<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

 X   Quarterly report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934


For the quarterly period ended October 31, 1998 or

     Transition report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934

For the transition period from ____________________ to ______________________

Commission file number 0-17521

                                    ZILA, INC
             (Exact Name of registrant as specified in its charter)

<TABLE>
<CAPTION>
          Delaware                                                   No. 86-0619668           
<S>                                               <C>
(State or Other Jurisdiction                       (IRS Employer Identification number)
corporation or organization)

5227 North 7th Street, Phoenix, Arizona                                     85014 
(Address of principal executive offices)                                  (Zip Code)
</TABLE>

Registrant's telephone number, including area code (602)266-6700 
(former name, former address and former fiscal year, if changed since last
report)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
         Yes  X    No.     

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         The number of shares of the Company's common stock outstanding at
October 31, 1998 was 35,301,936 shares.
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page no.
<S>                                                                                                      <C>
PART   I     FINANCIAL INFORMATION

   Item 1.  Financial Statements (Unaudited)

             Condensed consolidated balance sheets as of October 31, 1998 and July 31, 1998                 3

             Condensed consolidated statements of operations for three months ended October 31,
             1998 and 1997                                                                                  4

             Condensed consolidated statements of cash flows for three months ended October 31,
             1998 and 1997                                                                                  5

             Notes to unaudited condensed consolidated financial statements                                6-8

   Item 2.  Management's discussion and analysis of financial condition and results of operations         9-10

PART II.       OTHER INFORMATION

   Item 1.  Legal proceedings                                                                                10

   Item 5.  Other information                                                                                11

   Item 6.  Exhibits and reports on Form 8-K                                                                 11

             SIGNATURES                                                                                      12
</TABLE>
<PAGE>   3
ZILA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                            October                July
ASSETS                                                                                     31, 1998            31, 1998
                                                                                           --------            --------
<S>                                                                                    <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                            $  3,320,772         $  5,241,201
  Trade receivables - net                                                                 7,812,340            7,161,240
  Income tax receivable                                                                                          250,877
  Inventories                                                                            12,306,754           11,550,009
  Prepaid expenses and other current assets                                               1,383,035            1,003,381
  Deferred income taxes                                                                   3,631,430            2,785,430
                                                                                       ------------         ------------

         Total current assets                                                            28,454,331           27,992,138
                                                                                       ------------         ------------

PROPERTY AND EQUIPMENT - Net                                                              5,540,676            4,955,861
PURCHASED TECHNOLOGY RIGHTS - Net                                                         6,364,744            6,473,854
GOODWILL - Net                                                                           16,680,428           17,009,914
TRADEMARKS - Net                                                                         11,015,559           11,131,925
OTHER INTANGIBLE ASSETS - Net                                                             2,137,609            2,173,352
OTHER ASSETS                                                                                128,983              126,833
                                                                                       ------------         ------------


TOTAL                                                                                  $ 70,322,330         $ 69,863,877
                                                                                       ============         ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                     $  3,839,248         $  4,917,626
  Accrued liabilities                                                                     2,589,606            2,251,105
  Deferred revenue                                                                          669,514              567,956
  Short-term borrowings                                                                     121,717               87,598
  Current portion of long-term debt                                                         999,416              952,957
                                                                                       ------------         ------------

         Total current liabilities                                                        8,219,501            8,777,242

LONG-TERM DEBT - Net of current portion                                                   1,338,636            1,355,547
                                                                                       ------------         ------------

          Total liabilities                                                               9,558,137           10,132,789
                                                                                       ------------         ------------

SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK:
  Issued 30,000; outstanding 26,742 shares (October 31, 1998) and
  28,800 shares (July 31, 1998); liquidation preference value: $1,220 per share          31,387,056           33,801,930
                                                                                       ------------         ------------

SHAREHOLDERS' EQUITY:
  Preferred stock, $.001 par value - authorized
   2,500,000 shares; issued 30,000 shares of Series A
   Preferred Stock
  Common stock, $.001 par value - authorized,
   65,000,000 shares; issued 35,301,936 shares
   (October 31, 1998) and 34,743,575 shares (July 31, 1998)                                  35,302               34,744
  Capital in excess of par value                                                         46,569,473           43,877,560
  Deficit                                                                               (17,227,213)         (17,982,721)
                                                                                       ------------         ------------

