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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, 2005



| ̈ | 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.)



|                                                    |  |           
|--------------------------------------------------- |  | ----------
|12399 Belcher Road South, Suite 140, Largo, Florida |  | 33773     
|(Address of principal executive offices)            |  | (Zip Code)



Issuers
telephone number (727) 683-0670



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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, 2005 was 14,024,592.



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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, 2005 |            |   | March 31, 2005 |  
|                                                                                                                               |  | (Unaudited)   |            |   | (Audited)      |  
|ASSETS                                                                                                                         |  |               |            |   |                |   |            |  
|                                                                                                                               |  |              
|Current assets:                                                                                                                |  |               |            |   |                |   |            |  
|Cash and cash equivalents                                                                                                      |  | $             | 533,497    |   |                | $ | 1,870,561  |  
|Marketable equity securities, net                                                                                              |  |               | 915,670    |   |                |   | 1,162,546  |  
|Accounts receivable, net                                                                                                       |  |               | 2,563,280  |   |                |   | 2,720,424  |  
|Inventories, net                                                                                                               |  |               | 4,097,728  |   |                |   | 4,901,437  |  
|Prepaid expenses                                                                                                               |  |               | 546,339    |   |                |   | 389,978    |  
|Deferred consulting fees                                                                                                       |  |               | 263,754    |   |                |   | 308,745    |  
|Other current assets                                                                                                           |  |               | 140,537    |   |                |   | 218,465    |  
|Due from affiliates                                                                                                            |  |               | 1,162      |   |                |   | 959        |  
|Note receivable                                                                                                                |  |               | 160,266    |   |                |   |           |  
|Note receivable from affiliate                                                                                                 |  |               | 44,287     |   |                |   | 43,528     |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total current assets                                                                                                           |  |               | 9,266,520  |   |                |   | 11,616,643 |  
|                                                                                                                               |  |              
|Property, plant and equipment, net                                                                                             |  |               | 810,599    |   |                |   | 759,519    |  
|                                                                                                                               |  |              
|Note receivable                                                                                                                |  |               | 158,810    |   |                |   |           |  
|Goodwill                                                                                                                       |  |               | 4,543,315  |   |                |   | 4,577,613  |  
|Intangible assets, net                                                                                                         |  |               | 588,545    |   |                |   | 625,842    |  
|Deferred consulting fees                                                                                                       |  |               | 232,193    |   |                |   | 298,141    |  
|Other assets                                                                                                                   |  |               | 62,821     |   |                |   | 65,209     |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total assets                                                                                                                   |  | $             | 15,662,803 |   |                | $ | 17,942,967 |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                           |  |               |            |   |                |   |            |  
|                                                                                                                               |  |              
|Current liabilities:                                                                                                           |  |               |            |   |                |   |            |  
|Revolving note payable, net                                                                                                    |  | $             | 1,404,868  |   |                | $ | 1,572,344  |  
|Current portion of long-term obligations                                                                                       |  |               | 876,636    |   |                |   | 876,510    |  
|Capital lease obligation                                                                                                       |  |               |           |   |                |   | 546        |  
|Accounts payable                                                                                                               |  |               | 3,788,167  |   |                |   | 5,160,608  |  
|Other payables                                                                                                                 |  |               | 231,645    |   |                |   | 272,893    |  
|Accrued expenses                                                                                                               |  |               | 331,624    |   |                |   | 384,982    |  
|Accrued income taxes                                                                                                           |  |               | 5,009      |   |                |   | 5,009      |  
|Obligations to affiliates                                                                                                      |  |               | 87,636     |   |                |   | 78,944     |  
|Note payable                                                                                                                   |  |               |           |   |                |   | 18,851     |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total current liabilities                                                                                                      |  |               | 6,725,585  |   |                |   | 8,370,687  |  
|                                                                                                                               |  |              
|Long-term obligations, less current portion                                                                                    |  |               | 1,306,282  |   |                |   | 1,399,272  |  
|Deferred income taxes                                                                                                          |  |               | 248,124    |   |                |   | 336,999    |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total liabilities                                                                                                              |  |               | 8,279,991  |   |                |   | 10,106,958 |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Commitments and contingencies                                                                                                  |  |               |            |   |                |   |            |  
|                                                                                                                               |  |              
|Shareholders equity:                                                                                                          |  |               |            |   |                |   |            |  
|Preferred stock, undesignated; 800,000 shares authorized; no shares issued or outstanding                                      |  |               |           |   |                |   |           |  
|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; 45,000,000 shares authorized; 14,024,592 shares issued and outstanding                           |  |               | 140,246    |   |                |   | 140,246    |  
|Additional paid-in capital                                                                                                     |  |               | 8,646,924  |   |                |   | 8,646,924  |  
|Retained earnings (deficit)                                                                                                    |  |               | (1,957,959 | ) |                |   | (1,662,763 | )
|Accumulated other comprehensive income:                                                                                        |  |               |            |   |                |   |            |  
|Unrealized gains (losses) on marketable equity securities, net of tax                                                          |  |               | 553,601    |   |                |   | 711,602    |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total shareholders equity                                                                                                     |  |               | 7,382,812  |   |                |   | 7,836,009  |  
|                                                                                                                               |  |               |            |   |                |   |            |  
|Total liabilities and shareholders equity                                                                                     |  | $             | 15,662,803 |   |                | $ | 17,942,967 |  
|                                                                                                                               |  |               |            |   |                |   |            |  



