UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Mark one

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30 2022, 2023

or

☐ 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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 ☒ No ☐

Securities registered pursuant to Section 12(b) of the Act:

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes ☐ No ☐

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

Yes ☐ No ☒

As of June 6, 2022,5, 2023, the Registrant had 48,720,45449,728,084 shares of common stock outstandingoutstanding. 

ENZO BIOCHEM, INC.

FORM 10-Q

April 30, 20222023

INDEX

Part 1 Financial InformationPART I FINANCIAL INFORMATION

ItemITEM 1 Financial StatementsFINANCIAL STATEMENTS

ENZO BIOCHEM, INC.

ENZO BIOCHEM, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands, except share and per share data)

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

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

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

ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)

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

ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYOPERATIONS
Three Months Ended April 30, 2022 and 2021
(unaudited)(UNAUDITED)
(in thousands, except per share data)

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

ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Nine Months Ended April 30, 2022 and 2021
(unaudited)
(in thousands, except share data)

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

ENZO BIOCHEM, INC.

ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE LOSS
(UNAUDITED)
(in thousands)

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

ENZO BIOCHEM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended April 30, 2023 and 2022
(UNAUDITED)
(in thousands, except share data)

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

ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Nine Months Ended April 30, 2023 and 2022
(UNAUDITED)
(in thousands, except share data)

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

ENZO BIOCHEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

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

ENZO BIOCHEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of April 30, 20222023
(Unaudited)(UNAUDITED)
(Dollars in thousands, except share data)

Note 1 – Basis of Presentation

The accompanying consolidated financial statements include the accounts of Enzo Biochem, Inc. and its wholly-owned subsidiaries, Enzo Life Sciences, Enzo Clinical Labs, Enzo Therapeutics, Enzo Realty LLC and Enzo Realty II LLC, collectively or with one or more of its subsidiaries referred to as the “Company” or “Companies”. The Company has threetwo reportable segments: Clinical Services Products, and Therapeutics.Products. The consolidated balance sheet as of April 30, 2022,2023, the consolidated statements of operations, comprehensive (loss) incomeloss and stockholders’ equity for the three and nine months ended April 30, 20222023 and 2021,2022, and the consolidated statements of cash flows for the nine months ended April 30, 20222023 and 20212022 (the “interim statements”) 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 annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been condensed or omitted. The interim statements should be read in conjunction with the consolidated financial statements for the year ended July 31, 20212022 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, 20212022 has been derived from the audited financial statements at that date. The results of operations for the three and nine months ended April 30, 20222023 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2022.2023.

Change in segment reporting

Historically, we engaged in the research and development of therapeutic candidates through Enzo Therapeutics, a biopharmaceutical venture that was developing multiple novel approaches in the areas of gastrointestinal, infectious, ophthalmic and metabolic diseases, many of which were derived from the researching work of Enzo Life Sciences. Enzo Therapeutics focused its efforts on researching treatment regimens for diseases and conditions for which treatment options were ineffective, costly, and/or caused unwanted side effects. This focus generated a clinical and preclinical pipeline, as well as numerous patents and patent applications with Enzo Therapeutics as the assignee. At the beginning of fiscal 2023, we determined we would redirect our research resources and efforts to our two operating segments, Clinical Services and Products, and no longer consider Enzo Therapeutics a segment. The operating results of Enzo Therapeutics are now included in the “Other” segment. The prior period segment information for the three and nine months ended April 30, 2022 reported in Note 11 has been restated to be included in the “Other” segment. The operating expenses of Enzo Therapeutics for the three and nine months ended April 30, 2023 now included in the “Other” segment were $12 and $33, respectively. The operating expenses of Enzo Therapeutics for the three and nine months ended April 30, 2022 now included in the “Other” segment were $9 and $34, respectively.

Ransomware attack

On April 6, 2023, the Company experienced a ransomware attack that impacted certain critical information technology systems. In response, we promptly deployed containment measures, including disconnecting our systems from the internet, launching an investigation with assistance from third-party cybersecurity experts, and notifying law enforcement. We adhered to our disaster recovery plan, which enabled us to maintain operations throughout the incident response process. The Company’s facilities are open, and continue to provide services to patients and partners. On April 11, 2023, we became aware that certain data, including names, test information, and Social Security numbers, was accessed, and in some instances, exfiltrated from the Company’s information technology systems as part of this incident. The investigation of this incident and the assessment of its impact is ongoing. However, the Company identified unauthorized access to or acquisition of clinical test information of approximately 2,470,000 individuals. The Social Security numbers of approximately 600,000 of these individuals may also have been involved. The Company is evaluating whether its employees’ information may have been involved. The Company has provided notice to the individuals whose information may have been involved, as well as to regulatory authorities, in accordance with applicable law. The Company has incurred, and may continue to incur, certain expenses related to this attack, including expenses to respond to, remediate and investigate this matter. Further, the Company remains subject to risks and uncertainties as a result of the incident, including as a result of the data that was accessed or exfiltrated from the Company’s network as noted above. Additionally, security and privacy incidents have led to, and may continue to lead to, additional regulatory scrutiny and class action litigation exposure. We are in the process of evaluating the full scope of the costs and related impacts of this incident.