                                                                                         29,377,562           25,929,583
  Less 42,546 common shares held by wholly-owned
    subsidiary (at cost)                                                                       (425)                (425)
                                                                                       ------------         ------------

        Total shareholders' equity                                                       29,377,137           25,929,158
                                                                                       ------------         ------------

TOTAL                                                                                  $ 70,322,330         $ 69,863,877
                                                                                       ============         ============
</TABLE>

See notes to condensed consolidated financial statements.

                                       3
<PAGE>   4
ZILA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTERS ENDED OCTOBER 31, 1998 AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                 Quarters ended October 31,
                                                     1998                 1997
                                                     ----                 ----
<S>                                          <C>                  <C>
REVENUES                                     $ 16,502,808         $ 10,800,182

OPERATING COSTS AND EXPENSES
  Cost of products sold                         7,858,646            6,577,258
  Selling, general and administrative           7,611,952            4,363,864
  Depreciation and amortization                   886,318              321,276
                                             ------------         ------------
                                               16,356,916           11,262,398
                                             ------------         ------------

INCOME (LOSS) FROM OPERATIONS                     145,892             (462,216)
                                             ------------         ------------

OTHER INCOME (EXPENSES)
  Interest income                                  76,804               51,133
  Interest expense                                (70,222)             (11,619)
  Other income (expense)                            7,034               (7,088)
                                             ------------         ------------

                                                   13,616               32,426
                                             ------------         ------------

INCOME (LOSS) BEFORE BENEFIT FOR
    INCOME TAXES                                  159,508             (429,790)

INCOME TAX BENEFIT                                596,000
                                             ------------         ------------

NET INCOME (LOSS)                            $    755,508         $   (429,790)
                                             ============         ============

NET INCOME (LOSS) - BASIC                    $       0.02         $      (0.01)
                                             ============         ============

NET INCOME (LOSS) - DILUTED                  $       0.02         $      (0.01)
                                             ============         ============

BASIC SHARES OUTSTANDING                       35,000,460           32,699,119
EQUIVALENT SHARES                               7,400,238
                                             ------------         ------------
DILUTED SHARES OUTSTANDING                     42,400,698           32,699,119
                                             ============         ============
</TABLE>

See notes to condensed consolidated financial statements.

                                       4
<PAGE>   5
ZILA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                       1998                 1997
                                                                                       ----                 ----
<S>                                                                             <C>                 <C>
OPERATING ACTIVITIES:
     Net income (loss)                                                          $   755,508         $  (429,790)
     Adjustments to reconcile net income (loss) to
         net cash used in operating activities:
         Depreciation and amortization                                              886,318             321,276
         Discount on contractual obligation                                          46,459
         Deferred income taxes                                                     (596,000)
         Change in assets and liabilities:
             Receivables - net                                                     (400,223)           (107,576)
             Inventories                                                           (756,745)           (480,956)
             Prepaid expenses and other assets                                     (381,804)           (122,820)
             Accounts payable and accrued expenses                                 (739,877)           (372,423)
             Deferred revenue                                                       101,558                (866)
                                                                                -----------         ----------- 
               Net cash used in operating activities                             (1,084,806)         (1,193,155)
                                                                                -----------         ----------- 

INVESTING ACTIVITIES:
     Purchases of property and equipment                                           (820,388)           (220,988)
     Purchases of intangible assets                                                 (60,040)           (115,758)
                                                                                -----------         ----------- 
         Net cash used in investing activities                                     (880,428)           (336,746)
                                                                                -----------         ----------- 

FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                         34,119              70,769
     Net proceeds from issuance of common stock                                      27,597           8,213,114
     Principal payments on long-term debt                                           (16,911)             (6,946)
                                                                                -----------         ----------- 
         Net cash provided by financing activities                                   44,805           8,276,937
                                                                                -----------         ----------- 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                             (1,920,429)          6,747,036

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                  $ 5,241,201         $ 2,071,563
                                                                                -----------         ----------- 

CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $ 3,320,772         $ 8,818,599
                                                                                ===========         ===========

CASH PAID FOR INTEREST                                                          $    23,762         $    11,619
                                                                                ===========         ===========

CASH PAID FOR INCOME TAXES                                                      $      --           $      --
                                                                                ===========         ===========

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
     FINANCING ACTIVITIES FOR 1999:

     Income tax benefit attributable to exercise of common stock options        $   250,000
</TABLE>

See notes to condensed consolidated financial statements.

