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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the transition period from  to



Commission file number 0-23031



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DYNAMIC HEALTH PRODUCTS, INC.

(Exact name of small business issuer as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 34-1711778                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|6911 Bryan Dairy Road, Suite 210, Largo, Florida |  | 33777     
|(Address of principal executive offices)         |  | (Zip Code)



Issuers
telephone number (727) 329-1845



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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.    x  Yes ̈No



The number of shares outstanding of the Issuers common stock at $.01
par value as of August 12, 2004 was 12,774,834.



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PART I - FINANCIAL INFORMATION



Item 1. CONSOLIDATED FINANCIAL STATEMENTS.



DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                               |  |               |            |   |               |   |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                                                                               |  | June 30, 2004 |            |   | March 31,2004 |  
|                                                                                                                               |  | (Unaudited)   |            |   | (Audited)     |  
|ASSETS                                                                                                                         |  |               |            |   |               |   |            |  
|Current assets:                                                                                                                |  |               |            |   |               |   |            |  
|Cash and cash equivalents                                                                                                      |  | $             | 61,174     |   |               | $ | 219,119    |  
|Marketable equity securities, net                                                                                              |  |               | 4,227,286  |   |               |   | 3,806,324  |  
|Accounts receivable, net                                                                                                       |  |               | 88,157     |   |               |   | 154,230    |  
|Inventories, net                                                                                                               |  |               | 270,744    |   |               |   | 189,193    |  
|Prepaid expenses                                                                                                               |  |               | 46,802     |   |               |   | 43,468     |  
|Deferred consulting fees                                                                                                       |  |               | 247,500    |   |               |   |           |  
|Other current assets                                                                                                           |  |               | 51,662     |   |               |   | 56,345     |  
|Due from affiliates                                                                                                            |  |               | 153        |   |               |   | 10,605     |  
|Note receivable from affiliate                                                                                                 |  |               | 41,241     |   |               |   | 40,481     |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total current assets                                                                                                           |  |               | 5,034,719  |   |               |   | 4,519,765  |  
|                                                                                                                               |  |              
|Property, plant and equipment, net                                                                                             |  |               | 1,300,016  |   |               |   | 1,314,399  |  
|                                                                                                                               |  |              
|Intangible assets, net                                                                                                         |  |               | 25,413     |   |               |   | 25,842     |  
|Other assets                                                                                                                   |  |               | 4,491      |   |               |   | 5,141      |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total assets                                                                                                                   |  | $             | 6,364,639  |   |               | $ | 5,865,147  |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                           |  |               |            |   |               |   |            |  
|Current liabilities:                                                                                                           |  |               |            |   |               |   |            |  
|Accounts payable                                                                                                               |  | $             | 209,835    |   |               | $ | 126,086    |  
|Other payables                                                                                                                 |  |               | 73,518     |   |               |   | 95,413     |  
|Current portion of long-term obligations                                                                                       |  |               | 25,619     |   |               |   | 27,023     |  
|Accrued expenses                                                                                                               |  |               | 154,088    |   |               |   | 68,411     |  
|Obligations to affiliates                                                                                                      |  |               | 150,047    |   |               |   | 245,292    |  
|Note payable                                                                                                                   |  |               |           |   |               |   | 13,043     |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total current liabilities                                                                                                      |  |               | 613,107    |   |               |   | 575,268    |  
|                                                                                                                               |  |              
|Deferred income taxes                                                                                                          |  |               | 1,340,846  |   |               |   | 1,189,300  |  
|Long-term obligations, less current portion                                                                                    |  |               | 810,328    |   |               |   | 813,491    |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total liabilities                                                                                                              |  |               | 2,764,281  |   |               |   | 2,578,059  |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Commitments and contingencies                                                                                                  |  |               |            |   |               |   |            |  
|                                                                                                                               |  |              
|Shareholders equity:                                                                                                          |  |               |            |   |               |   |            |  
|Series A Convertible Preferred stock, $.01 par value; 400,000 shares authorized; no shares issued or outstanding               |  |               |           |   |               |   |           |  
|Series B 6% Cumulative Convertible Preferred stock, $.01 par value; 800,000 shares authorized; no shares issued or outstanding |  |               |           |   |               |   |           |  
|Common stock, $.01 par value; 20,000,000 shares authorized; 12,774,834 shares issued and outstanding                           |  |               | 127,748    |   |               |   | 127,748    |  
|Additional paid-in capital                                                                                                     |  |               | 2,941,568  |   |               |   | 2,671,568  |  
|Retained earnings (deficit)                                                                                                    |  |               | (2,024,866 | ) |               |   | (1,798,719 | )
|Accumulated other comprehensive income:                                                                                        |  |               |            |   |               |   |            |  
|Unrealized gains (losses) on marketable equity securities, net of tax                                                          |  |               | 2,555,908  |   |               |   | 2,286,491  |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total shareholders equity                                                                                                     |  |               | 3,600,358  |   |               |   | 3,287,088  |  
|                                                                                                                               |  |               |            |   |               |   |            |  
|Total liabilities and shareholders equity                                                                                     |  | $             | 6,364,639  |   |               | $ | 5,865,147  |  
|                                                                                                                               |  |               |            |   |               |   |            |  



See accompanying notes
to condensed consolidated financial statements.



