##### 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, 2006ORo

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

86-0619668(State or Other Jurisdiction
    of
    Incorporation or Organization)

(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 RegisteredNone

N/A   Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, $.001 par value
 (Title of Class)
  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




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##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


3Item 1A.


Risk
    Factors


15Item 1B.


Unresolved Staff
    Comments


21Item 2.


Properties


21Item 3.


Legal
    Proceedings


21Item 4.


Submission of
    Matters to a Vote of Security Holders


22PART IIItem 5.


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


22Item 6.


Selected Financial
    Data


23Item 7.


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


24Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk


44Item 8.


Financial
    Statements and Supplementary Data


44Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


44Item 9A.


Controls and
    Procedures


44Item 9B.


Other
    Information


47PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


47Item 11.


Executive
    Compensation


47Item 12.


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


47Item 13.


Certain
    Relationships and Related Transactions


47Item 14.


Principal
    Accounting Fees and Services


47PART IVItem 15.


Exhibits and
    Financial Statement Schedules


48SIGNATURES


49EX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



PART I  Item 1.
    Business    ® ®
  ® ® 630tm ® ®
  ®
  Recent
    Developments
  Nutraceuticals
    Business Unit Disposition
  ® ®
     3




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##### Table of Contents



Product
    Developments
  ® ®
  ® ® ® ® 630tm tm ®
  Potential
    Acquisition
  ® ® ® ® ® ®
 4




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##### Table of Contents



Our
    Products
  Nutraceuticals
    Ester-C®
  ® ® ® ®
  ® ® ® ® ® ® ® ® ® ® ®
  ® ®
  Ester-E®
  ® ® ® ®
    Pharmaceuticals
  ViziLite®
    Plus
  ® 630tm tm ® 630tm
 5




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##### Table of Contents



Peridex®
  ® ® ® ® ®
  Biotechnology
  OraTest®
  tm ® tm tm ®
  ® ® tm ® tm ®
    ®
    Sales and
    Marketing
  Nutraceuticals
  Ester-C®
    and
    Ester-E®
  ® ® ® ®
 6




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##### Table of Contents



® ® ® ®
  Pharmaceuticals
  ViziLite®
    Plus
  ® 630tm ® ®
  Peridex®
  ® ®
  Biotechnology
  OraTest®
  ® ® ® ® ®
  Manufacturing
    and Supply
  Nutraceuticals
  ® ® ® ®
  ®
 7




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##### Table of Contents



®
  Pharmaceuticals
  ViziLite®
    Plus
  ®
  Peridex®
  ® ®
  Biotechnology
  OraTest®
  ® tm ® tm tm
  Competition
    Pharmaceuticals
  ViziLite®
    Plus
  ® 630 ® ®
  Peridex®
  ® ®
 8




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##### Table of Contents



Biotechnology
  OraTest®
  ® ® ® tm
  Licensing
  Pharmaceuticals
  ViziLite®
  ® ® ® 630tm ®
  Peridex®
  ®
  Biotechnology
  OraTest®
  ® ®
  ®
 9




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Governmental
    Regulation
  General
              Ester-C®
    and
    Ester-E®
   10




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##### Table of Contents



® ®
      ® ® ® ® ®
  ® ®
  ®
  ® ®
  OraTest®
    and
    ViziLite®
    Plus
  ® ® ®
 11




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##### Table of Contents



®
  ®
  ® ® ® ® 630tm tm ® ®
  Patents
    and Trademarks
  Ester-C®
  Ester-C ®
  ®
  ® ®
  ®
  ®
  ® ®
  ® ® ®
 12




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Ester-E®
  Ester-E ®
  and/or
  ® state-of-the-art ®
  ®
  ViziLite®
  ® ®
  ® tm T-Blue 630tm
  ®
  Peridex®
  ® ® ®
  ®
  OraTest®
  ®
 13




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##### Table of Contents



tm tm tm tm and/or ® tm and/or tm tm tm
  ® ®
  Employees
    Available
    Information
  1-800-SEC-0330. www.sec.gov
  Form 10-K, Form 10-Q, Form 8-K,
  Forward-looking
    Statements
  Form 10-K
 14




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Item 1A.
    Risk
    Factors    Trends,
    Risks and Uncertainties Related to Our Business
  Obtaining
    regulatory approvals for our products is costly and
    uncertain.
      We may
    be unable to obtain FDA approval, or to establish a market, for
    OraTest®
    in the United States.
  ® ® ® ® ® ® ®
  ® ®
 15




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® ®
  ® tm ®
  The
    sale of the Nutraceuticals Business Unit reduced our revenue by
    approximately 76%.
    We may
    fail to realize the anticipated cost savings, revenue
    enhancements, product focus, or other benefits expected from our
    recent disposition of the Nutraceuticals Business Unit and any
    subsequent acquisition.
  day-to-day ® ®
 16




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We
    have incurred substantial expenses and committed valuable time
    related to the recent disposition of our Nutraceuticals Business
    Unit and our ability to successfully execute our business plan
    is dependent on our ability to obtain adequate
    financing.
    We are
    dependent on a few key products and our growth is dependent on
    the development of new products.
  ® ® ® ® ® ®
      Our
    proprietary rights may prove difficult to enforce.
  and/or and/or
 17




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We
    have historically been, and will probably be in the future,
    dependent on a few key customers.
    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.
  ®
 18




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If the
    use of our technology is determined to infringe on the
    intellectual property rights of others, our business could be
    harmed.
        We
    require certain raw materials for our manufacturing processes
    that may only be acquired through limited sources.
    If we
    are unable to obtain adequate funds on acceptable terms, we may
    not be able to develop and market our present and potential
    products.
  ® ®
 19




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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
  Financing
    arrangements or other corporate events could dilute existing
    ownership.
    In the
    past, we have experienced volatility in the market price of our
    common stock and we may experience such volatility in the
    future.
    Our
    Board of Directors may take actions which could dilute current
    equity ownership or prevent or delay a change in our
    control.
   20




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Corporate
    Headquarters
  85014-2800.
  Manufacturing
    Facilities
  tm ®
    Item 3.
    Legal
    Proceedings       21




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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 Repurchases of Equity
    Securities    High


LowFiscal Year Ended July 31,
    2006First quarter

$
3.99


$
3.00Second quarter


4.04



2.88Third quarter


3.91



2.95Fourth quarter


3.61



2.92Fiscal Year Ended July 31,
    2005First quarter

$
4.59


$
3.31Second quarter


5.00



3.42Third quarter


5.09



2.99Fourth quarter


3.80



2.55       Preferred
    Stock
   22




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##### Table of Contents



Warrants
    No. 00-19, (EITF 00-19),
      Issuer
    Repurchase of Equity Securities
    Item 6.
    Selected
    Financial Data   23




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##### Table of Contents



Form 10-K.
  Fiscal Years Ended July 31,Statement of Operations Data:

2006


2005


2004


2003


2002Net revenues

$
28,188


$
43,489


$
36,682


$
34,310


$
23,361Net income (loss) from continuing
    operations before accounting change


(27,748
)


(7,273
)


(4,175
)


11,726
(2)


(13,260
)Basic and diluted net income
    (loss) per share from continuing operations