                                       5
<PAGE>   6
                           ZILA, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.       The condensed consolidated financial statements include the accounts of
         Zila, Inc. and its wholly-owned subsidiaries, Zila Pharmaceuticals,
         Inc., Zila International Inc., Zila Ltd., Bio-Dental Technologies
         Corporation ("Bio-Dental"), Cygnus Imaging, Inc. ("Cygnus"), and Oxycal
         Laboratories, Inc. ("Oxycal"). All significant intercompany balances
         and transactions are eliminated in consolidation.

         In the opinion of management of Zila, Inc. and Subsidiaries ("Zila" or
         the "Company"), all adjustments, consisting of normal recurring
         accruals, considered necessary for a fair presentation have been
         included in the condensed consolidated financial statements. The
         results of operations for the interim period are not necessarily
         indicative of the results that may be expected for the entire year. The
         preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

2.       In March 1997, the Financial Accounting Standard Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
         Per Share", which is effective for financial statements for both
         interim and annual periods ending after December 15, 1997. SFAS No.
         128, requires a reconciliation of the numerator and denominator of
         basic and diluted earnings per share as follows:

<TABLE>
<CAPTION>
                                                                                    For the Three Months Ended October 31,
                                                                                            1998                      1997
                                                                                            ----                      ----
<S>                                                                                 <C>                        <C>
         Net income (loss)                                                              $755,508                $(429,790)
         Average outstanding common shares                                            35,000,460                32,699,119
         Basic net income (loss) per share                                                 $0.02                   $(0.01)
         Diluted net income (loss) per share:
             Net income (loss) available for diluted earnings
                  Per share                                                             $755,508                $(429,790)

         Average outstanding common shares from above                                 35,000,460                32,699,119
         Additional dilutive shares related to stock
              Options and warrants                                                       461,898
         Additional dilutive shares related to convertible
              Preferred stock                                                          6,938,340
                                                                                      ----------
         Average outstanding and potentially dilutive
              Common shares                                                           42,400,698                32,699,119
         Dilutive net income (loss) per share                                              $0.02                   $(0.01)
</TABLE>

                                        6
<PAGE>   7
         Options and warrants to purchase 2,083,928 shares of common stock at
         various prices were outstanding during the three months ended October
         31, 1998, but were not included in the computation of dilutive net
         income per share because the exercise prices of the options and
         warrants were greater than the average price of the common shares. The
         effect of including these shares in the computation of dilutive net
         income per share would be antidilutive.

         Since a loss was incurred for the three months ended October 31, 1997,
         options and warrants to purchase shares of common stock were not
         included in the computation of dilutive net income per share because
         their effect would be antidilutive.

3.       Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                                  October 31,               July 31,
                                                                                         1998                   1998
                                                                                         ----                   ----
<S>                                                                               <C>                    <C>
         Finished goods                                                            $7,507,965             $7,048,539
         Raw materials                                                              5,104,533              4,807,214
         Inventory reserves                                                         (305,744)              (305,744)
                                                                                  ------------           ------------
                                                                                  $12,306,754            $11,550,009
                                                                                  ============           ============
</TABLE>

4.       The Company has a New Drug Application pending with the Food and Drug
         Administration ("FDA") for ORATEST. The initiation of the marketing of
         ORATEST in the United States is dependent upon the approval of the New
         Drug Application ("NDA") by the FDA. During 1994, the FDA approved the
         Company's application for an Investigational New Drug for ORATEST,
         which allows the Company to manufacture the product in the United
         States for clinical studies and export to certain foreign countries. In
         November, 1998, the FDA notified the Company that the NDA is being
         given "priority review," which targets completion of agency review
         within six months from September 3, 1998, when the Company provided
         newly requested histopathology data. The Company believes that the FDA
         will approve the New Drug Application and the production and marketing
         of ORATEST.