- 2 -



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



|                                                                       |  |                             |            |   |      |   |            |  
|---------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                       |  | Three Months Ended June 30, |           
|                                                                       |  | 2004                        |            |   | 2003 |  
|Revenues:                                                              |  |                             |            |   |      |   |            |  
|Distribution                                                           |  | $                           | 241,267    |   |      | $ | 195,129    |  
|Prescription services                                                  |  |                             | 36,532     |   |      |   | 77,075     |  
|                                                                       |  |                             |            |   |      |   |            |  
|Total revenues                                                         |  |                             | 277,799    |   |      |   | 272,204    |  
|                                                                       |  |                             |            |   |      |   |            |  
|Cost of goods sold:                                                    |  |                             |            |   |      |   |            |  
|Distribution                                                           |  |                             | 123,601    |   |      |   | 80,611     |  
|Prescription services                                                  |  |                             | 30,536     |   |      |   | 54,307     |  
|                                                                       |  |                             |            |   |      |   |            |  
|Total cost of goods sold                                               |  |                             | 154,137    |   |      |   | 134,918    |  
|                                                                       |  |                             |            |   |      |   |            |  
|Gross profit:                                                          |  |                             |            |   |      |   |            |  
|Distribution                                                           |  |                             | 117,666    |   |      |   | 114,518    |  
|Prescription services                                                  |  |                             | 5,996      |   |      |   | 22,768     |  
|                                                                       |  |                             |            |   |      |   |            |  
|Total gross profit                                                     |  |                             | 123,662    |   |      |   | 137,286    |  
|                                                                       |  |                             |            |   |      |   |            |  
|Operating expenses:                                                    |  |                             |            |   |      |   |            |  
|Selling, general and administrative expenses                           |  |                             | 371,804    |   |      |   | 225,926    |  
|Amortization expense                                                   |  |                             | 429        |   |      |   | 311        |  
|Depreciation expense                                                   |  |                             | 18,152     |   |      |   | 22,066     |  
|                                                                       |  |                             |            |   |      |   |            |  
|Total operating expenses                                               |  |                             | 390,385    |   |      |   | 248,303    |  
|                                                                       |  |                             |            |   |      |   |            |  
|Operating loss before other income and expense                         |  |                             | (266,723   | ) |      |   | (111,017   | )
|                                                                       |  |                            
|Other income (expense):                                                |  |                             |            |   |      |   |            |  
|Interest income                                                        |  |                             | 773        |   |      |   | 767        |  
|Other income and expenses, net                                         |  |                             | 55,047     |   |      |   | 94,421     |  
|Losses on marketable equity securities, net                            |  |                             |           |   |      |   | (102,434   | )
|Equity in income (loss) of affiliated companies                        |  |                             |           |   |      |   | (2,246     | )
|Interest expense                                                       |  |                             | (15,244    | ) |      |   | (16,694    | )
|                                                                       |  |                             |            |   |      |   |            |  
|Total other income (expense)                                           |  |                             | 40,576     |   |      |   | (26,186    | )
|                                                                       |  |                             |            |   |      |   |            |  
|Loss before income taxes                                               |  |                             | (226,147   | ) |      |   | (137,203   | )
|                                                                       |  |                            
|Income tax expense (benefit)                                           |  |                             |           |   |      |   | (37,045    | )
|                                                                       |  |                             |            |   |      |   |            |  
|Net loss                                                               |  |                             | (226,147   | ) |      |   | (100,158   | )
|                                                                       |  |                            
|Preferred stock dividends                                              |  |                             |           |   |      |   |           |  
|                                                                       |  |                             |            |   |      |   |            |  
|Net loss available to common shareholders                              |  | $                           | (226,147   | ) |      | $ | (100,158   | )
|                                                                       |  |                             |            |   |      |   |            |  
|Basic and diluted loss per share                                       |  | $                           | (0.02      | ) |      | $ | (0.01      | )
|                                                                       |  |                             |            |   |      |   |            |  
|Basic and diluted weighted average number of common shares outstanding |  |                             | 12,774,834 |   |      |   | 12,331,500 |  
|                                                                       |  |                             |            |   |      |   |            |  



See accompanying notes
to condensed consolidated financial statements.



- 3 -



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY



|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   |           |  
|---------------------------------------------------------------------------------- |  | ----------------------- |  | ----------------------- | - | ------------ | - | ------------------------- | - | -------------------------- |  | ---------- | ------------------------------------- | - | ------------------------- |  | - | --------- | ----------------------------------- | - | ---------- | - |  | - | --------- |  | - | --------- | -
|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           | AccumulatedOtherComprehensiveIncome |   |            |  
|                                                                                   |  | Series APreferred Stock |  | Series BPreferred Stock |   | Common Stock |   | AdditionalPaid-in Capital |   | RetainedEarnings (Deficit) |  |            | UnrealizedGains (Losses)on Securities |   | TotalShareholders Equity | 
|                                                                                   |  | Shares                  |  | Dollars                 |   | Shares       |   | Dollars                   |   | Shares                     |  | Dollars    |                                       |   |                           | 
|Balances at March 31, 2004 (Audited)                                               |  |                        |  | $                       |  |              |  |                           | $ |                           |  | 12,774,834 |                                       | $ | 127,748                   |  | $ | 2,671,568 |                                     | $ | (1,798,719 | ) |  | $ | 2,286,491 |  | $ | 3,287,088 |  
|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                           
|COMPREHENSIVE INCOME (LOSS)                                                        |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   |           |  
|Net loss                                                                           |  |                        |  |                         |  |              |  |                           |   |                           |  |           |                                       |   |                          |  |   |          |                                     |   | (226,147   | ) |  |   |           |  |   | (226,147  | )
|Unrealized gains (losses) on marketable equity securities (net of tax of $151,546) |  |                        |  |                         |  |              |  |                           |   |                           |  |           |                                       |   |                          |  |   |          |                                     |   |           |   |  |   | 269,417   |  |   | 269,417   |  
|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   |           |  
|Comprehensive income (loss)                                                        |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   | 43,270    |  
|Issuance of 300,000 common stock warrants for consulting services                  |  |                        |  |                         |  |              |  |                           |   |                           |  |           |                                       |   |                          |  |   | 270,000   |                                     |   |           |   |  |   |           |  |   | 270,000   |  
|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   |           |  
|Balances at June 30, 2004 (Unaudited)                                              |  |                        |  | $                       |  |              |  |                           | $ |                           |  | 12,774,834 |                                       | $ | 127,748                   |  | $ | 2,941,568 |                                     | $ | (2,024,866 | ) |  | $ | 2,555,908 |  | $ | 3,600,358 |  
|                                                                                   |  |                         |  |                         |   |              |   |                           |   |                            |  |            |                                       |   |                           |  |   |           |                                     |   |            |   |  |   |           |  |   |           |  