While

Liquidity and Going Concern

During the nine months ended April 30, 2023, the Company incurred a net loss of $37,142, used cash in operating activities of $19,945 and had as of April 30, 2023 a working capital deficit of $10,153. The Company believes that based on its fiscal 2023 forecast, its current cash and cash equivalents level is not sufficient for its foreseeable liquidity and capital resource needs over at least the next twelve (12) months, which conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the unaudited interim financial statements are issued. In response to these conditions, the Company evaluated and is acting upon various financing strategies to obtain sufficient additional liquidity to meet its operating and capital requirements for the next twelve months following the date of issuance of these unaudited interim consolidated financial statements.

Specifically, the Company entered into a revolving line of credit for up to $8 million based on eligible receivables in March 2023, sold 10% convertible debentures and warrants for proceeds of $7 million in May 2023, and entered into an agreement to sell substantially all the operating assets and assign certain liabilities of our clinical laboratory business in March 2023, with an expected closing in July 2023. Additionally, in May 2023, we filed a Form S-3 “shelf” registration statement and sales agreement prospectus covering the offering, issuance and sale of our Common Stock that can be issued and sold under the sales agreement in an aggregate amount of up to $30 million. A total of $150 million of securities, including those covered by the Sales Agreement, may be sold under the shelf registration when it is declared effective. See Note 10 Stockholders equity for additional information.

There can be no assurance that these capital raising strategies will ultimately prove to be successful, and the Company may need to raise additional capital during the current fiscal year. Our liquidity plans are subject to a number of risks and uncertainties, some of which are outside our control. The revolving line of credit agreement and the 10% convertible debenture securities (discussed below) both contain clauses that require our closing the asset sale with Labcorp within a given time frame. Macroeconomic conditions could limit our ability to successfully execute our business plans and therefore adversely affect our liquidity plans. The unaudited interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Clinical Labs Asset Sale Agreement

On March 16, 2023, the Company entered into an Asset Purchase Agreement with respect to the sale to Labcorp of substantially all the operating assets and assignment of certain liabilities of the Clinical Labs division. The sale is expected to close in July 2023, at which time we will exit the clinical laboratory services business. See Note 13 Clinical Labs Asset Sale Agreement with Labcorp for additional information.

Revolving Line of Credit Agreement

On March 31, 2023, the Company entered into a Revolving Loan and Security Agreement with Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL as lender specializing in direct lending to middle-market companies in the healthcare sector. The credit facility provides for a maximum $8 million revolving line of credit based on the Company’s eligible accounts receivable. The annual interest rate is equal to the 90 day term SOFR rate plus 5.5%. The line of credit would terminate one year from closing and unused line fees and early prepayment penalties apply. As of April 30, 2023, the outstanding balance of the revolving loan was $3,354. See Note 7 Mortgage and loans payable, net for additional information.

Sale of 10% Convertible Debentures and Warrants

Subsequent to our fiscal quarter ended April 30, 2023, the Company entered into a Securities Purchase Agreement on May 19, 2023 for 10% Original Issue Discount Secured Convertible Debentures with an aggregate principal amount of $7,608,696 with a conversion price of $3.01 per share and (ii) warrants to purchase up to 1,000,000 shares of the Company’s common stock, par value $0.01 per share for an exercise price of $2.31 per share, for a total purchase price of $7,000,000. The Purchase Agreement contains customary representations, warranties and covenants. See Note 14 Subsequent Events for additional information.