5.       Upon consummation of the Company's merger with Bio-Dental, each of the
         outstanding shares of Bio-Dental common stock was converted into .825
         shares of the Company's common stock. Subsequent to the merger, the
         Company's stock transfer agent was presented with a certificate
         purporting to represent 220,000 shares of Bio-Dental common stock which
         did not appear on the records of Bio-Dental's stock transfer agent as
         of the closing date. The Company is currently investigating this matter
         and has not determined whether any shares of the Company's common stock
         are required to be issued in exchange for the shares purportedly
         represented by this certificate.

         The Company occasionally encounters minor litigation as a means to
         resolve disputes, which arise in the ordinary course of business. None
         of these minor lawsuits are believed to be material to the Company's
         ongoing operations or operating results.

                                        7
<PAGE>   8
6.       Deferred income taxes reflect the tax effect of temporary differences
         between the amounts of assets and liabilities recognized for financial
         reporting and tax purposes. In the past, the Company had fully offset
         its net deferred tax asset with a valuation allowance due to the
         Company's lack of earnings history. Recently, however, the Company
         returned to profitability and for the quarter ended October 31, 1998
         recorded an income tax benefit of $910,000 ($250,000 of which was
         attributable to the exercise of common stock options and therefore was
         credited to capital in excess of par value).

7.       In June 1997, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
         Comprehensive Income, and SFAS No. 131, Disclosures about Segments of
         an Enterprise and Related Information. SFAS No. 130 requires that an
         enterprise (a) classify items of other comprehensive income by their
         nature in a financial statement and (b) display the accumulated balance
         of other comprehensive income separately from retained earnings and
         additional capital in the equity section of a statement of financial
         position. SFAS No. 131 establishes standards for the way that public
         enterprises report information about operating segments in annual
         financial statements and requires that those enterprises report
         selected information about operating segments in interim financial
         reports to shareholders. It also establishes standards for disclosures
         about products and services, geographic areas and major customers. The
         Company adopted SFAS No. 130 on August 1, 1998. This adoption had no
         material impact on the Company's financial statements. Although SFAS
         No. 131 is effective for fiscal years beginning after December 15,
         1997, disclosures are only required at year end in the initial year of
         adoption.

                                        8
<PAGE>   9
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

                           ZILA, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS:

                  For the quarter ended October 31, 1998, the Company had net
income of $755,508 compared to a net loss of $429,790 for the quarter ended
October 31, 1997. Revenues during the first quarter of the current fiscal year
totaled $16,502,808 compared to revenues of $10,800,182 during the first quarter
of the prior fiscal year, a 52.8% increase. The growth in revenues was primarily
attributable to the Company's acquisitions of Oxycal and Peridex in November
1997.

                  In the quarter ended October 31, 1998, cost of products sold
was $7,858,646, a 19.5% increase from $6,577,258 for the quarter ended October
31, 1997. Cost of products sold as a percentage of revenues decreased to 47.6%
in the quarter ended October 31, 1998 from 60.9% in the quarter ended October
31, 1997. These decreases are primarily due to lower costs, as a percentage of
revenues, resulting from the acquisitions of Oxycal and the Peridex(R) product
line.

                  Selling, general and administrative expenses increased
$3,248,088 from $4,363,864 in the first quarter of fiscal year 1998 to
$7,611,952 for the same period in fiscal year 1999. This increase is
attributable mainly to selling, general and administrative expenses resulting
from the Oxycal and Peridex acquisitions. Additional expenses were incurred
related to regulatory, pre-marketing and clinical activities associated with the
Company's OraTest oral cancer detection system.

                  Depreciation and amortization expenses increased $565,042 from
$321,276 in the first quarter of fiscal 1998 to $886,318 for the same period in
fiscal 1999. The increase is mainly due to the additional amortization of
intangibles and goodwill from the Oxycal and Peridex acquisitions which occurred
during the second quarter of fiscal 1998.