$
(0.61
)

$
(0.16
)

$
(0.10
)

$
0.26


$
(0.30
)   At July 31,Balance Sheet Data:

2006


2005


2004


2003


2002Current assets

$
22,970


$
32,639


$
30,123


$
35,326


$
20,810Total assets


56,364



65,418



62,109



69,020



57,361Current liabilities


29,824



9,815



7,581



11,519



7,427Long-term debt


3,060



3,328



3,650



3,728



3,610Total liabilities


33,113



13,696



11,880



15,272



11,038Series B convertible
    preferred stock


463



463



463



463



463Total shareholders equity


23,251



51,722



50,228



53,748



46,323     (1)
    
    Includes $9.8 million gain from disposal of our Zilactin
    product line. (See Note 2 of Notes to Consolidated
    Financial Statements).(2)
    
    Includes $14.8 million contract settlement gain from our
    former contract research organization.(3)
    
    Includes adoption of SFAS No. 142, Goodwill and
    Other Intangibles Assets, in which we recorded a charge of
    $4.1 million as a cumulative effect of accounting
    change.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
      
    Zila Nutraceuticals, manufacturer and marketer of Advanced
    Protection
    Ester-C®
    and
    Ester-E®,
    proprietary, branded, highly effective forms of vitamins C and E.
    Zila Pharmaceuticals, manufacturer and marketer of superior
    products to promote oral health and prevent oral disease,
    including
    ViziLite®
    Plus with
    T-Blue630tm,
    chemiluminescent light for illumination of oral mucosal
    abnormalities,
    Peridex®
    prescription periodontal rinse, and the plastic molded products
    of Zila Swab Technologies, Inc. (IST). IST was sold
    in July 2006.
    Zila Biotechnology, a research, development and licensing
    business specializing in pre-cancer/cancer detection through its
    patented
    ZTCtm
    and
    OraTest®
    technologies.  ® ® ®
 24




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® ® ® ®
  Sale
    of Nutraceuticals Business Unit
      Product
    Development
  ® ®
  Other
    Disposition
   25




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##### Table of Contents



Results
    of Operations
  Fiscal
    Year Ended July 31, 2006 Compared to Fiscal Year Ended
    July 31, 2005
    Fiscal Years Ended July 31,Percent of





Percent ofNet





Net


%2006


Revenues


2005


Revenues


ChangeNet revenues

$
28,188



100
%

$
43,489



100
%


(35
)Cost of products sold


11,500



41



14,273



33



(19
)Gross profit


16,688



59



29,216



67



(43
)Operating expenses:Marketing & selling


17,986



64



15,718



36



14General & administrative


13,494



48



11,040



25



22Research & development


7,776



27



7,181



17



8Depreciation &
    amortization


2,727



10



2,414



6



1341,983



149



36,353



84



16Loss from operations


(25,295
)


(90
)


(7,137
)


(17
)


(254
)Other income (expense), net


(2,450
)


(8
)


(128
)






(1,814
)Loss from continuing operations
    before income taxes

$
(27,745
)


(98
)

$
(7,265
)


(17
)


(282
)   Consolidated
  ®
  ®
  ®
  ®
 26




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##### Table of Contents



®
      Nutraceuticals
    Fiscal Years Ended July 31,%2006


2005


ChangeNet revenues

$
21,472


$
38,471



(44
)Gross profit


13,145



25,994



(49
)Gross profit %


61
%


68
%Income (loss) from operations
    before income taxes


(2,692
)


9,022



(130
)     
    We engaged in a process to assess the feasibility of divesting
    the Nutraceuticals Business Unit and on August 13, 2006,
    signed a definitive agreement for the sale of all of the common
    stock of Zila Nutraceuticals, Inc. to NBTY, Inc. The purchase
    price is up to $40.5 million with $37.5 million
    (subject to a working capital adjustment) to be paid in cash at
    close and up to an additional $3 million to be potentially
    paid through an earn-out formula that is dependent upon the
    future performance of the business. On September 27, 2006,
    our shareholders approved this transaction and we closed the
    transaction on October 2, 2006. Several of our customers,
    among others, were involved in this process. As a result, we
    believe that they may not have purchased product in amounts
    consistent with prior experience over the second half of fiscal
    2006 as we engaged in this process because they were evaluating
    their strategic interest in the business. This had the effect of
    significantly decreasing our sales during the third and fourth
    quarters;
    Within the United States market, we continued our efforts to
    develop or identify new technologies to expand the line of Ester
    products. New product introductions and expansion of our
    customer base are fundamental to our future growth. The
    introduction of new products can span several years and require
    substantial investment in product development and marketing
    resources;
    Internationally, we sustained our efforts to obtain the approval
    of the Japanese Ministry of Health so that we may offer
    Ester-C®
    to Japanese consumers;
    As part of our international growth strategy we signed
    agreements with:  ® ®
  ®
 27




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##### Table of Contents



®
  ® ®
  
    We developed a new and improved form of our
    Ester-C®
    product and extended the patent protection for this new form of
    Ester-C until 2019. The new product offers all the benefits of
    Zilas traditional Ester-C plus an additional metabolite
    with new benefits designed to enhance the antioxidant potential
    of our existing
    Ester-C®
    formula.
    A clinical study of
    Ester-C®
    showed that the Ester formulation of vitamin C caused
    significantly fewer adverse epigastric effects (stomach upsets)
    and was much better tolerated by the body compared to regular
    vitamin C. This was the first double-blind, placebo-controlled
    study to evaluate whether
    Ester-C®
    causes fewer gastric upsets, the primary complaint of vitamin C
    consumption, than regular vitamin C. The study was published in
    a recent issue of Advances in Natural
    Therapy.
    A study conducted for the Australian company, Phosphagenics
    Limited, confirmed an earlier study suggesting that
    Ester-E®
    may proactively benefit cardiovascular health. In this animal
    study,
    Ester-E®
    significantly reduced LDL-C (so-called bad cholesterol),
    triglycerides, and plaque formation, while regular vitamin E had
    no significant effect. The study data showed that this unique
    form of vitamin E lowered bad cholesterol concentrations in
    blood by up to 44% and triglycerides by up to 51% in mice fed
    normal diets. When fed high cholesterol diets,
    Ester-E®
    significantly reduced plaque formation in the aorta by 58%.
    Again, regular vitamin E had no significant effect on plaque
    formation. These results confirm the earlier animal study
    indicating that
    Ester-E®
    may have the potential to yield healthier levels of total
    cholesterol, triglycerides and LDL-C in humans. The animal model
    chosen for the trials is commonly used in cardiovascular
    research as it mimics many of the properties observed clinically
    in humans.        Pharmaceuticals
    Fiscal Years Ended July 31,%2006


2005


ChangeNet revenues

$
6,716


$
5,018



34Gross profit


3,550



3,223



10Gross profit %


53
%


64
%Loss from operations before income
    taxes


(5,427
)


(1,011
)


