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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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



For the quarterly period ended June 30, 2003



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



For the transition period from ____________ to ____________



Commission file number 0-23031



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DYNAMIC HEALTH PRODUCTS, INC.

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



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



|12399 Belcher Road South, Suite 160, Largo, Florida |  | 33773     
|--------------------------------------------------- |  | ----------
|(Address of principal executive offices)            |  | (Zip Code)



Issuers
telephone number (727) 324-6667



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 13, 2003 was 12,331,500.



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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,    |            |   | March 31, |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ---------- | - | --------- | -
|                                                                                                                               |  | 2003        |            |   | 2003      |  
|                                                                                                                               |  | (Unaudited) |            |   | (Audited) |  
|ASSETS                                                                                                                         |  |             |            |   |           |  
|Current assets:                                                                                                                |  |             |            |   |           |  
|Cash and cash equivalents                                                                                                      |  | $           | 52,261     |   |           | $
|Certificate of deposit                                                                                                         |  |             |           |   |           |  
|Marketable equity securities, net                                                                                              |  |             |           |   |           |  
|Accounts receivable, net                                                                                                       |  |             | 88,909     |   |           |  
|Inventories                                                                                                                    |  |             | 20,978     |   |           |  
|Prepaid expenses                                                                                                               |  |             | 17,765     |   |           |  
|Other current assets                                                                                                           |  |             | 7,433      |   |           |  
|Due from affiliates                                                                                                            |  |             | 8,663      |   |           |  
|Note receivable from affiliate                                                                                                 |  |             | 38,186     |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total current assets                                                                                                           |  |             | 234,195    |   |           |  
|                                                                                                                               |  |            
|Property, plant and equipment, net                                                                                             |  |             | 1,355,234  |   |           |  
|                                                                                                                               |  |            
|Intangible assets, net                                                                                                         |  |             | 24,272     |   |           |  
|Investments in unconsolidated affiliates                                                                                       |  |             | 359,406    |   |           |  
|Other assets, net                                                                                                              |  |             | 12,312     |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total assets                                                                                                                   |  | $           | 1,985,419  |   |           | $
|                                                                                                                               |  |             |            |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                           |  |             |            |   |           |  
|Current liabilities:                                                                                                           |  |             |            |   |           |  
|Accounts payable                                                                                                               |  | $           | 152,949    |   |           | $
|Other payables                                                                                                                 |  |             | 80,769     |   |           |  
|Current portion of long-term obligations                                                                                       |  |             | 31,567     |   |           |  
|Accrued expenses                                                                                                               |  |             | 46,149     |   |           |  
|Accrued income taxes                                                                                                           |  |             | 5,746      |   |           |  
|Due to related party                                                                                                           |  |             | 47,819     |   |           |  
|Obligations to affiliates                                                                                                      |  |             | 56,638     |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total current liabilities                                                                                                      |  |             | 421,637    |   |           |  
|                                                                                                                               |  |            
|Long-term obligations, less current portion                                                                                    |  |             | 828,120    |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total liabilities                                                                                                              |  |             | 1,249,757  |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|                                                                                                                               |  |            
|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; 3,082,875 shares issued and outstanding                            |  |             | 30,828     |   |           |  
|Additional paid-in capital                                                                                                     |  |             | 2,538,142  |   |           |  
|Retained earnings (deficit)                                                                                                    |  |             | (1,833,308 | ) |           |  
|Accumulated other comprehensive income:                                                                                        |  |             |            |   |           |  
|Unrealized losses on marketable equity securities                                                                              |  |             |           |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total shareholders equity                                                                                                     |  |             | 735,662    |   |           |  
|                                                                                                                               |  |             |            |   |           |  
|Total liabilities and shareholders equity                                                                                     |  | $           | 1,985,419  |   |           | $
|                                                                                                                               |  |             |            |   |           |  