See accompanying notes
to condensed consolidated financial statements.



- 4 -



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                                        |  |                             |          |   |      |   |          |  
|--------------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                        |  | Three Months Ended June 30, |         
|                                                                                        |  | 2004                        |          |   | 2003 |  
|Cash flows from operating activities:                                                   |  |                             |          |   |      |   |          |  
|Net loss                                                                                |  | $                           | (226,147 | ) |      | $ | (100,158 | )
|                                                                                        |  |                            
|Adjustments to reconcile net loss to net cash used in operating activities:             |  |                             |          |   |      |   |          |  
|Depreciation and amortization                                                           |  |                             | 18,581   |   |      |   | 22,377   |  
|Amortization of deferred consulting fees                                                |  |                             | 22,500   |   |      |   |         |  
|Equity in (income) loss of affiliated companies                                         |  |                             |         |   |      |   | 2,246    |  
|Losses on sales of marketable equity securities, net of effect of deferred income taxes |  |                             |         |   |      |   | 65,389   |  
|Changes in operating assets and liabilities:                                            |  |                             |          |   |      |   |          |  
|Accounts receivable                                                                     |  |                             | 66,073   |   |      |   | (37,754  | )
|Inventories                                                                             |  |                             | (81,551  | ) |      |   | 4,684    |  
|Due to/from affiliates, net                                                             |  |                             | (85,552  | ) |      |   | (23,242  | )
|Prepaid expenses                                                                        |  |                             | (3,334   | ) |      |   | 20,979   |  
|Other current assets                                                                    |  |                             | 4,683    |   |      |   | 296      |  
|Other assets                                                                            |  |                             | 650      |   |      |   | (272     | )
|Accounts payable                                                                        |  |                             | 83,749   |   |      |   | 3,879    |  
|Other payables                                                                          |  |                             | (21,895  | ) |      |   | (5,195   | )
|Accrued expenses                                                                        |  |                             | 85,677   |   |      |   | 3,733    |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Net cash used in operating activities                                                   |  |                             | (136,566 | ) |      |   | (43,038  | )
|                                                                                        |  |                             |          |   |      |   |          |  
|Cash flows from investing activities:                                                   |  |                             |          |   |      |   |          |  
|Purchases of property and equipment                                                     |  |                             | (3,769   | ) |      |   | (2,995   | )
|Redemption of certificate of deposit                                                    |  |                             |         |   |      |   | 45,917   |  
|Purchase of investment                                                                  |  |                             |         |   |      |   | (3,750   | )
|Proceeds from sale of marketable equity securities                                      |  |                             |         |   |      |   | 4,781    |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Net cash provided by (used in) investing activities                                     |  |                             | (3,769   | ) |      |   | 43,953   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Cash flows from financing activities:                                                   |  |                             |          |   |      |   |          |  
|Payments of long-term obligations                                                       |  |                             | (17,610  | ) |      |   | (20,387  | )
|Proceeds from issuance of related party obligations                                     |  |                             |         |   |      |   | 47,819   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Net cash provided by (used in) financing activities                                     |  |                             | (17,610  | ) |      |   | 27,432   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Net increase (decrease) in cash                                                         |  |                             | (157,945 | ) |      |   | 28,347   |  
|                                                                                        |  |                            
|Cash and cash equivalents at beginning of period                                        |  |                             | 219,119  |   |      |   | 23,914   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                              |  | $                           | 61,174   |   |      | $ | 52,261   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Supplemental disclosure of cash flow information:                                       |  |                             |          |   |      |   |          |  
|Cash paid during the period for interest                                                |  | $                           | 15,093   |   |      | $ | 16,793   |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Cash paid during the period for income taxes                                            |  | $                           |         |   |      | $ |         |  
|                                                                                        |  |                             |          |   |      |   |          |  
|Supplemental schedule of non-cash financing activities:                                 |  |                             |          |   |      |   |          |  
|Issuance of common stock warrants for consulting services                               |  | $                           | 270,000  |   |      | $ |         |  
|                                                                                        |  |                             |          |   |      |   |          |  



See accompanying notes
to condensed consolidated financial statements.



- 5 -



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)



NOTE A-BASIS OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles for interim financial information and with the instruction to Form 10-QSB and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles for complete consolidated financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2004 and 2003 are not necessarily indicative of the results that may be expected for the
year ending March 31, 2005. For further information, refer to the consolidated financial statements and footnotes included in the Companys Form 10-KSB for the year ended March 31, 2004.



