##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended July
    31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number 0-17521
  Zila, Inc.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware(State or Other Jurisdiction
    of
    Incorporation or Organization)

86-0619668(I.R.S. Employer
    Identification No.)5227 North 7th Street,
    Phoenix, Arizona(Address of Principal
    Executive Offices)

85014-2800(Zip
    Code)   Registrants telephone number, including area code
 (602) 266-6700
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.001 par value

The NASDAQ Stock Market, LLC
    (NASDAQ Global Market)   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
  Rule 12b-2
  DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TABLE OF
    CONTENTS
   
 PAGEPART IItem 1.


Business


3Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


19Item 2.


Properties


19Item 3.


Legal Proceedings


20Item 4.


Submission of Matters to a Vote of Security
    Holders


21PART IIItem 5.


Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


21Item 6.


Selected Financial Data


25Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


26Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


40Item 8.


Financial Statements and Supplementary Data


40Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


40Item 9A.


Controls and Procedures


41Item 9B.


Other Information


42PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


42Item 11.


Executive Compensation


42Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


42Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


42Item 14.


Principal Accounting Fees and Services


42PART IVItem 15.


Exhibits and Financial Statement Schedules


43Signatures


47EX-10.APEX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



PART I
  Item 1.
    Business  Introduction
      ® 630tm ® ® ® ® tm ®
    Recent
    Developments
  Acquisition
    of Pro-Dentec
    Dispositions
  ® ®
   3




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##### Table of Contents



Private
    Placements
          OraTest®
    Strategic Direction
  ®
  ® ® and/or ®
     4




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##### Table of Contents



® ® 630tm 630tm ®
    ® ®
  tm tm ®
  ® ® ® ® ®
  Our
    Products
    ViziLite®
    Plus
  ® 630tm ® 630tm ® ® 630tm
  ® ®
 5




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##### Table of Contents



follow-up. ® ® follow-up.
  630tm ® 630tm ® ® ® tm ®
  Rota-dent
    One
    Step®
    With MicroAccess Flossing
    Actiontm
  ® tm ® ® tm ® ®
  ® ® ®
  ® ® ®
  Pro-Select®
    PlatinumtmPiezo-Ultrasonic Scaler System
  ® tm ® tm ®
 6




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##### Table of Contents



Dental
    Fluoride Products
  and/or
  Other
    Oral Pharmaceutical Products
    OraTest®
  tm ® tm tm ®
  ® ® tm ® tm ® ® non-serious
  Sales and
    Marketing
    ® 630tm
 7




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##### Table of Contents




    the expansion of our national sales force based on achievement
    of success metrics in existing focus markets;
    continuing education programs that emphasize the importance of
    oral cancer screening;
    a comprehensive program targeting insurers designed to secure a
    meaningful level of insurance reimbursement for use of the
    ViziLite®
    Plus device built upon the established ADA procedural
    code; and
    effective communication of information about current clinical
    efficacy trials that can provide thought
    leader-support,
    involvement and commitment to the
    ViziLite®
    Plus.        ® ® ® ®
  Manufacturing
    and Supply
  ®
  ® tm ® tm tm
  ® ®
 8




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##### Table of Contents



Competition
    ViziLite®
    Plus
  ® 630tm ® ®
  Rota-dent®
  ®
  Pro-Select®
  ® Pro-Select ®
  Dental
    Fluorides and Other Oral Pharmaceutical Products
   9




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##### Table of Contents



Licensing
  OraTest®
  ® ®
  Governmental
    Regulation
  General
          ® ® ®
 10




---



##### Table of Contents



Rota-dent ®
    ViziLite®
    Plus
  ® ® ® 630tm ® 630tm ® ® ®
  OraTest®
  ® ®
  Patents
    and Trademarks
  ViziLite®
    Plus with
    TBlue630tm
  ® ®
  ® tm 630tm tm ®
  ®
  ®
    ®
 11




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##### Table of Contents



® ® ®
  Rota-dent®
    Professional Powered Brush
  ® ®
  ®
  Pro-Select®
    Dental Scaler and Other Dental Products
  ®
  ®
  OraTest®
  ® tm tm tm tm and/or ® tm and/or ® tm tm tm
    ® ®
  Employees
    Available
    Information
   12




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##### Table of Contents



1-800-SEC-0330. www.sec.gov.
  Form 10-K, Form 10-Q, Form 8-K
  Forward-looking
    Statements
  Form 10-K
  Item 1A.
    Risk
    Factors    Trends,
    Risks and Uncertainties Related to Our Business
  We may
    be unable to obtain FDA or other regulatory approval for new
    drugs, devices or products or to establish markets in the United
    States and obtaining regulatory approval is costly and
    uncertain.
     13




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##### Table of Contents




    incurring substantial expenses, including fines, penalties,
    legal fees and costs to comply with the FDAs requirements
    changes in the methods of marketing and selling products
    taking FDA-mandated corrective action, which may include placing
    advertisements or sending letters to dental professionals and
    physicians rescinding previous advertisements or promotion
    disruption in the distribution of products and loss of sales
    until compliance with the FDAs position is obtained  Our
    lack of earnings history could adversely affect our financial
    health and prevent us from fulfilling our payment obligations,
    and if we are unable to generate funds or obtain funds on
    acceptable terms, we may not be able to develop and market our
    present and potential products.
  ®
  ®
  ® ® ® ® ® ®
 14




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##### Table of Contents



®
    
    making it more difficult for us to satisfy our obligations with
    respect to the Secured Notes;
    increasing our vulnerability to general adverse economic and
    industry conditions;
    limiting our flexibility in planning for, or reacting to,
    changes in our business and our industry;
    restricting us from making strategic acquisitions, introducing
    new products or exploiting business opportunities;
    requiring us to dedicate a substantial portion of our cash flow
    from operations to payments on our indebtedness, which will
    reduce the amount of our cash flow available for other purposes,
    including capital expenditures and other general corporate
    purposes;
    requiring us to sell debt securities or to sell some of our core
    assets, possibly on unfavorable terms;
    limiting our ability to obtain additional financing; and
    placing us at a possible competitive disadvantage compared to
    our competitors that may have greater financial resources.  Our
    debt instruments contain restrictive covenants that could
    adversely affect our business by limiting our
    flexibility.
    We may
    fail to realize the anticipated cost savings, revenue
    enhancements, product focus, or other benefits expected from our
    recent acquisition of Pro-Dentec.
   15




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##### Table of Contents



Historically
    we have been dependent on a few key products and our future
    growth is dependent on the development and/or acquisition of new
    products.
  ® ® ® ® ® ®
  ®
  ® and/or
    Our
    proprietary rights may prove difficult to enforce.
  and/or and/or
 16




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##### Table of Contents



We are
    dependent on our senior management and other key
    personnel.
    We and
    our products are subject to regulatory oversight that could
    substantially interfere with our ability to do
    business.
    We are
    at risk with respect to product liability claims.
    We
    face significant competition that could adversely affect our
    results of operation and financial condition.
    If the
    use of our technology is determined to infringe on the
    intellectual property rights of others, our business could be
    harmed.
     17




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##### Table of Contents



We
    require certain raw materials for our manufacturing processes
    that may only be acquired through limited sources.
    We
    have, in the past, received minor deficiencies from regulatory
    agencies related to our manufacturing facilities.
    Trends,
    Risks and Uncertainties Related to Our Capital Stock
  The
    Private Placements and other financing arrangements or corporate
    events could significantly dilute existing
    ownership.
   18




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##### Table of Contents



In the
    past, we have experienced volatility in the market price of our
    common stock and we may experience such volatility in the
    future.
      We may
    take actions which could dilute current equity ownership or
    prevent or delay a change in our control.
      Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Corporate
    Headquarters
  85014-2800.
 19




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##### Table of Contents



Manufacturing
    Facilities
  tm ® ®
  ® ®
      Item 3.
    Legal
    Proceedings       20




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities    High


LowFiscal Year Ended July 31, 2007First quarter

$
3.27


$
2.02Second quarter


2.90



1.86Third quarter


2.40



1.95Fourth quarter


2.03



1.00Fiscal Year Ended July 31, 2006First quarter

$
3.99


$
3.00Second quarter


4.04



2.88Third quarter


3.91



2.95Fourth quarter


3.61



2.92    21




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##### Table of Contents



Preferred
    Stock
    2006
    Private Placements
  ®
                   22




---



##### Table of Contents



Form 8-K Form 8-K),
          Form 8-K,
          
    Atlas Master Fund, Ltd.
    Booth & Co. FFC Hartmarx Retirement Income Trust
    Booth & Co. FFC Rush University Medical Center
    Endowment Account
    Booth & Co. FFC Rush University Medical Center
    Pension & Retirement
    BTG Investments LLC
    Calhoun & Co. FFC City of Dearborn General Employees
    Retirement Systems
    Calhoun & Co. FFC City of Dearborn Policemen and
    Firemen Revised Retirement Systems
    Crescent International Ltd.
    HHMI Investments, L.P.
    Iroquois Master Fund Ltd
    Mac & Co. 23




