |              |   |        |   |   | 10,377  |  
|Cost of clinical
 laboratory services            |  |                |       |              |   |               |   |       | 13,759 |              |   |        |   |   | 13,759  |  
|Research and
 development                        |  |                | 3,490  |              |   | 1,304          |   |       |       |              |   |        |   |   | 4,794   |  
|Provision for
 uncollectible accounts receivable |  |                |       |              |   |               |   |       | 1,422  |              |   |        |   |   | 1,422   |  
|Selling, general,
 and administrative and legal  |  |                | 10,202 |              |   |               |   |       | 9,333  |              |   | 6,669   |   |   | 26,204  |  
|Litigation
 settlement and related legal costs   |  |                |       |              |   |               |   |       |       |              |   | 3,698   |   |   | 3,698   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total operating
 expenses                        |  |                | 24,069 |              |   | 1,304          |   |       | 24,514 |              |   | 10,367  |   |   | 60,254  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Operating income
 (loss)                         |  |                | 2,592  |              |   | (1,304         | ) |       | (2,824 | )            |   | (10,367 | ) |   | (11,903 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Other income
 (expense):                         |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Interest income                                  |  |                |       |              |   |               |   |       |       |              |   | 14      |   |   | 14      |  
|Other                                            |  |                | (77    | )            |   |               |   |       | 32     |              |   |        |   |   | (45     | )
|Foreign exchange
 loss                           |  |                | (168   | )            |   |               |   |       |       |              |   |        |   |   | (168    | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Income (loss)
 before income taxes               |  | $              | 2,347  |              | $ | (1,304         | ) | $     | (2,792 | )            | $ | (10,353 | ) | $ | (12,102 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Depreciation and
 amortization included above    |  | $              | 1,609  |              | $ | 27             |   | $     | 490    |              | $ | 61      |   | $ | 2,187   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Share-based
 compensation included in above:     |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Cost of product revenues                         |  | $              |       |              | $ |               |   | $     | 5      |              | $ |        |   | $ | 5       |  
|Research and development                         |  |                | 6      |              |   |               |   |       |       |              |   |        |   |   | 6       |  
|Selling, general and administrative and
 legal   |  |                | 65     |              |   |               |   |       | 42     |              |   | 462     |   |   | 569     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Total                                            |  | $              | 71     |              | $ |               |   | $     | 47     |              | $ | 462     |   | $ | 580     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  
|Capital
 expenditures                            |  | $              | 825    |              | $ |               |   | $     | 1,157  |              | $ | 62      |   | $ | 2,044   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |         |   |   |         |  

17

---



Six months ended January 31, 2009

|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|------------------------------------------------ |  | -------------- | ------ | ------------ | - | -------------- | - | ----- | ------ | ------------ | - | ------ | - | - | ------- | -
|                                                 |  | Life
 Sciences |        | Therapeutics |   | Clinical
 Labs |   | Other |        | Consolidated |  
|                                                 |  |                |        |              |   |                |   |       |        |              |  
|Revenues:                                        |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Product revenues                                 |  | $              | 19,474 |              | $ |               |   | $     |       |              | $ |       |   | $ | 19,474  |  
|Royalty and
 license fee income                  |  |                | 4,820  |              |   |               |   |       |       |              |   |       |   |   | 4,820   |  
|Clinical
 laboratory services                    |  |                |       |              |   |               |   |       | 17,687 |              |   |       |   |   | 17,687  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                | 24,294 |              |   |               |   |       | 17,687 |              |   |       |   |   | 41,981  |  
|Operating
 expenses:                             |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Cost of product
 revenues                        |  |                | 13,396 |              |   |               |   |       |       |              |   |       |   |   | 13,396  |  
|Cost of clinical
 laboratory services            |  |                |       |              |   |               |   |       | 12,337 |              |   |       |   |   | 12,337  |  
|Research and
 development                        |  |                | 2,435  |              |   | 1,785          |   |       |       |              |   |       |   |   | 4,220   |  
|Provision for
 uncollectible accounts receivable |  |                |       |              |   |               |   |       | 3,235  |              |   |       |   |   | 3,235   |  
|Selling, general,
 and administrative and legal  |  |                | 6,378  |              |   |               |   |       | 7,852  |              |   | 8,110  |   |   | 22,340  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Total operating
 expenses                        |  |                | 22,209 |              |   | 1,785          |   |       | 23,424 |              |   | 8,110  |   |   | 55,528  |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Operating income
 (loss)                         |  |                | 2,085  |              |   | (1,785         | ) |       | (5,737 | )            |   | (8,110 | ) |   | (13,547 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Other income
 (expense):                         |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Interest income                                  |  |                |       |              |   |               |   |       | 57     |              |   | 495    |   |   | 552     |  
|Other                                            |  |                | 130    |              |   |               |   |       | 21     |              |   |       |   |   | 151     |  
|Foreign exchange
 loss                           |  |                | (955   | )            |   |               |   |       |       |              |   |       |   |   | (955    | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Income (loss)
 before income taxes               |  | $              | 1,260  |              | $ | (1,785         | ) | $     | (5,659 | )            | $ | (7,615 | ) | $ | (13,799 | )
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Depreciation and
 amortization included above    |  | $              | 955    |              | $ | 23             |   | $     | 484    |              | $ | 60     |   | $ | 1,522   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Share-based
 compensation included in above:     |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Cost of product revenues                         |  | $              |       |              | $ |               |   | $     | 3      |              | $ |       |   | $ | 3       |  
|Research and development                         |  |                | 13     |              |   | 15             |   |       |       |              |   |       |   |   | 28      |  
|Selling, general and administrative and
 legal   |  |                | 64     |              |   | 16             |   |       | 94     |              |   | 510    |   |   | 684     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Total                                            |  | $              | 77     |              | $ | 31             |   | $     | 97     |              | $ | 510    |   | $ | 715     |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  
|Capital
 expenditures                            |  | $              | 569    |              | $ | 77             |   | $     | 894    |              | $ | 18     |   | $ | 1,558   |  
|                                                 |  |                |        |              |   |                |   |       |        |              |   |        |   |   |         |  

Note 14  Contingencies

1. On
April 30, 2009, Shahram K. Rabbani (Mr. Rabbani), former Secretary,
Treasurer and member of the board of directors of the Company and the former
President of Enzo Clinical Labs, Inc., in connection with the termination of
his employment, submitted a demand for arbitration and related statement of claim
to the American Arbitration Association. The statement of claim named the Company,
Dr. Elazar Rabbani, the Chairman of the Board and Chief Executive Officer of
the Company, and Barry W. Weiner, the President, Chief Financial Officer of the
Company and a member of the Board, as respondents
and alleged, among other things, claims relating to the termination of Mr. Rabbanis
employment as President of Clinical Labs. The statement of claim purported to
allege claims for breach of contract against the Company, unlawful retaliation
under the Sarbanes-Oxleys whistleblower statute (the Claims)
against the Company, Dr. Rabbani and Mr. Weiner, and tortious interference with
contract against Dr. Rabbani and Mr. Weiner. Mr. Rabbani sought damages of no
less than $10 million consisting of contractually prescribed severance payments
(approximately $2.5 million), plus additional base salary and bonus going
forward for several years, compensatory damages, and punitive damages,
including attorneys fees and costs in connection with these proceedings.

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

On January 28, 2010,
the Company reached an agreement with Mr. Rabbani, to settle all of
the Claims as well as all of his claims against Dr. Rabbani
    and Mr. Weiner.

18

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Under the
terms of the agreement, Mr. Rabbani discontinued all actions he
commenced against the Company, Dr. Rabbani and Mr. Weiner. In
exchange, the Company agreed to pay Mr. Rabbani a lump sum payment
of $2.7 million. The parties also agreed to execute mutual general releases.
During the three months ended January 31, 2010, the Company recorded a
settlement expense of approximately $3.7 million, consisting of the lump sum
payment of $2.7 million and approximately $1.0 million of legal expenses
incurred in connection with the Claims. Subsequent to January 31, 2010, the
parties executed the mutual general releases and the Company paid the
aforementioned settlement of $2.7 million.