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, |           
|                                                                                            |  | 2005                        |            |   | 2004 |  
|Revenues:                                                                                   |  |                             |            |   |      |   |            |  
|Distribution                                                                                |  | $                           | 13,064,030 |   |      | $ | 241,267    |  
|Prescription services                                                                       |  |                             |           |   |      |   | 36,532     |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Total revenues                                                                              |  |                             | 13,064,030 |   |      |   | 277,799    |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Cost of goods sold:                                                                         |  |                             |            |   |      |   |            |  
|Distribution                                                                                |  |                             | 11,317,152 |   |      |   | 123,601    |  
|Prescription services                                                                       |  |                             |           |   |      |   | 30,536     |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Total cost of goods sold                                                                    |  |                             | 11,317,152 |   |      |   | 154,137    |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Gross profit:                                                                               |  |                             |            |   |      |   |            |  
|Distribution                                                                                |  |                             | 1,746,878  |   |      |   | 117,666    |  
|Prescription services                                                                       |  |                             |           |   |      |   | 5,996      |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Total gross profit                                                                          |  |                             | 1,746,878  |   |      |   | 123,662    |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Operating expenses:                                                                         |  |                             |            |   |      |   |            |  
|Selling, general and administrative expenses                                                |  |                             | 1,430,495  |   |      |   | 371,804    |  
|Amortization expense                                                                        |  |                             | 44,603     |   |      |   | 429        |  
|Depreciation expense                                                                        |  |                             | 36,812     |   |      |   | 18,152     |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Total operating expenses                                                                    |  |                             | 1,511,910  |   |      |   | 390,385    |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Operating income (loss) before other income and expense                                     |  |                             | 234,968    |   |      |   | (266,723   | )
|                                                                                            |  |                            
|Other income (expense):                                                                     |  |                             |            |   |      |   |            |  
|Interest income                                                                             |  |                             | 4,615      |   |      |   | 773        |  
|Other income and expenses, net                                                              |  |                             | (581       | ) |      |   | 55,047     |  
|Gain (loss) on sale of property                                                             |  |                             | (2,495     | ) |      |   |           |  
|Interest expense resulting from non-cash amortization of debt discount on convertible notes |  |                             | (409,827   | ) |      |   |           |  
|Interest expense                                                                            |  |                             | (121,876   | ) |      |   | (15,244    | )
|                                                                                            |  |                             |            |   |      |   |            |  
|Total other income (expense)                                                                |  |                             | (530,164   | ) |      |   | 40,576     |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Loss before income taxes                                                                    |  |                             | (295,196   | ) |      |   | (226,147   | )
|                                                                                            |  |                            
|Income tax expense (benefit)                                                                |  |                             |           |   |      |   |           |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Net loss                                                                                    |  |                             | (295,196   | ) |      |   | (226,147   | )
|                                                                                            |  |                            
|Preferred stock dividends                                                                   |  |                             |           |   |      |   |           |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Net loss available to common shareholders                                                   |  | $                           | (295,196   | ) |      | $ | (226,147   | )
|                                                                                            |  |                             |            |   |      |   |            |  
|Basic loss per share                                                                        |  | $                           | (0.02      | ) |      | $ | (0.02      | )
|                                                                                            |  |                             |            |   |      |   |            |  
|Basic weighted average number of common shares outstanding                                  |  |                             | 14,024,592 |   |      |   | 12,774,834 |  
|                                                                                            |  |                             |            |   |      |   |            |  
|Diluted loss per share                                                                      |  | $                           | (0.02      | ) |      | $ | (0.02      | )
|                                                                                            |  |                             |            |   |      |   |            |  
|Diluted weighted average number of common shares outstanding                                |  |                             | 14,024,592 |   |      |   | 12,774,834 |  
|                                                                                            |  |                             |            |   |      |   |            |  



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



|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   |           |  
|--------------------------------------------------------------------------------- |  | ------------------------ |  | ------------------------ | - | ------------ | - | ------- | - | --------------------------------------- |  | ---------- |  | -------------------------- | ------- | --------------------------- | - | --------- | ------------------------------------- | - | ---------- | -------------------------- |  | - | -------- | - |  | - | --------- | -
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  | Additional Paid-in Capital |         | Retained Earnings (Deficit) |   |           | Accumulated OtherComprehensive Income |   |            | Total Shareholders Equity | 
|                                                                                  |  | Series A Preferred Stock |  | Series B Preferred Stock |   | Common Stock |   |         |   | Unrealized Gains (Losses) on Securities |  |           
|                                                                                  |  | Shares                   |  | Dollars                  |   | Shares       |   | Dollars |   | Shares                                  |  | Dollars    |  |                            |         |                            
|Balances at March 31, 2005 (Audited)                                              |  |                         |  | $                        |  |              |  |         | $ |                                        |  | 14,024,592 |  | $                          | 140,246 |                             | $ | 8,646,924 |                                       | $ | (1,662,763 | )                          |  | $ | 711,602  |   |  | $ | 7,836,009 |  
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                        
|COMPREHENSIVE INCOME (LOSS)                                                       |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   |           |  
|Net loss                                                                          |  |                         |  |                          |  |              |  |         |   |                                        |  |           |  |                            |        |                             |   |          |                                       |   | (295,196   | )                          |  |   |          |   |  |   | (295,196  | )
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                        
|Unrealized gains (losses) on marketable equity securities (net of tax of $88,875) |  |                         |  |                          |  |              |  |         |   |                                        |  |           |  |                            |        |                             |   |          |                                       |   |           |                            |  |   | (158,001 | ) |  |   | (158,001  | )
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   |           |  
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                        
|Comprehensive income (loss)                                                       |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   | (453,197  | )
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   |           |  
|Balances at June 30, 2005 (Unaudited)                                             |  |                         |  | $                        |  |              |  |         | $ |                                        |  | 14,024,592 |  | $                          | 140,246 |                             | $ | 8,646,924 |                                       | $ | (1,957,959 | )                          |  | $ | 553,601  |   |  | $ | 7,382,812 |  
|                                                                                  |  |                          |  |                          |   |              |   |         |   |                                         |  |            |  |                            |         |                             |   |           |                                       |   |            |                            |  |   |          |   |  |   |           |  



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, |           
|                                                                            |  | 2005                        |            |   | 2004 |  
|Cash flows from operating activities:                                       |  |                             |            |   |      |   |          |  
|Net loss                                                                    |  | $                           | (295,196   | ) |      | $ | (226,147 | )
|                                                                            |  |                            
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                             |            |   |      |   |          |  
|Depreciation and amortization                                               |  |                             | 81,415     |   |      |   | 18,581   |  
|Amortization of deferred consulting fees                                    |  |                             | 110,939    |   |      |   | 22,500   |  
|Amortization of debt discount to interest expense                           |  |                             | 409,827    |   |      |   |         |  
|Loss on disposition of equipment                                            |  |                             | 2,495      |   |      |   |         |  
|Changes in operating assets and liabilities:                                |  |                             |            |   |      |   |          |  
|Accounts receivable                                                         |  |                             | (173,849   | ) |      |   | 66,073   |  
|Inventories                                                                 |  |                             | 803,709    |   |      |   | (81,551  | )
|Due to/from affiliates, net                                                 |  |                             | 7,730      |   |      |   | (85,552  | )
|Prepaid expenses                                                            |  |                             | (144,739   | ) |      |   | (3,334   | )
|Other current assets                                                        |  |                             | 77,928     |   |      |   | 4,683    |  
|Other assets                                                                |  |                             | 2,388      |   |      |   | 650      |  
|Accounts payable                                                            |  |                             | (1,372,441 | ) |      |   | 83,749   |  
|Other payables                                                              |  |                             | (41,248    | ) |      |   | (21,895  | )
|Accrued expenses                                                            |  |                             | (53,358    | ) |      |   | 85,667   |  
|                                                                            |  |                             |            |   |      |   |          |  
|Net cash used in operating activities                                       |  |                             | (584,400   | ) |      |   | (136,576 | )
|                                                                            |  |                             |            |   |      |   |          |  
|Cash flows from investing activities:                                       |  |                             |            |   |      |   |          |  
|Purchases of property and equipment                                         |  |                             | (91,387    | ) |      |   | (3,769   | )
|Proceeds from sale of property                                              |  |                             | 1,000      |   |      |   |         |  
|Repayments of note receivable                                               |  |                             | 11,917     |   |      |   |         |  
|Adjustment to purchase price of Dynamic Marketing, Inc.                     |  |                             | 34,298     |   |      |   |          |  
|Adjustment to purchase price of customer list                               |  |                             | (7,306     | ) |      |   |         |  
|                                                                            |  |                             |            |   |      |   |          |  
|Net cash provided by used in investing activities                           |  |                             | (51,478    | ) |      |   | (3,769   | )
|                                                                            |  |                             |            |   |      |   |          |  
|Cash flows from financing activities:                                       |  |                             |            |   |      |   |          |  
|Payments of long-term obligations                                           |  |                             | (382,061   | ) |      |   | (17,610  | )
|Proceeds from issuance of short-term obligations                            |  |                             | 3,212,869  |   |      |   |         |  
|Payments of short-term obligations                                          |  |                             | (3,531,994 | ) |      |   |         |  
|                                                                            |  |                             |            |   |      |   |          |  
|Net cash used in financing activities                                       |  |                             | (701,186   | ) |      |   | (17,610  | )
|                                                                            |  |                             |            |   |      |   |          |  
|Net increase (decrease) in cash                                             |  |                             | (1,337,064 | ) |      |   | (157,955 | )
|                                                                            |  |                            
|Cash at beginning of period                                                 |  |                             | 1,870,561  |   |      |   | 219,119  |  
|                                                                            |  |                             |            |   |      |   |          |  
|Cash at end of period                                                       |  | $                           | 533,497    |   |      | $ | 61,164   |  
|                                                                            |  |                             |            |   |      |   |          |  