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##### Table of Contents




    MicroCapital Fund LP
    MicroCapital Fund LTD
    Neal Goldman
    SF Capital Partners Ltd.
    SRB Greenway Capital, L.P.
    SRB Greenway Capital (QP), L.P.
    SRB Greenway Offshore Operating Fund, L.P.
    Visium Balanced Fund, LP
    Visium Balanced Offshore Fund, Ltd
    Visium Long Bias Fund, LP
    Visium Long Bias Offshore Fund, Ltd
    Walker Smith Capital, L.P.
    Walker Smith Capital (QP), L.P.
    Walker Smith International Fund, Ltd.
    Whalehaven Capital Fund Limited
    William Blair Small Cap Growth Fund  Warrants
    
    On July 27, 2006, we issued an aggregate of
    11,235 shares of common stock to Dr. Lawrence
    Michaelis, who is a member of our Medical Advisory Board,
    pursuant to the cashless exercise of a warrant, dated
    March 23, 2003. The warrant was exercisable for a total of
    16,000 shares of common stock and had an exercise price of
    $0.98 per share. Pursuant to the cashless exercise provisions of
    the warrant, the number of shares issuable for the warrant was
    reduced by 4,765 shares. The issuance of the shares
    pursuant to this warrant was exempt from registration under the
    Securities Act of 1933 in reliance on Section 4(2)
    promulgated thereunder as a transaction not involving any public
    offering.
    On March 24, 2006, in connection with the credit facility
    with Black Diamond Commercial Finance, we issued a warrant to
    purchase 1.2 million shares of our common stock at $3.79
    per share. In connection with the First Amendment and the Fifth
    Amendment to the Credit Agreement (described and defined in
    Note 8 to the Consolidated Financial Statements included
    elsewhere herein), the exercise price of such warrant was
    reduced to $3.14 per share and $2.22 per share, respectively.
    The warrant has a term of five years and expires March 24,
    2011. The warrant is exercisable at any time during its
    five-year contract term.
    On March 14, 2003, we issued warrants to purchase
    104,000 shares of our common stock to members of our
    Medical Advisory Board. The exercise price is $0.98 per share
    and the warrants have a term of five years. At July 31,
    2007, warrants were outstanding to purchase 88,000 shares
    of our common stock. The warrants were issued pursuant to the
    exemption set forth in Section 4(2) of the Securities Act.  Issuer
    Purchase of Equity Securities
   24




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Comparative
    Stock Performance
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN* Among
    ZILA, Inc., The NASDAQ Composite Index
    And The RDG MicroCap Pharmaceutical Index
  
  *
    
    $100 invested on 7/31/02 in stock or index-including
    reinvestment of dividends. Fiscal year ending July 31.  7/02


7/03


7/04


7/05


7/06


7/07ZILA, Inc.



100.0




382.4




501.3




456.3




411.3




162.5NASDAQ Composite



100.0




128.5




142.7




164.6




161.2




197.6RDG MicroCap Pharmaceutical



100.0




157.5




132.0




118.0




98.0




81.7   Item 6.
    Selected
    Financial Data    25




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##### Table of Contents



For the Years Ended July 31,2007


2006


2005


2004


2003Net revenues

$
28,801


$
2,822


$
1,199


$
162


$
221Income (loss) from continuing operations before accounting
    change(1)


(22,982
)


(26,046
)


(17,678
)


(14,350
)


1,523Basic and diluted net income (loss) per common share from
    continuing operations(1)

$
(0.41
)

$
(0.57
)

$
(0.39
)

$
(0.32
)

$
0.03   As of July 31,2007


2006


2005


2004


2003Current assets

$
24,854


$
22,970


$
32,639


$
30,123


$
35,326Total assets


63,881



56,364



65,418



62,109



69,020Current liabilities


10,568



29,824



9,815



7,581



11,518Long-term debt and capital lease obligations(2)


7,259



3,060



3,328



3,650



3,728Total liabilities


17,902



33,113



13,696



11,880



15,272Series B convertible preferred stock


463



463



463



463



463Total shareholders equity


45,979



23,251



51,722



50,228



53,748     (1)
    
    For fiscal 2003: (i) excludes the effects of the adoption
    of SFAS No. 142, Goodwill and Other Intangible
    Assets, in which we recorded a charge of
    $4.1 million as a cumulative effect of accounting
    change, and (ii) includes a $14.8 million
    contract settlement gain from our former contract research
    organization.(2)
    
    Long-term debt and capital lease obligations are presented net
    of a discount of $5.3 million for the fiscal year ended
    July 31, 2007.  ® ®
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation  Overview
    Pro-Dentec
 26




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® 630tm ® ® ® ® tm ®
  ® non-clinical
  ® ® and/or ®
      ® ® ® 630tm 630tm ®
    ® ®
  tm tm ®
 27




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® ® ® ® ®
  Results
    of Operations
  Fiscal
    Year Ended July 31, 2007 Compared to Fiscal Year Ended July
    31, 2006
        ®
  ® ®
  ®
    For the Years Ended July 31,% of





% of


%2007


Revenue


2006


Revenue


ChangeNet revenues

$
28,801



100.0
%

$
2,822



100.0
%


920.6
%Cost of products sold


11,857



41.2



1,925



68.2



515.9Gross profit


16,944



58.8



897



31.8



1,789.0Operating costs and expenses:Marketing and selling


14,412



50.0



5,595



198.3



157.6General and administrative


15,141



52.6



10,467



371.0



44.7Research and development


7,482



26.0



7,158



253.6



4.5Depreciation and amortization


2,921



10.1



1,415



50.1



106.4Loss from operations


(23,012
)


(79.9
)


(23,738
)


(841.2
)


(3.1
)Other income (expense)  net


(5,761
)


(20.0
)


(2,305
)


(81.7
)


149.9Loss from continuing operations before income taxes


(28,773
)


(99.9
)


(26,043
)


(922.9
)


10.5Income tax benefit (expense)


5,791



20.1



(3
)


(0.1
)


(193,133.3
)Loss from continuing operations

$
(22,982
)


(79.8
)%

$
(26,046
)


(923.0
)%


(11.8
)   ® ®
 28




---



##### Table of Contents



®
  ®
  ® ®
  ® ®
  ® ® ® ® ® ®
      ®
 29




---



##### Table of Contents



Fiscal
    Year Ended July 31, 2006 Compared to Fiscal Year Ended July
    31, 2005
    ® ® ® 630tm ® ® 630tm
  ® ®
  ®
  ®
  ®
    ® ®
  ®
      For the Years Ended July 31,% of





% of


%2006


Revenue


2005


Revenue


ChangeNet revenues

$
2,822



100.0
%

$
1,199



100.0
%


135.4
%Cost of products sold


1,925



68.2



499



41.6



285.8Gross profit


897



31.8



700



58.4



28.1Operating costs and expenses:Marketing and selling


5,595



198.3



2,124



177.1



163.4General and administrative


10,467



371.0



8,319



693.8



25.8Research and development


7,158



253.6



6,696



558.5



6.9Depreciation and amortization


1,415



50.1



1,221



101.8



15.9Loss from operations


(23,738
)


(841.2
)


(17,660
)


(1,472.8
)


34.4Other income (expense)  net


(2,305
)


(81.7
)


68



5.6



(3,489.7
)Loss from continuing operations before income taxes


(26,043
)


(922.9
)


(17,592
)


(1,467.2
)


48.0Income tax expense


(3
)


(0.1
)


(86
)


(7.2
)


(96.5
)Loss from continuing operations

$
(26,046
)


(923.0
)%

$
(17,678
)


(1,474.4
)%


47.3  30




---



##### Table of Contents



® 630tm ® ® ® ®
  ® 630tm ® ®
  ® 630tm ®
  ®
  ® ®
      Inflation
    and Seasonality
    Liquidity
    and Capital Resources
  Overview
   31




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##### Table of Contents



® ® ® ®
  ® ®
    For the Years Ended July 31,2007


2006


2005Net cash used in operating activities

$
(14,967
)

$
(20,809
)

$
(7,387
)Net cash provided by (used in) investing activities


12,395



(5,290
)


16,588Net cash provided by financing activities


13,473



17,119



57   As of July 31,2007


2006Cash and cash equivalents

$
14,859


$
3,958Working capital


14,286



(6,854
)Current ratio


2.4



0.8     Operating
    Activities
     32




---



##### Table of Contents



Investing
    Activities
    ® 630tm ®
  Financing
    Activities
      Private
    Placements
         33