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

Note 15  Subsequent Events

The Company
has evaluated events and transactions subsequent to January 31, 2010. No
subsequent events require recognition in the consolidated financial statements
or in the notes to the consolidated financial statements by the Company, except
for the update of the Contractual Obligations with respect to material changes
in minimum lease commitments. ( See Contractual Obligations in Item 2)

Item 2. 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 consolidated financial statements and related notes and
other information included elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

Our disclosure
and analysis in this report, including but not limited to the information
discussed in this Item 2, contain forward-looking information about our
Companys financial results and estimates, business prospects and products in
research that involve substantial risks and uncertainties. From time to time,
we also may provide oral or written forward-looking statements in other
materials we release to the public. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements
by the fact that they do not relate strictly to historic or current facts. They
use words such as anticipate, estimate, expect, project, intend, plan,
believe, will, and other words and terms of similar meaning in connection
with any discussion of future operations or financial performance. In
particular, these include statements relating to future actions, prospective
products or product approvals, future performance or results of current and
anticipated products, sales efforts, expenses, interest rates, foreign exchange
rates, intellectual property matters, the outcome of contingencies, such as
legal proceedings, and financial results.

We cannot
guarantee that any forward-looking statement will be realized, although we
believe we have been prudent in our plans and assumptions. Achievement of
future results is subject to risks, uncertainties and inaccurate assumptions.
Should known or unknown risks or uncertainties materialize, or should
underlying assumptions prove inaccurate, actual results could vary materially
from past results and those anticipated, estimated or projected. As a result,
investors are cautioned not to place undue reliance on any of our
forward-looking statements. Investors should bear this in mind as they consider
forward-looking statements.

We do not
assume any obligation to update or revise any forward-looking statement that we
make, even if new information becomes available or other events occur in the
future. We are also affected by other factors that may be identified from time
to time in our filings with the Securities and Exchange Commission, some of
which are set forth in Item 1A - Risk Factors in our Form 10-K filing for the
2009 fiscal year. You are advised to consult any further disclosures we make on
related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and
Exchange Commission. Although we have attempted to provide a list of important
factors which may affect our business, investors are cautioned that other
factors may prove to be important in the future and could affect our operating
results. You should understand that it is not possible to predict or identify
all such factors or to assess the impact of each factor or combination of
factors on our business. Consequently, you should not consider any such list to
be a complete set of all potential risks or uncertainties.

19

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Overview

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 13 in the notes to consolidated
financial statements):

Enzo Life Sciences
is a company that manufactures, develops and markets functional biology and
cellular biochemistry products and tools to research and pharmaceutical customers
world-wide and has amassed a large patent and technology portfolio. The
companys sources of revenues are from the direct sales of products consisting
of labeling and detection reagents for the genomics and sequencing markets and
royalty and licensing fee income. The pioneering platforms developed by Enzo
Life Sciences enable the development of a wide range of products in the
research products marketplace.

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

Enzo Clinical Labs
is a regional clinical laboratory serving the greater New York and New Jersey
medical community. The Company believes having clinical diagnostic services
allows us to capitalize firsthand on our extensive advanced molecular and
cytogenetic capabilities and the broader trends in predictive and personalized
diagnostics. We offer a menu of routine and esoteric clinical laboratory tests
or procedures used in general patient care by physicians to establish or
support a diagnosis, monitor treatment or medication, or search for an
otherwise undiagnosed condition. We operate a full-service clinical laboratory
in Farmingdale, New York, a network of 30 patient service centers throughout
greater New York and New Jersey, a stand alone stat or rapid response
laboratory in New York City, and a full-service phlebotomy department. Payments
for clinical laboratory testing services are made by the Medicare program,
healthcare insurers and patients.

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

Recent Developments

Assay Designs, Inc.

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

20

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The execution
of the Purchase Agreement and the closing of the transaction occurred
simultaneously on March 12, 2009. The purchase price consisted of $12,228,000
in cash exclusive of acquisition costs of approximately $540,000, subject to an
upward or downward post-closing purchase price adjustment based on Assay Designs
working capital as of the closing date, $100,000 of which will be held in
escrow for approximately 60-90 days to secure the payment of any downward
post-closing purchase price adjustment and $750,000 of which will be held in
escrow for 12 months to secure the payment of any indemnification obligations
of Assay Designs under the Purchase Agreement. Subsequent to the acquisition
date, the Company paid $270,000 in additional purchase price in connection with
the working capital adjustment and released the $100,000 escrow amount. The
cost of the acquisition included the cost to consolidate a leased facility and
the involuntary termination of certain employees, which occurred during the
measurement period.

The Assay
Designs acquisition strengthens the Companys position as a global provider of
life sciences reagents by broadening our product offerings and manufacturing
capabilities. Effective March 12, 2009, Assay Designs became a wholly-owned
subsidiary of Enzo Life Sciences. The acquisition was funded with the Companys
cash. The consolidated financial statements include the results of operations
for Assay Designs from the date of acquisition.

Biomol International L.P.

On May 8, 2008, Enzo Life
Sciences, Inc. acquired substantially all of the U.S. based assets and certain
liabilities of Biomol International, LP (Biomol LP) through a newly formed US
subsidiary Biomol International, Inc. and all of the stock of Biomols
wholly-owned United Kingdom subsidiary, Affinity Limited, through Axxora UK, a
wholly-owned subsidiary of Enzo Life Sciences, collectively referred to as
Biomol for approximately $18.1 million in cash and stock, subject to
adjustment, exclusive of acquisition costs of approximately $800,000 and two
contingent earn-out payments which will be accounted for as additional purchase
consideration over the next two years if and when the contingencies are
resolved beyond a reasonable doubt. At closing, the purchase price was
satisfied as follows: $12.9 million in cash was paid to Biomol LP, issuance of
352,000 shares of Enzo common stock, at fair market value, to Biomol LP, $1.5
million in cash was paid to an escrow agent for the two-year period following
the closing to satisfy any indemnification obligations of the sellers under the
Agreement and $550,000 was paid to an escrow agent, for the 60 day period
following the closing to satisfy any specified purchase price adjustments. The
$550,000 was released by the escrow agent in August 2008. The earn-outs of $2.5
million on each of the first two anniversaries of the acquisition date will be
based on attaining certain revenue and EBITDA targets, as defined. In June
2009, the conditions for the first annual earn-out of $2.5 million were met and
the Company recorded $2.5 million of additional goodwill. The Company issued
202,196 shares of Enzo common stock at fair value and paid $1.5 million in cash
to satisfy the $2.5 million earn-out liability.

21

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Results of
Operations
Three months ended January 31, 2010 as compared to January 31, 2009

Comparative Financial Data for the Three Months Ended January 31,

(In thousands)

|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|------------------------------------------------ |  | ---- | ------- | ---- | - | -------------------- | - | --------- | ------ | - |  | ---- | -
|                                                 |  | 2010 |         | 2009 |   | Increase
 (Decrease) |   | %
 Change |       
|                                                 |  |      |         |      |   |                      |   |           |       
|Revenues:                                        |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Product revenues                                 |  | $    | 10,767  |      | $ | 9,497                |   | $         | 1,270  |   |  | 13   | %
|Royalty and license fee income                   |  |      | 1,839   |      |   | 1,904                |   |           | (65    | ) |  | (3   | )
|Clinical laboratory services                     |  |      | 10,580  |      |   | 9,515                |   |           | 1,065  |   |  | 11   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Total revenues                                   |  |      | 23,186  |      |   | 20,916               |   |           | 2,270  |   |  | 11   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Operating expenses:                              |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Cost of product revenues                         |  |      | 5,322   |      |   | 6,591                |   |           | (1,269 | ) |  | (19  | )
|Cost of clinical laboratory services             |  |      | 6,979   |      |   | 6,314                |   |           | 665    |   |  | 11   |  
|Research and development                         |  |      | 2,350   |      |   | 2,218                |   |           | 132    |   |  | 6    |  
|Selling, general, and administrative             |  |      | 13,542  |      |   | 10,583               |   |           | 2,959  |   |  | 28   |  
|Provision for uncollectible accounts
 receivable |  |      | 510     |      |   | 1,376                |   |           | (866   | ) |  | (63  | )
|Legal                                            |  |      | 826     |      |   | 1,288                |   |           | (462   | ) |  | (36  | )
|Litigation settlement and related legal
 costs   |  |      | 3,698   |      |   |                     |   |           | 3,698  |   |  |     |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Total operating expenses                         |  |      | 33,227  |      |   | 28,370               |   |           | 4,857  |   |  | 17   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Operating loss                                   |  |      | (10,041 | )    |   | (7,454               | ) |           | (2,587 | ) |  | 35   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Other income (expense):                          |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Interest income                                  |  |      | 5       |      |   | 142                  |   |           | (137   | ) |  | (96  | )
|Other                                            |  |      | (64     | )    |   | 118                  |   |           | (182   | ) |  | (154 | )
|Foreign currency loss                            |  |      | (110    | )    |   | (373                 | ) |           | 263    |   |  | 71   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  
|Loss before income taxes                         |  | $    | (10,210 | )    | $ | (7,567               | ) | $         | (2,643 | ) |  | 35   |  
|                                                 |  |      |         |      |   |                      |   |           |        |   |  |      |  

Consolidated Results:

The 2010 period and the 2009 period refer to the three months ended
January 31, 2010 and 2009, respectively. The 2010 period includes the three
months results of ADI which was acquired on March 12, 2009.

