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Exhibit 1

Deloitte & Touche LLP

Suite 1200

2901 North Central Avenue

Phoenix, Arizona 85012-2799

Tel (602) 334-5100

Fax: (602) 234-5186

www.us.deloitte.com

October 26, 2003

The Audit Committee

Zila, Inc.

Phoenix, Arizona

Dear Members of the Audit Committee:

In planning and performing our audit of the consolidated financial statements
of Zila, Inc, and subsidiaries (the “Company”) for the year ended July 31, 2003
(on which we have issued our report dated October 26, 2003), we considered its
internal control in order to determine our auditing procedures for the purpose
of expressing an opinion on the financial statements and not to provide
assurance on the Company’s internal control. However, we noted certain matters
involving the Company’s internal control and its operation that we consider to
be reportable conditions under standards established by the American Institute
of Certified Public Accountants, Reportable conditions involve matters coming
to our attention relating to significant deficiencies in the design or
operation of the Company’s internal control that, in our judgment, could
adversely affect the Company’s ability to record, process, summarize, and
report financial data consistent with the assertions of management in the
financial statements. The reportable conditions that we noted are summarized
below and are more completely described in Exhibit I.

    •

    Deficiencies in the operation or design of business cycle internal
controls as it relates to sales cutoff
procedures.

    •

    Deficiencies in the operation or design of general computer controls.

We also submit our comments concerning certain observations and
recommendations relating to other accounting and operating matters. These
recommendations resulted from our observations made in connection with our
audit of the Company’s financial statements for the year ended July
31, 2003. Our comments are presented in Exhibit II. Our principal
recommendations on such other matters are summarized below.

    •

    Internal control recommendations and findings related to fixed assets,
inventory, allowance for bad debt and accrued co-op advertising.

This report is intended solely for the information and use of the audit
committee, management and others within the organization and is not intended to
be and should not be used by anyone other than these specified parties.

We will be pleased to discuss these comments with you and, if desired, to
assist you in implementing any of the suggestions.

Yours truly,

EXHIBIT I

ZILA, INC.

Reportable Conditions

Sales Cutoff

Observation: As of the fiscal year ended July 31, 2003, the Pharmaceutical
business segment did not have appropriate internal controls in place to ensure
that shipments, recognized as revenue in the year then ended, had met the
transfer of ownership requirement pursuant to Staff Accounting
Bulletin No.
101, Revenue Recognition in Financial Statements. The lack of such controls
resulted in the improper recognition of a material amount of prior to its
reversal as an audit adjustment.

Recommendation: We recommend that management institute a policy: that shipments
near period ends are sent using a mode of transportation that will have ample
time to arrive at the customers location prior to period end; that the
Pharmaceutical shipping department arrange receiving appointments with
customers prior to shipment; and that transfer of ownership of all shipments
near the end of an accounting period are confirmed by the Company to ensure
proper revenue recognition.

General Computer Controls

Observation: We noted the following deficiencies in the operation or
design of general computer controls which weaken the general computer
control:

    1.

    Documentation of system changes or audit trials do not exist for changes
made to the system
hardware, software, applications, databases or network. Without such
documentation, knowledge
required to ensure proper operation might be lost.

    2.

    Documentation of the policies and procedures related to security
access does not exist and,
therefore, could lead to a breakdown in system security.

    3.

    The Company does not have a business continuity plan for resuming
business operations in the
event of disaster. Lack of a plan could lead to lengthy delays in the
continuance of the business
operations should such a disaster occur.

    4.

    There is a lack of physical security surrounding the data
center(s)
of the Company’s facilities.
Access is not properly restricted to prevent unintentional or
intentional damage to the system.

    5.

    Daily and weekly backups are kept off-site but not in a safe
environment. Not keeping such
backups could lead to loss of critical information in the case of
fire, flood or theft.

Recommendation: We recommend that the Company internally, or through the use
of an outside organization, document the policies and procedures related to
system changes and security access. We also recommend that a business
continuity plan be written and policies established for the restriction of
access to the data centers. Finally, we recommend that system backups be kept
at a secure off-site location.

- 2 -

EXHIBIT II

ZILA, INC.

Other Observations and Comments

Accrued Advertising

Observation: Accruals are recorded when customers request credits, versus when
the program is established, which could lead to recognition in the
wrong accounting period.

Recommendation: We recommend that copies of approved programs be forwarded to
the accounting departments for proper period accrual.

Fixed Assets

Observation: All assets are not tagged and a physical inventory of such assets
has not been performed in prior years.

Recommendation: We recommend that a full physical inventory of Company fixed
assets is performed and such assets are tagged and recorded.