---



##### Table of Contents



34




---



##### Table of Contents



Credit
    Facility
    Industrial
    Development Revenue Bonds
    PharmaBio
    Investment
  ®
  Preferred
    Stock
   35




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##### Table of Contents



EBITDA
      For the Years Ended July 31,2007


2006


2005EBITDA

$
(2,620
)

$
(24,498
)

$
3,939Interest income


579



344



188Interest expense


(7,639
)


(2,153
)


(196
)Income tax expense


(65
)


(4
)


(86
)Amortization of financing costs


2,513



488



36Amortization of debt discounts


3,625



393



Non-cash interest on term loan


202



284



Non-cash derivative (income) expense


(1,059
)


137



Gain (loss) from disposition of discontinued operations


(16,185
)


629



(9,781
)Loss on sale of assets


2



27



6Non-cash research and development expense










49Non-cash stock-based compensation expense


1,691



528



43Non-cash charge for options issued to outside parties


49



103



Other non-cash items  net


202



(194
)


(8
)Changes in operating assets and liabilities:Trade receivables


902



7,499



(3,395
)Inventories


(62
)


(3,921
)


(201
)Prepaid expenses and other assets


496



(298
)


69Accounts payable and accrued liabilities


2,402



(173
)


1,950Net cash used in operating activities

$
(14,967
)

$
(20,809
)

$
(7,387
)  36




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##### Table of Contents



Off-Balance
    Sheet Financing Arrangements
    Contractual
    Obligations
    Beyond2008


2009


2010


2011


2012


5 Years


TotalLong-term debt (1)

$
840


$
840


$
12,840


$



$



$
500


$
15,020Capital lease obligations


92



78



35















205Operating leases


672



437



177



72











1,358Purchase obligations


360



360



















720Total

$
1,964


$
1,715


$
13,052


$
72


$



$
500


$
17,303     (1)
    
    Includes interest on our Secured Notes of $0.8 million for
    fiscal 2008 to 2010, which reflects a 7% rate for our Amended
    and Restated Secured Notes (see Note 8). However, at our
    option, interest payments can be made at an 8% annual rate in
    shares of our common stock at a price equal to 90% of the
    average closing bid price of such common stock for the 10
    trading days immediately prior to the relevant interest payment
    date.      Critical
    Accounting Policies and Estimates
    Revenue Recognition 
   37




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##### Table of Contents



Use of Estimates 
      Goodwill, Intangibles and Other Long-Lived
    Assets and/or and/or
  Recent
    Accounting Pronouncements
  Quantifying
    Misstatements in Current Year Financial Statements, Accounting Changes and Error
    Corrections.
 38




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##### Table of Contents



Fair
    Value Measures
  Accounting for Uncertainty in Income Taxes 
    An Interpretation of FASB Statement No. 109 Accounting for Income
    Taxes.
  Accounting for Certain Hybrid Financial
    Instruments  An Amendment of FASB Statements
    No. 133 and 140 Accounting for
    Derivative Instruments and Hedging Activities, Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an Amendment of FASB
    Statement No. 115, Accounting for Certain Investments in
    Debt and Equity Securities
  EITF 00-19-2, Accounting for Registration Payment
    Arrangements EITF 00-19-2), EITF 00-19-2
 39




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##### Table of Contents



Accounting for
    Contingencies. EITF 00-19-2 EITF 00-19-2 EITF 00-19-2 EITF 00-19-2
    EITF 00-19-2, EITF 00-19-2
  Item 7A.  Quantitative and
    Qualitative Disclosures about Market Risk
    and/or
  Item 8.
    Financial
    Statements and Supplementary Data  Page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   40




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures.
  Rules 13a-15(e) 15d-15(e)
  Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Control over Financial Reporting.
  Rules 13a-15(f) 15d-15(f)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting.
  Rules 13a-15(f) 15d-15(f)
          Form 10-K
 41




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm On Internal
    Control Over Financial Reporting.
    Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Form 10-K,
  Form 8-K Form 8-K.
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   42




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##### Table of Contents



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  Financial Statements. page F-1
  Financial Statement Schedule. page F-1 page F-1
  Exhibits.
    INDEX TO
    EXHIBITS
  Exhibit



MethodNumber

Description

of Filing3-A


Certificate of Incorporation, as amended

A3-B


Certificate of Amendment to Certificate of Incorporation

M3-C


Certificate of Amendment to Certificate of Incorporation

V3-D


Bylaws of Zila, Inc., as amended and restated through
    August 16, 2007

Ad4-A


Specimen Stock Certificate

A4-B


Form of 12% Unsecured Note due May 2007

W4-C


Form of 6% Senior Secured Note due November 2009

W4-D


Form of Initial Warrant

W4-E


Form of Additional Warrant

W4-F


Form of Secured Note Warrant

W4-G


Warrant, dated February 20, 2007, issued to Roth Capital
    Partners, LLC

X4-H


Form of Amended and Restated Senior Secured Convertible Note due
    July 2010

Ac10-A


Employee Stock Purchase Plan(1)

E10-B


Investment Agreement between Zila, Inc. and PharmaBio
    Development, Inc. dated December 18, 2002

H10-C


Reimbursement Agreement between Oxycal Laboratories,
    Incorporated, an Arizona Corporation, and Wells Fargo Business
    Credit, Inc. relating to $3,900,000  The Industrial
    Development Authority Revenue Bonds (Oxycal Laboratories,
    Incorporated Project) Series 1999A, dated as of
    February 6, 2004

I10-D


Employment Agreement between Zila, Inc. and Douglas D.
    Burkett, Ph.D., dated as of October 21, 2003(1)

I10-E


Lease between Zila, Inc. and Phoenix 7 LLC, dated
    January 30, 2004

I10-F


Offer letter between Zila, Inc. and Andrew A. Stevens dated
    January 15, 2004(1)

J10-G


1997 Stock Award Plan, as amended, dated September 30,
    2004(1)

K10-H


Offer letter between Zila, Inc. and Gary V. Klinefelter dated
    November 16, 2004(1)

L10-I


Retention Agreement with Andrew A. Stevens effective
    March 7, 2005(1)

L10-J


Retention Agreement with Diane E. Klein effective March 7,
    2005(1)

L10-K


Agreement of Purchase and Sale of Assets dated June 27,
    2005 with Blairex Laboratories, Inc.

M10-L


Form of Option Agreement(1)

M 43




---



##### Table of Contents



Exhibit



MethodNumber

Description

of Filing10-M


Credit Agreement dated March 24, 2006 by and among Zila,
    Inc., Zila Technical, Inc., Zila Biotechnology, Inc., Zila
    Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and Zila Swab
    Technologies, Inc. and Black Diamond Commercial Finance,
    L.L.C.

N10-N


First Amendment to Credit Agreement dated June 6, 2006 by
    and among Zila, Inc., Zila Technical, Inc., Zila Biotechnology,
    Inc., Zila Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and
    Zila Swab Technologies, Inc. and Black Diamond Commercial
    Finance, L.L.C.

N10-O


Second Amendment to Credit Agreement dated June 6, 2006 by
    and among Zila, Inc., Zila Technical, Inc., Zila Biotechnology,
    Inc., Zila Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and
    Zila Swab Technologies, Inc. and Black Diamond Commercial
    Finance, L.L.C.

O10-P


Third Amendment to Credit Agreement dated August 18, 2006
    by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

P10-Q


Fourth Amendment to Credit Agreement dated August 31, 2006
    by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

Q10-R


Fifth Amendment to Credit Agreement dated September 25,
    2006 by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

R10-S


Registration Rights Agreement, dated as of March 24, 2006,
    by and between Black Diamond Commercial Finance, L.L.C. and
    Zila, Inc.

N10-T


Offer Letter between Zila, Inc. and Frank J. Bellizzi dated
    May 22, 2006

N10-U


Warrant for the purchase of shares of common stock, dated
    March 24, 2006, issued to Black Diamond Commercial Finance,
    L.L.C. by Zila, Inc.

N10-V


Amended and Restated Warrant to Purchase Shares of Common Stock,
    dated June 6, 2006, issued to BDC Finance, L.L.C. by Zila,
    Inc.

N10-W


Amended and Restated Warrant to Purchase Shares of Common Stock,
    dated September 25, 2006, issued to BDC Finance, L.L.C. by
    Zila, Inc.

R10-X


Stock Purchase Agreement by and between NBTY, Inc. and Zila,
    Inc. with respects to all of the outstanding capital stock of
    Zila Nutraceuticals, Inc. dated August 13, 2006

S10-Y


First Amendment to Stock Purchase Agreement, dated
    September 28, 2006, by and between Zila, Inc. and NBTY,
    Inc.