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,
|                                                          |  | 2005                        |         | 2004
|Supplemental disclosure of cash flow information:         |  |                             |         |      |   |        
|Cash paid during the period for interest                  |  | $                           | 108,508 |      | $ | 15,093 
|                                                          |  |                             |         |      |   |        
|Cash paid during the period for income taxes              |  | $                           |        |      | $ |       
|                                                          |  |                             |         |      |   |        
|Supplemental schedule of non-cash investing activities:   |  |                             |         |      |   |        
|Conversion of accounts receivable to note receivable      |  | $                           | 330,993 |      | $ |       
|                                                          |  |                             |         |      |   |        
|Supplemental schedule of non-cash financing activities:   |  |                             |         |      |   |        
|Issuance of common stock warrants for consulting services |  | $                           |        |      | $ | 270,000
|                                                          |  |                             |         |      |   |        
|Issuance of short-term obligation for prepaid expenses    |  | $                           | 11,622  |      | $ |       
|                                                          |  |                             |         |      |   |        



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, 2005 AND 2004 (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, 2005 and 2004 are not necessarily indicative of the results that may be expected for the year ending March 31, 2006. 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, 2005.



NOTE B-PRINCIPLES OF CONSOLIDATION



The condensed consolidated financial statements as of and for the three months ended June 30, 2005 include the accounts of Dynamic Health Products, Inc.
and its principally wholly-owned subsidiaries (collectively the Company), Pharma Labs Rx, Inc. (Pharma FL), Dynamic Life Products, Inc., Herbal Health Products, Inc. (Herbal), Online Meds Rx, Inc. and its
subsidiary Dynamic Financial Consultants, LLC, Bryan Capital Limited Partnership, Pharma Labs Rx, Inc. (Pharma NV), Bob OLeary Health Food Distributor Co., Inc. (BOSS), Dynamic Marketing I, Inc. (DMI) and
DYHP Acquisitions, Inc. 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, 2004 include the accounts of Dynamic Health Products, Inc.
and its principally wholly-owned subsidiaries, Pharma Labs Rx, Inc., 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. 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.



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.
As of June 30, 2005 and 2004, $301 and zero, respectively, were due from Tribeca and are included in due from to affiliates.



7



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NOTE DSHAREHOLDERS EQUITY



On April 22, 2005, the Company filed a Registration Statement on Form S-2 for the registration of up to 2,944,690 shares of
the Companys common stock, including up to 2,194,690 shares of common stock underlying the March 2005 secured convertible notes in the principal amount of $4,000,000 and up to 750,000 shares issuable upon the exercise of common stock purchase
warrants. Such Registration Statement is not effective.



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.



At June 30, 2005 and 2004, investments in marketable equity securities, net are summarized as follows:



Available for sale equity securities:



|                           |  |      |         |      |   |          
|-------------------------- |  | ---- | ------- | ---- | - | ---------
|                           |  | 2005 |         | 2004
|Cost of securities         |  | $    | 50,667  |      | $ | 233,681  
|Plus gross unrealized gain |  |      | 865,003 |      |   | 928,865  
|                           |  |      |         |      |   |          
|Fair value                 |  | $    | 915,670 |      | $ | 1,162,546
|                           |  |      |         |      |   |          
|Gross unrealized loss      |  | $    |        |      | $ |         
|                           |  |      |         |      |   |          



Realized gains and
losses from available for sale equity securities are determined on the basis of the specific cost of the security sold versus the sale price of the security. For the three months ended June 30, 2005 and 2004, the Company had no sales of available
for sale equity securities. The change in marketable equity securities included in earnings for the three months ended June 30, 2005 and 2004 was zero.



Stock Warrants



In June 2004, pursuant to a Financial Consulting Agreement, the Company issued 300,000 warrants to purchase common stock, for consulting services. In
September 2004, pursuant to a Securities Purchase Agreement, the Company issued 1,375,000 warrants to purchase common stock, in connection with the Companys sale of a secured convertible note. On October 1, 2004, pursuant to a Financial
Consulting Agreement, the Company issued 200,000 4-year life warrants to purchase common stock, for consulting services. On March 29, 2005, pursuant to a Security Agreement, the Company issued 750,000 warrants to purchase common stock, in connection
with the Companys sale of a secured convertible note.



8



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At June 30, 2005 and 2004, the Company had outstanding warrants to purchase 2,625,000 and 300,000 shares
of the Companys common stock, respectively. The exercise prices range from $1.50 to $2.50 per share on the 300,000 warrants and they become exercisable in June 2005 and expire at various dates through June 2008. For the 1,375,000 warrants, the
exercise price is $1.04 per share, subject to certain adjustments pursuant to the September 30, 2004 Securities Purchase Agreement with Laurus Master Fund, Ltd. (Laurus), and they expire in September 2009. For the 200,000 warrants, the
exercise prices range from $1.25 to $1.50 per share, with 25% vesting on October 1, 2004 and then subsequent vesting is at 25% per quarter, expiring on October 1, 2008. For the 750,000 warrants, the exercise price is $1.37 per share, subject to
certain adjustments pursuant to the March 29, 2005 Security Agreement with Laurus, and they expire in March 2012.



For the warrants issued in connection with the financial consulting agreements, the balance of deferred consulting fees as of June 30, 2005 and 2004 was
$121,875 and $247,500, respectively. The initial valuation of these warrants was $465,000. For the three months ended June 30, 2005 and 2004, the Company included consulting expense in the amount of $69,375 and $22,500, respectively, in selling,
general and administrative expenses in the statements of operations, for these warrants.



