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

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

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

Enzo Life Sciences is a company that manufactures, develops and markets biomedical research products and tools to research and pharmaceutical customers around the world and has amassed a large patent and technology portfolio. The company's sources of revenue have been from the direct sales of products consisting of labeling and detection reagents for the genomics and sequencing markets, as well as through non-exclusive distribution agreements with other companies, and royalty and licensing 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 for its manufacturing, in-licensing, and commercialization of over 8,000 innovative high quality research reagents in key research areas. The division is an established source for a comprehensive panel of products to scientific experts in the fields of gene expression, non-radioactive labeling and detection, adipokines and obesity, apoptosis, bioactive lipids, cell cycle, cytoskeletal research, DNA damage and repair, epigenetic immunology and cancer research, inflammation, neurobiology, nitric oxide & oxidative stress, and signal transduction.

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.

Enzo Clinical Labs is a regional clinical laboratory to the greater New York and New Jersey medical community. The Company believes having this capability allows us to capitalize firsthand on our extensive advanced molecular and cytogenetic capabilities and the broader trends in predictive diagnostics. We offer a menu of routine and esoteric clinical laboratory tests or procedures used in general patient care by physicians to establish or support a diagnosis, monitor treatment or medication, or search for an otherwise undiagnosed condition. We operate a full-service clinical laboratory in Farmingdale, New York, a network of 23 patient service centers, 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. Fees billed to patients, Medicare, and third party payers are billed on the laboratory's standard gross fee schedule, subject to any limitations on fees negotiated with the third party payers or with the ordering physicians on behalf of their patients.

       Fiscal year ended July 31,           2008               2007               2006
                                      ----------------   ----------------   ----------------
       Product revenues               $ 28,087      36 % $  6,658      13 % $  4,750      12
       Royalty and license fees          7,630      10      5,820      11      3,150       8
       Clinical laboratory services     42,078      54     40,430      76     31,926      80
                                      - ------   - ---   - ------   - ---   - ------   - ---
       Total                          $ 77,795     100 % $ 52,908     100 % $ 39,826     100
                                      - ------   - ---   - ------   - ---   - ------   - ---

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

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

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

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 by 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 contingent 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 one-year period following the closing to satisfy any indemnification obligations of the sellers under the Agreement and $550,000 was paid to an escrow agent, for the 60 day period following the closing to satisfy any specified purchase price adjustments. The $550,000 was released by the escrow agent in August 2008. The earn-outs of $2.5 million on each of the next two anniversaries of the acquisition date will be based on attaining certain revenue targets and EBITDA, as defined. Biomol was a privately owned, closely held global manufacturer and marketer of specialty life sciences research products. Effective May 8, 2008, Biomol became a wholly-owned subsidiary of Enzo Life Sciences. The acquisition was financed with the Company's cash and cash equivalents and Enzo common stock. The consolidated financial statements presented herein include the results of operations for Biomol from the date of acquisition.

Comparative Financial Data for the Fiscal Years Ended July 31,

                                         Increase                               Increase
                              2008     (Decrease)    % Change        2007     (Decrease)    % Change        2006
                         --------- - ------------ - --------- - --------- - ------------ - --------- - ---------

Revenues:

Product revenues         $  28,087   $     21,429      322      $   6,658   $      1,908       40      $   4,750

Royalty and license
fee income                   7,630          1,810       31          5,820          2,670       85          3,150

Clinical laboratory
services                    42,078          1,648        4         40,430          8,504       27         31,926
                         - -------   -- ---------               - -------   -- ---------               - -------

Total revenue               77,795         24,887       47         52,908         13,082       33         39,826
                         - -------   -- ---------               - -------   -- ---------               - -------

Costs and expenses and
other (income):

Cost of product
revenues                    19,159         14,125      281          5,034          2,634      110          2,400

Cost of laboratory
services                    21,063          2,864       16         18,199          4,282       31         13,917

Research and
development                  8,637           (756 )     (8 )        9,393          1,497       19          7,896

Selling, general and
administrative              34,418          8,118       31         26,300          1,555        6         24,745
Provision for
uncollectible accounts
receivables                  3,716           (937 )    (20 )        4,653          1,020       28          3,633

Legal expenses               5,588         (4,707 )    (46 )       10,295          2,907       39          7,388

Interest income             (3,696 )        1,396       27         (5,092 )       (1,948 )     62         (3,144 )