Reclassifications



Certain reclassifications have been made to the financial statements as of
and for the three months ended June 30, 2003 to conform to the presentation as of and for the three months ended June 30, 2004.



Restatements



The financial statements as of and for the three months ended June 30, 2003 have been restated, and unless otherwise noted, all information presented has
been adjusted to retroactively reflect the four-for-one forward split of the Companys common stock in August 2003.



NOTE B-PRINCIPLES OF CONSOLIDATION



The condensed consolidated financial statements as of and for the three months ended June 30, 2004 include the accounts of Dynamic Health Products,
Inc. and its principally wholly-owned subsidiaries, Pharma Labs Rx, Inc. (Pharma FL), Dynamic Life Products, Inc., Herbal Health Products, Inc., Online Meds Rx, Inc. and its subsidiary Dynamic Financial Consultants, LLC, Bryan Capital
Limited Partnership, and Pharma Labs Rx, Inc. (Pharma NV). Significant intercompany balances and transactions have been eliminated in consolidation.



The condensed consolidated financial statements as of and for the three months ended June 30, 2003 include the accounts of Dynamic Health Products,
Inc. and its principally wholly-owned subsidiaries (collectively the Company), Pharma Labs Rx, Inc., Dynamic Life Products, Inc., Herbal Health Products, Inc. (Herbal), Online Meds Rx, Inc. (Online) and its
subsidiary Dynamic Financial Consultants, LLC, Bryan Capital Limited Partnership, and Todays Drug, Inc. Significant intercompany balances and transactions have been eliminated in consolidation.



NOTE C-INVESTMENTS IN UNCONSOLIDATED AFFILIATES



Investments in companies in which the Company has a 20% to 50% interest are
accounted for using the equity method. Accordingly, the investments are carried at cost, adjusted for the Companys proportionate share of their undistributed earnings and losses.



- 6 -



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The Company owns 30%, or 300,000 shares of common stock of Tribeca Beverage Company
(Tribeca), an affiliate of Jugal K. Taneja, Chairman of the Board of the Company and Mandeep K. Taneja, Chief Executive Officer and President of the Company. The investment was accounted for under the equity method until March 31, 2003,
at which time, as a result of managements analysis, it was determined that the investment was worthless and the Company recognized an impairment loss on the investment.



On April 30, 2003, the Company entered into a joint venture agreement with a company to form a Florida limited liability
company, Generilean Health Systems, LLC (Generilean), to market various products. Under the terms of the agreement, the Company had a 50% ownership and shared profits and losses equally. The Company was required to contribute half of the
costs incurred in the initial marketing of the products. The Company accounted for the investment under the equity method of accounting until March 31, 2004, at which time, the investment amounted to zero and the operations of the joint venture were
discontinued. As of June 30, 2003, the investment on the records of the Company and the operations of the joint venture were not material.



NOTE DSHAREHOLDERS EQUITY



Comprehensive Income



The Company utilizes the guidance provided by Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income,
which became effective for the Company for the fiscal year ended March 31, 1999. SFAS 130 establishes standards for reporting and display of comprehensive income within the general purpose financial statements and requires reclassification of
applicable financial statement components for any prior period comparative financial statement components. The Company implemented SFAS 130 as of and for the three months ended June 30, 2000 based on comprehensive income transactions being present.



The Company has elected to present the comprehensive income
items within the shareholders equity section of the balance sheet in addition to presenting a condensed consolidated statement of changes in shareholders equity statement. The following presents comprehensive income as of June 30, 2004:



|                                                                        |  |                  |          |   |                      |   |                  |  |   |          |  
|----------------------------------------------------------------------- |  | ---------------- | -------- | - | -------------------- | - | ---------------- |  | - | -------- | -
|                                                                        |  | Before-TaxAmount |          |   | Tax (Expense)Benefit |   | Net-of-TaxAmount | 
|Unrealized losses (gains) on marketable equity securities held for sale |  | $                | (420,963 | ) |                      | $ | 151,546          |  | $ | (269,417 | )
|                                                                        |  |                  |          |   |                      |   |                  |  |   |          |  
|Other comprehensive income                                              |  | $                | (420,963 | ) |                      | $ | 151,546          |  | $ | (269,417 | )
|                                                                        |  |                  |          |   |                      |   |                  |  |   |          |  



Stock Warrants



In June 2004, pursuant to a Financial Consulting
Agreement, the Company issued 300,000 warrants to purchase common stock, for consulting services. At June 30, 2004 and 2003, the Company had outstanding warrants to purchase 300,000 and zero shares of the Companys common stock, respectively,
at prices ranging from $1.50 to $2.50. The warrants become exercisable in June 2005 and expire at various dates through June 2008.