For the 1,375,000 warrants issued in connection with the Companys sales of a secured convertible note in September 2004, due to the convertible nature of the note, the Company recorded a charge of $2,066,667 due
to the beneficial conversion feature, in accordance with EITF Issue No. 98-5, Accounting For Convertible Securities With Beneficial Conversion Features Or Contingently Adjustable Conversion Ratios, and EITF Issue No. 00-27,
Application of EITF Issue No. 98-5 To Certain Convertible Instruments. The value of the beneficial conversion feature was measured using the intrinsic value and is being amortized to interest expense over the three year life of the note.
The Company allocated $1,413,358 of the aggregate proceeds from the note to the warrants as original issuance discount, which represented the relative fair value of the warrants at the date of issuance, and is amortizing the discount to interest
expense over the life of the note. The balance of the debt discount was $2,609,253 as of June 30, 2005, of which $1,449,245 is included in long-term obligations and of which $1,160,008 is included in current portion of long-term obligations. The
value of the conversion feature and the original issue discount amortized to interest expense for the three months ended June 30, 2005 was $289,198. The discount was determined utilizing the Black-Scholes option pricing model with a volatility
factor of 222.99% and a risk free interest rate of 3.38%.



For
the 750,000 warrants issued in connection with the Companys sales of a secured convertible note in March 2005, due to the convertible nature of the note, pursuant to EITF Issue No. 00-27, the Company recorded a discount utilizing the
Black-Scholes option pricing model for the warrants and the conversion feature of $1,431,633, which is being amortized as interest expense over the three year life of the loan. A volatility factor of 95.01% and risk free interest rate of 4.44% was
used. The balance of the debt discount was $1,307,028 as of June 30, 2005 and is included in revolving note payable, net. The value of the conversion feature and the original issue discount amortized to interest expense for the three months ended
June 30, 2005 was $120,629.



9



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Stock Options



On October 17, 2004 the Compensation Committee of the Companys Board of Directors granted options to purchase 500,000 shares of the Companys
common stock, effective October 1, 2004, to Jugal Taneja, the Companys Chairman and a principal shareholder of the Company, as compensation for Mr. Tanejas personal guarantee to Laurus Master Fund, Ltd. of financing in the amount of $6
million, to fund the BOSS acquisition. The exercise price of the options is $1.14 (110% of the fair value of the Companys common stock on September 30, 2004). The options vest approximately equally over a three year period, commencing October
1, 2005. For the options granted, the balance of deferred consulting fees as of June 30, 2005 was $374,072, of which the current portion was $166,254 and the long-term portion was $207,818. The initial valuation of these options was $498,763, with
$41,564 being expensed during the three months ended June 30, 2005. The fair value of the options granted was estimated on the grant date using the Black-Scholes option pricing model with a volatility factor of 223% and a risk free interest rate of
3.44%.



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 unaudited 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 Ended June 30, 2005 |          |   | Three Months Ended June 30, 2004 |  
|Net income (loss):                  |  |                                  |          |   |                                  |   |          |  
|As reported                         |  | $                                | (295,196 | ) |                                  | $ | (226,147 | )
|                                    |  |                                  |          |   |                                  |   |          |  
|Pro forma                           |  | $                                | (416,923 | ) |                                  | $ | (233,921 | )
|                                    |  |                                  |          |   |                                  |   |          |  
|Net income (loss) per common share: |  |                                  |          |   |                                  |   |          |  
|Basic income (loss) per share:      |  |                                  |          |   |                                  |   |          |  
|As reported                         |  | $                                | (0.02    | ) |                                  | $ | (0.02    | )
|                                    |  |                                  |          |   |                                  |   |          |  
|Pro forma                           |  | $                                | (0.03    | ) |                                  | $ | (0.02    | )
|                                    |  |                                  |          |   |                                  |   |          |  
|Diluted income (loss) per share:    |  |                                  |          |   |                                  |   |          |  
|As reported                         |  | $                                | (0.02    | ) |                                  | $ | (0.02    | )
|                                    |  |                                  |          |   |                                  |   |          |  
|Pro forma                           |  | $                                | (0.03    | ) |                                  | $ | (0.02    | )
|                                    |  |                                  |          |   |                                  |   |          |  



NOTE E-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, 2005 of $5,009 and $248,124, respectively. As of June 30, 2004, the Company
had a current and deferred tax liability recorded 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.



10



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NOTE F-EARNINGS (LOSS) PER SHARE



The following sets forth the unaudited computation of basic and diluted net earnings per common share:



|                                                   |  |                                  |            |   |                                  |   |            |  
|-------------------------------------------------- |  | -------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                                   |  | Three Months Ended June 30, 2005 |            |   | Three Months Ended June 30, 2004 |  
|Numerator:                                         |  |                                  |            |   |                                  |   |            |  
|Net income (loss)                                  |  | $                                | (295,196   | ) |                                  | $ | (226,147   | )
|Less preferred stock dividends                     |  |                                  |           |   |                                  |   |           |  
|                                                   |  |                                  |            |   |                                  |   |            |  
|Net income (loss) available to common shareholders |  | $                                | (295,196   | ) |                                  | $ | (226,147   | )
|                                                   |  |                                  |            |   |                                  |   |            |  
|Denominator:                                       |  |                                  |            |   |                                  |   |            |  
|Weighted average basic shares outstanding          |  |                                  | 14,024,592 |   |                                  |   | 12,774,834 |  
|Stock options                                      |  |                                  | 1,955,000  |   |                                  |   | 905,000    |  
|Warrants                                           |  |                                  | 2,625,000  |   |                                  |   | 92,308     |  
|Convertible notes                                  |  |                                  | 7,686,579  |   |                                  |   |           |  
|                                                   |  |                                  |            |   |                                  |   |            |  
|Weighted average fully diluted shares outstanding  |  |                                  | 26,291,171 |   |                                  |   | 13,772,142 |  
|                                                   |  |                                  |            |   |                                  |   |            |  



For the three months
ended June 30, 2005 and 2004, there were 12,266,579 and 997,308 shares, respectively, that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share, because to do so
would have been anti-dilutive.



NOTE G-FINANCIAL INFORMATION ABOUT INDUSTRY
SEGMENTS



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, 2005 the Company had one industry segment, Distribution. As of and for the three months ended June 30, 2004, 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.



11



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



|                         |  |   |           |  
|------------------------ |  | - | --------- | -
|Revenues:                |  |   |           |  
|Distribution             |  | $ | 241,267   |  
|Prescription services    |  |   | 36,532    |  
|                         |  |   |           |  
|                         |  | $ | 277,799   |  
|                         |  |   |           |  
|Intersegment sales       |  | $ |          |  
|                         |  |   |           |  
|Gross profit:            |  |   |           |  
|Distribution             |  | $ | 117,666   |  
|Prescription services    |  |   | 5,996     |  
|                         |  |   |           |  
|                         |  | $ | 123,662   |  
|                         |  |   |           |  
|Operating income (loss): |  |   |           |  
|Distribution             |  | $ | (101,444  | )
|Prescription services    |  |   | (3,948    | )
|Corporate                |  |   | (161,331  | )
|                         |  |   |           |  
|                         |  | $ | (266,723  | )
|                         |  |   |           |  
|Assets:                  |  |   |           |  
|Distribution             |  | $ | 460,749   |  
|Prescription services    |  |   | 1,957,504 |  
|Corporate                |  |   | 3,946,386 |  
|                         |  |   |           |  
|                         |  | $ | 6,364,639 |  
|                         |  |   |           |  



NOTE H-RELATED PARTY TRANSACTIONS



On October 1, 1999, the Company entered into a triple-net
lease agreement with GeoPharma, Inc. (GeoPharma), a publicly traded company and an affiliate of the Company, whereby GeoPharma agreed to lease the Companys land and 33,222 square foot building situated in Largo, Florida for a term
of ten years. The initial rental under the lease was approximately $192,000 annually. The lease provided 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. On October 25, 2004, the Company sold the building to GeoPharma for $1,925,000 in cash. This resulted in a gain of $654,241 to the Company for the year ended March 31,
2005. The sale price was determined by an independent third-party appraisal. 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 GeoPharma. As of June 30,
2005 and 2004, the Companys investment in GeoPharma, consisting of 347,938 shares of its common stock, is included in marketable equity securities, net.