Other income                  (198 )        2,501       93         (2,699 )       (2,699 )      -              -
                         - -------   -- ---------               - -------   -- ---------               - -------

Total costs and
expenses                    88,687         22,604       34         66,083          9,248       16         56,835
                         - -------   -- ---------               - -------   -- ---------               - -------

(Loss) before income
taxes                    $ (10,892 ) $      2,283               $ (13,175 ) $      3,834               $ (17,009 )
                         - -------   -- ---------               - -------   -- ---------               - -------

The "2008 period" and the "2007 period" refer to the fiscal years ended July 31, 2008 and 2007, respectively. The 2008 period includes the full year results of Axxora which was acquired on May 31, 2007 and the results of Biomol from the May 8, 2008, date of acquisition, to July 31, 2008.

Product revenues during the 2008 period were $28.1 million compared to $6.7 million in the year ago period, an increase of $21.4 million or 322%. The 2008 period increase is primarily due to the contribution of product revenues from the Axxora and Biomol acquisitions.

Royalty and license fee income during the 2008 period was $7.6 million compared to $5.8 million in the 2007 period, an increase of $1.8 million or 31%. Royalties are earned from the reported net sales of Qiagen products subject to a license and from a License Agreement with Abbott which was entered into in the third quarter of fiscal 2007. During the 2008 period, the Company recognized royalties of approximately $5.5 million from Qiagen, an increase of approximately $0.7 million over the prior year ago period, and royalties and license fees under the Abbott License Agreement of approximately $2.1 million, an increase of approximately $1.1 million over the year ago period. There are no expenses relating to royalty and license fee income.

The cost of product revenues during the 2008 period was $19.1 million compared to $5.0 million in the 2007 period, an increase of $14.1 million. The increase is primarily due to the full year impact of Axxora's and the partial period of Biomol's cost of product revenues of approximately $13.0 million and $1.6 million, respectively for the 2008 period, which includes the impact of an inventory fair value adjustment of $2.0 million related to sales of inventory acquired from Axxora and Biomol offset by decreases at Enzo Life Sciences - New York.

The cost of clinical laboratory services during the 2008 period was $21.1 million as compared to $18.2 million in the prior period, an increase of $2.9 million or 16%. Due to the increased volume of patients serviced and tests performed, the Company incurred increased costs primarily relating to reagent costs of $1.4 million, laboratory personnel costs of $1.1 million, outside reference lab costs of $0.1 million, and other related laboratory costs of $0.2 million.

Research and development expenses were approximately $8.6 million during the 2008 period, compared to $9.4 million in the 2007 period, a decrease of $0.8 million or 8%. The decrease was due to a decrease of $0.9 million relating to the timing of clinical trial and related activities at the Therapeutics segment, a decrease of $0.3 million in research supplies and related costs at Enzo Life Sciences - New York, offset by the increase in research and development incurred by Axxora and Biomol of $0.4 million.

Selling, general and administrative expenses were approximately $34.4 million during the 2008 period as compared to $26.3 million in the 2007 period, an increase of $8.1 million or 31%. Included in the 2008 period is approximately $6.8 million of selling, general and administrative expenses increases related to the full year of Axxora and Biomol expenses from the date of acquisition. The increase in the other Companies' operations of approximately $1.5 million was primarily due to payroll and payroll related costs of $1.8 million and professional fees of $0.3 million offset by a decrease in information technology costs of $0.3 million and a decrease in insurance costs of $0.3 million.

The provision for uncollectible accounts receivable, primarily relating to the clinical laboratory segment was $3.7 million for the 2008 period as compared to $4.6 million in the 2007 period, the decrease of $0.9 million or 20% was due to improved billing and collections procedures.

Legal expense was $5.6 million during the 2008 period compared to $10.3 million in the 2007 period, a decrease of $4.7 million or 46%, due to a decrease in patent litigation activity in the current period.

Interest income was $3.7 million during the 2008 period as compared to $5.1 million during the 2007 period. The Company earns interest by investing primarily in short term and liquid investments, including money market accounts, commercial paper and US government instruments. The Company had higher average invested balances during the 2007 period due to the net proceeds from registered direct offerings of common stock in December 2006 and February 2007 offset by uses of cash for operations and the acquisition of Axxora in May 2007. The 2008 period's invested cash was reduced by the use of $15.0 million of cash to purchase Biomol in May 2008 and by the use of cash to fund operations. Further, interest income decreased during the 2008 period because the rates declined in response to monetary policy actions taken by the U.S. Federal Reserve.