Product revenues increased overall by $1.3 million in 2010 to $10.8
million as compared to the 2009 period. Our core product revenues demonstrated
organic growth of 7% or $0.5 million and the revenue from the recently acquired
ADI contributed acquisition growth of 27% or $2.6 million. Foreign currency
fluctuation positively affected revenues by $0.3 million. This overall growth
was impacted by declines in our low margin third-party distribution business of
$2.9 million of which one customer accounted for $2.1 million of the decline.

Royalty and license fee income during the 2010 period was $1.8 million
compared to $1.9 million in the 2009 period, a decrease of $0.1 million or 3%.
Royalties are primarily earned from the reported net sales of Qiagen products
subject to a license agreement and from a license agreement with Abbott. During
the 2010 period, the Company recognized royalties of approximately $1.1 million
from Qiagen and royalties and license fees under the Abbott License Agreement
of approximately $0.7 million. There are no direct expenses relating to royalty
and license fee income.

Clinical laboratory revenues during the 2010 period were $10.6 million
compared to $9.5 million in the 2009 period. The 2010 periods increase over
the 2009 period was $1.1 million or 11%. During the 2010 period revenue
increased due to higher service volume.

The cost of product revenues during the 2010 period was $5.3 million
compared to $6.6 million in the 2009 period, a decrease of $1.3 million or 19%.
The decrease is primarily due to the impact of $1.9 million in lower costs from
low margin third party distribution business, reduced fair value accounting
adjustments of $0.3 million in accordance with purchase accounting rules and
reclassification of $0.5 million in costs relating to the realignment of
manufacturing facilities and personnel. Such amounts in 2010 were partially
offset by product cost relating to ADI of $1.2 million. We believe that cost of
product revenues for future periods will be affected by, among other things,
the further integration of acquired businesses in addition to sales volumes,
competitive conditions and foreign currency rates.

22

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The cost of clinical laboratory services during the
    2010 period was $7.0 million as compared to $6.3 million in the 2009 period,
    an increase of $0.7 million or 11%. The Company incurred increased costs
    partially due to increased service volume in 2010. Increases occurred in
    reagent costs and supplies of $0.2 million, laboratory personnel costs of
    $0.2 million and outside reference lab costs of $0.2 million. Laboratory
    personnel costs increased primarily due to additional headcounts in phlebotomists
    to expand patient collection sites and other personnel to manage expanded
internal operations.

Research and development expenses were approximately $2.3 million
during the 2010 period, compared to $2.2 million in the 2009 period, an
increase of $0.1 million or 6%. The increase was principally attributed to
higher costs of $0.5 million at Enzo Life Sciences primarily from the acquired
ADI offset by $0.4 million in lower clinical trial and related activities at
the Therapeutics segment.

Selling, general and administrative expenses were approximately $13.5
million during the 2010 period as compared to $10.6 million in the 2009 period,
an increase of $2.9 million or 28%. The increase was primarily due to the net
increase at the Enzo Life Sciences segment of $1.8 million in the 2010 period
which included approximately $0.9 million of selling, general and
administrative expenses related to Assay Designs operations, the impact of
realigning manufacturing facilities and certain personnel of $0.5 million and
additional payroll costs. The Clinical Lab segments selling general and
administrative increased $0.9 million primarily due to increased payroll and
related benefits of $0.4 million, computer related costs of $0.2 million, and
other expenses of $0.3 million.

The provision for uncollectible accounts receivable, primarily relating
to the Clinical Labs segment was $0.5 million for the 2010 period as compared
to $1.4 million in the 2009 period, a decrease of $0.9 million or 63%. During
the 2009 period, the Company recorded a charge attributed to increased
provisions for the Clinical Labs legacy billing system, which was replaced in
August 2008, due to reduced collection efforts relating to the legacy billing
system, the correction of an immaterial error relating to fiscal 2008, and
increased provisions required based on changes in payer mix, offset by a
reduced requirement under the new billing system.

Legal expense was $0.8 million during the 2010 period compared to $1.3
million in the 2009 period, a decrease of $0.5 million or 36%, due to reduction
of $1.1 million in legal services provided relating to certain patent
litigation and general matters offset by approximately $0.6 million in
incremental legal costs incurred for proxy related matters in 2010.

Interest income was $5,000 during the 2010 period as compared to $0.1
million during the 2009 period. The interest income decrease during the 2010
period is attributed to the decline in interest rates in response to monetary
policy actions taken by the U.S. Federal Reserve. Furthermore, the Company had
higher average invested balances during the 2009 period. The Company earns
interest by investing primarily in short term US treasury bills, and money market
accounts.

In
connection with the litigation settlement with Mr. Shahram K. Rabbani to settle
all of his claims against the Company, and certain of its executive officers,
the Company agreed to pay a lump sum payment of $2.7 million. The Company
recorded a settlement expense of approximately $3.7 million, consisting of the
lump sum payment of $2.7 million and approximately $1.0 million of legal
expenses incurred in connection with the claims.

The loss on foreign currency was $0.1 million during
    the 2010 period, primarily due to a non-cash loss on an intercompany
    term loan denominated in British pounds sterling and the slight strengthening
    of other foreign currencies relative to the US dollar during the period and
    the impact that had on settled transactions during the period. During the
    2009 period, the loss on foreign currency transactions was $0.4 million primarily
    due to a non-cash loss on the intercompany term loan denominated in British
    pounds sterling. The British currency depreciated significantly against the
    US dollar during the 2009 period but only slightly in the 2010 period.

23

---



The Companys effective income tax rate provision
    for the 2010 period was 1.2% compared to 1.4% during the 2009 period. The
    tax provisions for the 2010 and 2009 periods were based on state and local
    taxes, domestic and foreign tax for tax deductible goodwill and indefinite
    lived intangibles, and book to tax differences for acquired inventory and
    differed from the expected net operating loss carry forward benefit at the
    U.S. federal statutory rate of 34% primarily due to the inability to recognize
    such benefit. The carry forward benefit cannot be recognized because of uncertainties
    relating to future taxable income, in terms of both its timing and its sufficiency.

Segment Results

The Life Sciences segments income before taxes was $0.4 million for
the 2010 period as compared to $0.1 million for the 2009 period. Product
revenues increased by $1.3 million in the 2010 period primarily due to the
contribution of product revenues from the March 2009 acquisition of Assay
Designs and organic growth from our core products which replaced low margin,
high volume distribution product revenues principally to one customer. Royalty
and license fee income decreased $0.1 million from the Qiagen agreement and the
Abbott license agreement. The segments gross margin increased $2.5 million to
$7.3 million. Gross profit margins increased to 58% from 42% due to favorable
impact from ADIs higher margin, which replaced lower margin revenue in 2009,
lower inventory fair value adjustments and realignment of personnel from
manufacturing to trading activity. The segments other operating expenses,
including selling, general and administrative, legal and research and
development, increased by approximately $2.3 million during the 2010 period
primarily due to the inclusion of Assay Designs expenses and the impact of the
aforementioned realignment of personnel. The segment experienced a non-cash
foreign currency loss of $0.1 million during the 2010 period resulting from the
impact that slightly strengthening foreign currencies had on settled
transactions and on an intercompany loan denominated in pounds sterling. In
aggregate, the inventory fair value adjustment and amortization of intangibles
negatively impacted the segment operating results in the 2010 period by $0.6
million.

The Clinical Laboratory segments loss before
    taxes was $2.0 million for the 2010 period as compared to a loss of $2.3
    million in the 2009 period. The revenue from laboratory services increased
    in the 2010 period by $1.1 million due to increased service volume. The gross
    profit of $3.6 million, which increased $0.4 million in 2010, was impacted
    by higher service volume in 2010 offset by the increase in the cost of laboratory
    services of $0.7 million. In the 2010 period, selling, general and administrative
    costs increased by approximately $0.9 million primarily due to increases
    in payroll and payroll related costs of $0.4 million and other operating
    costs of $0.5 million. The provision for uncollectible accounts receivable
    decreased by $0.9 million as compared to the 2009 period.

The Therapeutics segments loss before income taxes was approximately
$0.6 million for the 2010 period as compared to a loss of $1.0 million for the
2009 period. The decrease in the segment loss of $0.4 million was primarily due
to decreases in clinical trial activities of $0.3 million and salaries and
related costs of $0.1 million.