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 1.3 million shares of Vertical Health Solutions, Inc. (Vertical), 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 share of Vertical common stock for each ten shares of the Companys common stock held on July 16, 2004. The Company only distributed
whole shares and any



12



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fractional shares to which shareholders would otherwise be entitled were rounded down to the nearest whole share. Jugal
K. Taneja, a principal shareholder and Chairman of the Board of the Company is also a principal shareholder and a Director of Vertical. On July 26, 2004, the Company distributed approximately 1.3 million shares of Vertical common stock to its
shareholders. This resulted in a gain of $1,359,966 to the Company for the year ended March 31, 2005.



For the three months ended June 30, 2005 and 2004, the Company charged Vertical consulting fees totaling zero and $2,000, respectively, for accounting and
administrative services. The charge was on an hourly basis for services rendered. As of June 30, 2005 and 2004, approximately $325 and zero, respectively, were due from Vertical and are included in amounts due from affiliates. As of June 30, 2005
and 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 (Tribeca), 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 of $166,939 in the investment. As of June 30, 2005, $301 was due from Tribeca and is included in due from affiliates. As
of June 30, 2004, $1 was due to Tribeca and is included in obligations to affiliates.



On March 22, 2002, the Company entered into a Sublease and Consent agreement with Innovative Health Products, Inc. (Innovative), a wholly-owned subsidiary of GeoPharma, 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 served as the Companys corporate headquarters and was also used for its offices, warehousing
and shipping operations. The facility was sublet for a term of approximately one year, ending on March 31, 2003. The sublease contained an option to continue the sublease subsequent to March 31, 2003, on a month-to-month basis through January 10,
2004, unless terminated earlier. The option to continue was exercised and on January 1, 2004 the Company terminated the sublease. The rental under the sublease was $33,384 annually.



On January 1, 2004, the Company entered into a verbal agreement with Innovative, 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 served as the Companys corporate headquarters and was also used for its offices, warehousing and
shipping operations. The facility was sublet until May 1, 2005, at which time the sublease was terminated. The initial rental under the sublease was $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.



13



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For the three months ended June 30, 2005 and 2004, purchases of products from subsidiaries of GeoPharma
were $95,211 and $136,932, respectively, and sales of products to subsidiaries of GeoPharma $22,524 and zero, respectively. As of June 30, 2005 and 2004, $62,210 and $147,783, respectively, were due to subsidiaries of GeoPharma and are included in
obligations to affiliates. As of June 30, 2005 and 2004, $202 and 138, respectively, were due from GeoPharma and are included in due from 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.



As of June 30, 2005 and 2004, amounts due to T & L, Inc. (T&L), an affiliate of Mandeep K. Taneja, a
Director, Chief Executive Officer and President of the Company, were $2,471, for product purchases and services provided to the Company during the year ended March 31, 2005. For the three months ended June 30, 2005 and 2004, there were no purchases
of products or services provided to the Company by T&L.



On
July 28, 2004, the Company issued a promissory note payable to an affiliate of the Chairman of the Company, in the principal amount of $50,000. The principal together with interest at the rate of 7% per annum is payable on demand. Proceeds were used
for placement of funds in escrow in connection with the acquisition of Bob OLeary Health Food Distributor Co., Inc., effective October 1, 2004. The note was subsequently repaid on October 5, 2004.



On September 7, 2004, the Company issued a promissory note payable to the
Companys Chairman, in the principal amount of $100,000. The principal together with interest at the rate of 7% per annum is payable on demand. Proceeds were used for placement of funds in escrow in connection with the acquisition of Bob
OLeary Health Food Distributor Co., Inc., effective October 1, 2004. The note was subsequently repaid on October 5, 2004.



On October 17, 2004, a meeting of the Compensation Committee of the Board of Directors of the Company was held. At the meeting, the Compensation Committee
granted options to purchase 500,000 shares of the Companys common stock, effective October 1, 2004, to Jugal Taneja, the Companys Chairman and a principal shareholder of the Company, as compensation for Mr. Tanejas personal
guarantee to Laurus Master Fund, Ltd. of financing in the amount of $6 million, to fund the BOSS acquisition. The exercise price of the options is $1.14 (110% of the fair value of the Companys common stock on September 30, 2004). The options
vest approximately equally over a three-year period, commencing October 1, 2005. The value of the options, as determined by reference to the Black-Scholes option pricing model, has been recorded as a prepaid expense and is being amortized over the
life of the loan (see Note D).



On March 29, 2005, the Company
entered into a lease with GAM Realty, LLC, an affiliate of Gregg Madsen, the Chief Operating Officer of DMI, which was effective March 31, 2005, whereby the Company agreed to lease approximately 15,000 square feet of office and warehouse space for
its operations in Cranston, Rhode Island. This facility is used for a portion of the office, warehousing and shipping operations of DMI. The lease is for a term of five years ending on March 31, 2010. The initial rental under the lease was $120,000
annually.



14



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NOTE I - CONCENTRATION OF CREDIT RISK



Concentrations of credit risk with respect to trade receivables are limited due to the distribution of sales over a large
customer base. For the three months ended June 30, 2005, DPS Nutrition Inc. accounted for 11%, in relation to total consolidated revenues. For the three months ended June 30, 2004, one customer, PHE, Inc. accounted for 14%, in relation to total
consolidated revenues. The Company has no concentration of customers within specific geographic areas outside of the United States that would give rise to significant geographic credit risk.



Financial instruments that potentially subject the Company to concentrations
of credit risk include cash deposits with commercial banks and brokerage firms. At June 30, 2005 and 2004, the Company maintained cash balances in excess of the Federal Deposit Insurance Companys $100,000 insurance limit.



NOTE J-SUBSEQUENT EVENT



On July 19, 2005, the Company entered into a Postponement Agreement with Laurus Master Fund, Ltd., whereby Laurus agreed to
postpone the Companys obligation to make certain amortization payments on its secured convertible note and, in consideration therefore, the Company issued to Laurus 275,000 shares of restricted common stock of the Company. Pursuant to the
agreement, the principal portion of the monthly amount that is due on the first business day of each of the months from August 2005 through March 2006, in the amount of $187,500 per month, shall not be required to be paid until the first business
day of each of the months from February 2007 through September 2007, respectively, in each case, in addition to the regular monthly principal payments due in each of the months. In connection with the agreement, Laurus agreed to amend the
Registration Rights Agreement with the Company to extend the dates for the filing requirements of the Companys Registration Statement.