Impact of COVID-19

We made substantial investments to expand and maintain the amount of COVID-19 testing available in the communities we serve since the start of the pandemic in March 2020. We applied our technical expertise in molecular diagnostics to develop next generation COVID-19 diagnostic and antibody testing options which were approved under the FDA Emergency Use Authorization (EUA). During the fiscal year ended July 31, 2022, the Company generated substantial COVID-19 related services revenues, representing 44% of all services revenues. This testing had a significantly positive impact on the profitability and cash flow of our Clinical services segment for most of fiscal 2022. Revenues from COVID-19 testing during the three and nine months ended April 30, 2022 represented 43% and 49%, respectively of all services revenues. The rate of transmission of COVID-19 and the severity of its variants is on the declinehave dramatically declined in the USU.S. Revenues from COVID-19 testing during the three and nine months ended April 30, 2023 represented approximately 4% and 5%, respectively, of all services revenues.

In March 2022, the U.S. Health Resources and Services Administration (“HRSA”) informed providers that, after March 22, 2022, it would stop accepting claims for testing and treatment for uninsured individuals under the HRSA COVID-19 Uninsured Program and that claims submitted prior to that date would be subject to eligibility and availability of funds. Although we believe that our estimates for contractual allowances and patient price concessions are appropriate, actual results could differ from those estimates.

Volume, revenues, profitability, and cash flow from COVID-19 testing during the current periods were all substantially and materially lower than the prior year period levels. COVID-19 testing is no longer a material part of our Clinical Services business.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company, including inflation and actions by the Federal Reserve to increase interest rates as of April 30, 2023 and through the date of this Quarterly Report. The accounting matters assessed included, but were not limited to, the Company’s patient self-pay revenue concessions and credit losses in the Clinical Services segment, accounts receivable, inventories and the economy has beguncarrying value of goodwill and other long-lived assets. The Company’s future assessment of economic factors could result in additional material adverse impacts to open, it continues to spread in other parts of the world and negatively impacts the world economy. Federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 resulted in, among other things, a significant reduction in physician office visits, the cancellation of elective medical procedures, customers of our products remaining closed or continuing to curtail their operations (voluntarily or in response to government orders), and the continuation of work-from-home policies. The COVID-19 impact on the Company’s operations is consistent with the overall industry and our competitors, partners, and vendors.consolidated financial statements in future reporting periods.

While the Company anticipates that COVID-19 will continue to impact its business for the rest of fiscal 2022 and potentially beyond, the Company expects that increases in vaccination rates and booster shots, the development of new therapeutics and greater availability of rapid COVID-19 tests will likely result in a continued, significant decline in demand for its COVID-19 testing. As a result, COVID-19 testing volume in fiscal year 2022 has not and likely will not match 2021 levels. Global supply chain issues due to the pandemic continue to hamper both the manufacturing of products within the life science segment as well as testing capabilities in the clinical laboratory.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”)GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

COVID-19

The extent to which the COVID-19 pandemic impacts the Company’s business and consolidated results of operations, financial position and cash flows will depend on numerous evolving factors including, but not limited to: the magnitude and duration of the COVID-19 pandemic, the extent to which it will impact worldwide macroeconomic conditions including, but not limited to, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic. These factors are beyond the Company’s knowledge and control, and as a result, at this time the Company cannot reasonably estimate the impact the COVID-19 pandemic will have on its businesses but the impact could be material. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of April 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s patient self-pay revenue concessions and credit losses in the Clinical Services segment, accounts receivable, inventories and the carrying value of goodwill and other long-lived assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods. We expect COVID-19 testing volume will continue to decline in the quarters ahead as the percentage of Americans who are vaccinated increases, the severity of its variants declines, and the general use of at home testing. However, the emergence and spread of more serious variants may cause our COVID-19 testing volume to increase again. Even after the COVID-19 pandemic has moderated and the business and social distancing restrictions have eased, we may continue to experience similar adverse effects to our businesses, consolidated results of operations, financial position and cash flows resulting from a recessionary economic environment that may persist.

Effect of New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The amendments in the ASU simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We adopted the amendments in this ASU beginning August 1, 2021. The adoption of the amendments in this ASU did not have a material impact on our consolidated results of operations, financial position or cash flows.

Pronouncements Issued but Not Yet Adopted

In June 2016, FASBthe Financial Accounting Standards Board (“FASB” issued ASUAccounting Standards Update (“ASU”) No. 2016-13 Financial Instruments – Credit Losses (Topic 326). This standard changes the impairment model for most financial instruments, including trade receivables, from an incurred loss method to a new forward-looking approach, based on expected losses.

The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. Adoption of this standard is required for our annual and interim periods beginning August 1, 2023, providedas we qualifyqualified as a smaller reporting company at the end of fiscal 2022 and must be adopted using a modified retrospective transition approach. We are currently assessing the impact of the adoption of this standard on our results of operations, financial position and cash flows.