The Other segments loss before taxes for the 2010 period was
approximately $7.9 million as compared to $4.4 million in the 2009 period, an
increase of $3.5 million. The Other segments 2010 period loss reflects the
litigation settlement and related legal costs of $3.7 and an increase in
professional fees and consulting costs and public relations of $0.2 million
partially offset by a decrease in other operating expenses of $0.1 million.
Legal expenses decreased $0.3 million due to reduced services provided relating
to certain patent litigation activity and general matters offset by incremental
legal costs relating to proxy matters. Interest income declined $0.1 million
due to the decline in interest rates. The Company earns interest by investing
primarily in short term US government treasury bills, and money market
accounts.

24

---



Results of
Operations
Six months ended January 31, 2010 as compared to January 31, 2009

Comparative Financial Data for the Six Months Ended January 31,

(in thousands)

|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|------------------------------------------------ |  | ---- | ------- | ---- | - | --------------------- | - | -------- | ------ | - |  | ---- | -
|                                                 |  | 2010 |         | 2009 |   | Increase 
 (Decrease) |   | % Change |       
|                                                 |  |      |         |      |   |                       |   |          |       
|Revenues:                                        |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Product revenues                                 |  | $    | 21,511  |      | $ | 19,474                |   | $        | 2,037  |   |  | 10   | %
|Royalty and license fee income                   |  |      | 5,150   |      |   | 4,820                 |   |          | 330    |   |  | 7    |  
|Clinical laboratory services                     |  |      | 21,690  |      |   | 17,687                |   |          | 4,003  |   |  | 23   |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Total revenues                                   |  |      | 48,351  |      |   | 41,981                |   |          | 6,370  |   |  | 15   |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Operating expenses:                              |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Cost of product revenues                         |  |      | 10,377  |      |   | 13,396                |   |          | (3,019 | ) |  | (23  | )
|Cost of clinical laboratory services             |  |      | 13,759  |      |   | 12,337                |   |          | 1,422  |   |  | 12   |  
|Research and development                         |  |      | 4,794   |      |   | 4,220                 |   |          | 574    |   |  | 14   |  
|Selling, general, and administrative             |  |      | 25,122  |      |   | 19,842                |   |          | 5,280  |   |  | 27   |  
|Provision for uncollectible accounts
 receivable |  |      | 1,422   |      |   | 3,235                 |   |          | (1,813 | ) |  | (56  | )
|Legal                                            |  |      | 1,082   |      |   | 2,498                 |   |          | (1,416 | ) |  | (57  | )
|Litigation settlement and related legal
 costs   |  |      | 3,698   |      |   |                      |   |          | 3,698  |   |  |     |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Total operating expenses                         |  |      | 60,254  |      |   | 55,528                |   |          | 4,726  |   |  | 8    |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Operating loss                                   |  |      | (11,903 | )    |   | (13,547               | ) |          | 1,644  |   |  | 12   |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Other income (expense):                          |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Interest income                                  |  |      | 14      |      |   | 552                   |   |          | (538   | ) |  | (97  | )
|Other                                            |  |      | (45     | )    |   | 151                   |   |          | (196   | ) |  | (130 | )
|Foreign currency loss                            |  |      | (168    | )    |   | (955                  | ) |          | 787    |   |  | (82  | )
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  
|Loss before income taxes                         |  | $    | (12,102 | )    | $ | (13,799               | ) | $        | 1,697  |   |  | 12   |  
|                                                 |  |      |         |      |   |                       |   |          |        |   |  |      |  

Consolidated Results:

The 2010 period and the 2009 period refer to the six months ended
January 31, 2010 and 2009, respectively. The 2010 period includes the six
months results of ADI which was acquired on March 12, 2009.

Product revenues increased overall by $2.0 million in 2010 to $21.5
million as compared to the 2009 period. Our core product revenues demonstrated
organic growth of 4% or $0.6 million and the revenue from the recently acquired
ADI contributed acquisition growth of 27% or $5.3 million. Foreign currency
fluctuation positively affected revenues by $0.4 million. This overall growth
was partially offset by declines in our low margin third-party distribution
business of $5.4 million of which one customer accounted for $4.2 million of
the decline.

Royalty and license fee income during the 2010 period was $5.1 million
compared to $4.8 million in the 2009 period, an increase of $0.3 million or 7%.
Royalties are primarily earned from the reported net sales of Qiagen products
subject to a license agreement and from a license agreement with Abbott. During
the 2010 period, the Company recognized royalties of approximately $3.7 million
from Qiagen, an increase of approximately $0.2 million over the 2009 period,
and royalties and license fees under the Abbott License Agreement of
approximately $1.4 million, an increase of $0.1 million over the 2009 period.
There are no direct expenses relating to royalty and license fee income.

Clinical laboratory revenues during the 2010 period were $21.7 million
compared to $17.7 million in the 2009 period. The 2010 periods increase
over the 2009 period was $4.0 million or 23%. During the 2010 period revenue
increased due to higher service volume. During the 2009 period, revenues were
adversely affected by contractual adjustments of $2.3 million. These immaterial
contractual adjustments in 2009 related to computational errors that affected
the calculated expected reimbursement rate in fiscal 2008, 2007 and 2006 and
for periods prior to August 1, 2005 for the majority of payers and credits issued
which were not accrued for timely.

25

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The cost of product revenues during the 2010 period
    was $10.4 million compared to $13.4 million in the 2009 period, a decrease
    of $3.0 million or 23%. The decrease is primarily due to the impact of $4.6
    million in lower costs from low margin third-party distribution business,
    reduced fair value accounting adjustments of $0.6 million in accordance with
    purchase accounting rules and reclassification of $0.7 million in costs relating
    to the realignment of manufacturing facilities and personnel. Such amounts
    in 2010 were partially offset by product cost relating to ADI of $2.5 million
    and by the cost of sales of organic growth. We believe that cost of product
    revenues for future periods will be affected by, among other things, the
    further integration of acquired businesses in addition to sales volumes,
competitive conditions and foreign currency rates.

The cost of clinical laboratory services during the 2010 period was
$13.8 million as compared to $12.3 million in the 2009 period, an increase of
$1.4 million or 12%. The Company incurred increased costs partially due to
increased service volume in 2010. Increases occurred in reagent costs and
supplies of $0.5 million, laboratory personnel costs of $0.5 million and outside
reference lab costs of $0.4 million. Laboratory personnel costs increased
primarily due to additional headcounts in phlebotomists to expand patient
collection sites and other personnel to manage expanded internal operations.

Research and development expenses were approximately $4.8 million
during the 2010 period, compared to $4.2 million in the 2009 period, an
increase of $0.6 million or 14%. The increase was principally attributed to
higher costs of $1.1 million at Enzo Life Sciences primarily related to Assay
Designs offset by $0.5 million in lower clinical trial and related activities
and payroll costs at the Therapeutics segment.

Selling, general and administrative expenses were approximately $25.1
million during the 2010 period as compared to $19.8 million in the 2009 period,
an increase of $5.3 million or 27%. The increase was primarily due to the net
increase at the Enzo Life Sciences segment of $3.8 million in the 2010 period
which included approximately $2.0 million of selling, general and administrative
expenses related to Assay Designs operations, the impact of realigning
manufacturing facilities and certain personnel of $0.7 million, $0.4 million in
payroll and related marketing costs of $0.2 million. The Clinical Lab segments
selling general and administrative increased $1.5 million primarily due to
increased payroll and related benefits of $0.7 million, information technology
costs of $0.2 million, and other expenses of $0.4 million. These increases were
offset by a decrease in the Other segments selling general and administrative
of approximately $0.3 million, primarily due to decreases in payroll and
payroll related costs of $0.2 million.

The provision for uncollectible accounts receivable, primarily relating
to the Clinical Labs segment was $1.4 million for the 2010 period as compared
to $3.2 million in the 2009 period, a decrease of $1.8 million or 56%. During
the 2009 period, the Company recorded a charge attributed to increased
provisions for the Clinical Labs legacy billing system, which was replaced in
August 2008, due to reduced collection efforts relating to the legacy billing
system, the correction of an immaterial error relating to fiscal 2008, and
increased provisions required based on changes in payer mix, offset by a
reduced requirement under the new billing system.

Legal expense was $1.1 million during the 2010 period compared to $2.5
million in the 2009 period, a decrease of $1.4 million or 57%, due to reduction
in $1.5 million in legal services provided relating to certain patent litigation
matters and general matters and the reimbursement of $0.5 million in legal
costs under our insurance policy offset by approximately $0.6 million in
incremental legal costs incurred for proxy related costs in the three months
ended January 31, 2010.