15



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



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 consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting
Principles and the Standards of the Public Company Accounting Oversight Board (United States).



Overview



The Company
derives its revenues from developing, marketing and distributing a wide variety of sports nutrition products, performance drinks, non-prescription dietary supplements, over-the-counter drugs, health and beauty care products, health food and
nutritional products, soft goods and other related products. We also derived revenues from services provided in connection with prescription services, until September 30, 2004.



Revenues for the distribution segment result from product sales and are recognized by the Company upon passage of title and
risk of loss to customers (when product is delivered to common carrier for shipment to customers). Provisions for discounts and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are
recorded. Sales incentives to customers and returns have thus far been immaterial to the Company. All shipping and handling costs invoiced to customers are included in revenues. Revenues for the prescription services segment resulted from
non-product related administrative fees earned principally for pharmacy network management and are recorded when performance occurs and collectibility is assured.



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. Costs incurred by the Company for shipping and handling are included in cost of goods sold. 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, legal and accounting
costs, sales and marketing and other indirect operating costs.



Interest income is comprised of interest earned on notes receivable and interest earned on cash balances maintained in interest bearing accounts with banks.



Interest expense is primarily associated with borrowings for the funding of acquisitions and other working capital needs.



16



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Other income (expense) consists primarily of rental income.



Effective October 1, 2004, the Company acquired Bob OLeary Health Food
Distributor Co., Inc. The results of operations of BOSS from April 1, 2005 through June 30, 2005 are included in the results of operations of the Company.



Effective March 31, 2005, the Company, through its wholly-owned subsidiary, Dynamic Marketing I, Inc., acquired Dynamic Marketing, Inc. On March 30, 2005,
through the filing by Dynamic Marketing I, Inc. of Articles of Merger, effective March 31, 2005, Dynamic Marketing, Inc. merged into Dynamic Marketing I, Inc. with Dynamic Marketing I, Inc. being the surviving entity. The results of operations of
DMI for April 1, 2005 through June 30, 2005 are included in the results of operations of the Company.



Results of Operations



Three
Months Ended June 30, 2005 Compared To Three Months Ended June 30, 2004



Revenues. The Company generated total revenues of $13,064,030 for the three months ended June 30, 2005, an increase of $12,786,231 or 4,602.7%, compared to $277,799 for the three months ended June 30, 2004.
Distribution revenues increased $12,822,763 or 5,314.8%, to $13,064,030 for the three months ended June 30, 2005, compared to $241,267 for the three months ended June 30, 2004. The increase was primarily attributable to revenues associated with BOSS
of approximately $10 million and revenues associated with DMI of approximately $2.8 million. Revenues associated with Herbal increased by approximately $850. BOSS has expanded its distribution channels with the opening of distribution centers in
Henderson, Nevada and Largo, Florida in May 2005. Prescription services revenues were $36,532 for the three months ended June 30, 2004. The Company discontinued its prescription services operations in September 2004.



Gross profit. The Company achieved total gross profit of $1,746,878 for the
three months ended June 30, 2005, an increase of $1,623,216 or 1,312.6%, compared to $123,662 for the three months ended June 30, 2004. Total gross margins, as a percentage of revenues, decreased to 13.4% for the three months ended June 30, 2005
from 44.5% for the three months ended June 30, 2004. Distribution gross profit increased $1,629,212 or 1,384.6%, to $1,746,878 for the three months ended June 30, 2005, as compared to $117,666 for the three months ended June 30, 2004. BOSSs
gross profit was approximately $1.1 million, DMIs gross profit was approximately $484,000, and Herbals gross profit was approximately $124,000. For the three months ended June 30, 2005, distribution gross margin decreased to 13.4%, from
48.8% for the three months ended June 30, 2004. The decrease was primarily attributable to lower gross margins associated with BOSS of 11.4% and DMI of 17.4%, as compared to a gross margin for Herbal of 51.4%. Prescription services gross profit was
$5,996 for the three months ended June 30, 2004.



Operating
expenses. The Company incurred operating expenses of $1,511,910 for the three months ended June 30, 2005, compared to $390,385 for the three months ended June 30, 2004. For the three months ended June 30, 2005, these expenses include various
administrative, sales, marketing and other direct operating expenses of $1,430,495, and amortization and depreciation expenses of $81,415, compared to $371,804 in various administrative, sales, marketing and other direct operating expenses, and
amortization and depreciation expenses of $18,581 for the three months ended June 30, 2004. Operating expenses, excluding amortization



17



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and depreciation expenses decreased to 11.0% of revenues for the three months ended June 30, 2005, from 133.8% of
revenues for the three months ended June 30, 2004. The decrease in operating expenses as a percentage of revenues was primarily attributable to the increase in revenues associated with BOSS and DMI, as well as a decrease in legal fees, and was
partially offset by expenses associated with BOSS and DMI, as well as an increase in amortization of deferred consulting fees of $110,939 and an increase in insurance expense.



Interest income. Interest income was $4,615 for the three months ended June 30, 2005, compared to $773 for the three months
ended June 30, 2004. The increase in interest income was due to interest received on the note receivable and higher cash amounts held in interest bearing accounts in banks.



Interest expense. Interest expense was $531,703 for the three months ended June 30, 2005, compared to $15,244 for the three
months ended June 30, 2004. Interest expense increased for the three months ended June 30, 2005, primarily due to the $6 million convertible term note that funded on September 30, 2004, in connection with the acquisition of BOSS and the $4 million
convertible minimum borrowing note and revolving note in connection with the acquisition of DMI. Approximately $409,800 of the interest expense relates to the non-cash amortization of the debt discounts based on the Black-Scholes pricing model,
applied to the warrants issued in conjunction with the September 30, 2004 convertible term note and the March 29, 2005 convertible minimum borrowing note and revolving note.



Income taxes. As of June 30, 2005, the Company had an accrued income tax liability of $5,009 and an estimated deferred
income tax liability of $248,124, which primarily represented the potential future tax expense associated with the unrealized gains on marketable equity securities. As of June 30, 2004, the Company had no accrued income tax liability and a net
deferred income tax liability of $810,328.



Net income (loss)
per share. Net loss per share for the three months ended June 30, 2005 and 2004 was $0.02. The net loss per share for the three months ended June 30, 2005 as compared to the three months ended June 30, 2004 was primarily a result of an increase in
the Companys interest expense of $516,459, a decrease in other income and expenses, net, of $54,466, due to the absence of rental income subsequent to the October 2004 sale of the Companys land and building, and was partially offset by
an increase in the Companys operating income before other income and expense of $501,691,



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, 2005 and 2004. 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 and through its revolving note payable. The Company had working capital of $2,540,935 at June 30, 2005, compared to working capital of $3,245,956 at March 31, 2005.