(437
)  28




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##### Table of Contents




    Introduced our
    ViziLite®
    Plus product at the October 2005 annual meeting of the American
    Dental Association and commenced sales in our second fiscal
    quarter.
    ViziLite®
    Plus combines the oral screening technology of ViziLite, an
    advanced biophotonic light technology, with
    TBlue630tm,
    a marking system using
    Zila®
    Tolonium Chloride, the only patented pharmaceutical-grade form
    of toluidine blue used in marking lesions identified during a
    ViziLite examination;
    Targeted key geographical markets that have demonstrated early
    acceptance of
    ViziLite®
    and placed Specialists into 11 key markets as part of our
    strategy to establish
    ViziLite®
    as the standard of care for dental offices in the detection of
    oral abnormalities;
    Increased dental office awareness of
    ViziLite®
    Plus to greater than 50% of dentists nationally;
    Expanded
    ViziLite®
    distribution into 500 of the nations group dental
    practices;
    Expanded insurance reimbursement for
    ViziLite®
    Plus regionally and nationally;
    Established an exclusive supply agreement with Aven Dental S.A
    of Athens, Greece for the distribution of Peridex in Greece.
    Aven Dental S.A.was founded in 1979 to provide leading dental
    products to the Greek market. Aven currently represents many
    well-known companies and brands including Rembrandt, Parkell,
    and Orascoptic;
    Divested IST in July 2006 as part of our ongoing strategy to
    focus on our core products with the greatest growth potential.
    (IST is presented as discontinued operations in the accompanying
    financial statements and no longer part of the Pharmaceuticals
    Business Unit.)  ® ® ® 630tm ® ® ® ®
  ® 630tm ® ®
  ® 630tm
 29




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##### Table of Contents



Biotechnology
    Fiscal Years Ended July 31,%2006


2005


ChangeNet revenues

$



$




Research and development expense


7,154



6,696



7Loss from continuing operations
    before income taxes


(9,336
)


(8,541
)


(9
)     
    We made significant progress in the furtherance of our
    OraTest®
    regulatory program during fiscal 2006. In our second fiscal
    quarter, we successfully reached agreement with the Food and
    Drug Administration (FDA) on the design and size of
    the new phase III clinical trial under the FDAs
    special protocol assessment (SPA) process and commenced
    patient enrollment. The SPA trial is expected to provide the
    primary basis for safety and efficacy in the OraTest new drug
    application (NDA). Prior studies will also be
    submitted in the NDA and are expected to support the
    products safety and efficacy. The revised regulatory
    program is designed to reduce the duration and the cost of the
    original program while improving the potential market size by
    assessing the efficacy of
    OraTest®
    in staining cancerous and pre-cancerous oral lesions in a
    population of tobacco users and alcohol drinkers. We believe
    that we can complete the current study enrollment in
    approximately one year from the beginning of enrollment from
    most clinical sites in spring 2006, although no assurances can
    be given in this regard. The on-going trial is expected to
    require less than 4,000 patients who generally undergo a
    single visit and may include up to two interim analyses. We have
    made significant progress in enrolling patients in the study and
    we are approaching a point where an interim analysis of the test
    results may be required. Upon completion of the clinical program
    and assuming that all required clinical requirements are
    achieved, we estimate that it will require approximately six
    months to complete our clinical, non-clinical and chemistry,
    manufacturing and controls (CMC) objectives in order
    to prepare the NDA supplement for submission to the FDA.
    We continued efforts to re-commission our manufacturing facility
    as we prepare to commercialize
    OraTest®.
    We continued efforts to determine and complete the remaining
    clinical, non-clinical and CMC requirements for the NDA.  ®
  ®
 30




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##### Table of Contents



Results
    of Operations
  Fiscal
    Year Ended July 31, 2005 Compared to Fiscal Year Ended
    July 31, 2004
    Fiscal Years Ended July 31,Percent of





Percent ofNet





Net


%2005


Revenues


2004


Revenues


ChangeNet revenues

$
43,489



100
%

$
36,682



100
%


19Cost of products sold


14,273



33



13,485



37



6Gross profit


29,216



67



23,197



63



26Operating expenses:Marketing & selling


15,718



36



9,417



26



67General & administrative


11,040



25



9,951



27



11Research & development


7,181



17



5,933



16



21Depreciation &
    amortization


2,414



6



2,169



6



1136,353



84



27,470



75



32Loss from operations


(7,137
)


(17
)


(4,273
)


(12
)


(67
)Other income (expense), net


(128
)






100







(228
)Loss from continuing operations
    before income taxes

$
(7,265
)


(17
)

$
(4,173
)


(12
)


(74
)   Consolidated
    ®
  ® ®
    ® tm
   31




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##### Table of Contents



Nutraceuticals
    Fiscal Years Ended July 31,%2005


2004


ChangeNet revenues

$
38,471


$
32,433



19Gross profit


25,994



20,286



28Gross profit %


68
%


63
%Income from operations before
    income taxes


9,022



8,300



9     
    Growing consumer awareness and trial of
    Ester-C®
    in response to increased media and promotion investment and
    improved advertising methods;
    Improved gross profits through purchase of ascorbic acid under
    supply agreements that provided a substantial portion of our
    annual requirements at prices equivalent to historical averages,
    providing cost predictability for our
    Ester-C®
    products;
    The commercial introduction of our
    Ester-E®
    tocopheryl phosphates, an enhanced form of natural vitamin E and
    the first line extension under our successful Ester
    umbrella of products, was made much more difficult and
    ultimately unprofitable to date by unprecedented and unexpected
    negative publicity regarding vitamin E;
    Increased capacity and efficiency through upgrading our
    Ester-C®
    production facility in Prescott, Arizona;
    Consolidation amongst our customer base that has increased the
    percentage of our total revenues that is attributable to one of
    our largest customers, NBTY, Inc.  ® ® ® ®
  ®
   32




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##### Table of Contents



® ®
  Pharmaceuticals
    Fiscal Years Ended July 31,%2005


2004


ChangeNet revenues

$
5,018


$
4,249



18Gross profit


3,223



2,910



11Gross profit %


64
%


69
%Loss from operations before income
    taxes


(1,011
)


(619
)


(63
)     
    A continued product rollout of
    ViziLite®
    with emphasis in key markets that resulted in improving sales
    trends;
    Strengthening the position of
    Peridex®
    in the direct to dental market via competitive new advertising
    and new packaging forms;
    Increased marketing and selling investment to support the
    ViziLite®
    rollout and to increase
    Peridex®
    brand value.  ® ® ®
  product-to-market ® ® ® ®
  ® ® ® ®
   33




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##### Table of Contents



Biotechnology
    Fiscal Years Ended July 31,%2005


2004


ChangeNet revenues

$



$




Research and development expense


6,696



5,476



22Loss from continuing operations
    before income taxes


(8,541
)


(7,142
)