Interest income was $14,000 during the 2010 period
    as compared to $0.6 million during the 2009 period. The interest income decrease
  during the 2010 period is attributed to the decline in interest rates in
  response to monetary policy actions taken by the U.S. Federal Reserve.
  Furthermore, the Company had higher average invested balances during the 2009
  period. The Company earns interest by investing primarily in short term US
  treasury bills, and money market accounts.

In
connection with the litigation settlement with Mr. Shahram K. Rabbani to settle
all of his claims against the Company, and certain of its executive officers,
the Company agreed to pay a lump sum payment of $2.7 million. The Company
recorded a settlement expense of approximately $3.7 million, consisting of the
lump sum payment of $2.7 million and approximately $1.0 million of legal
expenses incurred in connection with the claims (See Note 14).

The loss on foreign currency was $0.2 million during
    the 2010 period, due to a non-cash loss on an intercompany term loan
    denominated in British pounds sterling and the slight strengthening of other
    foreign currencies relative to the US dollar during the period and the impact
    that had on settled transactions during the period. During the 2009 period,
    the loss on foreign currency transactions was $1.0 million primarily due
    to a non-cash loss on the intercompany term loan denominated in British pounds
    sterling. The British currency depreciated significantly against the US dollar
    during the 2009 period but only slightly in the 2010 period.

26

---



The Companys effective income tax rate for the 2010 period was 0.3%
compared to 1.8% during the 2009 period. The tax provision for the 2010 and
2009 periods were based on state and local taxes, domestic and foreign tax for
tax deductible goodwill and indefinite lived intangibles, and book to tax
differences for acquired inventory and differed from the expected net operating
loss carry forward benefit at the U.S. federal statutory rate of 34% primarily
due to the inability to recognize such benefit. The carry forward benefit
cannot be recognized because of uncertainties relating to future taxable
income, in terms of both its timing and its sufficiency. In the 2010 period,
the Company recognized a benefit of $0.1 million primarily as a result of the
expiration of the statute of limitations for an uncertain tax position.

Segment Results

The Life Sciences segments income before taxes was $2.3 million for
the 2010 period as compared to $1.3 million for the 2009 period. Product
revenues increased by $2.0 million in the 2010 period primarily due to the
contribution of product revenues from the March 2009 acquisition of Assay
Designs and organic growth from our core products which replaced low margin,
high volume distribution product revenues principally to one customer. Royalty
and license fee income increased $0.3 million from the Qiagen agreement and the
Abbott license agreement. The segments gross margin of $16.3 million, which
increased $5.4 million in 2010, was negatively impacted by $0.3 million
representing the fair value adjustment attributed to the sale of inventory
acquired from Assay Designs. The remaining fair value adjustment attributed to
inventory acquired from Assay Designs of $0.1 million will negatively impact
gross margins in the third quarter of fiscal 2010. Gross profit margins
increased to 61% from 45% due to favorable impact from ADIs higher margin,
which replaced lower margin revenue in 2009, lower inventory fair value
adjustments and realignment of personnel from manufacturing to trading
activity. The segments other operating expenses, including selling, general
and administrative, legal and research and development, increased by
approximately $4.9 million during the 2010 period primarily due to the
inclusion of Assay Designs expenses of $2.8 million and the impact of the
aforementioned realignment of personnel of $0.7 million and payroll and related
costs of $0.4 million. The segment experienced a non-cash foreign currency loss
of $0.2 million during the 2010 period resulting from the impact that slightly
strengthening foreign currencies had on settled transactions and on an
intercompany loan denominated in pounds sterling. In aggregate, the inventory
fair value adjustment and amortization of intangibles negatively impacted the
segment operating results in the 2010 period by $1.1 million.

The Clinical Laboratory segments loss before
    taxes was $2.8 million for the 2010 period as compared to a loss of $5.7
    million in the 2009 period. The revenue from laboratory services increased
    in the 2010 period by $4.0 million due to increased service volume and during
    the 2009 period revenues were adversely affected by contractual adjustments
    of $2.3 million. The 2010 period gross profit of $7.9 million increased $2.6
    million over the 2009 period due to service volume increases and the impact
    the aforementioned $2.3 million contractual adjustment had on the 2009
    period gross profit. In the 2010 period, the selling, general and administrative
    costs increased by approximately $1.5 million primarily due to increases
    in payroll and payroll related costs of $0.7 million, information technology
    costs of $0.2 million, and other operating costs of $0.6 million. The provision
    for uncollectible accounts receivables decreased by $1.8 million as compared
    to the 2009 period. During the 2009 period, the Company recorded a charge
    attributed to increased provisions for the Clinical Labs legacy billing system,
    which was replaced in August 2008, due to reduced collection efforts relating
    to the legacy billing system, the correction of an immaterial error relating
    to fiscal 2008, and increased provisions required based on changes in payer
    mix, offset by a reduced requirement under the new billing system.

The Therapeutics segments loss before income taxes was approximately
$1.3 million for the 2010 period as compared to a loss of $1.8 million for the
2009 period. The decrease in the segment loss of $0.5 million was primarily due
to decreases in clinical trial activities of $0.3 million and decreases in
salaries and related costs of $0.2 million.

The Other segments loss before taxes for the
    2010 period was approximately $10.4 million as compared to $7.6 million in
    the 2009 period, an increase of $2.8 million. The Other segments 2010
    period loss reflects the litigation settlement of $3.7 million, a decrease
    in payroll and payroll related costs of $0.2 million, and an increase in
    professional fees and consulting costs and public relations of $0.1 million.
    Legal expenses decreased $1.2 million due to the reimbursement of $0.5 million
    in legal fees and reduced services provided relating to certain patent litigation
    activity and general matters, offset by incremental legal costs incurred
    for proxy related matters in 2010. Interest income declined $0.5 million
    due to the decline in interest rates. The Company earns interest by investing
    primarily in short term US government treasury bills, and money market accounts.

Liquidity and Capital Resources

At January 31, 2010, the Company had cash and cash equivalents of $8.2
million and short-term investments of $36.3 million, or $44.5 million in
aggregate as compared to $50.2 million at July 31, 2009. Short term investments
are in US Government treasury bills. The Company had working capital of $49.3
million at January 31, 2010 compared to $60.5 million at July 31, 2009. The
decrease in working capital was primarily the result of funding capital
expenditures and the 2010 period net loss.

27

---



Net cash used in operating activities for the six months ended January
31, 2010 was approximately $3.7 million as compared to $4.1 million for the six
months ended January 31, 2009. The decrease in net cash used in operating
activities in the 2010 period over the 2009 period of approximately $0.4
million was primarily due to the decrease in the period net loss of $1.9
million and by changes in operating assets and liabilities of $0.6 million,
partially offset by the effect of lower non-cash adjustments in the 2010 period
over the 2009 period aggregating $2.1 million.

Net cash provided by investing activities was approximately $5.0
million as compared to a use of cash of $65.8 million in the year ago period.
The change is primarily due to the net increase in short term investments in US
Government instruments of $64.5 million in the 2009 period. In the 2010 period
net maturities of short-term investments of $7 million were offset by capital
expenditures of $2 million.

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

Biomol International L.P.

On May 8, 2008, the Companys wholly-owned subsidiary, Enzo Life
Sciences, acquired substantially all of the U.S. based assets of Biomol
International, L.P. (Biomol) through Enzo Life Sciences newly-formed
subsidiary, Biomol International, Inc., and all of the outstanding capital stock
of Biomols two wholly owned United Kingdom subsidiaries through Enzo Life
Sciences wholly owned subsidiary, Axxora (UK) Ltd. (the Biomol Acquisition),
for a purchase price of $18 million, comprised of $15 million in cash, subject
to downward adjustment based on net asset value on the closing date, and $3
million of unregistered common stock of the Company. In addition, Biomol may be
entitled to receive a maximum of $5 million in earn-out payments over the next
two years, payable in two installments of $2.5 million on each of the next two
anniversaries of the closing date, if certain revenues and EBITDA targets for
the acquired business are attained. The earn-out payments, if any, will be
payable in a combination of cash and shares of the Companys common stock,
provided no more than 50% of the earn-out payments will be paid in stock. In
June 2009, the conditions for the first annual earn-out of $2.5 million were
met and the Company recorded $2.5 million of additional goodwill. The Company
issued 202,196 shares of Enzo common stock at fair value and paid $1.5 million
in cash to satisfy the $2.5 million earn-out liability.

The Company believes that its current cash position
    is sufficient for its foreseeable liquidity and capital resource needs over
    the next 12 months, including the settlement of the litigation described
    in Note 14 and any potential earn-out payments, although there can be no
    assurance that future events will not alter such view.