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, |          
|------------------------------------------------------------ |  | --------------------------- | ---------
|                                                             |  | 2003                        |          
|Revenues:                                                    |  |                             |          
|Distribution                                                 |  | $                           | 195,129  
|Prescription services                                        |  |                             | 77,075   
|                                                             |  |                             |          
|Total revenues                                               |  |                             | 272,204  
|                                                             |  |                             |          
|Cost of goods sold:                                          |  |                             |          
|Distribution                                                 |  |                             | 80,611   
|Prescription services                                        |  |                             | 54,307   
|                                                             |  |                             |          
|Total cost of goods sold                                     |  |                             | 134,918  
|                                                             |  |                             |          
|Gross profit:                                                |  |                             |          
|Distribution                                                 |  |                             | 114,518  
|Prescription services                                        |  |                             | 22,768   
|                                                             |  |                             |          
|Total gross profit                                           |  |                             | 137,286  
|                                                             |  |                             |          
|                                                             |  |                            
|Operating expenses:                                          |  |                             |          
|Selling, general and administrative expenses                 |  |                             | 225,926  
|Amortization expense                                         |  |                             | 311      
|Depreciation expense                                         |  |                             | 22,066   
|                                                             |  |                             |          
|Total operating expenses                                     |  |                             | 248,303  
|                                                             |  |                             |          
|Operating loss before other income and expense               |  |                             | (111,017 
|                                                             |  |                            
|Other income (expense):                                      |  |                             |          
|Interest income                                              |  |                             | 767      
|Other income and expenses, net                               |  |                             | 51,319   
|Losses on marketable equity securities, net                  |  |                             | (102,434 
|Equity in income (loss) of affiliated companies              |  |                             | (2,246   
|Interest expense                                             |  |                             | (16,694  
|                                                             |  |                             |          
|Total other income (expense)                                 |  |                             | (69,288  
|                                                             |  |                             |          
|Loss before income taxes                                     |  |                             | (180,305 
|Income tax expense (benefit)                                 |  |                             | (37,045  
|                                                             |  |                             |          
|Net loss                                                     |  |                             | (143,260 
|Preferred stock dividends                                    |  |                             |         
|                                                             |  |                             |          
|Net loss available to common shareholders                    |  | $                           | (143,260 
|                                                             |  |                             |          
|Basic loss per share                                         |  | $                           | (0.05    
|                                                             |  |                             |          
|Basic weighted average number of common shares outstanding   |  |                             | 3,082,875
|                                                             |  |                             |          
|Diluted loss per share                                       |  | $                           | (0.05    
|                                                             |  |                             |          
|Diluted weighted average number of common shares outstanding |  |                             | 3,082,875
|                                                             |  |                             |          



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-inCapital |   | RetainedEarnings (Deficit) |  |           | UnrealizedLosses onSecurities |   |                                     | TotalShareholders Equity |  
|                                                          |  | Shares                  |  | Dollars                 |   | Shares       |   | Dollars                  |   | Shares                     |  | Dollars   |                               |   |                                     |                          
|Balances at March 31, 2002 (Audited)                      |  |                        |  | $                       |  |              |  |                          | $ |                           |  | 3,082,875 |                               | $ | 30,828                              |                           | $ | 2,538,142 | 
|COMPREHENSIVE INCOME (LOSS)                               |  |                         |  |                         |   |              |   |                          |   |                            |  |           |                               |   |                                     |                           |   |           | 
|Net loss                                                  |  |                        |  |                         |  |              |  |                          |   |                           |  |          |                               |   |                                    |                           |   |          | 
|Unrealized gains (losses) on marketable equity securities |  |                        |  |                         |  |              |  |                          |   |                           |  |          |                               |   |                                    |                           |   |          | 
|                                                          |  |                         |  |                         |   |              |   |                          |   |                            |  |           |                               |   |                                     |                           |   |           | 
|Comprehensive income (loss)                               |  |                         |  |                         |   |              |   |                          |   |                            |  |           |                               |   |                                     |                           |   |           | 
|                                                          |  |                         |  |                         |   |              |   |                          |   |                            |  |           |                               |   |                                     |                           |   |           | 
|Balances at June 30, 2003 (Unaudited)                     |  |                        |  | $                       |  |              |  |                          | $ |                           |  | 3,082,875 |                               | $ | 30,828                              |                           | $ | 2,538,142 | 
|                                                          |  |                         |  |                         |   |              |   |                          |   |                            |  |           |                               |   |                                     |                           |   |           | 