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Stock Options



The Company has adopted only the disclosure provision of SFAS No. 123, Accounting for Stock Based Compensation, as it relates to employee
awards. Accounting Principles Board Opinion No. 25 is applied in accounting for the plan. Accordingly, no compensation expense is recognized related to the stock based compensation plans. The pro forma net earnings (loss) per common share, if the
Company had elected to account for its plan consistent with the methodology prescribed by SFAS No. 123, are shown in the following:



|                                    |  |                                 |          |   |                                 |   |          |  
|----------------------------------- |  | ------------------------------- | -------- | - | ------------------------------- | - | -------- | -
|                                    |  | Three Months EndedJune 30, 2004 |          |   | Three Months EndedJune 30, 2003 |  
|                                    |  | (Unaudited)                     |          |   | (Unaudited)                     |  
|Net income (loss):                  |  |                                 |          |   |                                 |   |          |  
|As reported                         |  | $                               | (226,147 | ) |                                 | $ | (100,158 | )
|                                    |  |                                 |          |   |                                 |   |          |  
|Pro forma                           |  | $                               | (233,921 | ) |                                 | $ | (117,261 | )
|                                    |  |                                 |          |   |                                 |   |          |  
|Net income (loss) per common share: |  |                                 |          |   |                                 |   |          |  
|Basic income (loss) per share:      |  |                                 |          |   |                                 |   |          |  
|As reported                         |  | $                               | (0.02    | ) |                                 | $ | (0.01    | )
|                                    |  |                                 |          |   |                                 |   |          |  
|Pro forma                           |  | $                               | (0.02    | ) |                                 | $ | (0.01    | )
|                                    |  |                                 |          |   |                                 |   |          |  
|Diluted income (loss) per share:    |  |                                 |          |   |                                 |   |          |  
|As reported                         |  | $                               | (0.02    | ) |                                 | $ | (0.01    | )
|                                    |  |                                 |          |   |                                 |   |          |  
|Pro forma                           |  | $                               | (0.02    | ) |                                 | $ | (0.01    | )
|                                    |  |                                 |          |   |                                 |   |          |  



NOTE E-SEGMENT INFORMATION



In accordance with the provisions of Statement of
Financial Accounting Standards No. 131 (SFAS 131), Disclosures About Segments of an Enterprise and Related Information, a company is required to disclose selected financial and other related information about its operating segments.
Operating segments are components of an enterprise about which separate financial information is available and is utilized by the chief operating decision maker related to the allocation of resources and in the resulting assessment of the
segments overall performance. As of and for the three months ended June 30, 2004 and 2003, the Company had two industry segments: Distribution and Prescription Services. In addition to being presented separately, intersegment financial data is
included in the gross segment amounts disclosed below in order to present accurate segment information, whereas on the condensed consolidated balance sheets and statements of operations, all intercompany transactions have been eliminated in
consolidation.



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Presented below is condensed segment information as of and for the three months ended June 30, 2004 and
2003:



|                         |  |                                 |           |   |                                 |   |           |  
|------------------------ |  | ------------------------------- | --------- | - | ------------------------------- | - | --------- | -
|                         |  | Three Months EndedJune 30, 2004 |           |   | Three Months EndedJune 30, 2003 |  
|                         |  | (Unaudited)                     |           |   | (Unaudited)                     |  
|Revenues:                |  |                                 |           |   |                                 |   |           |  
|Distribution             |  | $                               | 241,267   |   |                                 | $ | 195,129   |  
|Prescription services    |  |                                 | 36,532    |   |                                 |   | 77,075    |  
|Intersegment sales       |  |                                 |          |   |                                 |   |          |  
|Gross profit:            |  |                                 |           |   |                                 |   |           |  
|Distribution             |  |                                 | 117,666   |   |                                 |   | 114,518   |  
|Prescription services    |  |                                 | 5,996     |   |                                 |   | 22,768    |  
|Operating income (loss): |  |                                 |           |   |                                 |   |           |  
|Distribution             |  |                                 | (101,444  | ) |                                 |   | 5,999     |  
|Prescription services    |  |                                 | (3,948    | ) |                                 |   | (368      | )
|                         |  |                                
|                         |  | As of June 30, 2004             |           |   | As of June 30, 2003             |  
|                         |  | (Unaudited)                     |           |   | (Unaudited)                     |  
|Assets:                  |  |                                 |           |   |                                 |   |           |  
|Distribution             |  | $                               | 460,749   |   |                                 | $ | 214,972   |  
|Prescription services    |  |                                 | 1,957,504 |   |                                 |   | 14,723    |  
|Corporate                |  |                                 | 3,946,386 |   |                                 |   | 2,790,449 |  



NOTE F-INCOME TAXES



The Company utilizes the guidance provided by Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS 109, the Company uses the asset and liability method which recognizes the amount of current and deferred taxes payable or refundable based on transactions
recorded as of and for the periods presented in the consolidated financial statements as determined by the enacted tax laws and tax rates. The Company has a current and deferred tax liability recorded as of June 30, 2004 of zero and $1,340,846,
respectively. The deferred tax liability is primarily a result of the differences arising between book and tax basis of unrealized gains and losses, net, on marketable equity securities.



NOTE G-RELATED PARTY TRANSACTIONS



On October 1, 1999, the Company entered into a triple-net lease agreement with Geopharma, Inc. (Geopharma), formerly Innovative Companies,
Inc., an affiliate of the Company, whereby Geopharma agreed to lease the Companys land and 33,222 square foot building in Largo, Florida for a term of ten years. The initial rental under the lease was approximately $192,000 annually. The lease
provides for an annual cost-of-living increase. This facility serves as Geopharmas corporate headquarters and also serves as part of Geopharmas offices, manufacturing, warehousing and shipping operations. Jugal K. Taneja, a principal



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shareholder and Chairman of the Board of the Company, is also a principal shareholder, and Chairman of the Board of
Geopharma. As of June 30, 2004, the Companys investment in Geopharma, consisting of 347,938 shares of its common stock, is included in marketable equity securities, net.