(20
)     
    Increased spending for the
    OraTest®
    product regulatory program;
    Continued development of a commercialization strategy for the
    OraTest®
    product;
    Approval of modifications to the current
    OraTest®
    regulatory program submitted to the FDA and aimed at reducing
    the programs overall duration and total cost;
    Re-commissioning of our
    ZTCtm
    manufacturing facility to support our regulatory program and the
    production of
    ViziLite®
    Plus with
    TBlue630tm,
    the first commercialized use of our
    ZTCtm
    technology;
    Renegotiation of the General Services Agreement with Quintiles
    Transnational Corp. (Quintiles), our contract
    research organization, to support the modifications to our
    regulatory program;
    Expanded use of our Medical Advisory Board, whose members are
    some of the worlds leading researchers studying cancers
    located in the head and neck, to assist in development of our
    regulatory strategy and in development of our product
    commercialization strategy; and
    Evaluation of other
    ZTCtm
    pre-cancer and cancer detection applications.  ®
  Inflation
    and Seasonality
    Liquidity
    and Capital Resources
  Overview
  ®
  ® ® ®
 34




---



##### Table of Contents



® ®
      Fiscal Years Ended July 31,2006


2005Net cash used in operating
    activities

$
(20,809
)

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


(5,290
)


16,588Net cash provided by (used in)
    financing activities


17,119



57   July 31,


July 31,2006


2005Cash and cash equivalents

$
3,958


$
12,938Working capital


(6,854
)


22,824Current ratio


0.8



3.3     Operating
    Activities
   35




---



##### Table of Contents



Investing
    Activities
  ® 630tm ®
  Financing
    Activities
    Income
    Taxes
    Black
    Diamond Credit Facility
     36




---



##### Table of Contents



No. 00-19, (EITF 00-19),
       37




---



##### Table of Contents



Industrial
    Development Revenue Bonds
      PharmaBio
    Investment
  ®
 38




---



##### Table of Contents



Supply
    Arrangements
  ®
  Preferred
    Stock
  one-to-one. one-to-one.
  Stock
    Repurchase Program
    EBITDA
     39




---



##### Table of Contents



Reconciliation
    of GAAP Measures to Non-GAAP Measure
  Fiscal Years Ended July 31,2006


2005


2004(Unaudited)(In thousands)EBITDA

$
(24,498
)

$
3,939


$
(1,431
)Interest income


344



188



109Interest expense


(2,152
)


(196
)


(342
)Depreciation and amortization


(3,036
)


(2,746
)


(2,671
)Income tax expense


(4
)


(86
)


(2
)Net income (loss)

$
(29,346
)(b)

$
1,099
(a)

$
(4,337
)     (a)
    
    Includes the $9.8 million gain from the disposal of our
    Zilactin product line (see Note 2 of Notes to Consolidated
    Financial Statements).(b)
    
    Includes the $629,000 loss from the disposal of IST (see
    Note 2 of Notes to Consolidated Financial Statements).  Contractual
    Obligations
    2007


2008 & 2009


2010 & 2011


Thereafter


TotalLong-term debt

$
18,289


$
991


$
491


$
1,495


$
21,266Operating leases


430



687



316







1,433Capital lease obligations


72



84











156Purchase obligations


7,975



5,379











13,354Total

$
26,766


$
7,141


$
807


$
1,495


$
36,209           Critical
    Accounting Policies and Estimates
   40




---



##### Table of Contents



Revenue Recognition
      Use of Estimates
        ® ®
 41




---



##### Table of Contents



®
  ® ® 630tm ®
  Goodwill, Intangibles and Other Long-Lived
    Assets and/or and/or
      Zila Pharmaceuticals Goodwill ®
  Zila Nutraceuticals Goodwill ®
  OraTest® ® ® ® tm
 42




---



##### Table of Contents



®
  Recent
    Accounting Pronouncements
  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 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.
 43




---



##### Table of Contents



Item 7A.  Quantitative
    and Qualitative Disclosures about Market Risk    and/or
  Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    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)
 44




---



##### Table of Contents



Managements
    Annual Report on Internal Control Over Financial
    Reporting.
  Rule 13a-15(f)
            Form 10-K,
 45




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm On Internal
    Control Over Financial Reporting.
      Internal
    Control  Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
    
    46




---



##### Table of Contents



Item 9B.
    Other Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    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    Item 14.
    Principal
    Accountant Fees and Services   47




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  (a)(1)


Financial Statements. The Index to
    Consolidated Financial Statements and Financial Statement
    Schedule on
    page F-1
    is incorporated herein by reference as the list of financial
    statements required as part of this report.(a)(2)


Financial Statement Schedule. The
    Index to Consolidated Financial Statements and Financial
    Statement Schedule on
    page F-1
    is incorporated herein by reference as the list of financial
    statements required as part of this report.(a)(3)


The exhibit list in the Index to
    Exhibits is incorporated herein by reference as the list of
    exhibits required as part of this report.  48




---



##### Table of Contents



SIGNATURES  Form 10-K
    ANDREW
    A. STEVENS
   Vice President and Chief Financial Officer
 (Principal Financial Officer)
  POWER OF
    ATTORNEY
  attorney-in-fact, Form 10-K attorney-in-fact attorneys-in-fact
  Form 10-K
  Signature

Title

Date/s/  DOUGLAS
    D.
    BURKETT, PH.D.Douglas
    D. Burkett, Ph.D.

Chairman of the Board, President,
    and Chief Executive Officer

October 10, 2006/s/  DAVID
    R. BETHUNEDavid
    R. Bethune

Director

October 10, 2006/s/  LESLIE
    H. GREENLeslie
    H. Green

Director

October 10, 2006/s/  CHRISTOPHER
    D. JOHNSONChristopher
    D. Johnson

Director

October 10, 2006/s/  KURT
    R. KRAUSSKurt
    R. Krauss

Director

October 10, 2006/s/  MICHAEL
    S. LESSERMichael
    S. Lesser

Director

October 10, 2006/s/  S.
    TIMOTHY
    ROSES.
    Timothy Rose

Director

October 10, 2006  49




---



##### Table of Contents



APPENDIX F
  ZILA,
    INC. AND SUBSIDIARIES
    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
    FINANCIAL STATEMENT SCHEDULE
  Page1.


Financial StatementsReport of
    Independent Registered Public Accounting Firm  BDO
    Seidman LLP


F-2Report of
    Independent Registered Public Accounting Firm 
    Deloitte & Touche LLP


F-3Consolidated
    Balance Sheets as of July 31, 2006 and 2005


F-4Consolidated
    Statements of Operations for the Years Ended July 31, 2006,
    2005 and 2004


F-5Consolidated
    Statements of Comprehensive Income (Loss) for the Years Ended
    July 31, 2006, 2005 and 2004


F-6Consolidated
    Statements of Shareholders Equity for the Years Ended
    July 31, 2006, 2005 and 2004


F-7Consolidated
    Statements of Cash Flows for the Years Ended July 31, 2006,
    2005 and 2004


F-8Notes to
    Consolidated Financial Statements


F-92.