We reviewed all other recently issued accounting pronouncements and have concluded they are not applicable or not expected to be significant to the accounting for our operations.

Concentration Risk

Other than the Medicare program, two providers whose programs are included in the “Third-party payers” and “Health Maintenance Organizations” (“HMOs”) categories represent approximately 30% and 35% of Clinical Services net revenue for the three months ended April 30, 2022 and 2021 respectively, and 34% of Clinical Services net revenue for both the nine months ended April 30, 2022 and 2021.

Other than the Medicare program, one provider whose programs are included in the “Third-party payers” and “Health Maintenance Organizations” (“HMOs”HMO’s”) categories represents 20%approximately 16% and 17% of Clinical Services net revenue for the three and nine months ended April 30, 2023, respectively and 13% of the Clinical Services net accounts receivable as of April 30, 2022.

For2023. Other than the Medicare program, two providers whose programs are included in the “Third-party payers” and “Health Maintenance Organizations” (“HMO’s”) categories represent approximately 30% and 34% of Clinical Services net revenue for the three and nine months ended April 30, 2022, the Life Sciences segment’s revenue includes $2,800 from one customer, representing 11% of its revenues for the nine month period.respectively.

Income Taxes

The Company accounts for income taxes under the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The liability method requires that any tax benefits recognized for net operating loss carry forwards and other items be reduced by a valuation allowance wherewhen it is not more likely than not that the benefits willmay not be realized in the foreseeable future.realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under the liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. It is the Company’s policy to provide for uncertain tax positions, if any, and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected.

We maintain a full valuation allowance on all tax assets and, as a consequence, do not provide any tax benefit for the fiscal 2022 period loss or any tax provision for the fiscal 2021 period pre-tax income.

Fair Value Measurements

The Company determines fair value measurements used in its consolidated financial statements based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs, as determined by either the principal market or the most advantageous market.

Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.

Marketable securities

The Company limits its credit risk associated with investments by investing in a mutual fund and an exchange traded fund (ETF) which hold highly rated corporate bonds, asset backed securities, municipal bonds, mortgage obligations and government obligations. These investments are classified as trading securities and are Level 1 fair value investments. During the three months ended of April 30, 2022, the Company sold all of its marketable securities, resulting in proceeds of $28,695, which is included in cash and cash equivalents. The Company recognized a realized loss - net on the sale of the marketable securities of $1,283 for the nine months ended April 30, 2022. The Company earned interest of $447 on the marketable securities over the holding period of the marketable securities.

Note 2 – Net income (loss) per share

Basic net income (loss) per share represents net income (loss) divided by the weighted average number of common shares outstanding during the period. As a result of the net loss for the three and nine months ended April 30, 2023 and 2022, diluted weighted average shares outstanding are the same as basic weighted average shares outstanding, and do not include the potential common shares from stock options, restricted stock units, andor unearned performance stock units because to do so would be antidilutive.

For the three and nine months ended April 30, 2023, approximately 173,000 and 105,000, respectively, of potential common shares from “in the money options” and unvested restricted stock and performance stock units were excluded from the calculation of diluted (loss) per share because their effect would be antidilutive. For the three and nine months ended April 30, 2022, approximately 438,000 and 510,000, respectively, of potential common shares (“infrom “in the money options”), restricted stock units, and unearnedunvested performance stock units were excluded from the calculation of diluted (loss) per share. For the three and nine months ended April 30, 2021, approximately 47,000 and 23,000 weighted average stock options and unvested performance stock units were included in the calculation of diluted weighted average shares outstanding.share because their effect would be antidilutive.

For the three and nine months ended April 30, 2022,2023, the effect of approximately 1,319,0004,097,000 and 1,068,0003,627,000, respectively, of outstanding “out of the money” options to purchase common shares were excluded from the calculation of diluted net loss(loss) income per share because their effect would be anti-dilutive. For the three and nine months ended April 30, 2021,2022, the effect of approximately 2,264,0001,319,000 and 2,122,0001,068,000, respectively, of outstanding “out of the money” options to purchase common shares were excluded from the calculation of diluted net (loss) income per share because their effect would be anti-dilutive.