T10-Z


Purchase Agreement for the Shares, Unsecured Notes, Initial
    Warrants and Additional Warrants, dated November 13, 2006,
    by and among Zila, Inc. and the investors thereto

U10-Aa


Purchase Agreement for the Secured Notes and Secured Note
    Warrants, dated November 13, 2006, by and among Zila, Inc.
    and the investors thereto

U10-Ab


Agreement and Plan of Merger, dated November 13, 2006, by
    and among Zila, Inc., Zila Merger, Inc., Professional Dental
    Technologies, Inc. and certain stockholders thereto

U10-Ac


Pledge and Security Agreement, dated November 28, 2006, by
    and among Zila, Inc., Zila Biotechnology, Inc., Zila
    Pharmaceuticals, Inc., Zila Technical, Inc., Zila Limited,
    Balyasny Asset Management, L.P. and the investor parties thereto

W10-Ad


Engagement Letter, dated July 14, 2006, by and between
    Zila, Inc. and Roth Capital Partners, LLC

Ae10-Ae


Registration Rights Agreement for the Shares, Unsecured Notes,
    Initial Warrants and Additional Warrants, dated
    November 28, 2006, by and among Zila, Inc. and the investor
    parties thereto

W10-Af


Registration Rights Agreement for the Secured Notes and Secured
    Note Warrants, dated November 28, 2006, by and among Zila,
    Inc. and the investor parties thereto

W10-Ag


Offer letter between Zila, Inc. and Lawrence A. Gyenes(1)

Y10-Ah


Asset Purchase Agreement, dated September May 31, 2007, by
    and between Zila, Inc., Zila Pharmaceuticals, Inc., 3M and 3M
    Innovative Properties Company

Z 44




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##### Table of Contents



Exhibit



MethodNumber

Description

of Filing10-Ai


Employment Agreement between Zila, Inc. and Gary V. Klinefelter,
    dated as of March 30, 2007(1)

Ab10-Aj


Employment Agreement between Zila, Inc. and Diane E. Klein,
    dated as of March 30, 2007(1)

Ab10-Ak


Form of Restricted Stock Award Agreement(1)

Ab10-Al


Severance Agreement and Release of Claims, dated June 13,
    2007, by and between Zila, Inc. and Douglas D. Burkett

Aa10-Am


Registration Rights Agreement, dated August 13, 2007, by
    and among Zila, Inc., Visium Balanced Offshore Fund, Ltd.,
    Visium Balanced Fund, LP, Visium Long Bias Offshore Fund, Ltd.,
    Visium Long Bias Fund, LP, and Atlas Master Fund, Ltd.

Ac10-An


Amendment Agreement, dated August 13, 2007, by and among
    Zila, Inc., Visium Balanced Offshore Fund, Ltd., Visium Balanced
    Fund, LP, Visium Long Bias Offshore Fund, Ltd., Visium Long Bias
    Fund, LP, and Atlas Master Fund, Ltd.

Ac10-Ao


Offer Letter, accepted August 16, 2007, by and between
    Zila, Inc. and David R. Bethune

Ad10-Ap


Severance Agreement and Release, dated July 30, 2007, by
    and between Zila, Inc. and Lawrence A. Gyenes

*21


Subsidiaries of Registrant

*23


Consent of BDO Seidman, LLP, Independent Registered Public
    Accounting Firm

*24
.1

Power of Attorney (included on page 45 of this Annual
    Report on
    Form 10-K)

*31
.1

Sarbanes-Oxley Section 302 Certification of the Chief
    Executive Officer

*31
.2

Sarbanes-Oxley Section 302 Certification of the Chief
    Financial Officer

*32
.1

Sarbanes-Oxley Section 906 Certification of the Chief
    Executive Officer

**32
.2

Sarbanes-Oxley Section 906 Certification of the Chief
    Financial Officer

**     (1)
    
    Management contract or compensatory plan or arrangement*
    
    Filed herewith**
    
    Furnished herewithA
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 1999B
    
    Incorporated by reference to the Companys Annual Report
    on
    Form 10-K
    for fiscal year ended July 31, 2002C
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed January 3, 2000D
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2001E
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 7, 2000F
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended October 31, 2001G
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed July 3, 2002H
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2003I
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2004J
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 2004K
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 8, 2004L
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2005M
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 2005 45




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##### Table of Contents



N
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2006O
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 7, 2006P
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 24, 2006Q
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed September 7, 2006R
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed September 29, 2006S
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed September 6, 2006T
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed October 4, 2006U
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed November 17, 2006V
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 24, 2006W
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed December 4, 2006X
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed February 23, 2007Y
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed March 13, 2007Z
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed June 6, 2007Aa
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed June 14, 2007Ab
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2007Ac
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 14, 2007Ad
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 22, 2007Ae
    
    Incorporated by reference to the Companys Pre-Effective
    Amendment No. 1 to Registration Statement on
    Form S-3
    filed April 23, 2007 46




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##### Table of Contents



SIGNATURES
  Form 10-K
    /s/  FRANK
    J. BELLIZZI   Executive Vice President
 (Principal Executive Officer)
  POWER OF
    ATTORNEY
  Form 10-K
  Form 10-K
  Signature

Title

Date/s/  DAVID
    R. BETHUNEDavid
    R. Bethune

Executive Chairman of the Board

October 15, 2007/s/  J.
    STEVEN GARRETTJ.
    Steven Garrett

Director

October 15, 2007/s/  DAVID
    GOLDMANDavid
    Goldman

Director

October 15, 2007/s/  LESLIE
    H. GREENLeslie
    H. Green

Director

October 15, 2007/s/  O.
    B. PARRISHO.
    B. Parrish

Director

October 15, 2007/s/  GEORGE
    J. VUTUROGeorge
    J. Vuturo

Director

October 15, 2007/s/  DIANE
    E. KLEINDiane
    E. Klein

Vice President  Finance

October 15, 2007  47




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##### Table of Contents



APPENDIX F
  ZILA,
    INC. AND SUBSIDIARIES
    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
    FINANCIAL STATEMENT SCHEDULE
  Page1 Financial StatementsReports of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of July 31, 2007
    and 2006


F-5Consolidated Statements of Operations and
    Comprehensive Loss for the Years Ended July 31, 2007, 2006 and
    2005


F-6Consolidated Statements of Shareholders
    Equity for the Years Ended July 31, 2007, 2006 and 2005


F-7Consolidated Statements of Cash Flows for the
    Years Ended July 31, 2007, 2006 and 2005


F-8Notes to Consolidated Financial Statements


F-92 Financial Statement ScheduleSchedule II - Valuation of Qualifying
    Accounts


F-41  F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm On Internal
    Control Over Financial Reporting
      Internal Control  Integrated
    Framework
         F-2




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##### Table of Contents



F-3




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm
              Internal Control Integrated
    Framework
  
    F-4




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  As of July 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
14,859,159


$
3,958,190Trade receivables  net of allowances of $173,000 and
    $9,000


4,273,580



254,786Inventories  net


4,074,733



1,845,773Prepaid expenses and other current assets


1,646,229



1,513,462Current assets of discontinued operations






15,397,949Total current assets


24,853,701



22,970,160Property and equipment  net


6,219,436



1,684,017Purchased technology  net


9,884,017



2,552,937Goodwill  net


10,171,351



Trademarks and other intangible assets  net


11,555,041



3,842,448Other assets


1,197,684



2,721,885Long-term assets of discontinued operations






22,592,498Total assets

$
63,881,230


$
56,363,945LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable


3,043,608


$
2,088,479Accrued liabilities


5,751,697



1,791,906Warrant and common stock repurchase liability


1,376,393



2,369,965Short-term borrowings






30,347Current portion of deferred gain on sale leaseback


152,976



152,976Current portion of long-term debt and capital lease obligations


77,472



18,067,681Current liabilities of discontinued operations


165,368



5,322,862Total current liabilities


10,567,514



29,824,216Deferred gain on sale leaseback


75,659



228,635Long-term debt and capital lease obligations  net of
    current portion


7,258,569



527,874Long-term liabilities of discontinued operations






2,532,137Total liabilities


17,901,742



33,112,862Commitments and contingencies (Notes 14 and 15)Shareholders equity:Preferred stock  Series B, $.001 par
    value  2,500,000 shares authorized,
    100,000 shares issued and outstanding, liquidation
    preference of $650,000


462,500



462,500Common stock, $.001 par value  147,500,000 and
    65,000,000 shares authorized, 62,466,338 and
    46,007,593 shares issued and outstanding


62,466



46,008Additional paid-in capital


123,436,957



85,305,331Accumulated deficit


(76,054,251
)


(61,929,007
)Accumulated other comprehensive loss


(127,118
)


(82,678
)Treasury stock, at cost (1,151,243 and 218,411 common shares)


(1,801,066
)