Contractual Obligations

There have been no material changes to our Contractual
Obligations reported in our Form 10-K for the fiscal year ended July 31, 2009,
except for the increase in future minimum lease obligations relating to our
corporate office. In connection with a lease amendment and extension, our
minimum lease commitments increased $5.6 million reflective of both a lease
extension and an increase in square feet. The increase in the presentation
periods (in thousands) based on the July 31, 2009 fiscal year end is: less than
    1 year: $0; 1-3 years: $0.5 million; 4-5 years: $0.7 million; and over 5
    years: $4.4 million. We are currently seeking to sublease the additional
    space, which aggregates $2.7 million in future rental costs, until such time
    it is needed by the Company

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

Critical Accounting Policies

The Companys discussion and analysis of its financial condition and
results of operations are based upon Enzo Biochem, Inc.s 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 ongoing basis, we evaluate our estimates,
including those related to contractual adjustments, 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.

28

---



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. During the three and six months ended
January 31, 2009, one customer in the Life Science segment represented $2.2
million and $4.3 million respectively of total product revenues.

Royalties

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

License fees and multiple element
arrangements

When evaluating multiple element arrangements, the Company considers
whether the components of the arrangement represent separate units of
accounting, which requires subjective determinations and requires management to
make judgments about the fair value of the individual elements and whether such
elements are separable from the other aspects of the contractual relationship.

Revenues  Clinical laboratory services

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

The following are tables of the Clinical Labs segments net revenues
and percentages by revenue category for the three and six months ended January
31, 2010 and 2009:

Clinical Labs net revenues

Net revenues

|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|----------------- |  | ------------------------------------- | ------ | ------------------------------------- |  | --------------- | - | ------- | ------ |  |  | --- | -
|                  |  | Three
 months ended
 January 31, 2010 |        | Three
 months ended
 January 31, 2009 | 
|                  |  |                                       |        |                                       | 
|                  |  | (In
 thousands)                       |        | (in
 %)                               |  | (In
 thousands) |   | (in
 %) |       
|                  |  |                                       |        |                                       |  |                 |   |         |       
|Revenue category  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|Medicare          |  | $                                     | 2,716  |                                       |  | 26              |   | $       | 2,300  |  |  | 25  |  
|Third-party payer |  |                                       | 4,681  |                                       |  | 44              |   |         | 4,686  |  |  | 49  |  
|Patient self-pay  |  |                                       | 2,020  |                                       |  | 19              |   |         | 1,558  |  |  | 16  |  
|HMOs             |  |                                       | 1,163  |                                       |  | 11              |   |         | 971    |  |  | 10  |  
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|Total             |  | $                                     | 10,580 |                                       |  | 100             | % | $       | 9,515  |  |  | 100 | %
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|Net revenues      |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|                  |  | Six
 months ended
 January 31, 2010   |        | Six
 months ended
 January 31, 2009   | 
|                  |  |                                       |        |                                       | 
|                  |  | (In
 thousands)                       |        | (in
 %)                               |  | (In
 thousands) |   | (in
 %) |       
|                  |  |                                       |        |                                       |  |                 |   |         |       
|Revenue category  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|Medicare          |  | $                                     | 5,570  |                                       |  | 26              |   | $       | 4,601  |  |  | 26  |  
|Third-party payer |  |                                       | 9,551  |                                       |  | 44              |   |         | 8,565  |  |  | 48  |  
|Patient self-pay  |  |                                       | 4,157  |                                       |  | 19              |   |         | 2,785  |  |  | 16  |  
|HMOs             |  |                                       | 2,412  |                                       |  | 11              |   |         | 1,736  |  |  | 10  |  
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  
|Total             |  | $                                     | 21,690 |                                       |  | 100             | % | $       | 17,687 |  |  | 100 | %
|                  |  |                                       |        |                                       |  |                 |   |         |        |  |  |     |  

The Company provides services to certain patients covered by various
third-party payers, including the Federal Medicare program. Laws and
regulations governing Medicare are complex and subject to interpretation for
which action for noncompliance includes fines, penalties and exclusion from the
Medicare programs. The Company believes that it is in compliance with all
applicable laws and regulations and is not aware of any pending or threatened
investigations involving allegations of potential wrongdoing.

Other than the Medicare program, one provider whose programs are
included in the Third-party payer and Health Maintenance Organizations
(HMOs) categories represented 25% of the Clinical Labs services net revenues
for the three months ended January 31, 2010 and 2009 and 26% for the six months
ended January 31, 2010 and 2009.

29

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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, 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 may negatively affect
our revenues per test.

During the three months ended January 31, 2010 and 2009, the
contractual adjustment percentages, determined using current and historical
reimbursement statistics, were 83.1% and 77.1%, respectively, of gross
billings. During the six months ended January 31, 2010 and 2009, the
contractual adjustment percentages, determined using current and historical
reimbursement statistics, were 82.8%, and 77.4%, respectively, of gross
billings. During the six months ended January 31, 2009 the Company also made a
$2.3 million adjustment increasing the contractual allowance to correct
immaterial errors in the computation of the contractual allowance percentages
affecting the periods August 1, 2005 through July 31, 2008 and periods prior to
August 1, 2005, and credits not recorded correctly. The adjustment increased
the 2009 periods loss before income tax by $2.3 million or $0.06 per share.

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 the
number of tests we perform. However, there can be no assurance that we can
increase the number of tests we perform or that if we do increase the number of
tests we perform, that we can maintain that higher number of tests performed,
or that an increase in the number of tests we perform would result in increased
revenue.

The Company estimates (by using a sensitivity analysis) that each 1%
point change in the contractual adjustment percentage could result in a change
in clinical laboratory services revenues of approximately $1,260,000, and
$763,000 for the six months ended January 31, 2010 and 2009, respectively, and
a change in the net accounts receivable of approximately $307,000 as of January
31, 2010. 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. Adjustments to our standard
fee schedule will impact the contractual adjustment recorded. Therefore, we are
unable to quantify the effect of contractual adjustment recorded during the
current period that relates 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 variance
 reimbursement analysis of current and historical claim settlement and
 reimbursement experience with payers;     
| |   |                                                                                                                              
| |  | an analysis of
 current gross billings and receivables by payer.                                                             

30

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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 laboratory segments net receivables are detailed by
billing category and as a percent to its total net receivables. At January 31,
2010 and July 31, 2009, approximately 44% and 40%, respectively, of the
Companys net accounts receivable relates to its clinical laboratory business,
which operates in the New York and New Jersey Metropolitan areas.

The Life Sciences segments accounts receivable, of which $2.0 million
or 30% and $2.1 million or 28% represents foreign receivables as of January 31,
2010 and July 31, 2009 respectively, includes royalty receivables of $1.7
million and $2.5 million, as of January 31, 2010 and July 31, 2009,
respectively, of which approximately $1.1 million and $1.9 million,
respectively is from Qiagen Corporation (Note 12).

Net accounts receivable

|                           |  |                          |        |                       |  |             |   |         |        |  |  |     |  
|-------------------------- |  | ------------------------ | ------ | --------------------- |  | ----------- | - | ------- | ------ |  |  | --- | -
|                           |  | As
 of
 January 31, 2010 |        | As
 of
 July 31, 2009 | 
|                           |  |                          |        |                       | 
|Billing category           |  | (In
 000s)              |        | (in
 %)               |  | (In
 000s) |   | (in
 %) |       
|                           |  |                          |        |                       |  |             |   |         |       
|Clinical Labs              |  |                          |        |                       |  |             |   |         |        |  |  |     |  
|Medicare                   |  | $                        | 944    |                       |  | 18          |   | $       | 1,113  |  |  | 22  |  
|Third party payers         |  |                          | 2,218  |                       |  | 42          |   |         | 2,003  |  |  | 40  |  
|Patient self-pay           |  |                          | 1,798  |                       |  | 34          |   |         | 1,635  |  |  | 32  |  
|HMOs                      |  |                          | 310    |                       |  | 6           |   |         | 303    |  |  | 6   |  
|                           |  |                          |        |                       |  |             |   |         |        |  |  |     |  
|Total clinical
 labs       |  | $                        | 5,270  |                       |  | 100         | % | $       | 5,054  |  |  | 100 | %
|                           |  |                          |        |                       |  |             |   |         |        |  |  |     |  
|Total life
 sciences       |  |                          | 6,736  |                       |  |             |   |         | 7,426  |  |  |     |  
|                           |  |                          |        |                       |  |             |   |         |        |  |  |     |  
|Total accounts
 receivable |  | $                        | 12,006 |                       |  |             |   | $       | 12,480 |  |  |     |  
|                           |  |                          |        |                       |  |             |   |         |        |  |  |     |  