Note 3 – Revenue Recognition

Clinical Services Revenue

The Company accounts for revenue pursuant to Accounting Standards Codification (“ASC”) Topic 606. Service revenues in the Company’s clinical services business accounted for 54% and 71% of the Company’s total revenues for the three months ended April 30, 2023 and 2022, respectively and 56% and 71% for the nine months ended April 30, 2023 and 2022, and 76% of the Company’s total revenues for the three and nine months ended April 30, 2021respectively and are primarily comprised of a high volume of relatively low-dollar transactions. The services business, which provides clinical testing services, satisfies its performance obligation and recognizes revenues upon completion of the testing process for a specific patient and reporting to the ordering physician. The Company may also perform clinical testing services for other laboratories and will recognize revenue from those services when reported to the ordering laboratory. The Company estimates the amount of consideration it expects to receive from customer groups using the portfolio approach. These estimates of the expected consideration include the impact of contractual allowances and price concessions on our customer group portfolios consisting of healthcare insurers, government payers, client payers and patients as described below. Contracts with customers in our laboratory services business do not contain a financing component, based on the typically limited period of time between performance of services and collection of consideration. The transaction price includes variable consideration in the form of the contractual allowance and price concessions as well as the collectability of the transaction based on patient intent and ability to pay. The Company uses the expected value method in estimating the amount of the variability included in the transaction price.

The following are descriptions of our laboratory services business portfolios:

Third party payers and Health Maintenance Organizations (HMOs)(HMO’s)

Reimbursements from third party payers, primarily healthcare insurers and HMOsHMO’s are based on negotiated fee-for-service schedules and on capitated payment rates. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical collection and denial experience and the terms of the Company’s contractual arrangements. Adjustments to the allowances, based on actual receipts from the third-party payers, are recorded upon settlement.

Collection of the consideration the Company expects to receive is normally a function of providing complete and correct billing information to these third-partythird party payers within the various filing deadlines, and typically occurs within 30 to 90 days of billing. Provided the Company has billed healthcare insurers accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. If there has been a delay in billing, the Company determines if the amounts in question will likely go past the filing deadline, and if so, will reserve accordingly for the billing.

Third-party payers, including government programs, may decide to deny payment or recoup payments for testing that they contend was improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. Our revenues may be subject to adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance and changes by government agencies and payers in interpretations, requirements, and “conditions of participation” in various programs.

Government Payer - Medicare

Reimbursements from Medicare are based on fee-for-service schedules set by Medicare, which is funded by the government. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from Medicare, which considers historical collection and denial experience and other factors. Adjustments to the allowances, based on actual receipts from the government payers, are recorded upon settlement.

Collection of consideration the Company expects to receive is normally a function of providing the complete and correct billing information within the various filing deadlines and typically occurs within 60 days of billing. Provided the Company has billed the government payer accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. If there has been a delay in billing, the Company determines if the amounts in question will likely go past the filing deadline, and, if so, it will reserve accordingly for the billing.

Patient self-pay

Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Coinsurance and deductible responsibilities based on fees negotiated with healthcare insurers are also billed to insured patients and included in this portfolio. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients in accordance with the Company’s policies and implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement. Patient responsibility is invoiced and if it reaches 91 days outstanding, the account is sent to a collection agency for further processing. After the account has been with the collection agency for at least 105 days, and is determined to be uncollectable it is written off.

The following table represents clinical services net revenues and percentages by type of customer:

For the three and nine months ended April 30, 20222023 and 2021,2022, all of the Company’s clinical services revenues were generated within the United States.

Products Revenue

Products revenues consist ofIn accordance with ASC Topic 606, the Company generates product revenue from the sale of our single-use products used in the identification of genomic informationinformation. Revenue is recorded net of sales tax. The Company considers revenue to be earned when all of the following criteria are met: the Company has a contract with a customer that creates enforceable rights and obligations; promised products are identified; the transaction price is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the contract. The transaction price for the contract is measured as the amount of consideration the Company expects to receive in exchange for the goods expected to be transferred. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company’s products is generally at shipment or delivery, depending on contractual terms, but occurs when title and risk of loss transfers to the customer which represents the point in time when the customer obtains the use of and substantially all of the remaining benefit of the product. As such, the Company’s performance obligation related to product sales is satisfied at a point in time followingtime. The Company recognizes a receivable when it has an unconditional right to payment, which represents the transfer of control of such productsamount the Company expects to collect in a transaction and is most often equal to the customer, which generally occurs upon shipment.transaction price in the contract. Payment terms for shipments to end-user and distributor customers may range from 30 to 90 days. Any claims for credit or return of goods may be made generally within 30 days of receipt. Revenues are reduced to reflect estimated credits and returns, although historically these adjustments have not been material. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related shipping and handling costs are reflected in cost of products.