(551,071
)Total shareholders equity


45,979,488



23,251,083Total liabilities and shareholders equity

$
63,881,230


$
56,363,945    F-5




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
  For the Years Ended July 31,2007


2006


2005Net revenues

$
28,800,840


$
2,821,548


$
1,199,076Cost of products sold


11,856,957



1,924,857



499,456Gross profit


16,943,883



896,691



699,620Operating costs and expenses:Marketing and selling


14,411,711



5,594,879



2,124,009General and administrative


15,140,696



10,466,919



8,318,709Research and development


7,482,374



7,158,034



6,695,507Depreciation and amortization


2,921,045



1,415,075



1,220,702Loss from operations


(23,011,943
)


(23,738,216
)


(17,659,307
)Other income (expense):Interest income


550,035



270,638



178,110Interest expense


(7,385,539
)


(1,920,428
)


(30,556
)Derivative income (expense)


1,058,873



(136,722
)


Loss on sale of assets


(933
)


(20,791
)


(362
)Other income (expense)


16,422



(497,104
)


(79,949
)Total other income (expense)


(5,761,142
)


(2,304,407
)


67,243Loss from continuing operations before income taxes


(28,773,085
)


(26,042,623
)


(17,592,064
)Income tax benefit (expense)


5,790,964



(3,600
)


(86,300
)Loss from continuing operations


(22,982,121
)


(26,046,223
)


(17,678,364
)Income (loss) from discontinued operations


(510,625
)


(2,671,246
)


8,996,799Gain (loss) on disposal of discontinued operations


16,185,058



(628,862
)


9,781,029Income tax expense


(5,856,405
)






Total income (loss) from discontinued operations


9,818,028



(3,300,108
)


18,777,828Net income (loss)


(13,164,093
)


(29,346,331
)


1,099,464Preferred stock dividends


39,000



39,000



39,000Net income (loss) attributable to common shareholders

$
(13,203,093
)

$
(29,385,331
)

$
1,060,464Basic and diluted net income (loss) per common share:Loss from continuing operations

$
(0.41
)

$
(0.57
)

$
(0.39
)Income (loss) from discontinued operations


0.18



(0.07
)


0.41Net loss attributable to common shareholders

$
(0.23
)

$
(0.64
)

$
0.02Weighted average common shares outstanding  basic and
    diluted


56,377,332



45,702,651



45,564,562Consolidated Statements of Comprehensive LossNet income (loss)

$
(13,164,093
)

$
(29,346,331
)

$
1,099,464Foreign currency translation adjustment


(44,440
)


(18,754
)


9,529Comprehensive income (loss)

$
(13,208,533
)

$
(29,365,085
)

$
1,108,993    F-6




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##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedAdditional





Other





TotalPreferred Stock


Common Stock


Paid-in


Accumulated


Comprehensive


Treasury


ShareholdersShares


Amount


Shares


Amount


Capital


Deficit


Income (Loss)


Stock


EquityBalance, July 31, 2004


100,000


$
462,500



45,723,296


$
45,723


$
83,968,913


$
(33,604,140
)

$
(73,453
)

$
(571,373
)

$
50,228,170Preferred stock dividends






















(39,000
)










(39,000
)Issuance of common stock under employee stock purchase plan










66,519



67



223,017















223,084Exercise of common stock options and warrants










74,235



74



127,882















127,956Issuance of common stock from treasury


















3,445











20,302



23,747Trylon share adjustment to market value


















49,000















49,000Foreign currency translation


























9,529







9,529Net income






















1,099,464











1,099,464Balance, July 31, 2005


100,000



462,500



45,864,050



45,864



84,372,257



(32,543,676
)


(63,924
)


(551,071
)


51,721,950Preferred stock dividends






















(39,000
)










(39,000
)Issuance of common stock under employee stock purchase plan










49,913



50



153,874















153,924Exercise of common stock options and warrants










93,630



94



171,850















171,944Stock-based compensation expense


















607,350















607,350Foreign currency translation


























(18,754
)






(18,754
)Net loss






















(29,346,331
)










(29,346,331
)Balance, July 31, 2006


100,000



462,500



46,007,593



46,008



85,305,331



(61,929,007
)


(82,678
)


(551,071
)


23,251,083Cumulative-effect adjustment of adopting FSP No. EITF
    00-19-2


















2,460,489



(922,151
)










1,538,338Preferred stock dividends






















(39,000
)










(39,000
)Issuance of common stock










9,100,000



9,100



7,611,781















7,620,881Issuance of common stock purchase warrants


















16,888,348















16,888,348Conversion of unsecured debt










6,900,000



6,900



4,445,448















4,452,348Beneficial conversion feature of secured debt


















4,397,050















4,397,050Issuance of shares in settlement of liability










289,728



290



659,710















660,000Issuance of common stock under employee stock purchase plan










10,703



10



16,893















16,903Exercise of common stock options and warrants










30,000



30



42,645















42,675Stock-based compensation expense










128,314



128



1,735,660















1,735,788Accrued repurchase of common shares and warrants


















(126,398
)










(1,249,995
)


(1,376,393
)Foreign currency translation


























(44,440
)






(44,440
)Net loss






















(13,164,093
)










(13,164,093
)Balance, July 31, 2007


100,000


$
462,500



62,466,338


$
62,466


$
123,436,957


$
(76,054,251
)

$
(127,118
)

$
(1,801,066
)

$
45,979,488    F-7




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years Ended July 31,2007


2006


2005Cash flows from operating activities:Net income (loss)

$
(13,164,093
)

$
(29,346,331
)

$
1,099,464Adjustments to reconcile net income (loss) to net cash used in
    operating activities:Depreciation and amortization


3,419,630



3,036,211



2,745,486Amortization of financing costs


2,512,724



487,556



36,418Amortization of debt discounts


3,624,602



393,219



Non-cash interest on term loan


201,940



283,981



Non-cash derivative (income) expense


(1,058,873
)


136,722



Loss (gain) from disposition of discontinued operations


(16,185,058
)


628,862



(9,781,029
)Loss on sale of assets


1,769



27,387



6,202Non-cash research and development expense










49,000Non-cash stock-based compensation expense


1,691,275



527,700



42,860Non-cash charge for options issued to outside parties


49,148



102,808



Other non-cash items  net


201,580



(193,986
)


(7,912
)Changes in operating assets and liabilities (excluding the
    effect of the Pro-Dentec acquisition):Trade receivables


901,657



7,498,718



(3,395,402
)Inventories


(61,686
)


(3,920,543
)


(200,796
)Prepaid expenses and other assets


495,792



(297,723
)


68,567Accounts payable and accrued liabilities


2,402,324



(173,173
)


1,949,787Net cash used in operating activities


(14,967,269
)


(20,808,592
)


(7,387,355
)Cash flows from investing activities:Additions to property and equipment


(969,228
)


(1,017,726
)


(1,871,230
)Additions to intangible assets


(498,954
)


(1,115,497
)


(553,122
)Restricted cash deposited to collateralize letter of credit


3,610,950



(3,083,167
)


(10,430
)Proceeds from sale of assets






8,289



500Acquisition of Pro-Dentec


(34,058,808
)


(723,826
)


Proceeds from disposition of discontinued operations


44,311,249



641,750



11,022,608Proceeds from sale of short-term investments










8,000,000Net cash provided by (used in) investing activities


12,395,209



(5,290,177
)


16,588,326Cash flows from financing activities:Short-term borrowings (repayments)  net


(30,347
)


(123,988
)


154,335Proceeds from issuance of common stock


15,980,323



302,710



317,580Proceeds from convertible notes payable


24,075,000







Proceeds from secured term loan






20,000,000



Financing costs


(2,551,339
)


(2,285,237
)


Principal payments on long-term debt


(23,961,608
)


(735,043
)


(347,034
)Dividends paid to preferred stockholders


(39,000
)


(39,000
)


(68,250
)Net cash provided by financing activities


13,473,029



17,119,442



56,631Net increase (decrease) in cash and cash equivalents


10,900,969



(8,979,327
)


9,257,602Cash and cash equivalents  beginning of year


3,958,190



12,937,517



3,679,915Cash and cash equivalents  end of year

$
14,859,159


$
3,958,190


$
12,937,517    F-8




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Nature of
    Business Activities, Basis of Presentation and Summary of
    Significant Accounting Policies  Nature
    of Business Activities and Basis of
    Presentation
    ® ® 630tm ® ® ® ® tm ®
    ® ® ® ® ® ® ® tm ® ®
  Disclosures about Segments of an Enterprise and Related
    Information
 F-9




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Summary
    of Significant Accounting Policies
  Principles of Consolidation
  Use of Estimates and Risks and Uncertainties
  Reclassifications
  Business Concentration
  ® ® ®
      Revenue Recognition
  Cash and Cash Equivalents
 F-10