Financial Statement ScheduleSchedule II 
    Valuation and Qualifying Accounts


F-34  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                Internal Control Integrated
    Framework
  
    F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm              
    F-3




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 July 31,
    2006 and 2005
  2006


2005ASSETSCURRENT ASSETS:Cash and cash equivalents

$
3,958,190


$
12,937,517Restricted cash collateral


3,610,950



527,783Trade receivables  net
    of allowances of $70,000 and $150,000


3,764,022



11,422,743Inventories  net


9,698,810



6,024,266Prepaid expenses and other current
    assets


1,938,188



1,726,778Total current assets


22,970,160



32,639,087PROPERTY AND EQUIPMENT 
    net


8,410,580



9,691,686PURCHASED TECHNOLOGY
    RIGHTS  net


2,552,937



3,031,613GOODWILL  net


6,930,192



6,930,192TRADEMARKS AND OTHER INTANGIBLE
    ASSETS  net


12,554,397



12,652,564DEFERRED FINANCING COSTS AND OTHER
    ASSETS


2,945,679



473,095TOTAL ASSETS

$
56,363,945


$
65,418,237LIABILITIES AND
    SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
4,753,785


$
5,397,213Accrued liabilities


4,156,030



3,717,630Warrant liability


2,369,965



Short-term borrowings


30,347



154,335Deferred revenue and deferred gain
    on sale leaseback


152,976



221,726Current portion of long-term debt
    and capital lease obligations


18,361,113



323,758Total current liabilities


29,824,216



9,814,662Deferred revenue and deferred gain
    on sale leaseback


228,635



553,486Long-term debt and capital lease
    obligations  net of current portion


3,060,011



3,328,139Total liabilities


33,112,862



13,696,287COMMITMENTS AND CONTINGENCIES
    (Note 13)SHAREHOLDERS EQUITY:Preferred stock 
    Series B, $.001 par value 
    2,500,000 shares authorized, 100,000 shares issued and
    outstanding


462,500



462,500Common stock, $.001 par
    value  65,000,000 shares authorized,
    46,007,593 shares and 45,864,050 shares issued and
    outstanding


46,008



45,864Capital in excess of par value


85,305,331



84,372,257Accumulated other comprehensive
    loss


(82,678
)


(63,924
)Accumulated deficit


(61,929,007
)


(32,543,676
)Common stock in treasury, at cost,
    218,411 shares


(551,071
)


(551,071
)Total shareholders equity


23,251,083



51,721,950TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
56,363,945


$
65,418,237    F-4




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES




CONSOLIDATED
    STATEMENTS OF OPERATIONS


Years
    Ended July 31, 2006, 2005 and 2004




|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                             |  | 2006 |             |   | 2005 |   |            | 2004 | 
|                                                                            
|Net revenues                                                                 |  | $    | 28,188,419  |   |      | $ | 43,488,867 |      |  | $ | 36,681,761 |  
|Cost of products sold (exclusive
    of depreciation shown separately below) |  |      | 11,500,872  |   |      |   | 14,272,895 |      |  |   | 13,485,155 |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Gross profit (exclusive of
    depreciation shown separately below)          |  |      | 16,687,547  |   |      |   | 29,215,972 |      |  |   | 23,196,606 |  
|Operating costs and expenses:                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Marketing and selling                                                        |  |      | 17,986,349  |   |      |   | 15,718,486 |      |  |   | 9,416,580  |  
|General and administrative                                                   |  |      | 13,493,846  |   |      |   | 11,039,704 |      |  |   | 9,951,093  |  
|Research and development                                                     |  |      | 7,775,592   |   |      |   | 7,181,206  |      |  |   | 5,932,870  |  
|Depreciation and amortization                                                |  |      | 2,726,835   |   |      |   | 2,413,525  |      |  |   | 2,168,909  |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|                                                                             |  |      | 41,982,622  |   |      |   | 36,352,921 |      |  |   | 27,469,452 |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from operations                                                         |  |      | (25,295,075 | ) |      |   | (7,136,949 | )    |  |   | (4,272,846 | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Other income (expense):                                                      |  |      |             |   |      |   |            |      |  |   |            |  
|Interest income                                                              |  |      | 343,521     |   |      |   | 187,712    |      |  |   | 108,525    |  
|Interest expense                                                             |  |      | (2,152,221  | ) |      |   | (195,080   | )    |  |   | (342,105   | )
|Derivative expense                                                           |  |      | (136,772    | ) |      |   |           |      |  |   |           |  
|Gain on sale leaseback of building                                           |  |      |            |   |      |   |           |      |  |   | 470,462    |  
|Loss on sale of assets                                                       |  |      | (27,387     | ) |      |   | (6,202     | )    |  |   | (2,731     | )
|Other expense                                                                |  |      | (476,998    | ) |      |   | (114,005   | )    |  |   | (134,458   | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|                                                                             |  |      | (2,449,807  | ) |      |   | (127,575   | )    |  |   | 99,693     |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from continuing operations
    before income taxes                      |  |      | (27,744,882 | ) |      |   | (7,264,524 | )    |  |   | (4,173,153 | )
|Income tax expense                                                           |  |      | (3,600      | ) |      |   | (8,300     | )    |  |   | (2,106     | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from continuing operations                                              |  |      | (27,748,482 | ) |      |   | (7,272,824 | )    |  |   | (4,175,259 | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Discontinued operations:                                                     |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from operations                                                         |  |      | (968,987    | ) |      |   | (1,330,741 | )    |  |   | (161,552   | )
|Net (loss) gain on disposal                                                  |  |      | (628,862    | ) |      |   | 9,781,029  |      |  |   |           |  
|Income tax expense                                                           |  |      |            |   |      |   | (78,000    | )    |  |   |           |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Income (loss) from discontinued
    operations                               |  |      | (1,597,849  | ) |      |   | 8,372,288  |      |  |   | (161,552   | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                            |  |      | (29,346,331 | ) |      |   | 1,099,464  |      |  |   | (4,336,811 | )
|Preferred stock dividends                                                    |  |      | 39,000      |   |      |   | 39,000     |      |  |   | 39,000     |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Net income (loss) attributable to
    common shareholders                    |  | $    | (29,385,331 | ) |      | $ | 1,060,464  |      |  | $ | (4,375,811 | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Basic net income (loss) per common
    share:                                |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from continuing operations                                              |  | $    | (0.61       | ) |      | $ | (0.16      | )    |  | $ | (0.10      | )
|Income (loss) from discontinued
    operations                               |  |      | (0.03       | ) |      |   | 0.18       |      |  |   |           |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                            |  | $    | (0.64       | ) |      | $ | 0.02       |      |  | $ | (0.10      | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Weighted average shares outstanding                                          |  |      | 45,702,651  |   |      |   | 45,564,562 |      |  |   | 45,333,794 |  
|Diluted net income (loss) per
    common share:                              |  |      |             |   |      |   |            |      |  |   |            |  
|Loss from continuing operations                                              |  | $    | (0.61       | ) |      | $ | (0.16      | )    |  | $ | (0.10      | )
|Income (loss) from discontinued
    operations                               |  |      | (0.03       | ) |      |   | 0.18       |      |  |   |           |  
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                            |  | $    | (0.64       | ) |      | $ | 0.02       |      |  | $ | (0.10      | )
|                                                                             |  |      |             |   |      |   |            |      |  |   |            |  
|Weighted average shares outstanding                                          |  |      | 45,702,651  |   |      |   | 45,564,562 |      |  |   | 45,333,794 |  







F-5



---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (LOSS)
 Years Ended July 31, 2006, 2005 and 2004
  2006


2005


2004Net income (loss)

$
(29,346,331
)

$
1,099,464


$
(4,336,811
)Other comprehensive income (loss):Foreign currency translation
    adjustment