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

|                                 |  |                    |        |                 |   |        |  
|-------------------------------- |  | ------------------ | ------ | --------------- | - | ------ | -
|In 000s                         |  | January
 31,
 2010 |        | July
 31,
 2009 |  
|                                 |  |                    |        |                 |  
|Beginning balance                |  | $                  | 4,786  |                 | $ | 886    |  
|Provision for
 doubtful accounts |  |                    | 1,422  |                 |   | 5,189  |  
|Write-offs, net                  |  |                    | (1,265 | )               |   | (1,289 | )
|                                 |  |                    |        |                 |   |        |  
|Ending balance                   |  | $                  | 4,943  |                 | $ | 4,786  |  
|                                 |  |                    |        |                 |   |        |  

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

The allowance for doubtful accounts includes the balances, after
receipt of the approved settlements from third party payers for the
insufficient diagnosis information received from the ordering physician, which
result in denials of payment and the uncollectible portion of receivables from
self payers, including deductibles and copayments, which are subject to credit
risk and patients ability to pay. During the three and six months ended
January 31, 2010 and 2009, the Company determined an allowance for doubtful
accounts less than 210 days and wrote off 100% of accounts receivable over 210
days, as it assumed those accounts are uncollectible, except for certain fully
reserved balances, principally related to Medicare. These accounts have not
been written off because the payers filing date deadline has not occurred or
the collection process has not been exhausted. The Companys collection
experience on Medicare receivables beyond 210 days has been insignificant. The
Company adjusts the historical collection analysis for recoveries, if any, on
an ongoing basis.

The Companys ability to collect outstanding receivables from third
party payers is critical to its operating performance and cash flows. The
primary collection risk lies with uninsured patients or patients for whom
primary insurance has paid but a patient portion remains outstanding. The
Company also assesses the current state of its billing functions in order to
identify any known collection or reimbursement issues in order to assess the
impact, if any, on the allowance estimates, which involves judgment. The
Company believes that the collectibility of its receivables is directly linked
to the quality of its billing processes, most notably, those related to
obtaining the correct information in order to bill effectively for the services
provided.

31

---



Should circumstances change (e.g. shift in payer mix, decline in
economic conditions or deterioration in aging of receivables), our estimates of
net realizable value of receivables could be reduced by a material amount.
During the three and six month periods ended January 31, 2010 versus 2009, our
bad debt expense decreased by $0.9 million and $1.8 million, respectively.
During the three and six month period ended January 31, 2009 period, the
Company recorded a charge of $1.5 million and $2.6 million, respectively
attributed to increased provisions for the Clinical Labs legacy billing system,
which was replaced in August 2008, due to reduced collection efforts relating
to the legacy billing system, increased provisions required based on changes in
payer mix, and the correction of an immaterial error in the allowance for
doubtful accounts relating to fiscal 2008. The Company is presently managing
two systems until the legacy system collection efforts are deemed completed.
Billing for laboratory services is complicated because of many factors,
especially: the differences between our standard gross fee schedule for all
payers and the reimbursement rates of the various payers we deal with, disparity
of coverage and information requirements among the various payers, and disputes
with payers as to which party is responsible for reimbursement.

The following table indicates the Clinical Labs aged gross receivables
by payer group (in thousands), which is prior to adjustment to gross
receivables for: 1) contractual adjustment, 2) fully reserved balances not yet
written off, and 3) other revenue adjustments.

|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|----------------------- |  | ------------- | ------ | - |  | ---------------- | - | - | ----- | ----------------------------- |  | --- | - | ---------------- | ------ | - |  | ------------- | - | - | ----- |  |  | --- | - | - | ----- |  |  | --- | -
|As of January 31, 2010  |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 Party Payers
 Amount   |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |      
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|1-30 days               |  | $             | 19,608 |   |  | 65               | % | $ | 2,992 |                               |  | 57  | % | $                | 10,130 |   |  | 67            | % | $ | 3,165 |  |  | 53  | % | $ | 3,321 |  |  | 90  | %
|31-60 days              |  |               | 4,300  |   |  | 14               | % |   | 473   |                               |  | 9   | % |                  | 2,234  |   |  | 15            | % |   | 1,220 |  |  | 20  | % |   | 373   |  |  | 10  | %
|61-90 days              |  |               | 2,263  |   |  | 8                | % |   | 372   |                               |  | 7   | % |                  | 1,013  |   |  | 7             | % |   | 866   |  |  | 15  | % |   | 12    |  |  |    | %
|91-120 days             |  |               | 1,519  |   |  | 5                | % |   | 218   |                               |  | 4   | % |                  | 642    |   |  | 4             | % |   | 654   |  |  | 12  | % |   | 5     |  |  |    | %
|121-150 days            |  |               | 670    |   |  | 2                | % |   | 177   |                               |  | 4   | % |                  | 472    |   |  | 3             | % |   | 19    |  |  |    | % |   | 2     |  |  |    | %
|Greater than 150 days*  |  |               | 1,661  |   |  | 6                | % |   | 999   |                               |  | 19  | % |                  | 621    |   |  | 4             | % |   | 37    |  |  |    | % |   | 4     |  |  |    | %
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 30,021 |   |  | 100              | % | $ | 5,231 |                               |  | 100 | % | $                | 15,112 |   |  | 100           | % | $ | 5,961 |  |  | 100 | % | $ | 3,717 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|As of July 31, 2009     |  | Total
 Amount |        | % |  | Medicare
 Amount |   | % |       | Third
 
 Party Payers
 Amount |  | %   |   | Self-pay
 Amount |        | % |  | HMOs
 Amount |   | % |      
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |      
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|1-30 days               |  | $             | 19,251 |   |  | 70               | % | $ | 3,193 |                               |  | 61  | % | $                | 9,695  |   |  | 73            | % | $ | 2,882 |  |  | 51  | % | $ | 3,481 |  |  | 99  | %
|31-60 days              |  |               | 4,508  |   |  | 17               | % |   | 894   |                               |  | 16  | % |                  | 1,957  |   |  | 15            | % |   | 1,635 |  |  | 29  | % |   | 22    |  |  | 1   | %
|61-90 days              |  |               | 1,783  |   |  | 6                | % |   | 256   |                               |  | 5   | % |                  | 680    |   |  | 5             | % |   | 836   |  |  | 15  | % |   | 11    |  |  |    | %
|91-120 days             |  |               | 1,019  |   |  | 4                | % |   | 249   |                               |  | 5   | % |                  | 483    |   |  | 4             | % |   | 280   |  |  | 5   | % |   | 7     |  |  |    | %
|121-150 days            |  |               | 340    |   |  | 1                | % |   | 134   |                               |  | 3   | % |                  | 202    |   |  | 2             | % |   |      |  |  |    | % |   | 4     |  |  |    | %
|Greater than 150 days** |  |               | 636    |   |  | 2                | % |   | 536   |                               |  | 10  | % |                  | 100    |   |  | 1             | % |   |      |  |  |    | % |   |      |  |  |    | %
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  
|Totals                  |  | $             | 27,537 |   |  | 100              | % | $ | 5,262 |                               |  | 100 | % | $                | 13,117 |   |  | 100           | % | $ | 5,633 |  |  | 100 | % | $ | 3,525 |  |  | 100 | %
|                        |  |               |        |   |  |                  |   |   |       |                               |  |     |   |                  |        |   |  |               |   |   |       |  |  |     |   |   |       |  |  |     |  

|   |                                                                          
|-- | -------------------------------------------------------------------------
|*  | Total includes
 $709 fully reserved over 210 days as of January 31, 2010.
|   |                                                                          
|** | Total includes
 $340 fully reserved over 210 days as of July 31, 2009.   

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.

In fiscal 2008, the
Company adopted the accounting pronouncement that prescribes a
more-likely-than-not threshold for the recognition and derecognition of tax
positions, provides guidance on the accounting for interest and penalties
relating to tax positions and requires that the cumulative effect of applying
the provisions of the pronouncement be reported as an adjustment to the opening
balance of retained earnings or other appropriate components of equity or net
assets in the statement of financial position. The Company did not have any
significant unrecognized tax positions and there was no material effect on our
financial condition or results of operations as a result of implementing the
pronouncement.

32

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Inventory

The Company values inventory at the lower of cost (first-in, first-out)
or market. Work-in-process and finished goods inventories consist of material,
labor, and manufacturing overhead. On a quarterly basis, we review inventory
quantities on hand and analyze the provision for excess and obsolete inventory
based on our estimate of sales forecasts based on sales history and anticipated
future demand. Our estimate of future product demand may not be accurate and we
may understate or overstate the provision for excess and obsolete inventory.
Accordingly, unanticipated changes in demand could have a significant impact on
the value of our inventory and results of operations. At January 31, 2010 and
July 31, 2009, our reserve for excess and obsolete inventory was $1.0 million.