The Company earned other income of $0.2 million during the 2008 period versus $2.7 million in the 2007 period. During the 2007 period, the Company recognized a $2.0 million gain on a patent litigation settlement and a $0.7 million payment from a former distributor under an expired distribution agreement which is presently subject to a lawsuit in which the Company is plaintiff.

The Company's effective tax rate (benefit) provision for the 2008 period was 2.2%, compared to (1.0%) during the 2007 period. The tax benefit for the 2008 period was based on state and local taxes, book to tax differences for inventory acquired from Axxora, and taxes and interest incurred from a local tax audit and differed from the expected net operating loss carry forward benefit at the U.S. federal statutory rate of 34% primarily due to the inability to recognize such benefit. The carry forward benefit cannot be recognized because of uncertainties relating to future taxable income, in terms of both its timing and its sufficiency.

Segment Results

The Life Sciences segment's income before taxes was approximately $3.4 million for the 2008 period as compared to $4.0 million in the 2007 period. The decrease is partially due to the recognition in the 2007 period of the Company's $2.0 million patent litigation settlement with Sigma Aldrich and a $0.7 million payment from a former distributor under an expired distribution agreement which is presently subject to a lawsuit in which the Company is plaintiff. Product revenues increased by $21.4 million in the 2008 period due to the contribution of products revenues from Axxora for the full year in 2008 as compared to the two months in 2007 and the Biomol acquisition from the date of acquisition. Royalty and license fee income increased $1.8 million from the existing Qiagen agreement and the Abbott License Agreement entered into in the third quarter of fiscal 2007. The segment's gross margin of $16.6 million was negatively impacted by $2.0 million representing the fair value adjustment attributed to the sale of inventory acquired from Axxora and Biomol. The remaining fair value adjustment attributed to inventory acquired from Biomol of $1.4 million will negatively impact gross margins through May 2009.

Segment operating expenses, including selling, general and administrative and research and development, increased by approximately $7.1 million during the 2008 period primarily due to the inclusion of Axxora's and Biomol's expenses.

The Clinical Laboratory segment's income before taxes was $2.0 million for the 2008 period as compared to $3.3 million in the 2007 period. The 2008 period was positively impacted by an increase in laboratory service revenues of $1.6 million or 4%, due to the expansion of an insurance provider agreement effective January 2007. The gross profit was negatively impacted by an increase in the cost of laboratory services of $2.9 million as compared to the 2007 period. In the 2008 period the selling, general and administrative costs increased by approximately $1.1 million due primarily due to increases in sales commissions of $0.3 million and payroll and payroll related costs of $0.7 million, attributable to the increase in service revenues. The provision for uncollectible accounts receivables decreased by $1.0 million due to improved billing and collection procedures. The segment also earned interest in the 2008 period of $0.2 million on its cash generated by operations.

The Therapeutics segment's loss before income taxes was approximately $5.0 million for the 2008 period as compared to a loss of $6.0 million for the 2007 period. The decrease in the loss of $1.0 million was primarily due to decreases in clinical trial activities, consulting, payroll and payroll related costs of $0.9 million, and the recognition of $0.1 million from a government grant, included in other income in the consolidated financial statements.

The Other segment's loss before taxes for the 2008 period was approximately $11.3 a decrease of $3.1 million as compared to $14.4 in the 2007 period. The Other segment's 2008 period loss reflects a decrease in legal expenses of $4.9 million due to a decrease in patent litigation activity in the current period compared to the 2007 period, partially offset by an increase in general and administrative expenses of $0.2 million, and a decrease in interest income of $1.5 million due to lower levels of cash available for investment and declining interest rates.

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

Royalty and license fee income during fiscal 2007 was $5.8 million compared to $3.2 million in the year ago period, an increase of $2.6 million or 85%. Royalties are earned from net sales of Qiagen products subject to a license and from a License Agreement with Abbott which was entered into in the fiscal 2007 third quarter. During fiscal 2007, the Company recognized approximately $0.9 million in royalties under the license agreement and approximately $0.1 million of the $1.5 million upfront payment received from the Abbott License Agreement. There are no expenses relating to royalty and license fee income.

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

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

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

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

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

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

Other income was $2.7 million during the fiscal year ended July 31, 2007 versus $0 in the year ago period. During the 2007 period, the Company as . . .