For the three months ended June 30, 2004 and 2003, the Company charged Vertical Health Solutions, Inc.
(Vertical), an affiliate of the Company, consulting fees totaling $2,000 and $1,215, respectively, for accounting and administrative services. The charge is on an hourly basis for services rendered. As of June 30, 2004 and 2003, zero and
$6,360, respectively, were due from Vertical and are included in amounts due from affiliates. Jugal K. Taneja, a principal shareholder and Chairman of the Board of the Company is also a principal shareholder and a Director of Vertical. As of June
30, 2004, the Companys investment in Vertical is included in marketable equity securities, net.



The Company owns 30%, or 300,000 shares of common stock of Tribeca Beverage Company, an affiliate of Jugal K. Taneja, a principal shareholder and Chairman
of the Board of the Company, and Mandeep K. Taneja, a Director, Chief Executive Officer and President of the Company. The investment was accounted for under the equity method until March 31, 2003, at which time, as a result of managements
analysis, it was determined that the investment was worthless and the Company recognized an impairment loss in the investment. As of June 30, 2004, $1 was due from Tribeca and is included in amounts due from affiliates. As of June 30, 2003, $2,878
was due to Tribeca and is included in obligations to affiliates.



On January 1, 2004, the Company entered into a verbal agreement with Geopharma, whereby the Company agreed to sublease approximately 5,131 square feet of office and warehouse space for its executive offices and its operations in Largo,
Florida. This facility serves as the Companys corporate headquarters and is also used for its offices, warehousing and shipping operations. The facility is sublet for a term of two years ending on December 31, 2005. The Company is in the
process of finalizing a written agreement with Geopharma. The sublease will contain an annual option to continue the sublease subsequent to December 31, 2005 and a provision for an annual cost-of-living increase. The initial rental under the
sublease is $41,066 annually.



Amounts due from and to
affiliates represent balances owed to or from the Company for sales or purchases occurring in the normal course of business. Amounts due from and to these affiliates are in the nature of trade payables or receivables and fluctuate based on sales and
purchasing volume and payments received. Any future transactions between the Company and its officers, directors or affiliates will be subject to approval by a majority of disinterested directors or shareholders in accordance with Florida law.



For the three months ended June 30, 2004 and 2003, purchases
of products from subsidiaries of Geopharma were $136,932 and $50,949, respectively. There were no sales of products to subsidiaries of Geopharma for the three months ended June 30, 2004 and 2003. As of June 30, 2004 and 2003, $138 and $191,
respectively, were due from Geopharma and are included in amounts due from affiliates, and $147,560 and $49,643, respectively, were due to subsidiaries of Geopharma and are included in obligations to affiliates.



- 10 -



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Research and development is primarily contracted through Geopharma, and product nutritional information,
as well as product label requirements, are prepared by Geopharmas regulatory staff personnel. Research and development costs have been immaterial to the operations of the Company, and are charged to expense as incurred.



For the three months ended June 30, 2004 and 2003, purchases of products from
T & L, Inc. (T&L), an affiliate of Mandeep K. Taneja, a Director, Chief Executive Officer and President of the Company, were zero and $22,113, respectively. There were no sales of products to T&L for the three months ended
June 30, 2004 and 2003. As of June 30, 2004 and 2003, $2,471 and 4,117, respectively, were due to T&L and are included in obligations to affiliates.



NOTE H-SUBSEQUENT EVENTS



On June 14, 2004, the Board of Directors of the Company, approved the declaration of a pro rata dividend distribution to holders of record of its issued
and outstanding common shares as of July 1, 2004, in the form of approximately 1.2 million shares of Vertical Health Solutions, Inc., a Florida corporation, which the Company owned. On July 7, 2004, the Board of Directors of the Company amended the
record date to July 16, 2004 and the distribution date to July 26, 2004. The payment rate was one (1) share of Vertical common stock for each ten (10) shares of the Companys common stock held on July 16, 2004. The Company only distributed
whole shares and any fractional shares to which shareholders would otherwise be entitled were rounded down to the nearest whole share.



On July 26, 2004, the Company distributed approximately 1.2 million shares of Vertical Health Solutions, Inc. common stock to its shareholders.



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.



The following management discussion and analysis should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes thereto presented elsewhere in this Form 10-QSB. The discussion is based upon such condensed consolidated financial statements that have been prepared in accordance with U.S.
Generally Accepted Accounting Principles.



The statements
contained in this Report that are not historical are forward-looking statements, including statements regarding the Companys expectations, intentions, beliefs or strategies regarding the future. Forward-looking statements include the
Companys statements regarding liquidity, anticipated cash needs and availability and anticipated expense levels. All forward-looking statements included in this Report are based on information available to the Company on the date hereof, and
the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Companys actual results could differ materially from those in such forward-looking statements. Additionally, the following
discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Report. The discussion is based upon such condensed consolidated financial statements, which
have been prepared in accordance with U.S. Generally Accepted Accounting Principles.



Overview



The Company derives its revenues
from developing, wholesaling and distributing a wide variety of non-prescription dietary supplements, and health and beauty care products. We also derive revenues from services provided in connection with prescription services.



Revenues are billed and recognized as product is shipped, net of discounts,
allowances, returns and credits. The Company has a no return policy. However, with certain large customers, industry practice mandates the acceptance of certain returns, which have thus far been immaterial to the Company.



Cost of goods sold is comprised of direct product costs, contracted service
fees, direct personnel compensation and other statutory benefits and indirect costs relating to labor to support the warehousing of product and other warehousing overhead. Research and development expenses are charged against cost of goods sold as
incurred and are not material to the Companys operations. Selling, general and administrative costs include management and general office salaries, advertising and promotional expenses, sales and marketing and other indirect operating costs.
Interest and other income (expense) consist primarily of interest income associated with notes receivable, and interest expense associated with borrowings to finance capital and other working capital needs.