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, |         
|--------------------------------------------------------------------------------------- |  | --------------------------- | --------
|                                                                                        |  | 2003                        |         
|Cash flows from operating activities:                                                   |  |                             |         
|Net loss                                                                                |  | $                           | (143,260
|                                                                                        |  |                            
|Adjustments to reconcile net loss to net cash used in operating activities:             |  |                             |         
|Depreciation and amortization                                                           |  |                             | 22,377  
|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                                                                     |  |                             | (37,754 
|Inventories                                                                             |  |                             | 4,684   
|Due to/from affiliates, net                                                             |  |                             | 19,860  
|Prepaid expenses                                                                        |  |                             | 20,979  
|Other current assets                                                                    |  |                             | 296     
|Other assets                                                                            |  |                             | (272    
|Accounts payable                                                                        |  |                             | 3,879   
|Other payables                                                                          |  |                             | (5,195  
|Accrued expenses                                                                        |  |                             | 3,733   
|                                                                                        |  |                             |         
|Net cash used in operating activities                                                   |  |                             | (43,038 
|                                                                                        |  |                             |         
|Cash flows from investing activities:                                                   |  |                             |         
|Purchases of property and equipment                                                     |  |                             | (2,995  
|Purchase of certificate of deposit                                                      |  |                             |        
|Redemption of certificate of deposit                                                    |  |                             | 45,917  
|Purchase of investment                                                                  |  |                             | (3,750  
|Proceeds from sale of marketable equity securities                                      |  |                             | 4,781   
|Proceeds from related party receivables                                                 |  |                             |        
|                                                                                        |  |                             |         
|Net cash provided by (used in) investing activities                                     |  |                             | 43,953  
|                                                                                        |  |                             |         
|Cash flows from financing activities:                                                   |  |                             |         
|Payments of long-term obligations                                                       |  |                             | (20,387 
|Proceeds from issuance of related party obligations                                     |  |                             | 47,819  
|                                                                                        |  |                             |         
|Net cash provided by (used in) financing activities                                     |  |                             | 27,432  
|                                                                                        |  |                             |         
|Net increase (decrease) in cash                                                         |  |                             | 28,347  
|Cash and cash equivalents at beginning of period                                        |  |                             | 23,914  
|                                                                                        |  |                             |         
|Cash and cash equivalents at end of period                                              |  | $                           | 52,261  
|                                                                                        |  |                             |         



See accompanying notes
to condensed consolidated financial statements.



-5-



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Continued)



|                                                                                          |  | Three Months Ended June 30,
|----------------------------------------------------------------------------------------- |  | ---------------------------
|                                                                                          |  | 2003                       
|Supplemental disclosure of cash flow information:                                         |  |                            
|Cash paid during the period for interest                                                  |  | $                          
|                                                                                          |  |                            
|Cash paid during the period for income taxes                                              |  | $                          
|                                                                                          |  |                            
|                                                                                          |  |                            
|Supplemental schedule of non-cash investing activities:                                   |  |                            
|Exchange of notes receivable from affiliate to investment in preferred stock of affiliate |  | $                          
|                                                                                          |  |                            
|                                                                                          |  |                            
|Supplemental schedule of non-cash financing activities:                                   |  |                            
|Conversion of Series B 6% Cumulative Convertible Preferred stock into common stock        |  | $                          
|                                                                                          |  |                            
|Accrual of preferred stock dividends                                                      |  | $                          
|                                                                                          |  |                            





See accompanying notes to condensed consolidated financial statements.