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Allowances for Doubtful Accounts and Sales
    Returns
  Inventories work-in-process (first-in,
  Property and Equipment
    Building


40 yearsBuilding improvements


15 yearsLeasehold improvements


5  7 yearsFurniture and equipment


3  10 yearsProduction, laboratory and warehouse equipment


7  10 years   Long-Lived Assets Accounting for the Impairment or Disposal of Long-Lived
    Assets
  Goodwill and Other Intangible Assets Goodwill and Other Intangible
    Assets
       F-11




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Deferred Financing Costs costs-net
  Share-Based Payments Share-Based Payment
  Accrued Warranty Costs
  Derivative Warrant Liability and Debt Discount
    Amortization No. 00-19, Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock (EITF 00-19),
  and/or EITF 98-5, Accounting for Convertible Securities with Beneficial
    Conversion Features or Contingently Adjustable Conversion
    Ratios (EITF 98-5) EITF 00-27, Application of Issue
    No. 98-5
    to Certain Convertible Instruments (EITF 00-27).
 F-12




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Research and Development
  Advertising
  Shipping Costs
  Income Taxes Accounting for
    Income Taxes
  Net Income (Loss) Per Common Share
  Comprehensive Income (Loss)
  Financial Instruments
     F-13




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Foreign Currency Translation and Foreign Currency
    Transactions
  Recently
    Issued Accounting Pronouncements and Adopted
    Accounting
  Quantifying
    Misstatements in Current Year Financial Statements, Accounting Changes and Error
    Corrections.
  Fair
    Value Measures
  Accounting for Uncertainty in Income Taxes 
    An Interpretation of FASB Statement No. 109
 F-14




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for Certain Hybrid Financial
    Instruments  An Amendment of FASB Statements
    No. 133 and 140 Accounting for
    Derivative Instruments and Hedging Activities, Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities.
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an Amendment of FASB
    Statement No. 115, Accounting for Certain Investments in
    Debt and Equity Securities
  EITF 00-19-2, Accounting for Registration Payment
    Arrangements EITF 00-19-2), EITF 00-19-2 Accounting for
    Contingencies. EITF 00-19-2 EITF 00-19-2 EITF 00-19-2 EITF 00-19-2
   F-15




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EITF 00-19-2, EITF 00-19-2
  2.
    Acquisition     F-16




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Assets acquired:Cash and cash equivalents

$
853Trade receivables


3,135Inventories


2,385Prepaid expenses and other current assets


295Property and equipment


4,541Intangible assets not subject to amortization:Trademarks


5,449Intangible assets subject to amortization:Purchased technology  proprietary know-how


8,173Covenants not to compete


2,305Customer lists and relationships


1,187Other assets


2Goodwill


10,171Total assets acquired


38,496Liabilities assumed:Accounts payable


1,018Accrued liabilities


684Notes payable


1,158Total liabilities assumed


2,860Net assets acquired

$
35,636      F-17




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Net revenues

$
40,223


$
37,708


$
35,668Loss from continuing operations


(21,475
)


(22,509
)


(14,582
)Basic and diluted net loss per common share from continuing
    operations


(0.35
)


(0.36
)


(0.24
)     3.
    Dispositions    Nutraceuticals
    disposition
      Pharmaceuticals
    dispositions
  ®
    ®
 F-18




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2007


2006


2005Nutraceuticals:Net revenues

$
1,629


$
21,473


$
38,471Income (loss) from discontinued operations


(1,360
)


(3,046
)


9,022Gain (loss) on disposal of discontinued operations


11,024







Pharmaceuticals:Net revenues

$
3,694


$
6,176


$
10,863Income (loss) from discontinued operations


849



375



(25
)Gain (loss) on disposal of discontinued operations


5,161



(629
)


9,781Total discontinued operations:Net revenues

$
5,323


$
27,649


$
49,334Income (loss) from discontinued operations


(511
)


(2,671
)


8,997Gain (loss) on disposal of discontinued operations


16,185



(629
)


9,781  F-19




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Nutraceuticals


Pharmaceuticals


TotalCurrent assets:Trade receivables

$
2,633


$
876


$
3,509Restricted cash collateral


3,611







3,611Inventories


7,679



174



7,853Prepaid expenses and other current assets


223



202



425Total current assets


14,146



1,252



15,398Property and equipment


6,706



20



6,726Goodwill


2,897







2,897Trademarks and other intangible assets


8,675



4,070



12,745Other assets


224







224Total assets

$
32,648


$
5,342


$
37,990Current liabilities:Current portion of long-term debt and capital lease obligations

$
294


$



$
294Accounts payable


2,475



190



2,665Accrued liabilities


2,087



277



2,364Total current liabilities


4,856



467



5,323Long-term debt and capital lease obligations  net of
    current portion


2,532







2,532Total liabilities

$
7,388


$
467


$
7,855   4.
    Inventories    2007


2006Finished goods

$
1,413


$
1,088Work-in-process


323



281Raw materials


2,659



533Inventory reserves


(320
)


(56
)Total inventories

$
4,075


$
1,846  F-20




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Property
    and Equipment    2007


2006Land

$
529


$
Building and improvements


2,181



Furniture and equipment


1,955



1,789Leasehold improvements and other assets


1,360



894Production, laboratory and warehouse equipment


4,828



2,533Total property and equipment


10,853



5,216Less: Accumulated depreciation and amortization


(4,634
)


(3,532
)Property and equipment  net

$
6,219


$
1,684   Accounting for
    Leases.
 F-21




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Goodwill
    and Other Intangible Assets    2007


2006Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountAmortizable intangible assets:Trademarks and other intangible assets:Trademarks

$
132


$
(11
)

$
121


$
104


$
(7
)

$
97Patents


2,495



(350
)


2,145



2,483



(209
)


2,274Licensing costs


2,674



(1,514
)


1,160



2,737



(1,266
)


1,471Covenant not to compete and other


3,556



(876
)


2,680











Total trademarks and other intangible assets:


8,857



(2,751
)


6,106



5,324



(1,482
)


3,842Purchased technology


15,592



(5,708
)


9,884



7,419



(4,866
)


2,553Total amortizable intangible assets


24,449



(8,459
)


15,990



12,743



(6,348
)


6,395Unamortizable intangible assets:Trademarks.


5,449







5,449











Goodwill


10,171







10,171











Total intangible assets.

$
40,069


$
(8,459
)

$
31,610


$
12,743


$
(6,348
)

$
6,395     Range of


Weighted Average Remaining Useful LivesUseful Lives


July 31, 2007


July 31, 2006Purchased technology rights


15



14.5



5.3Trademarks


7-10



7.6



9.2Patents


4-17



6.2



6.4Licensing costs


7-10



4.4



5.4Covenant not to compete and other


2-15



1.8



      F-22




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008

$
2,6982009


1,9112010


1,5122011


1,5022012


990   7.
    Accrued
    Liabilities    2007


2006Accrued research and development

$
1,964


$
349Accrued employee compensation and related taxes


1,860



347Accrued professional and consulting fees


569



852Accrued fees due Investors for Restructuring (see Note 8)


600



Other accrued expenses


759



244Total accrued expenses

$
5,752


$
1,792   8.
    Debt    2007


2006Short-term borrowings  installment note payable on
    insurance policies

$



$
30Current portion of long-term debt:Secured term loan  net of discount

$



$
18,044Capital lease obligations


77



24Total current portion of long-term debt

$
77


$
18,068Long-term debt:6.0% Senior Secured Convertible Notes  net of
    unamortized discount of $5,345 and nil

$
6,655


$
Secured term loan  net of unamortized discount of nil
    and $1,840






18,044PharmaBio


500



500Capital lease obligations


181



52Total long-term debt


7,336



18,596Less: Current portion


(77
)


(18,068
)Long-term debt  net of current portion

$
7,259


$
528   Short-term
    Borrowing
   F-23




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Private
    Placements
                         F-24




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  EITF 98-5 EITF 00-27
    non-financial
                   F-25




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      EITF 00-19 Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity
    Secured
    Term Loan
         F-26




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                        PharmaBio
    Development, Inc.
  ®
 F-27




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Capital
    Leases
      Long-Term


CapitalDebt


Leases


Total2008

$



$
77


$
772009






70



702010


12,000



34



12,0342013 and thereafter


500







500Total


12,500



181



12,681Less: Current portion






(77
)


(77
)Less: Discount on Secured Notes


(5,345
)






(5,345
)Long-term portion

$
7,155


$
104


$
7,259   9.
    Share
    Based Payments  Stock
    Options and Awards
  Accounting for
    Stock-Based
    Compensation Accounting for Stock Issued to Employees
       F-28




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Stock based compensation expense assuming fair value method
    applied(1)