Goodwill and Indefinite-Lived Intangibles

Goodwill, representing the cost of acquired businesses in excess of the
fair value of net assets acquired, and indefinite-lived intangibles are not
amortized, but are evaluated annually for impairment. The Company performs its
annual impairment test as of the first day of its fiscal fourth quarter or if
indicators of potential impairment exist. Goodwill is considered impaired if
the carrying amount of the reporting unit exceeds its estimated fair value. In
assessing the recoverability of goodwill, the Company reviews both quantitative
as well as qualitative factors to support its assumptions with regard to fair
value. The fair value of a reporting unit, which is based on geographic region,
is estimated using both a discounted cash flow model and a weighted average
multiple of earnings before interest and taxes from comparable companies. To
date, there have been no impairment charges recorded. As of May 1, 2009, one of
the Companys reporting units fair value exceeded its carrying value by 10%.
This reporting units goodwill was $5.3 million at the date of our annual
impairment test. In determining fair value, the Company makes certain
judgments, including the identification of reporting units and the selection of
comparable companies. If these estimates or their related assumptions change in
the future as a result of changes in strategy and/or market conditions, the
Company may be required to record an impairment charge.

Intangible Assets

Intangible assets (exclusive of patents), arose primarily from
acquisitions and primarily consist of customer relationships, trademarks,
licenses, employment and non-compete agreements, and website and database
content. Finite-lived intangible assets are amortized according to their
estimated useful lives, which range from 4 to 15 years. The Company has
capitalized certain legal costs directly incurred in pursuing patent
applications as patent costs. When such applications result in an issued
patent, the related costs are amortized over a ten year period or the life of
the patent, whichever is shorter, using the straight-line method. The Company
reviews its issued patents and pending patent applications, and if it
determines to abandon a patent application or that an issued patent no longer
has economic value, the unamortized balance in deferred patent costs relating
to that patent is immediately expensed.

Recent Accounting Pronouncements

Effective August 1, 2009, the Company adopted The Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC or Codification)
of Generally Accepted Accounting Principles  Overall. The Codification
established one source for all U.S. GAAP and became the source of authoritative
accounting principles for nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. The Codification is not intended to change existing GAAP and as
such did not have an impact on the consolidated financial statements of the
Company.

The adoption of the following accounting standards and updates during
the first three months of fiscal 2010 did not result in a significant impact to
our consolidated financial statements.

On June 15, 2009, we adopted the accounting pronouncement that amends
the requirements for disclosures about fair value of financial instruments,
regarding the fair value of financial instruments for annual, as well as interim,
reporting periods. This pronouncement was effective prospectively for all
interim and annual reporting periods ending after June 15, 2009.

33

---



Effective August 1, 2009, we adopted the revised accounting standard
relating to business combinations, including assets acquired and liabilities
assumed arising from contingencies. This standard requires the use of the
acquisition method of accounting, defines the acquirer, establishes the
acquisition date and applies to all transactions and other events in which one
entity obtains control over one or more other businesses. Upon our adoption of
this standard, we will be required to expense certain transaction costs and
related fees associated with business combinations that were previously
capitalized. In addition, with the adoption of this standard, changes to
valuation allowances for acquired deferred income tax assets and adjustments to
unrecognized tax benefits acquired generally are to be recognized as
adjustments to income tax expense rather than goodwill.

Effective August 1, 2009, we adopted the accounting standard regarding
the determination of the useful life of intangible assets that removes the
requirement to consider whether an intangible asset can be renewed without
substantial cost or material modifications to the existing terms and
conditions, and replaces it with a requirement that an entity consider its own
historical experience in renewing similar arrangements, or a consideration of
market participant assumptions in the absence of historical experience. This
standard also requires entities to disclose information that enables users of
financial statements to assess the extent to which the expected future cash
flows associated with the asset are affected by the entitys intent and/or
ability to renew or extend the arrangements.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in foreign currency exchange
rates and, to a much lesser extent, interest rates on investments in short-term
instruments, which 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 2009 fiscal
year.

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 January
31, 2010, our assets and liabilities would increase or decrease by $2.0 million
and $0.9 million, respectively, and our net sales and net (loss) or earnings
would increase or decrease by $1.5 million and $0.6 million, respectively, on
an annual basis.

We also maintain intercompany balances and loans receivable with
subsidiaries with different local currencies. These amounts are at risk of
foreign exchange losses if exchange rates fluctuate. Assuming a hypothetical
aggregate change of 10% in the exchange rates of foreign currencies against the
U.S. dollar at January 31, 2010, our pre-tax earnings would be favorably or
unfavorably impacted by approximately $0.4 million, on an annual basis.

Interest Rate Risk

Our excess cash is invested in highly liquid short term money market
funds and short term investments in US Government agency discount notes with
high credit ratings. Changes in interest rates may affect the investment income
we earn on money market funds and short term investments and therefore affect
our cash flows and results of operations. As of January 31, 2010, we were
exposed to interest rate change market risk with respect to our money market
accounts and short term investments totaling $39.1 million. The money market
accounts and short-term investments yield or bear interest rates ranging from
0% to 0.5%. Each 100 basis point (or 1%) fluctuation in interest rates will
increase or decrease interest income on the money market funds and short-term
investments by approximately $0.4 million on an annual basis.

As of January 31, 2010, we did not maintain any fixed or variable
interest rate financing.

34

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Item 4. Controls
and Procedures

(a)
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Companys
management conducted an evaluation (as required under Rules 13a-15(b) and
15d-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) of the Companys disclosure controls and procedures (as such term is
defined under the Exchange Act), under the supervision and with the
participation of the principal executive officer and the principal financial
officer. Based on this evaluation, the principal executive officer and the
principal financial officer concluded that the Companys disclosure controls
and procedures are effective as of the end of the period covered by this
report, 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. Notwithstanding the
foregoing, a control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that it will detect or uncover
failures within the Company to disclose material information otherwise required
to be set forth in the Companys periodic reports.

(b) Changes
in Internal Controls over Financial Reporting

There was no change in the Companys internal controls over financial
reporting during the fiscal quarter covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

PART
II  OTHER INFORMATION

|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

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

On January
28, 2010, the Company and Mr. Rabbani reached a settlement in the arbitration
lawsuit brought by Mr. Rabbani in connection with the termination of Mr.
Rabbanis employment, as previously disclosed in the Companys Annual Report on
Form 10-K for the year ended July 31, 2009. For a full description regarding
this settlement, please see Note 14 to the financial statements in Part 1, Item
1 of this Form 10-Q.

There have
been no other material developments with respect to other previously reported
legal proceedings discussed in the annual report on Form 10-K for the fiscal
year ended July 31, 2009 filed with the Securities and Exchange Commission.

|         |             
|-------- | ------------
|Item 1A. | Risk Factors

There have been no material changes from the risk factors disclosed in
Part 1, Item 1, of the Companys Annual Report on Form 10-K for the fiscal year
ended July 31, 2009.

35

---



|        |                  
|------- | -----------------
|Item 5. | Other Information

(a) The Annual Meeting of Shareholders was held on January 29, 2010.

(b) The following matters were voted upon and the results were as
follows:

(1) Mr. Irwin C. Gerson, Mr. Gregory M. Bortz, and Dr. Stephen B. H.
Kent were nominated by management and elected by the shareholders to serve as a
Class I Directors until the 2013 Annual Meeting of Shareholders or until their
respective successors have been duly elected and qualified. The shareholders
voted as follows:

|                |             |          
|--------------- | ----------- | ---------
|                | Affirmative | Withheld 
|                |             |          
|Irwin C. Gerson | 21,573,755  | 4,750,900
|                |             |          
|Gregory Bortz   | 23,970,273  | 2,354,382
|                |             |          
|Stephen B. Kent | 23,968,597  | 2,356,058

(2) The shareholders voted 33,601,116 shares in the affirmative with
respect to the ratification of Ernst & Young LLP as the Companys
independent auditors for the fiscal year ending July 31, 2010, 1,998,033 shares
against and 61,743 shares abstained.

SIGNATURES

Pursuant to the requirements 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. |                                                                               
|                      |                    |                                                                               
|                      | (Registrant)       |                                                                               
|                      |                    |                                                                               
|Date: March 12,
 2010 | by:                | /s/ Barry Weiner                                                              
|                      |                    |                                                                               
|                      |                    | Chief Financial
 Officer, Principal Accounting Officer, Treasurer and Director

36

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