-6-



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DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

JUNE 30, 2003 AND 2002 (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, 2003 and 2002 are not necessarily indicative of the results that may be expected for the year ending March 31, 2004. 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, 2003.



Certain reclassifications have been made to the financial statements as of and for the three months ended June 30, 2002, and as of March 31, 2003, to
conform to the presentation as of and for the three months ended June 30, 2003.



NOTE B-PRINCIPLES OF CONSOLIDATION



The
condensed consolidated financial statements as of and for the three months ended June 30, 2003 and 2002 include the accounts of Dynamic Health Products, Inc. and its principally wholly-owned subsidiaries (collectively the Company), J.
Labs, Inc., Dynamic Life Products, Inc., Herbal Health Products, Inc., Online Meds Rx, Inc. and its subsidiary Dynamic Life Asia, LLC, Dynamic Financials Corporation and its subsidiary 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.



Investment in net
assets of an affiliated company, Vertical Health Solutions, Inc. (Vertical), was accounted for under the equity method until December 31, 2002, at which time the Companys percentage of ownership in Vertical was reduced from
approximately 21.0% to approximately 19.5%. At June 30, 2003, the Company owned approximately 19.2% of Vertical. As of June 30, 2003 and 2002, the investment amounted to $357,902 and $435,286, respectively. For the three months ended June 30, 2002,
$4,060 was recorded as the Companys share of Verticals loss.



-7-



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The consolidated results of operations of Vertical for the three months ended June 30, 2002 are
summarized below:



|                                        |  | Three MonthsEnded June 30, 2002 |         
|--------------------------------------- |  | ------------------------------- | --------
|                                        |  | (Unaudited)                     |         
|Condensed Income Statement Information: |  |                                 |         
|Net sales                               |  | $                               | 323,972 
|Gross profit                            |  |                                 | 170,866 
|Net loss                                |  |                                 | (126,275



Investment in net
assets of an affiliated company, Tribeca Beverage Company (Tribeca), was accounted for under the equity method until March 31, 2003, at which time it was determined by management that the investment was worthless. As of June 30, 2002,
the investment amounted to $175,954. For the three months ended June 30, 2002, $4,909 was recorded as the Companys share of Tribecas loss. At June 30, 2003 and 2002, the Company owned 30% and 20%, respectively, of Tribeca.



The results of operations for Tribeca for the three months ended June 30,
2002 are summarized below:



|                                        |  | Three MonthsEnded June 30, 2002 |        
|--------------------------------------- |  | ------------------------------- | -------
|                                        |  | (Unaudited)                     |        
|Condensed Income Statement Information: |  |                                 |        
|Net sales                               |  | $                               | 37,954 
|Gross profit                            |  |                                 | 17,145 
|Net loss                                |  |                                 | (24,544



Investment in net
assets of an affiliated company, DrugMax, Inc. (DrugMax), was accounted for under the equity method until November 22, 2002, at which time the Company distributed all of its shares of common stock of DrugMax to its shareholders. For the
three months ended June 30, 2002, $155,214 was recorded as the Companys share of DrugMaxs loss. At June 30, 2003 and 2002, the Company owned zero and approximately 27% of DrugMax, respectively.



-8-



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The consolidated results of operations of DrugMax for the three months ended June 30, 2002 are summarized
below:



|                                        |  | Three MonthsEnded June 30, 2002 |           
|--------------------------------------- |  | ------------------------------- | ----------
|                                        |  | (Unaudited)                     |           
|Condensed Income Statement Information: |  |                                 |           
|Net sales                               |  | $                               | 63,103,819
|Gross profit                            |  |                                 | 1,980,826 
|Net income (loss)                       |  |                                 | (571,690  



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 has a 50%
ownership and shares profits and losses equally. The Company is required to contribute half of the costs incurred in the initial marketing of the products. The Company accounts for the investment under the equity method of accounting. 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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 has implemented SFAS 130 as of and for the three months ended June 30, 2002 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 consolidated statement of changes in shareholders equity statement.