Products revenue by geography is as follows:

As of February 1, 2023 and 2022, the consolidated balance of accounts receivables was $10,866 and $15,316, respectively. As of August 1, 2022 and 2021, the consolidated balance of accounts receivable was $11,516 and $10,198, respectively.

Note 4 -– Supplemental disclosure for statement of cash flows

DuringIn the nine months ended April 30, 20222023 and 2021,2022, interest paid by the Company was $167$204 and $177,$167, respectively.

For the nine months ended April 30, 20222023 and 2021,2022, the net reductions in the measurement of right of use assets and liabilities included in cash flows from operating activities was $5 and $29, respectively. For the nine months ended April 30, 2023, the Company recorded right of use assets and $67, respectively. The changes are included in changes in accruedoperating lease liabilities other current liabilities, and other liabilities in the statement of cash flows.$1,717.

For the nine months ended April 30, 20222023 and 2021,2022, tax on capital paid by the Company was $9 and $120, and $145, respectively.

In January 2021, the Company issued 332,700 restricted shares of common stock to two senior executives in settlement of their accrued bonuses totaling $875.

Note 5 – Inventories

Inventories consist of the following:

Note 6 – Goodwill and intangible assetsLong-Lived Assets

Goodwill

The Company’s net carrying amount of goodwill is in the Clinical LaboratoryLabs Services segment and is $7,452 as of April 30, 20222023 and July 31, 2021.2022.

The Company reviews the recoverability of the carrying value of long-lived assets (including its intangible assets, all of which have finite lives) of an asset or asset group for impairment annually as of the end of the fiscal year, or more frequently if indicators of potential impairment exist. Should indicators of impairment exist, the carrying values of the assets are evaluated in relation to the operating performance and future undiscounted cash flows of an asset or asset group. The net book value of the long-lived asset is adjusted to fair value if its expected future undiscounted cash flow is less than its book value. Primarily based on the Asset Purchase Agreement with Labcorp, the Company has determined that there is no impairment of goodwill or long-lived assets at April 30, 2023.

Note 7 – Mortgage and Loans payable, net

Intangible assetsLoans payable, net

On March 31, 2023, we entered into a Revolving Loan and Security Agreement (the “Credit Facility”) among Enzo Clinical Labs, Inc. and Enzo Life Sciences, Inc., and the Company as borrowers and certain of its domestic subsidiaries, as guarantors (the “Guarantors”), and Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL as lender (“SLR”). The Company’s changeCredit Facility provides for a maximum $8 million revolving line of credit. The Company is using the borrowing proceeds under the Credit Facility for working capital and general corporate purposes. The commitment under the Credit Facility expires after one year and all outstanding borrowings under the Credit Facility will become due and payable at that time. Prior to its expiration, the Company expects to prepay and terminate the Credit Facility upon the closing of the Asset Purchase Agreement pertaining to the Clinical Labs business, and a standard termination fee would be payable in connection therewith. The Credit Facility is secured by a first priority perfected security interest in the collateral. The collateral includes substantially all the U.S. assets of the Company and the Guarantors, including among other assets, cash, receivables, inventory and fixed assets.

Borrowings under the Credit Facility, which are based on eligible receivables of the Company’s Clinical Labs and U.S.-based Life Sciences operating segments, accrue interest at the rate per annum equal to Term SOFR (Secured Overnight Financing Rate) for a three-month tenor of 5.30% at April 30, 2023 plus 5.50%. Other fees, such as an unused line fee and a collateral monitoring fee, also apply. The Company borrowed $5,500 under the Credit Facility upon the closing thereof. As of April 30, 2023, the net carrying amountbalance outstanding was $3,354, which is classified as Loans payable, net in current liabilities.

The Credit Facility includes customary affirmative and negative covenants for revolving credit facilities of intangible assets, allthis nature, including certain limitations on the incurrence of additional indebtedness and liens. In addition, the Credit Facility requires the Borrowers to maintain certain minimum liquidity levels as of the last day of each calendar month. The levels decline over time, starting at $4 million as of April 30, 2023, then $3 million as of May 31, 2023 and $2 million as of the end of each month thereafter. As of April 30, 2023, the Company was not in compliance with SLR’s minimum liquidity covenant as per the strict definitions in the Life Sciences Products segment is as follows:

Intangible assets, all finite-lived, consistagreement pertaining to qualified cash, which constituted an event of default. On June 12, 2023, SLR and the following:

At April 30, 2022, informationCompany agreed to a waiver limited to the specific event of default with respect to acquired intangibles is as follows:the minimum liquidity covenant.