$
3,915Net income (loss) attributable to common shareholders:As reported

$
1,060Fair value impact of employee stock compensation expense not
    included in net income as reported


(3,872
)Pro forma

$
(2,812
)Basic and diluted net income (loss) per common share:As reported

$
0.02Pro forma

$
(0.06
)     (1)
    
    Includes stock-based compensation expense for stock options for
    employees and directors and Employee Stock Purchase Plan
    activity.      2007


2006


2005Risk-free interest rate


5
%


4
%


4
%Expected volatility


61
%


67
%


75
%Expected term (in years)


5.8



5.0



6.4Dividend yield










    F-29




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          WeightedAverageNumber


Exerciseof Options


PriceOptions outstanding  beginning of year


3,235


$
3.54Granted


1,299



2.47Exercised


(30
)


1.42Expired


(921
)


3.93Forfeited


(666
)


2.87Options outstanding  end of year


2,917



3.11      F-30




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Vested orExpectedOutstanding


Vest


ExercisableNumber of options


2,917



2,634



1,921Aggregate intrinsic value of options

$
130,000


$
130,000


$
130,000Weighted average remaining contractual term (in years)


5.8



5.5



4.6Weighted average exercise price

$
3.11


$
3.11


$
3.16       WeightedWeighted


AverageAverage


Remaining


AggregateNumber


Grant


Contractual


Intrinsicof Shares


Value


Term


ValueUnvested balance as of July 31, 2006





$







$
Granted


275



2.50Vested


(142
)


2.58Forfeited






Unvested balance as of July 31, 2007


133


$
2.42



1.4


$
173         2007


2006Marketing and selling

$
141


$
17General and administrative


1,530



461Research and development


8



18Inventory


12



4Discontinued operations






28Total stock-based compensation

$
1,691


$
528   Warrants
   F-31




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      WeightedWeighted


AverageAverage


Remaining


AggregateNumber


Exercise


Contractual


Intrinsicof Shares


Price


Term


ValueWarrants outstanding  beginning of year


1,302


$
2.16



4.4


$
383Granted


11,636



2.21Expired


(14
)


4.40Warrants outstanding  end of year


12,924


$
2.20



4.3


$
28     Stock
    Purchase Plan
  and/or
  10.
    Income
    Taxes    2007


2006


2005Current:Federal

$



$



$
State


65



4



8Total current


65



4



8Deferred:Federal


(4,995
)






State


(861
)






Total deferred


(5,856
)






Total income tax benefit

$
(5,791
)

$
4


$
8  F-32




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Federal statutory rate


(35
)%


(35
)%


35
%Adjustments:State income taxes  net of federal tax effects










4Non-deductible meal and entertainment expenses










2Non-deductible intangible amortization


1



1



13Non-deductible financing costs


2







Non-deductible stock-based compensation


1







Non-taxable fair value adjustments


(1
)






Increase (decrease) in valuation allowance


12



34



(53
)Effective tax rate


(20
)%


0
%


1
%     2007


2006Deferred income tax assets:Net operating loss carry forwards

$
19,711


$
16,056Book basis versus tax basis differences






481Alternative minimum tax credit


230



230Miscellaneous reserves and accruals


573



382Stock-based compensation


437



143Other


188



266Total deferred income tax assets


21,139



17,558Deferred income tax liabilities:Depreciation and amortization


(495
)


(78
)Book basis versus tax basis differences


(5,861
)


Federal income tax on state NOL carryforwards


(873
)


(697
)Other


(278
)


(378
)Total deferred income tax liabilities


(7,507
)


(1,153
)Valuation allowance


(13,632
)


(16,405
)Net deferred income tax assets

$



$
    F-33




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      11.
    Supplemental
    Schedule of Cash flow Information    2007


2006


2005Interest paid

$
1,314


$
976


$
168Income taxes paid


172



102



14Capital lease obligation for new equipment


181



65



6Beneficial conversion feature of Secured Convertible Notes


4,397







Conversion of Unsecured Convertible Notes


4,452







Non-cash effect of removal of contractual restrictions on issued
    common stock










49   12.
    Convertible
    Preferred Stock    13.
    Treasury
    Stock      14.
    Leases     F-34




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Capital


OperatingLeases


Leases


Total2008

$
92


$
672


$
7642009


78



437



5152010


35



177



2122011






72



72Total minimum lease payments


205


$
1,358


$
1,563Less: Amounts representing interest


(24
)Present value of future minimum lease payments


181Less: Current portion of capital lease obligations


(77
)Long-term portion of capital lease obligations

$
104   15.
    Commitments
    and Contingencies  Litigation
     F-35




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##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Employment
    Agreements
    Business
    Venture Agreements
   F-36




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##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Indemnifications
  and/or
  Registration
    Payment Arrangements
  30-day
     F-37




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##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             F-38




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          16.
    Net Loss
    Per Share Information    For the Years Ended July 31,2007


2006


2005Numerator:Net income (loss)

$
(13,203
)

$
(29,385
)

$
1,060Denominator:Basic and diluted weighted average number of common shares
    outstanding


56,377



45,703



45,565Antidilutive securities not included in the diluted earnings per
    share calculation:Options and warrants to purchase common shares


192



340



382Common share stock awards


40







Convertible preferred stock


100



100



100Total potentially dilutive securities


332



440



482     17.
    Employee
    Benefit Plan   F-39




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  18.
    Quarterly
    Financial Data (Unaudited)    2007October 31


January 31


April 30


July 31Net revenues

$
339


$
7,149



10,894


$
10,419Gross profit


(161
)


4,123



6,663



6,319Loss from continuing operations


(6,372
)


(6,442
)


(4,401
)


(5,767
)Income from discontinued operations


6,114



291



93



3,320Net loss


(258
)


(6,151
)


(4,308
)


(2,447
)Basic and diluted net income (loss) per share:Loss from continuing operations

$
(0.14
)

$
(0.12
)

$
(0.07
)

$
(0.09
)Income from discontinued operations


0.13



0.01







0.05Net loss

$
(0.01
)

$
(0.11
)

$
(0.07
)

$
(0.04
)   2006October 31


January 31


April 30


July 31Net revenues

$
654


$
829


$
1,218


$
121Gross profit


316



311



508



(238
)Loss from continuing operations


(5,186
)


(5,338
)


(7,649
)


(7,873
)Income (loss) from discontinued operations


184



(1,908
)


(426
)


(1,150
)Net income loss


(5,002
)


(7,246
)


(8,075
)


(9,023
)Basic and diluted net income (loss) per share:Loss from continuing operations

$
(0.11
)

$
(0.12
)

$
(0.17
)

$
(0.17
)Loss from discontinued operations






(0.04
)


(0.01
)


(0.03
)Net loss

$
(0.11
)

$
(0.16
)

$
(0.18
)

$
(0.20
)   19.
    Geographic
    Information   F-40




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##### Table of Contents



SCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS
  Balance 


Charged to





Balance -Beginning


Costs and





Endof Year


Expenses


Deductions


of YearAllowance for doubtful accounts receivable:July 31, 2005

$



$



$



$
July 31, 2006














July 31, 2007






118



(35
)


83Allowance for sales returns:July 31, 2005






18



1



19July 31, 2006


19



10



(20
)


9July 31, 2007


9



105



(24
)


90Inventory reserve:July 31, 2005


112



176



(159
)


129July 31, 2006


129



52



(126
)


55July 31, 2007


55



266



(1
)


320Deferred tax valuation allowance:July 31, 2005


6,204







(598
)


5,606July 31, 2006


5,606



10,799







16,405July 31, 2007


16,405







(2,773
)


13,632  F-41




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##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibit



MethodNumber

Description

of Filing3-A


Certificate of Incorporation, as amended

A3-B


Certificate of Amendment to Certificate of Incorporation

M3-C


Certificate of Amendment to Certificate of Incorporation

V3-D


Bylaws of Zila, Inc., as amended and restated through
    August 16, 2007

Ad4-A


Specimen Stock Certificate

A4-B


Form of 12% Unsecured Note due May 2007

W4-C


Form of 6% Senior Secured Note due November 2009

W4-D


Form of Initial Warrant

W4-E


Form of Additional Warrant

W4-F


Form of Secured Note Warrant

W4-G


Warrant, dated February 20, 2007, issued to Roth Capital
    Partners, LLC

X4-H


Form of Amended and Restated Senior Secured Convertible Note due
    July 2010

Ac10-A


Employee Stock Purchase Plan(1)

E10-B


Investment Agreement between Zila, Inc. and PharmaBio
    Development, Inc. dated December 18, 2002

H10-C


Reimbursement Agreement between Oxycal Laboratories,
    Incorporated, an Arizona Corporation, and Wells Fargo Business
    Credit, Inc. relating to $3,900,000  The Industrial
    Development Authority Revenue Bonds (Oxycal Laboratories,
    Incorporated Project) Series 1999A, dated as of
    February 6, 2004

I10-D


Employment Agreement between Zila, Inc. and Douglas D.
    Burkett, Ph.D., dated as of October 21, 2003(1)

I10-E


Lease between Zila, Inc. and Phoenix 7 LLC, dated
    January 30, 2004

I10-F


Offer letter between Zila, Inc. and Andrew A. Stevens dated
    January 15, 2004(1)

J10-G


1997 Stock Award Plan, as amended, dated September 30,
    2004(1)

K10-H


Offer letter between Zila, Inc. and Gary V. Klinefelter dated
    November 16, 2004(1)

L10-I


Retention Agreement with Andrew A. Stevens effective
    March 7, 2005(1)

L10-J


Retention Agreement with Diane E. Klein effective March 7,
    2005(1)

L10-K


Agreement of Purchase and Sale of Assets dated June 27,
    2005 with Blairex Laboratories, Inc.