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, 2003, the Company had two
industry segments: Distribution and Prescription Services. For the three months ended June 30, 2002, the Company had one industry segment, Distribution. 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.



-9-



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



|                         |  | Three MonthsEnded June 30, 2003 |        
|------------------------ |  | ------------------------------- | -------
|                         |  | (Unaudited)                     |        
|Revenues:                |  |                                 |        
|Distribution             |  | $                               | 195,129
|Prescription services    |  |                                 | 77,075 
|Intersegment sales       |  |                                 |       
|Gross profit:            |  |                                 |        
|Distribution             |  |                                 | 114,518
|Prescription services    |  |                                 | 22,768 
|Operating income (loss): |  |                                 |        
|Distribution             |  |                                 | 5,999  
|Prescription services    |  |                                 | (368   





|                      |  | As of June 30, 2003
|--------------------- |  | -------------------
|                      |  | (Unaudited)        
|Assets:               |  |                    
|Distribution          |  | $                  
|Prescription services |  |                    
|Corporate             |  |                    



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. As of June 30, 2003, the Company had an accrued income tax liability of $5,746 and no net
deferred income tax asset or liability.



NOTE GRELATED PARTY
TRANSACTIONS



On October 1, 1999, the Company entered into
a triple-net lease agreement with Innovative Companies, Inc. (Innovative), an affiliate of the Company, whereby Innovative 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 Innovatives corporate headquarters and also serves as part of Innovatives offices,
manufacturing, warehousing and shipping operations. Jugal K. Taneja, a principal shareholder and Chairman of the Board of the Company is also a principal shareholder, and Chairman of the Board of Innovative.



-10-



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On March 22, 2002, the Company entered into a Sublease and Consent agreement with Innovative Health
Products, Inc., a wholly-owned subsidiary of Innovative, whereby the Company agreed to sublease approximately 5,200 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 offices, warehousing and shipping operations. The facility was sublet for a term of approximately one year, ending on March 31, 2003. The sublease contains an option to continue the sublease
subsequent to March 31, 2003, on a month-to-month basis through January 10, 2004, unless terminated earlier. This option to continue has been exercised. The rental under the sublease is $33,384 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. The
Company believes that material affiliated transactions and loans, and business relationships entered into by the Company or its subsidiaries with certain of its officers, directors and principal stockholders or their affiliates were on terms no less
favorable than the Company could have obtained from independent third parties. Any future transactions between the Company and its officers, directors or affiliates will be subject to approval by a majority of disinterested directors or stockholders
in accordance with Florida law.



For the three months ended
June 30, 2003 and 2002, purchases of products from subsidiaries of Innovative were $50,949 and $47,751, respectively. For the three months ended June 30, 2003 and 2002, sales of products to a subsidiary of Innovative were zero and approximately
$3,394, respectively. As of June 30, 2003 and March 31, 2003, $191 and $91, respectively, were due from Innovative and are in included in amounts due from affiliates, and $49,643 and $29,140, respectively, were due to subsidiaries of Innovative and
are included in obligations to affiliates.



Research and
development is primarily contracted through Innovative, and product nutritional information, as well as product label requirements, are prepared by Innovative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, 2003 and 2002, sales of products to a subsidiary of DrugMax, an affiliate of the Company, were zero and $5,760, respectively. There were no purchases of products from subsidiaries of DrugMax for the three
months ended June 30, 2003 and 2002. Jugal K. Taneja, a principal shareholder and Chairman of the Board of the Company is also a principal shareholder, Chairman of the Board and Chief Executive Officer of DrugMax. William L. LaGamba, the Chief
Operating Officer and President of DrugMax is also a principal shareholder of the Company.