(18,754
)


9,529



2,191Comprehensive income (loss)

$
(29,365,085
)

$
1,108,993


$
(4,334,620
)   Foreign


AccumulatedCurrency


OtherTranslation


ComprehensiveAdjustments


LossBalance at July 31, 2004

$
(73,453
)

$
(73,453
)Other comprehensive income


9,529



9,529Balance at July 31, 2005


(63,924
)


(63,924
)Other comprehensive loss


(18,754
)


(18,754
)Balance at July 31, 2006

$
(82,678
)

$
(82,678
)    F-6




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
 Years Ended July 31, 2006, 2005 and 2004
  AccumulatedCommon Stock


Capital in








Other


TotalPreferred Stock





Par


Excess of


Accumulated


Treasury


Comprehensive


ShareholdersShares


Amount


Shares


Value


Par Value


Deficit


Stock


Income (Loss)


EquityBALANCE, JULY 31, 2003


100,000


$
462,500



45,439,893


$
45,440


$
83,115,533


$
(29,228,329
)

$
(571,373
)

$
(75,644
)

$
53,748,127Warrants issued for services
    provided


















28,028















28,028Dividends on preferred stock






















(39,000
)










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










76,803



77



249,883















249,960Exercise of common stock options
    and warrants










206,600



206



440,001















440,207Trylon shares adjustment to market
    value


















135,468















135,468Foreign currency translation






























2,191



2,191Net loss






















(4,336,811
)










(4,336,811
)BALANCE, JULY 31, 2004


100,000



462,500



45,723,296



45,723



83,968,913



(33,604,140
)


(571,373
)


(73,453
)


50,228,170Dividends on preferred stock






















(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 shares 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
)


(551,071
)


(63,924
)


51,721,950Dividends on preferred stock






















(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
)

$
(551,071
)

$
(82,678
)

$
23,251,083    F-7




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended July 31, 2006, 2005, 2004
  2006


2005


2004OPERATING ACTIVITIES:Net income (loss)

$
(29,346,331
)

$
1,099,464


$
(4,336,811
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization
    continuing operations


2,726,835



2,413,525



2,168,909Depreciation and amortization
    discontinued operations


309,376



331,961



502,031Amortization of financing costs


487,556



36,418



186,086Amortization of term loan discount


393,219







Non-cash interest on term loan


283,981







Non-cash derivative expense


136,722Loss (gain) from sale of
    discontinued operations


628,862



(9,781,029
)


Loss (gain) on sale of assets


27,387



6,202



(467,731
)Impairment of assets










288,940Non-cash research and development
    expense






49,000



72,187Non-cash stock-based employee
    compensation expense


527,700



42,860



65,827Non-cash charge for options issued
    to outside parties


102,808







Other non-cash items  net


(193,986
)


(7,912
)


(26,131
)Change in assets and liabilities:Receivables  net


7,498,718



(3,395,402
)


(1,272,570
)Inventories


(3,920,543
)


(200,796
)


1,268,369Prepaid expenses and other assets


(297,723
)


68,567



1,576,773Accounts payable and accrued
    liabilities


(173,173
)


1,949,787



(3,654,487
)Net cash used in operating
    activities


(20,808,592
)


(7,387,355
)


(3,628,608
)INVESTING ACTIVITIES:Additions to property and equipment


(1,017,726
)


(1,871,230
)


(1,276,811
)Additions to intangible assets


(1,115,497
)


(553,122
)


(723,967
)Restricted cash deposited to
    collateralize letter of credit


(3,083,167
)


(10,430
)


(517,353
)Net proceeds from sale of assets


8,289



500



1,721,876Acquisition of operations


(723,826
)






Net proceeds from disposition of
    discontinued operations


641,750



11,022,608



Proceeds from sale of short-term
    investments






8,000,000



3,950,000Purchases of short-term investments










(11,950,000
)Net cash provided by (used in)
    investing activities


(5,290,177
)


16,588,326



(8,796,255
)FINANCING ACTIVITIES:Short-term borrowings (repayments),
    net


(123,988
)


154,335



(154,793
)Proceeds from secured term loan


20,000,000







Financing costs


(2,285,237
)






(91,531
)Principal payments on long-term debt


(735,043
)


(347,034
)


(442,639
)Proceeds from issuance of common
    stock


302,710



317,580



652,757Dividends paid to preferred
    stockholders


(39,000
)


(68,250
)


(19,500
)Net cash provided by financing
    activities


17,119,442



56,631



(55,706
)NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS


(8,979,327
)


9,257,602



(12,480,569
)CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR


12,937,517



3,679,915



16,160,484CASH AND CASH EQUIVALENTS, END OF
    YEAR

$
3,958,190


$
12,937,517


$
3,679,915    F-8




---



##### Table of Contents



ZILA,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
 Years Ended July 31, 2006, 2005 and 2004
  1.
    Nature of
    Business Activities and Summary of Significant Accounting
    Policies  Nature
    of Business Activities
    Advanced Protection ® ® ® ® ® ® ® ® ®
      Summary
    of Significant Accounting Policies
  Principles of Consolidation
  Use of Estimates and Risks and Uncertainties
  ® ® ®
 F-9




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
   Reclassifications
  Business Concentration
    Fiscal Years Ended July 31,2006


2005


2004Customer A


15
%


41
%


34
%Customer B


11
%


12
%


13
%     2006


2005Nutraceuticals Business Unit:Customer A


*
%


25
%Customer B


*



18Customer C


15



*Customer D


11



*Pharmaceuticals Business Unit:Customer E


15



11     *
    
    Less than 10%      Revenue Recognition
   F-10




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
    Cash and Cash Equivalents 
  Restricted Cash
  Allowances for Doubtful Accounts and Sales
    Returns
  Inventories (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
   F-11




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
   Goodwill and Other Intangible Assets Goodwill and Other Intangible
    Assets ( )
        Share-Based Payments
  Deferred Financing Costs
  Derivative Warrant Liability, Debt Discount Amortization and
    Fair Value Determination No. 00-19, (EITF 00-19),
 F-12




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
    Research and Development
  Advertising
  Shipping Costs
  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  (Continues)
   Recently
    Issued Accounting Pronouncements
  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 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.
 F-14




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
    2.
    Dispositions    Pharmaceuticals Business Unit Dispositions
  ® over-the-counter
  ® ®
    Fiscal Years Ended July 31,2006


2005


2004Net revenues from discontinued
    operations

$
2,282


$
7,234


$
11,829Loss on discontinued operations,
    net of tax

$
(969
)

$
(1,331
)

$
(161
)   Corporate Headquarters Sale of Assets
  3.
    Inventories    2006


2005Finished goods

$
4,380


$
732Work in process


439



579Raw materials


4,937



4,853Inventory reserves


(57
)


(140
)Total inventories

$
9,699


$
6,024  F-15




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
   4.
    Property
    and Equipment    2006


2005Land

$
403


$
403Building and improvements


5,719



5,135Furniture and equipment


2,679



2,856Leasehold improvements and other
    assets


915



707Production and warehouse equipment


6,063



7,821Total property and equipment


15,779



16,922Less accumulated depreciation and
    amortization


(7,368
)