Results of Operations



Three Months Ended June 30, 2004 Compared To Three Months Ended June 30, 2003



Revenues. The Company generated total revenues of $277,799 for the
three months ended June 30, 2004, an increase of $5,595 or 2.1%, compared to $272,204 for the three months ended June 30, 2003. Distribution revenues increased $46,138 or 23.6% to $241,267 for the three months ended June 30, 2004, compared to
$195,129 for the three months ended June 30, 2003.



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The increase was primarily attributable to increased revenues from existing customers, with the introduction of new
products, as well as increased revenues as a result of expansion of the Companys customer base. Prescription services revenues decreased $40,543 or 52.6% to $36,532 for the three months ended June 30, 2004, from $77,075 for the three months
ended June 30, 2003. The decrease was primarily attributable to a change in the mix of prescription services provided due to an increase in governmental regulations.



Gross profit. The Company achieved total gross profit of $123,662 for the three months ended June 30, 2004, a
decrease of $13,624 or 9.9%, compared to $137,286 for the three months ended June 30, 2003. Total gross margins, as a percentage of revenues, decreased from 50.4% for the three months ended June 30, 2003 to 44.5% for the three months ended June 30,
2004. Distribution gross profit increased $3,148 or 2.7%, to $117,666 for the three months ended June 30, 2004, compared to $114,518 for the three months ended June 30, 2003. The increase was primarily attributable to an increase in the
Companys customer base, and was partially offset by a change in the Companys mix of sales, due to increased sales of products that yield a lower gross margin. Prescription services gross profit decreased $16,772 or 73.7%, to $5,996 for
the three months ended June 30, 2004, compared to $22,768 for the three months ended June 30, 2003. The decrease was primarily attributable to the decrease in prescription services revenue, as well as an increase in direct labor costs.



Operating expenses. The Company incurred operating expenses of
$390,385 for the three months ended June 30, 2004, compared to $248,303 for the three months ended June 30, 2003. For the three months ended June 30, 2004, these expenses include various administrative, sales, marketing and other direct operating
expenses of $371,804, and depreciation and amortization expenses of $18,581, compared to $225,926 of various administrative, sales, marketing and other direct operating expenses, and depreciation and amortization expenses of $22,377 for the three
months ended June 30, 2003.



Operating expenses, excluding
amortization expense and depreciation expense increased to 133.8% of revenues for the three months ended June 30, 2004, from 83.0% of revenues for the three months ended June 30, 2003. The increase in operating expenses as a percentage of revenues
was primarily attributable to an increase in advertising and promotional expenses, consulting fees, legal fees, public relations fees, salary and payroll expenses, rent, and insurance expenses, and was partially offset by a decrease in director
fees, tradeshow and web site expenses.



Interest income.
Interest income was $773 for the three months ended June 30, 2004, compared to $767 for the three months ended June 30, 2003.



Interest expense. Interest expense was $15,244 for the three months ended June 30, 2004, compared to $16,694 for the three months ended June 30,
2003. The decrease in interest expense was primarily a result of a decrease in the Companys outstanding obligations.



Income taxes. As of June 30, 2004, the Company had no accrued income tax liability and an estimated deferred income tax liability of $1,340,846,
which primarily represented the potential future tax expense associated with the unrealized gains on marketable equity securities. As of June 30, 2003, the Company had an accrued income tax liability of $5,746 and a deferred income tax liability of
$356,984. The deferred income tax liability was primarily associated with unrealized gains on marketable equity securities. During the three months ended June 30, 2003, the Company recorded income tax benefit of $37,045, associated with the reversal
of unrealized losses on marketable equity securities.



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Net loss per share.Net loss per share was $0.02 for the three months ended June 30, 2004,
compared to net loss per share of $0.01 for the three months ended June 30, 2003. The increase in net loss per share for the three months ended June 30, 2004, compared to the three months ended June 30, 2003, was primarily a result of an increase in
the Companys operating loss before other income and expense of $155,706, and a decrease in other income and expenses, net, of $39,374, partially offset by the absence of losses on marketable equity securities, net, of $102,434, and the absence
of equity in loss of affiliated companies of $2,246.



Inflation; Seasonality.Management believes that there was no material effect on operations or the financial condition of the Company as a result of inflation for the three months ended June 30, 2004 and 2003. Management also
believes that its business is not seasonal; however, significant promotional activities can have a direct impact on sales volume in any given quarter.



Financial Condition, Liquidity and Capital Resources



The Company has financed its operations through the usage of available cash reserves. The Company had working capital of $4,421,612 and $3,944,497,
respectively, at June 30, 2004 and March 31, 2004.



Net cash
used in operating activities was $136,566 for the three months ended June 30, 2004, as compared to net cash used in operating activities of $43,038 for the three months ended June 30, 2003. The usage of cash was primarily attributable to an increase
in inventories of $81,551, an increase in amounts due to/from affiliates, net, of $85,552, an increase in prepaid expenses of $3,334 and a decrease in other payables of $21,895, partially offset by a decrease in accounts receivable of $66,073, a
decrease in other current assets of $4,683, a decrease in other assets of $650, an increase in accounts payable of $83,749 and an increase in accrued expenses of $85,677.



Net cash used in investing activities was $3,769, representing the purchase of property and equipment.