M10-L


Form of Option Agreement(1)

M10-M


Credit Agreement dated March 24, 2006 by and among Zila,
    Inc., Zila Technical, Inc., Zila Biotechnology, Inc., Zila
    Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and Zila Swab
    Technologies, Inc. and Black Diamond Commercial Finance,
    L.L.C.

N10-N


First Amendment to Credit Agreement dated June 6, 2006 by
    and among Zila, Inc., Zila Technical, Inc., Zila Biotechnology,
    Inc., Zila Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and
    Zila Swab Technologies, Inc. and Black Diamond Commercial
    Finance, L.L.C.

N10-O


Second Amendment to Credit Agreement dated June 6, 2006 by
    and among Zila, Inc., Zila Technical, Inc., Zila Biotechnology,
    Inc., Zila Nutraceuticals, Inc., Zila Pharmaceuticals, Inc., and
    Zila Swab Technologies, Inc. and Black Diamond Commercial
    Finance, L.L.C.

O10-P


Third Amendment to Credit Agreement dated August 18, 2006
    by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

P10-Q


Fourth Amendment to Credit Agreement dated August 31, 2006
    by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

Q10-R


Fifth Amendment to Credit Agreement dated September 25,
    2006 by and among Zila, Inc., Zila Technical, Inc., Zila
    Biotechnology, Inc., Zila Nutraceuticals, Inc., Zila
    Pharmaceuticals, Inc., and Zila Swab Technologies, Inc. and
    Black Diamond Commercial Finance, L.L.C.

R




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##### Table of Contents



Exhibit



MethodNumber

Description

of Filing10-S


Registration Rights Agreement, dated as of March 24, 2006,
    by and between Black Diamond Commercial Finance, L.L.C. and
    Zila, Inc.

N10-T


Offer Letter between Zila, Inc. and Frank J. Bellizzi dated
    May 22, 2006

N10-U


Warrant for the purchase of shares of common stock, dated
    March 24, 2006, issued to Black Diamond Commercial Finance,
    L.L.C. by Zila, Inc.

N10-V


Amended and Restated Warrant to Purchase Shares of Common Stock,
    dated June 6, 2006, issued to BDC Finance, L.L.C. by Zila,
    Inc.

N10-W


Amended and Restated Warrant to Purchase Shares of Common Stock,
    dated September 25, 2006, issued to BDC Finance, L.L.C. by
    Zila, Inc.

R10-X


Stock Purchase Agreement by and between NBTY, Inc. and Zila,
    Inc. with respects to all of the outstanding capital stock of
    Zila Nutraceuticals, Inc. dated August 13, 2006

S10-Y


First Amendment to Stock Purchase Agreement, dated
    September 28, 2006, by and between Zila, Inc. and NBTY,
    Inc.

T10-Z


Purchase Agreement for the Shares, Unsecured Notes, Initial
    Warrants and Additional Warrants, dated November 13, 2006,
    by and among Zila, Inc. and the investors thereto

U10-Aa


Purchase Agreement for the Secured Notes and Secured Note
    Warrants, dated November 13, 2006, by and among Zila, Inc.
    and the investors thereto

U10-Ab


Agreement and Plan of Merger, dated November 13, 2006, by
    and among Zila, Inc., Zila Merger, Inc., Professional Dental
    Technologies, Inc. and certain stockholders thereto

U10-Ac


Pledge and Security Agreement, dated November 28, 2006, by
    and among Zila, Inc., Zila Biotechnology, Inc., Zila
    Pharmaceuticals, Inc., Zila Technical, Inc., Zila Limited,
    Balyasny Asset Management, L.P. and the investor parties thereto

W10-Ad


Engagement Letter, dated July 14, 2006, by and between
    Zila, Inc. and Roth Capital Partners, LLC

Ae10-Ae


Registration Rights Agreement for the Shares, Unsecured Notes,
    Initial Warrants and Additional Warrants, dated
    November 28, 2006, by and among Zila, Inc. and the investor
    parties thereto

W10-Af


Registration Rights Agreement for the Secured Notes and Secured
    Note Warrants, dated November 28, 2006, by and among Zila,
    Inc. and the investor parties thereto

W10-Ag


Offer letter between Zila, Inc. and Lawrence A. Gyenes(1)

Y10-Ah


Asset Purchase Agreement, dated September May 31, 2007, by
    and between Zila, Inc., Zila Pharmaceuticals, Inc., 3M and 3M
    Innovative Properties Company

Z10-Ai


Employment Agreement between Zila, Inc. and Gary V. Klinefelter,
    dated as of March 30, 2007(1)

Ab10-Aj


Employment Agreement between Zila, Inc. and Diane E. Klein,
    dated as of March 30, 2007(1)

Ab10-Ak


Form of Restricted Stock Award Agreement(1)

Ab10-Al


Severance Agreement and Release of Claims, dated June 13,
    2007, by and between Zila, Inc. and Douglas D. Burkett

Aa10-Am


Registration Rights Agreement, dated August 13, 2007, by
    and among Zila, Inc., Visium Balanced Offshore Fund, Ltd.,
    Visium Balanced Fund, LP, Visium Long Bias Offshore Fund, Ltd.,
    Visium Long Bias Fund, LP, and Atlas Master Fund, Ltd.

Ac10-An


Amendment Agreement, dated August 13, 2007, by and among
    Zila, Inc., Visium Balanced Offshore Fund, Ltd., Visium Balanced
    Fund, LP, Visium Long Bias Offshore Fund, Ltd., Visium Long Bias
    Fund, LP, and Atlas Master Fund, Ltd.

Ac10-Ao


Offer Letter, accepted August 16, 2007, by and between
    Zila, Inc. and David R. Bethune

Ad10-Ap


Severance Agreement and Release, dated July 30, 2007, by
    and between Zila, Inc. and Lawrence A. Gyenes

*21


Subsidiaries of Registrant

*23


Consent of BDO Seidman, LLP, Independent Registered Public
    Accounting Firm

*24
.1

Power of Attorney (included on page 45 of this Annual
    Report on
    Form 10-K)

*31
.1

Sarbanes-Oxley Section 302 Certification of the Chief
    Executive Officer

*




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##### Table of Contents



Exhibit



MethodNumber

Description

of Filing31
.2

Sarbanes-Oxley Section 302 Certification of the Chief
    Financial Officer

*32
.1

Sarbanes-Oxley Section 906 Certification of the Chief
    Executive Officer

**32
.2

Sarbanes-Oxley Section 906 Certification of the Chief
    Financial Officer

**     (1)
    
    Management contract or compensatory plan or arrangement*
    
    Filed herewith**
    
    Furnished herewithA
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 1999B
    
    Incorporated by reference to the Companys Annual Report
    on
    Form 10-K
    for fiscal year ended July 31, 2002C
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed January 3, 2000D
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2001E
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 7, 2000F
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended October 31, 2001G
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed July 3, 2002H
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2003I
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2004J
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 2004K
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 8, 2004L
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended January 31, 2005M
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for fiscal year ended July 31, 2005N
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2006O
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 7, 2006P
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 24, 2006Q
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed September 7, 2006R
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed September 29, 2006S
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed September 6, 2006T
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed October 4, 2006U
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed November 17, 2006V
    
    Incorporated by reference to the Companys Proxy Statement
    on Schedule 14A filed November 24, 2006W
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed December 4, 2006X
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed February 23, 2007Y
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed March 13, 2007Z
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed June 6, 2007Aa
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed June 14, 2007Ab
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended April 30, 2007Ac
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 14, 2007




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##### Table of Contents



Ad
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed August 22, 2007Ae
    
    Incorporated by reference to the Companys Pre-Effective
    Amendment No. 1 to Registration Statement on
    Form S-3
    filed April 23, 2007