For the three months ended June 30, 2003 and 2002, purchases of products from T & L, Inc. (T&L), an affiliate of Mandeep K. Taneja, Chief Executive Officer and President of the Company, were
$23,113 and zero, respectively. There were no sales of products to T & L for the three months ended June 30, 2003 and 2002. As of June 30, 2003 and March 31, 2003, $4,117 and zero, respectively, were due to T & L and are included in
obligations to affiliates.



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For the three months ended June 30, 2003 and 2002, the Company charged Vertical, an affiliate of the
Company, consulting fees of $1,215 and zero, respectively, for accounting and administrative services. The charge is on an hourly basis for services rendered. As of June 30, 2003 and March 31, 2003, $6,360 and $6,063, respectively, were due from
Vertical and are included in amounts due from affiliates.



NOTE
HSUBSEQUENT EVENT



On July 29, 2003, the Board of
Directors of the Company approved a forward split of its outstanding shares of common stock on a four-for-one basis effective August 12, 2003, such that for each share of Company common stock held as of August 1, 2003, each shareholder was entitled
to receive three additional shares of Company common stock. The payment date for the additional shares of common stock was August 12, 2003. After the forward split the Company had 12,331,500 shares of common stock issued and outstanding.



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



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, 2003 Compared To Three Months Ended June 30, 2002



Revenues. The Company generated total revenues of $272,204 for the
three months ended June 30, 2003, an increase of $96,404 or 54.8%, compared to $175,800 for the three months ended June 30, 2002. Distribution revenues increased $19,329, or 11.0%, to $195,129 for the three months ended June 30, 2003, compared to
$175,800 for the three months ended



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June 30, 2002. 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. The Company commenced its prescription services operations in March 2003. Prescription services revenues were $77,075 for the
three months ended June 30, 2003.



Gross profit. The
Company achieved total gross profit of $137,286 for the three months ended June 30, 2003, an increase of $32,170 or 30.6%, compared to $105,116 for the three months ended June 30, 2002. Total gross margins, as a percentage of revenues, decreased
from 59.8% for the three months ended June 30, 2002 to 50.4% for the three months ended June 30, 2003. Distribution gross profit increased $9,402 or 8.9%, to $114,518 for the three months ended June 30, 2003, as compared to $105,116 for the three
months ended June 30, 2002. The decrease was primarily attributable to a change in the Companys mix of sales, due to increased sales of products that yield a lower gross margin, and was partially offset by an increase in the Companys
customer base, as well as increased sales to existing customers. Prescription services gross profit was $22,768 for the three months ended June 30, 2003. There was no prescription services gross profit for the three months ended June 30, 2002 since
the Company did not commence its prescription services operations until March 2003.



Operating expenses. The Company incurred operating expenses of $248,303 for the three months ended June 30, 2003, compared to $269,440 for the three months ended June 30, 2002. These expenses include various
administrative, sales, marketing and other direct operating expenses of $225,926, and depreciation and amortization expenses of $22,377 for the three months ended June 30, 2003, compared to $246,097 of various administrative, sales, marketing and
other direct operating expenses, and depreciation and amortization expenses of $23,343 for the three months ended June 30, 2002. Operating expenses, excluding amortization and depreciation expense decreased to 83.0% of revenues for the three months
ended June 30, 2003, from 140.0% of revenues for the three months ended June 30, 2002. The decrease was primarily attributable to decreased accounting and legal expenses, and was partially offset by increased insurance and web site expenses.



Interest income. Interest income was $767 for the three
months ended June 30, 2003, compared to $34,160 for the three months ended June 30, 2002. The decrease in interest income was a result of a decrease in notes receivable, and a decrease in cash and cash equivalents.



Interest expense. Interest expense was $16,694 for the three months
ended June 30, 2003, compared to $18,007 for the three months ended June 30, 2002. The decrease in interest expense was primarily a result of a decrease in the Companys outstanding obligations, as well as favorable interest rate changes.