         Recently, the Company returned to profitability and for the quarter
ended October 31, 1998 recorded an income tax benefit of $910,000 ($250,000 of
which was attributable to the exercise of common stock options and therefore was
credited to capital in excess of par value). In the past, the Company had fully
offset its net deferred tax asset with a valuation allowance due to the
Company's lack of earnings history.

LIQUIDITY AND CAPITAL RESOURCES

                  At October 31, 1998, the Company had net working capital of
$20,234,830 and its current ratio (the ratio of current assets to current
liabilities) was 3.5 to 1. At July 31, 1998, the Company had net working capital
of $19,214,896, and its current ratio was 3.2 to 1.

                  Trade accounts receivable - net at October 31, 1998 were
$7,812,340 compared to trade accounts receivable - net at July 31, 1998 of
$7,161,240. Trade accounts receivable - net as a percentage of quarterly
revenues were 47.3% at October 31, 1998 as compared to 43.0% at July 31, 1998.

                                        9
<PAGE>   10
                  At October 31, 1998, the Company had inventories of
$12,306,754, an increase of $756,745 from inventories at July 31, 1998. The
Company believes current inventories are at levels necessary to support market
expansion and to maintain adequate liquidity.

                  During the three months ended October 31, 1998, net cash used
in operations was approximately $1.084.806. This was primarily the result of
changes in operating assets and liabilities offset by net income for the period.
Net cash used in investing activities was approximately $880,000 during the
three months ended October 31, 1998 and primarily were manufacturing related
expenditures for OraTest and Oxycal.

         Management believes that continued growth in the Company's sales of its
products will provide sufficient funding for the Company's current operations
for the next twelve months. The Company may require additional financing to
support the production of its products in quantities sufficient to support
continued market expansion and to fund future OraTest manufacturing and
marketing costs.

         The Company is currently working to mitigate the extent of any "Year
2000" problems that may exist at the Company and may have an effect on its
business, but it has not yet completed this evaluation. However, based on the
Company's research gathered to date, the Company does not expect the costs to
address the problem will be material, and it does not expect that the
consequences of incomplete or untimely resolution of the problem will materially
impact the operation of its business. The Company's PracticeWorks(R) software
was programmed in such a manner that it is Year 2000 ready.

FORWARD LOOKING INFORMATION

         This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. See the "Cautionary Factors That May Affect Future
Results" in the Company's Form 10-K for the year ended July 31, 1998, which
identifies some important factors that could cause actual results to differ
materially from those contained in such forward-looking statements.

PART II - OTHER INFORMATION

Item 1. - Legal Proceedings

         Upon consummation of the Company's merger with Bio-Dental, each of the
outstanding shares of Bio-Dental common stock was converted into .825 shares of
the Company's Common Stock. Subsequent to the merger with Bio-Dental, the
Company's stock transfer agent was presented with a certificate purporting to
represent 220,000 shares of Bio-Dental common stock which did not appear on the
records of Bio-Dental's stock transfer agent as of the closing date. The Company
is currently investigating this matter and has not determined whether any shares
of the Company's common stock are required to be issued in exchange for the
shares purportedly represented by this certificate.

         The Company occasionally encounters minor litigation as a means to
resolve disputes which arise in the ordinary course of business. None of these
minor lawsuits is believed to be material to the Company's ongoing operations or
operating results.

                                       10
<PAGE>   11
Item 5 - Other information  

         None

Item 6 - Exhibits and Reports on Form 8-K

         (a)      Exhibits

           Exhibit Number             Description

                      27              Financial Data Schedule

         (b)      Reports on Form 8-K

                  None

                                       11
<PAGE>   12
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: December 11, 1998                      By /s/Joseph Hines
     -------------------                        ---------------
                                             Joseph Hines
                                             President, Chairman of the Board
                                             (Principal Executive Officer)



                                             By /s/Bradley C. Anderson
                                               -----------------------
                                             Bradley C. Anderson
                                             Vice President and Chief
                                             Financial Officer (Principal
                                             Financial & Accounting Officer)

                                       12
<PAGE>   13
  


                                Exhibit Index



           Exhibit Number             Description

                      27              Financial Data Schedule