Net cash used in operating activities was $584,400 for the three months ended June 30, 2005, as compared to net cash used in
operating activities of $136,576 for the three months



18



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ended June 30, 2004. The usage of cash was primarily attributable to a decrease in accounts payable of $1,372,441 based
on substantial repayments made on accounts, an increase in accounts receivable of $173,849 based on increases in credit sales, an increase in prepaid expenses of $144,739 primarily for insurance premiums, a decrease in accrued expenses of $53,358
and a decrease in other payables of $41,248, partially offset by a decrease in inventories of $803,709 partially due to a reduction in restocking levels and to the sales of products from the Companys new distribution facilities, a decrease in
other current assets of $77,928, a decrease in amounts due to/from affiliates, net, of $7,730 and a decrease in other assets of 2,388.



Net cash used in investing activities was $51,478, representing purchases of property and equipment of $91,387 and an adjustment to the purchase price of
a customer list of $7,306 due to an increase from estimated expenses to actual expenses, partially offset by an adjustment to the purchase price of Dynamic Marketing, Inc. (DM) of $34,298 based upon net adjustments to goodwill upon
finalization of DMs books and records, repayments of a note receivable of $11,917 and proceeds from the sale of property of $1,000.



Net cash used in financing activities was $701,186, representing payments of long-term obligations of $382,061 and the excess of payments versus advances
received of $319,125 on the Companys short-term revolving note.



At June 30, 2005, the Company had $533,497 in cash and cash equivalents, as compared to $61,164 at June 30, 2004.



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 increased revenues associated with acquisitions made during the year ended March 31, 2005. 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.



On September 30, 2004, the Company entered into a
Securities Purchase Agreement with Laurus Master Fund, Ltd., whereby the Company completed the sale to Laurus of a secured convertible note in the principal amount of $6,000,000 and warrants to purchase 1,375,000 shares of Company common stock. Net
proceeds from the offering were used to pay the purchase price for the acquisition of Bob OLeary Health Food Distributor Co., Inc., effective on October 1, 2004.



The convertible note accrues interest at a rate per annum equal to the prime rate published in The Wall Street
Journal plus 2%, subject to a floor of 6%. The interest rate on the convertible note is subject to possible downward adjustment as follows:



| |  |  | the interest rate will be decreased by 1.0% (or 100 basis points) for every 25% increase of the Companys common stock price above the fixed conversion price prior to an
effective registration statement covering the shares of common stock underlying the convertible notes and warrants; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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| |  |  | the interest rate will be decreased by 2.0% (or 200 basis points) for every 25% increase of the Companys common stock price above the fixed conversion price after an effective
registration statement covering the shares of common stock underlying the convertible notes and warrants, however, the interest rate cannot drop below 0%.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The convertible note has a term of three years. The fixed conversion rate is equal to $.90 (103% of the average closing
price for the ten days prior to the execution of the securities purchase agreement).



Beginning on December 1, 2004, and each month thereafter, the Company shall pay $187,500 of the outstanding principal, together with accrued interest on the convertible note, in cash or registered stock. The monthly
payments shall be payable in registered stock if: (i) the Company has an effective registration statement under which the stock can be sold; (ii) the average closing price of the Companys common stock as reported by Bloomberg, L.P. on the
Companys principal trading market for the five trading days immediately preceding such repayment date shall be greater than or equal to 110% of the fixed conversion rate; and (iii) the amount of such conversion does not exceed 25% of the
aggregate dollar trading volume of our common stock for the twenty two (22) day trading period immediately preceding the applicable repayment date. If the conversion criteria are not met, the investor shall convert only such part of the monthly
payment that meets the conversion criteria. Any part of the monthly payment due on a repayment date that the investor has not been able to convert into shares of common stock due to failure to meet the conversion criteria, shall be paid by the
Company in cash at the rate of 102% of the principal portion of the monthly payment otherwise due on such repayment date. As of June 30, 2005, the outstanding principal balance on the convertible note was $4,687,500. As of March 31, 2005 and June
30, 2005, 989,758 shares of Company common stock had been issued to Laurus in payment of $750,000 of principal and $140,782 of interest on the note.



Laurus will not be entitled to be issued shares of common stock in repayment of any portion of the convertible note or upon exercise of the warrants if
and to the extent such issuance would result in Laurus and its affiliates beneficially owning more than 4.99% of the Companys issued and outstanding common stock upon such issuance, unless Laurus shall have provided at least 75 days prior
written notice to the Company of its revocation of such restriction.



The convertible note may be prepaid by the Company in cash by paying to the holder 115% of the principal and related accrued and unpaid interest thereon being prepaid. 115% of the full principal amount of the convertible note is due upon
default under the terms of convertible note. In addition, the Company has granted the investor a security interest in substantially all of the Companys assets and intellectual property, as well as registration rights.



The warrants are exercisable until five years from the date of the Securities
Purchase Agreement at a purchase price equal to $1.04 per share (115% of the average closing price of the Companys common stock for the 10 trading days immediately prior to the execution date). The warrants are exercisable on a cashless basis.
In the event that the warrants are exercised on a cashless basis, then the Company will not receive any proceeds. In addition, the exercise price of the warrants will be adjusted in the event the Company issues common stock at a price below market,
with the exception of any securities issued as of the date of this warrant or issued in connection with the convertible notes issued pursuant to the Securities Purchase Agreement.



Due to the convertible nature of the note, the Company recorded a charge of $2,066,667 due to the beneficial conversion
feature, in accordance with EITF Issue No. 98-5, Accounting



20



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For Convertible Securities With Beneficial Conversion Features Or Contingently Adjustable Conversion Ratios, and
EITF Issue No. 00-27, Application of EITF Issue No. 98-5 To Certain Convertible Instruments. The value of the beneficial conversion feature was measured using the intrinsic value and is being amortized to interest expense over the three
year life of the note. The Company allocated $1,413,358 of the aggregate proceeds from the note to the warrants as original issuance discount, which represented the relative fair value of the warrants at the date of issuance, and is amortizing the
discount to interest expense over the life of the note. The value of the conversion feature and the original issue discount amortized to interest expense for the three months ended June 30, 2005 was $289,198. The discount was determined utilizing
the Black-Scholes pricing model with a volatility factor of 222.99% and a risk free interest rate of 3.38%.



The Companys obligations under the Security Agreement, Securities Purchase Agreement and the Note are secured by a first priority lien on all of the
Companys assets and all future assets acquired, including a pledge by the Company of shares representing 100% of the Companys share capital of GeoPharma, Inc. and DrugMax, Inc., and a put option on the pledged shares of GeoPharma, Inc.
and DrugMax, Inc. at $6.00 and $4.00 per share, respectively.



On October 29, 2004, the Company filed a Registration Statement on Form S-2 for the registration of up to 8,701,585 shares of the Companys common stock, including up to 7,326,585 shares of common stock underlying the Secured
Convertible Note issued to Laurus Master Fund, Ltd., in the principal amount of $6,000,000 and up to 1,375,000 shares issuable upon the exercise of common stock purchase warrants. On November 15, 2004, the Securities and Exchange Commission declared
the Registration Statement to be effective.