Income taxes. As of June 30, 2003, the Company had an
accrued income tax liability of $5,746 and no net deferred income tax asset or liability. During the three months ended June 30, 2003, the Company recorded an income tax benefit of $37,045, associated with the reversal of unrealized losses on
marketable equity securities.



Net loss per share.Net
loss per share for the three months ended June 30, 2003 was $0.05, compared to net loss per share of $0.09 for the three months ended June 30, 2002. The decrease in net loss per share was primarily a result of a decrease in the Companys
operating loss before other income and expense of $53,307, a decrease in equity in loss of affiliated



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companies of $161,938, an increase in income tax benefit of $37,045, partially offset by an increase in losses on
marketable equity securities, net, of $102,434.



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, 2003 and 2002. 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 a working capital deficit of $187,442 and $124,052
at June 30, 2003 and March 31, 2003, respectively.



Net cash
used in operating activities was $43,038 for the three months ended June 30, 2003, as compared to net cash used in operating activities of $185,366 for the three months ended June 30, 2002. The usage of cash was primarily attributable to an increase
in accounts receivable of $37,754, an increase in other assets of $272 and a decrease in other payables of $5,195, partially offset by a decrease in inventories of $4,684, a decrease in amounts due to/from affiliates, net, of $19,860, a decrease in
prepaid expenses of $20,979, a decrease in other current assets of $296, an increase in accounts payable of $3,879 and an increase in accrued expenses of $3,733.



Net cash provided by investing activities was $43,953, representing the redemption of a certificate of deposit of $45,917
and proceeds from the sale of marketable equity securities of $4,781, partially offset by the purchase of property and equipment of $2,995 and the purchase of an investment of $3,750.



Net cash provided by financing activities was $27,432, representing proceeds from the issuance of related party obligations
of $47,819 and was partially offset by payments of long-term obligations of $20,387.



At June 30, 2003, the Company had $52,261 in cash and cash equivalents, as compared to $465,163 at June 30, 2002.



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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Item 3. CONTROLS AND PROCEDURES.



Within the 90 days prior to the date of filing of this quarterly report on Form 10-QSB, 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 (as defined in Exchange Act Rules 13a-14 and 15d-14). 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 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 Florida from Gerald Schmoling, a former President of a subsidiary of the Company. However, in the past year the
plaintiff has not taken any action with respect to this matter. Management believes that such claim is frivolous and the litigation is being defended.



The Company is involved in litigation in New Jersey over a claim for commissions. Management believes that such claim is without merit and is defending it
aggressively.



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.



Not applicable.



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, 2003.



Item 5. OTHER INFORMATION.



On July 29, 2003, the Board of Directors of the Company
approved a forward split of its outstanding shares of common stock on a four-for-one basis effective August 12, 2003, such that for each share of Company common stock held as of August 1, 2003, each shareholder was entitled to receive three
additional shares of Company common stock. The payment date for the additional shares of common stock was August 12, 2003. After the forward split the Company had 12,331,500 shares of common stock issued and outstanding.



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.
|--- |  | ---------------------------------------------------------------------------------------------------------



|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.
|---- |  | -------------------------------------------------------------------------------------------------------



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|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.
|---- |  | -----------------------------------------------------------------------------------------------------------------------

|
|



(b) Reports on Form
8-K.



During the three month period ending June 30, 2003,
the Company filed no reports on Form 8-K.



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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.



|Date: August 14, 2003 |  | Dynamic Health Products, Inc.   By: /s/ Mandeep K. TanejaMandeep K. Taneja, Chief
Executive Officer and President
|--------------------- |  | -----------------------------------------------------------------------------------------------------------------





|Date: August 14,
2003 |  | By: /s/ Cani I.
ShumanCani I. Shuman, Chief Financial Officer
|--------------------- |  | -------------------------------------------------------------



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