Accounts Receivable Allowance

Observation: Accounts receivable are aged based upon the issuance date of the
invoice rather than the due date considering each customers’ individual payment
terms. This decreases the usefulness of the aging information for collection
purposes and analysis of the allowance for bad debts.

Recommendation: We recommend that agings be calculated on specific
invoices’ due date per the contractual payment terms.

Inventory

Observation (Pharmaceutical Segment): There is a significant delay in the
processing of required paperwork related to the transfer of inventory between various Company
owned and third-party warehouses. Such delays can lead to inaccurate
inventory records and order issues.

Recommendation:
We recommend that policies are written and enforced that
transfers are logged and remitted to the appropriate accounting department immediately.

Observation (Pharmaceutical Segment): Reconciliations of physical inventories
to inventory compilations within the general ledger are done without the approval of
management or communication with those who have performed such inventories.

Recommendation; We recommend that the reconciliation of the physical counts
to the compilation and general ledger be done concurrently with the counts in
order to identify the discrepancies that need to be further investigated.

Observation (Pharmaceutical Segment): Individuals with day-to-day custody of
physical inventory are responsible for the physical inventory quarterly counts.

- 3 -

Recommendation: We recommend that members of the accounting function attend
all counts and maintain supervisory responsibility of the process.

Observation: There do not appear to be formal policies and procedures in place
for the development and maintenance of the inventory reserve accounts in the
Nutraceuticals segment.

Recommendation: We recommend that the Company analyze the current inventory
to develop and document reasonable policies and procedures for the
development of the inventory reserve.

- 4 -

Exhibit 2

Zila, Inc

Schedule of Post Closing and Audit Adjustments

4th Quarter and Year ended July 31, 2004

Response to SEC Comment No. 5 and 5.b.

    % of

    % of

    4th Quarter

    Pretax

    Pretax

    Fiscal 2004

    Net Loss

    Fiscal 2004

    Net Loss

    Loss from Continuing Operations before Income Taxes - per Consolidating Trial
Balances

    $
    (184,470
    )

    77
    %

    $
    (4,280,897
    )

    99
    %

    Post Closing Adjustments by Zila:

    1

    Reduction of bonus accrual

    152,176

    -64
    %

    152,176

    -4
    %

    2

    Reduction of royalties for Q-4, FY04

    148,352

    -62
    %

    148,352

    -3
    %

    3

    Accrue wage settlement for job classification change - Q4-04

    (25,000
    )

    10
    %

    (25,000
    )

    1
    %

    4

    Accrue disputed legal fees based on settlement  - Q4-04

    (27,000
    )

    11
    %

    (27,000
    )

    1
    %

    5

    Expense miscellaneous prepaid asset

    (4,125
    )

    2
    %

    (4,125
    )

    0
    %

    6

    Expense July 04 invoice received after preliminary close

    (19,200
    )

    8
    %

    (19,200
    )

    0
    %

    7

    Record
intangible asset acquired at 7-31 - 04 - Trylon modification agreement

    63,281

    -27
    %

    63,281

    -1
    %

    8

    Write off retainer for professional services related to the disposition of IST

    (20,000
    )

    8
    %

    (20,000
    )

    0
    %

    9

    Reserve for estimated state franchise tax settlement

    (4,059
    )

    2
    %

    (4,059
    )

    0
    %

    Post Closing Adjustments -  Pre-Tax Loss Impact

    264,425

    -111
    %

    264,425

    -6
    %

    Audit Adjustments by Independent Public Accountants

    10

    Increase
property tax accrual based on actual billing recevied after 7-31 - 04

    (15,651
    )

    7
    %

    (15,651
    )

    0
    %

    11

    Reduce reserve for sales returns at July 31, 2004

    53,387

    -22
    %

    53,387

    -1
    %

    12

    Adjust Q-4 FY04 finished goods inventory overhead absorption

    (27,762
    )

    12
    %

    (27,762
    )

    1
    %

    13

    Accrue 7-31
- 04 invoice received after preliminary closing

    (9,666
    )

    4
    %

    (9,666
    )

    0
    %

    14

    Reduction of accrued audit expense for July 31, 2004

    16,900

    -7
    %

    16,900

    0
    %

    15

    Accrue July 04 services billed on August 04 invoices

    (11,010
    )

    5
    %

    (11,010
    )

    0
    %

    16

    Reduction of
accrued commissions at 7-31 - 04

    16,838

    -7
    %

    16,838

    0
    %

    17

    Expense machine repair invoice incorrectly capitalized Q1-FY04

    (4,155
    )

    2
    %

    (4,155
    )

    0
    %

    18

    Expense software installation training costs incorrectly capitalized Q4-FYO4

    (13,799
    )

    6
    %

    (13,799
    )

    0
    %

    19

    Correct deferred royalty revenue

    (34,375
    )

    14
    %

    (34,375
    )

    1
    %

    20

    Record asset impairment for IST’s long-lived assets held for sale

    (288,940
    )

    121
    %

    (288,940
    )

    7
    %

    Audit Adjustments - Pre-Tax Loss Impact

    (318,233
    )

    134
    %

    (318,233
    )

    7
    %

    Adjustments Total

    (53,808
    )

    23
    %

    (53,808
    )

    1
    %

    Loss from Continuing Operations before Income Taxes

    $
    (238,278
    )

    100
    %

    $
    (4,334,705
    )

    100
    %

Exhibit 3

Zila, Inc.