Net cash used in financing activities was $17,610, representing payments of
long-term obligations.



At June 30, 2004, the Company had
$61,174 in cash and cash equivalents, as compared to $52,261 at June 30, 2003.



Management believes that cash expected to be generated from operations and current cash reserves will be sufficient for the Company to meet its capital expenditures and working capital needs, for its operations as
presently conducted, with the Companys recent introduction of new products. The Companys future liquidity and cash requirements will depend on a wide range of factors, including the level of business in existing operations, expansion of
facilities and possible acquisitions. In particular, if cash flows from operations are not sufficient, it will be necessary for the Company to seek additional financing. While there can be no assurance that such financing would be available in
amounts and on terms acceptable to the Company, management believes that such financing would likely be available on acceptable terms.



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In June 2004, the Company entered into a Proposal Letter with an institutional investor, pursuant to
which such investor will purchase a $6,000,000 convertible note from the Company. The closing is subject to various terms and conditions including negotiations of definitive agreements between the investor and the Company.



In June 2004, pursuant to a Financial Consulting Agreement, the Company
issued 300,000 warrants to purchase common stock, for consulting services. At June 30, 2004 and 2003, the Company had outstanding warrants to purchase 300,000 and zero shares of the Companys common stock, respectively, at prices ranging from
$1.50 to $2.50. The warrants become exercisable in June 2005 and expire at various dates through June 2008.



Item 3. CONTROLS AND PROCEDURES.



As of June 30, 2004, the Companys management carried out an evaluation, under the supervision and with the participation of the Companys Disclosure Committee, including the Companys Chief Executive
Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer
have concluded that the Companys disclosure controls and procedures are effective as of June 30, 2004 to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act
of 1934, as amended, is accumulated and communicated to the Companys management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are
effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. There were no significant changes in the Companys internal controls or in other
factors that could significantly affect those controls subsequent to the date of their evaluation.



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PART II - OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS.



The Company is involved in litigation in Georgia from Hi-Tech Pharmaceuticals, Inc. (Hi-Tech) over claims regarding intellectual property
matters. Plaintiff seeks unspecified monetary damages as well as non-monetary relief. Management of the Company does not believe that it has any material exposure with regard to the allegations of the claims. The Company is vigorously defending this
action. In addition, the Company has instituted counterclaims against Hi-Tech and Jared Wheat, the President of Hi-Tech. We are seeking relief for libel, slander and tortious interference in amounts in excess of $75,000, exclusive of interest and
costs.



In February 2004, the Company was served with a
complaint involving litigation in Maryland from Beyond Systems, Inc. over claims regarding commercial electronic mail matters. Plaintiff seeks monetary damages in excess of $100,000, exclusive of interest and costs. Management believes that such
claim is without merit and will defend it vigorously.



In May
2004, the Company was served with a complaint involving litigation in Ohio from 40 Js, LLC over claims regarding patent infringement. Plaintiff seeks unspecified monetary damages as well as non-monetary relief. Management believes that such
claim is without merit and is defending it vigorously.



From
time to time the Company is subject to litigation incidental to its business including possible product liability claims. Such claims, if successful, could exceed applicable insurance coverage. The Company is not currently a party to any legal
proceedings which it believes will have a material adverse affect on its results of operations.



Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.



None.



Item 3. DEFAULTS UPON SENIOR
SECURITIES.



Not applicable.



Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.



There were no matters submitted to a vote of security holders during the
three months ended June 30, 2004.



Item 5. OTHER INFORMATION.



On June 14, 2004, the Board of Directors of the Company,
approved the declaration of a pro rata dividend distribution to holders of record of its issued and outstanding common shares as of July 1, 2004, in the form of approximately 1.2 million shares of Vertical Health Solutions, Inc.
(Vertical), a Florida corporation, which the Company owned. On July 7, 2004, the Board of Directors of the Company amended the record date to July 16, 2004 and the distribution date to July 26, 2004. The payment rate was one (1) share of
Vertical common stock for each ten (10) shares of the Companys common stock held on July 16, 2004. The Company only distributed whole shares and any fractional shares to which shareholders would otherwise be entitled were rounded down to the
nearest whole share.



- 16 -



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On July 26, 2004, the Company distributed approximately 1.2 million shares of Vertical Health Solutions,
Inc. common stock to its shareholders.



Item 6. EXHIBITS AND REPORTS ON FORM
8-K.



(a) Exhibits.



The following exhibits are filed with this report:



|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|3.1  |  | Articles of Amendment to Articles of Incorporation of Dynamic Health Products, Inc., filed July 30, 2003.(1)           
|     | 
|31.1 |  | Certification Of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|31.2 |  | Certification Of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|(1) | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB/A for the quarter ended June 30, 2003, file number 0-23031, filed in Washington, D.C.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Reports on Form 8-K.
|--- | --------------------



During the three month period ending June 30, 2004, the Company filed no reports on Form 8-K.



- 17 -



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SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                      |  |                               |  |                                        
|--------------------- |  | ----------------------------- |  | ---------------------------------------
|                      |  | Dynamic Health Products, Inc.
|                      |  |                              
|Date: August 16, 2004 |  | By:                           |  | /s/ Mandeep K. Taneja                  
|                      |  |                               |  | Mandeep K. Taneja, Chief Executive     
|                      |  |                               |  | Officer and President                  
|                      |  |                              
|Date: August 16, 2004 |  | By:                           |  | /s/ Cani I. Shuman                     
|                      |  |                               |  | Cani I. Shuman, Chief Financial Officer



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