(7,230
)Property and equipment 
    net

$
8,411


$
9,692     5.
    Intangible
    Assets    2006


2005Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountAmortizable intangibles:Purchased technology rights

$
7,419


$
4,866


$
2,553


$
7,419


$
4,387


$
3,032Trademarks and other intangible
    assets:Trademarks


11,766



4,068



7,698



11,657



3,602



8,055Patents


3,668



499



3,169



3,168



624



2,544Licensing costs


3,162



1,475



1,687



3,162



1,108



2,054Total trademarks and other
    intangible assets


18,596



6,042



12,554



17,987



5,334



12,653Total amortizable intangible assets


26,015



10,908



15,107



25,406



9,721



15,685Unamortizable intangible asset:Goodwill


12,401



5,471



6,930



12,401



5,471



6,930Total intangible assets

$
38,416


$
16,379


$
22,037


$
37,807


$
15,192


$
22,615      F-16




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
    6.
    Debt    2006


2005Short-term borrowings:Installment note payable on
    insurance policies

$
30


$
154Current portion of long-term debt:Secured term loan, net of discount

$
18,044


$
IDA bond payable, Series A,
    current portion


245



245Capital lease obligations, current
    portion


72



50Note payable for equipment






29Total current portion of long-term
    debt

$
18,361


$
324Long-term debt:Secured term loan

$
19,884


$
Less  unamortized
    discount on term loan


(1,840
)


IDA bond payable, Series A


2,721



2,967PharmaBio


500



500Capital lease obligations


156



156Notes payable for equipment






29Total long-term debt


21,421



3,652Less current portion


18,361



324Long-term portion

$
3,060


$
3,328   Short-term Borrowing
  Secured Term Loan
   F-17




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
                 F-18




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
          PharmaBio Development ®
  Industrial Development Revenue Bonds
 F-19




---



##### Table of Contents



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


Capital


TotalDebt


Leases


Debt2007

$
18,289


$
72


$
18,3612008


245



65



3102009


746



19



7652010


245







2452011


245







2452012 and thereafter


1,495







1,495Total


21,265



156



21,421Less current portion


18,289



72



18,361Long-term portion

$
2,976


$
84


$
3,060   7.
    Stock
    Options and Warrants  Stock
    Options
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees
    catch-up
 F-20




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
            Fiscal Years Ended July 31,2005


2004Stock based compensation expense
    assuming fair value method applied(1)

$
3,915


$
1,079Net income (loss) attributable to
    common shareholders:As reported

$
1,060


$
(4,376
)Fair value impact of employee
    stock compensation expense not included in net income (loss) as
    reported


3,872



1,013Pro forma

$
(2,812
)

$
(5,389
)Net income (loss) attributable to
    common shareholders per basic share outstanding:As reported

$
0.02


$
(0.10
)Pro forma

$
(0.06
)

$
(0.12
)Net income (loss) attributable to
    common shareholders per diluted share outstanding:As reported

$
0.02


$
(0.10
)Pro forma

$
(0.06
)

$
(0.12
)     (1)
    
    Includes stock-based compensation expense for stock options for
    employees and directors and Employee Stock Purchase Plan
    activity.    Selling and marketing

$
25General and administrative


467Research and development


26Inventory


10$
528  F-21




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
     Fiscal Years Ended July 31,2006


2005


2004Black-Scholes model assumptions:Risk-free interest rate


4
%


4
%


4
%Expected volatility


67
%


75
%


75
%Expected term (in years)


5.0



6.4



5.7Dividend yield










          F-22




---



##### Table of Contents



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


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOutstanding at July 31, 2005


2,345


$
3.58Granted


1,372



3.56Exercised


(82
)


2.09Expired


(330
)


4.30Forfeited


(70
)


3.50Outstanding at July 31, 2006


3,235


$
3.54



7.0


$
878Options exercisable at
    July 31, 2006


2,071


$
3.53



5.9


$
857       Warrants
     F-23




---



##### Table of Contents



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


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOutstanding at July 31, 2005


133


$
1.69Granted


1,200



3.14Exercised


(16
)


0.989Forfeited/expired


(15
)


4.50Outstanding at July 31, 2006


1,302



3.00



4.4


$
383Warrants exercisable at
    July 31, 2006


1,302



3.00



4.4


$
383   Stock
    Purchase Plan
  and/or
  8.
    Income
    Taxes    2006


2005


2004Current:Federal

$



$



$
State


(4
)


(8
)


(2
)Total current


(4
)


(8
)


(2
)Deferred:Federal










State










Total deferred










Total consolidated income tax
    (benefit) provision

$
(4
)

$
(8
)

$
(2
)  F-24




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
     2006


2005


2004Federal statutory rate


(35
) %


35
%


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






4



Non-deductible meal and
    entertainment expenses






2



1Non-deductible intangible
    amortization


1



13



4Increase (decrease) in valuation
    allowance


34



(53
)


30Effective tax rate


0
%


1
%


0
%     2006


2005Deferred income tax assets:Net operating loss carry forwards

$
16,056


$
4,151Book basis versus tax basis
    differences


481



947Alternative minimum tax credit


230



230Miscellaneous reserves and accruals


382



637Stock based compensation


143



Other


266



82Total deferred income tax assets


17,558



6,047Deferred income tax liabilities:Depreciation and amortization


(78
)


(113
)Federal income tax on state NOL
    carryforwards


(697
)


(74
)Other


(378
)


(254
)Total deferred income tax
    liabilities


(1,153
)


(441
)Valuation allowance


(16,405
)


(5,606
)Net deferred income tax assets

$



$
        F-25




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
   9.
    Supplemental
    Schedule of Cash flow Information    2006


2005


2004Interest paid

$
976


$
168


$
158Income taxes paid


102



14



193Capital lease obligation for new
    equipment


65



6



232Non-cash effect of removal of
    contractual restrictions on issued common stock






49



135Liability satisfied through
    issuance of warrants










28   10.
    Convertible
    Preferred Stock    11.
    Treasury
    Stock    12.
    Leases         F-26




---



##### Table of Contents



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


OperatingLeases


Leases


Total2007

$
85


$
413


$
4982008


69



368



4372009


20



284



3042010






203



2032011






106



106Thereafter










Total minimum lease payments


174


$
1,374


$
1,548Less: amounts representing interest


18Present value of minimum lease
    payments


156Less: Current portion of capital
    lease obligations


72Long-term portion of capital lease
    obligations

$
84     13.
    Commitments
    and Contingencies  FDA
    approval of the
    OraTest®
    product
  ® ® tm ®
  ViziLite®
  ® ®
  Litigation
   F-27




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
       Employment
    Agreements
    Vital
    Health Sciences Ltd. License Agreement
    Supply
    Arrangements
  ®
  Indemnifications
  and/or
 F-28




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
    14.
    Employee
    Benefit Plan  ,
  15.
    Accrued
    Liabilities    2006


2005Accrued professional and
    consulting fees

$
1,739


$
1,248Accrued royalties


505



815Accrued employee compensation and
    related taxes


516



712Accrued advertising


803



433Other


593



510Total accrued liabilities

$
4,156


$
3,718   16.
    Segment
    Information  Advanced Protection ® ® ® ® ® ® ®
 F-29