Explanation of Adjustments

Response to Comments 5.a., 5.c and 5.d.

Reference in this
Exhibit 3 to “Zila,” the “Company,” “we,” “us,” or “our”
refer to Zila, Inc. and its wholly owned subsidiaries.

    Adjustment

    (Exhibit 2)

    Explanation - Response to 5.a., 5.c. and 5.d

    1

    Our bonus plan is based on meeting annual performance targets
and is reviewed and adjusted quarterly based on our estimate
of achievement of performance targets. At year end, the
achievement of the annual performance requirements under our
annual bonus plan is computed and the bonus accrual is
adjusted if necessary. The adjustment to our bonus accrual
related to actual performance in our fourth quarter.

    2

    The adjustment to a royalty accrual resulted from a
modification to the related licensing agreement that
eliminated royalties on sales on one of our products in the
fourth quarter of fiscal 2004. The agreement modification was
finalized in September 2004. As a result of this
modification, royalty expense that was accrued in the fourth
quarter of fiscal 2004 was reversed.

    3

    This adjustment relates to the estimated cost of wage
settlements resulting from changes in job classifications for
certain employees required under the Fair Labor Standards
Act. The changes in job classifications were made in the
fourth quarter of fiscal 2004 and accordingly the adjustment
was made in the fourth quarter of fiscal 2004.

    4

    In September 2004, a negotiated settlement was reached for
disputed billings for professional fees. The professional
services were provided in the first and second quarters of
fiscal 2004. As a result of the settlement, we recorded an
accrued liability for the settlement costs at July 31, 2004.
We concluded that the effect of the $27,000 settlement was
not material to the first and second quarters of fiscal 2004.

    5

    This adjustment was made to prepaid trade show expenses. The
trade show occurred in January 2003 and should have been
expensed in the second quarter of fiscal 2003. We concluded
that the amount of the adjustment was not material to any
quarter or fiscal year and expensed the $4,125 in the fourth
quarter of fiscal 2004.

    6

    This adjustment related to an accrual for an expense for a
July 2004 invoice received after our preliminary close. The
accrued expense relates to July 2004 and is therefore
properly recorded in the fourth quarter of fiscal 2004.

    7

    As described in Note 2 of the Notes to Consolidated Financial
Statements in our Form 10-K for the fiscal year ended July
31, 2004, we acquired technology rights from The Trylon
Corporation as of July 31, 2004 valued at $63,281. This
adjustment was necessary to record this transaction in the
fourth quarter fiscal 2004 adjustment.

    8

    This adjustment relates to the write-off of a deposit paid to
an investment banking firm retained to solicit offers for the
sale of our subsidiary, Innovative Swab Technologies (“IST”).
As described in Note 3 of the Notes to Consolidated
Financials Statements in our Form 10-K for the fiscal year
ended July 31, 2004, our Board of Directors decided

1

    Adjustment

    (Exhibit 2)

    Explanation - Response to 5.a., 5.c. and 5.d

    in September 2004 to withdraw IST from the market.
We wrote off this deposit in the fourth quarter of fiscal
2004 because of the termination of the agreement with the
investment banking firm.

    9

    This adjustment was recorded as an estimate of the cost of a
state franchise tax settlement. The state franchise taxes
relate to fiscal years 2002 and 2003 and the matter was
settled subsequent to our fiscal year end on July 31, 2004.
We believe that the $4,095 adjustment for this settlement did
not have a significant affect on any prior quarter or fiscal
year, and we accordingly recorded the adjustment in the
fourth quarter of fiscal 2004.

    10

    This adjustment relates to a change in our estimate for
property taxes for fiscal 2004 for one our reporting units.
Subsequent to our preliminary close, we received an actual
invoice for our property billing and we adjusted our property
tax accrual to reflect this billing in the fourth quarter of
fiscal 2004.

    11

    This adjustment relates to a change in our estimate for our
reserve for sales returns at one of our reporting units. As a result
of the change in estimate, we recorded in the fourth quarter of
fiscal 2004.

    12

    This adjustment