---



##### Table of Contents



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


Pharmaceuticals


Biotechnology


Corporate


TotalNet revenues from continuing
    operations:2006

$
21,472


$
6,716


$



$



$
28,1882005


38,471



5,018











43,4892004


32,433



4,249











36,682Income (loss) from continuing
    operations before income taxes:2006


(2,692
)


(5,427
)


(9,336
)


(10,290
)


(27,745
)2005


9,022



(1,011
)


(8,541
)


(6,735
)


(7,265
)2004


8,300



(619
)


(7,142
)


(4,712
)


(4,173
)Identifiable assets from
    continuing operations:2006


32,774



9,599



9,680



4,311



56,3642005


34,084



10,949



18,993



1,392



65,4182004


31,469



11,521



15,561



3,558



62,109Capital expenditures:2006


447



128



421



22



1,0182005


735



279



737



120



1,8712004


759



31



37



450



1,277Depreciation and amortization:2006


1,269



401



851



206



2,7272005


1,131



344



732



207



2,4142004


1,057



330



683



99



2,169     17.
    Quarterly
    Financial Data (Unaudited)    2006Quarter EndedOctober 31


January 31


April 30


July 31Net revenues

$
9,114


$
8,881


$
5,986


$
4,207Gross profit


5,646



5,412



3,604



2,026Loss from continuing operations


(4,687
)


(7,152
)


(7,926
)


(7,983
)Income from discontinued operations


(315
)


(94
)


(149
)


(1,040
)Net income (loss)

$
(5,002
)

$
(7,246
)

$
(8,075
)

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

$
(0.10
)

$
(0.16
)

$
(0.18
)

$
(0.17
)Income (loss) from discontinued
    operations


(0.01
)


0.00



(0.00
)


(0.02
)Net loss

$
(0.11
)

$
(0.16
)

$
(0.18
)

$
(0.19
)  F-30




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
   2005Quarter EndedOctober 31


January 31


April 30


July 31Net revenues

$
9,681


$
10,816


$
11,798


$
11,194Gross profit


6,502



7,285



8,246



7,173Loss from continuing operations


(2,837
)


(2,384
)


(1,505
)


(547
)Income (loss) from discontinued
    operations


125



(272
)


(646
)


9,165Net loss

$
(2,712
)

$
(2,656
)

$
(2,151
)

$
8,618Basic and diluted net income
    (loss) per share:Loss from continuing operations

$
(0.06
)

$
(0.05
)

$
(0.04
)

$
(0.01
)Income (loss) from discontinued
    operations


0.00



(0.01
)


(0.01
)


0.20Net loss

$
(0.06
)

$
(0.06
)

$
(0.05
)

$
0.19   18.
    Subsequent
    Events  Disposition of the Nutraceuticals Business
    Unit
    Form 10-Q
    Current assets

$
14,271Property, plant and equipment


6,707Goodwill


2,897Patents, trademarks and other
    intangibles


8,675Other assets


224Total assets

$
32,774Current liabilities

$
4,856Bonds and capital lease obligations


2,532Total liabilities

$
7,388  F-31




---



##### Table of Contents



ZILA, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continues)
     Fiscal Years Ended July 31,2006


2005


2004Net revenues

$
21,472


$
38,471


$
32,433Income (loss) from operations


(2,692
)


9,022



8,300       Potential Acquisition
   F-32




---



##### Table of Contents



SCHEDULE II



VALUATION
    AND QUALIFYING ACCOUNTS  Balance at


Charged to





Balance atBeginning


Costs and





End ofDescription

of Period


Expenses


Deductions


of Period(In thousands)Allowance for doubtful accounts
    receivable:July 31, 2004

$
317


$
(90
)

$
168


$
59July 31, 2005


59



37



54



42July 31, 2006


42



(26
)


10



6Allowance for sales returns:July 31, 2004


294



154



235



213July 31, 2005


213



11



116



108July 31, 2006


108



124



168



64Inventory reserve:July 31, 2004


355



172



330



197July 31, 2005


197



290



347



140July 31, 2006


140



373



456



57Deferred tax valuation allowance:July 31, 2004


5,259



945







6,204July 31, 2005


6,204







598



5,606July 31, 2006


5,606



10,799







16,405  F-33




---



##### 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

Amended and Restated Bylaws (as
    amended through September 26, 2002)


B4-A

Specimen Stock Certificate


A10-A

Asset Purchase Agreement dated
    October 28, 1999 between Zila, Inc., and Cygnus Imaging,
    Inc. and Procare Laboratories, Inc.


A10-B

Promissory Note dated
    October 28, 1999 between Zila, Inc. and Procare
    Laboratories, Inc.


A10-C

Asset Purchase Agreement dated as
    of November 30, 1999 by and among Zila, Inc., Integrated
    Dental Technologies, Inc., InfoCure Systems, Inc., and InfoCure
    Corporation


C10-D

Engagement Letter dated
    March 15, 2001 between Zila, Inc. and Douglas, Curtis and
    Allyn, LLC


D10-E

Employee Stock Purchase Plan(1)


E10-F

Asset Purchase Agreement, dated as
    of November 1, 2001, by and between Ryker Dental of
    Kentucky, Inc. and HSI Ryker, Inc.


F10-G

Amended and Restated Asset
    Purchase Agreement dated as of December 4, 2001 by and
    among Zila, Inc., Ryker Dental of Kentucky, Inc. and
    PracticeWares, Inc.


F10-H

First Amendment to Engagement
    Letter dated as of June 6, 2002 between Zila, Inc. and
    Douglas, Curtis & Allyn, LLC


G10-I

Fourth Extension and Modification
    Agreement dated as of June 6, 2002 between Ryker Dental of
    Kentucky, Inc., PracticeWares, Inc. and Practice Works, Inc. and
    Gregory A. Jones


G10-J

First Amendment to Amended and
    Restated Asset Purchase Agreement dated as of June 18, 2002
    between Ryker Dental of Kentucky, Inc., PracticeWares, Inc. and
    Zila, Inc


G10-K

Stockholders Agreement dated as of
    June 18, 2002, among PracticeWorks, Inc., Gregory A Jones,
    Ryker Dental of Kentucky, Inc. and PracticeWares, Inc


G10-L

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


H10-M

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-N

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


I10-O

Purchase Agreement between Zila,
    Inc. and Gary and Janet Hedge, dated as of November 7, 2003


I10-P

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


I10-Q

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


J10-R

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


K10-S

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


L10-T

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


L10-U

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


L10-V

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


M10-W

Form of Option Agreement(1)


M10-X

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-Y

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.


N




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##### Table of Contents



Exhibit



MethodNumber

Description

of Filing10-Z

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-Aa

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-Ab

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-Ac

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-Ad

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


N10-Ae

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


N10-Af

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-Ag

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-Ag

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-Ah

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-Ai

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


T21

Subsidiaries of Registrant


*23.1

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


*23.2

Consent of Deloitte &
    Touche 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, 2003




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##### Table of Contents



I
    
    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, 2006