On October 17,
2004, the Compensation Committee of the Board of Directors of the Company granted options to purchase 500,000 shares of the Companys common stock, effective October 1, 2004, to Jugal Taneja, the Companys Chairman and a principal
shareholder of the Company, as compensation for Mr. Tanejas personal guarantee to Laurus Master Fund, Ltd. of financing in the amount of $6 million, to fund the BOSS acquisition. The exercise price of the options is $1.14 (110% of the fair
value of the Companys common stock on September 30, 2004). The options vest approximately equally over a three-year period, commencing October 1, 2005. The value of the options, $498,763, as determined by reference to the Black-Scholes option
pricing model, has been recorded as deferred consulting fees and is being amortized over the three year life of the loan. For the three months ended June 30, 2005, the amount amortized as consulting fees was $41,564. As of June 30, 2005, the balance
of deferred consulting fees for these options was $374,072, of which the current portion was $166,254 and the long-term portion was $207,818.



On March 29, 2005, the Company entered into agreements with Laurus Master Fund, Ltd., whereby the Company completed the sale to Laurus of convertible debt
and a warrant to purchase Company common stock in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933. The securities sold to Laurus include the following:



| |  |  | A secured convertible minimum borrowing note with a principal amount of $2,000,000;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | A secured revolving note with a principal amount not to exceed $4,000,000; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | A common stock purchase warrant to purchase 750,000 shares of common stock of the Company, at a purchase price of $1.37 per share, exercisable for a period of seven years;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



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The Company is permitted to borrow an amount based upon its eligible accounts receivable and inventory,
as defined in the agreements with Laurus. The Company must pay certain fees for any unused portion of the credit facility or in the event the facility is terminated prior to expiration. The Companys obligations under the notes are secured by
all of the assets of the Company, including but not limited to inventory and accounts receivable. The notes mature on March 29, 2008. Annual interest on the Notes is equal to the prime rate published in The Wall Street Journal from time
to time, plus 2.0%, provided, that, such annual rate of interest may not be less than 6%, subject to certain downward adjustments resulting from certain increases in the market price of the Companys common stock. Interest on the notes is
payable monthly in arrears on the first day of each month, commencing on April 1, 2005.



The principal amount of the secured convertible minimum borrowing note, together with accrued interest thereon is payable on March 29, 2008. The secured convertible minimum borrowing note may be redeemed by the
Company in cash by paying the holder 115% of the principal amount, plus accrued interest. The holder of the term note may require the Company to convert all or a portion of the term note, together with interest and fees thereon at any time. The
number of shares to be issued shall equal the total amount to be converted, divided by $1.13.



Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the notes will be reduced accordingly. The conversion price of the secured convertible notes may be adjusted
in certain circumstances such as if the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, or takes such other actions as would otherwise result in dilution. 115% of
the full principal amount of the convertible notes is due upon default under the terms of convertible notes. Laurus has contractually agreed to restrict its ability to convert if the convertible notes would exceed the difference between the number
of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant and the option held by such holder and 4.99% of the outstanding shares of common stock of the Company.



The Company is obligated to file a registration statement registering the
resale of shares of the Companys common stock issuable upon conversion of the convertible notes, exercise of the warrant and exercise of the option. If the registration statement is not filed by April 28, 2005, or declared effective within 75
days thereafter, or if the registration is suspended other than as permitted, in the registration rights agreement between the Company and Laurus, the Company is obligated to pay Laurus certain fees and the obligations may be deemed to be in
default. On April 22, 2005, the Company filed such registration statement on Form S-2, which is not effective.



The funding provided for detachable warrants and an embedded conversion feature. Pursuant to EITF Issue No. 00-27, the Company recorded a discount
utilizing the Black-Scholes pricing model for the warrants and the conversion feature of $1,431,633, which is being amortized as interest expense over the life of the loan. A volatility factor of 95.01% and risk free interest rate of 4.44% was used.



The proceeds of the funding were used for the acquisition of
Dynamic Marketing, Inc., costs associated with the acquisition and for working capital. As of June 30, 2005, the balance due on this revolving note was $2,711,895. The borrowing is in excess of the advance rates provided for in the note. The lender
has issued a waiver to this covenant whereby the Company is permitted to bring the ratios into compliance within one year from the date of the note.



22



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On July 19, 2005, the Company entered into a Postponement Agreement with Laurus Master Fund, Ltd.,
whereby Laurus agreed to postpone the Companys obligation to make certain amortization payments on its secured convertible note and, in consideration therefore, the Company issued to Laurus 275,000 shares of restricted common stock of the
Company. Pursuant to the agreement, the principal portion of the monthly amount that is due on the first business day of each of the months from August 2005 through March 2006, in the amount of $187,500 per month, shall not be required to be paid
until the first business day of each of the months from February 2007 through September 2007, respectively, in each case, in addition to the regular monthly principal payments due in each of the months. In connection with the agreement, Laurus
agreed to amend the Registration Rights Agreement with the Company to extend the dates for the filing requirements of the Companys Registration Statement.



On April 12, 2005, the Company issued a note payable to Royal Premium Budget, Inc., for insurance expenses associated with a new policy, in the
principal amount of $11,622. The principal together with interest at the rate of 13.5% per annum was payable in nine monthly installments commencing April 12, 2005 in the amount of $1,365. Upon cancellation of the policy on June 1, 2005, the
insurance company repaid the balance on the note.



On May 3,
2005, the Company received a promissory note in conversion of accounts receivable from Health Express Food, Inc. in the principal amount of $330,993. The note shall be paid to the Company in twenty three (23) monthly installments of $15,000,
including principal and interest at 8% per annum, commencing June 15, 2005. As of June 30, 2005, the remaining principal balance on the note was $319,076.



Item 3. CONTROLS AND PROCEDURES.



Evaluation of disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of our management,
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 procedures. Based on managements evaluation as of the end of the period
covered by this Quarterly Report, our chief executive officer and chief financial officer have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934, as amended (the Exchange Act)) were sufficiently effective to ensure that the information required to be disclosed by us in the reports that we filed under the Exchange Act is gathered, analyzed and disclosed with adequate
timeliness, accuracy and completeness.



Changes in internal
controls. There have been no significant changes in the Companys internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above, nor were there any significant
deficiencies or material weaknesses in our internal controls. Accordingly, no corrective actions were required or undertaken.



23



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PART II - OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS.



The Company is involved in litigation with Hi-Tech Pharmaceuticals, Inc. (Hi-Tech), whereby Hi-Tech filed a lawsuit against the Company on
August 25, 2003 with the United States District Court for the Northern District of Georgia over claims regarding intellectual property matters, in connection with the use of the Companys product named StaminaPro. Hi-Tech 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. For more than nine months the
plaintiff has failed to participate in this action. Furthermore, the plaintiffs initial action seeking injunction against the Company was denied by the court.



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. UNREGISTERED SALES OF EQUITY 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.



None.



Item 5. OTHER INFORMATION.



None.



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



(a) Exhibits.



The following exhibits are filed with this report:



|3.1 | Articles of Incorporation of Direct Rx Healthcare, Inc., filed January 27, 1998. (1)
|--- | ------------------------------------------------------------------------------------



|3.2 | Articles of Amendment to Articles of Incorporation of Nu-Wave Health Products, Inc., dated August 11, 1998. (2)
|--- | ---------------------------------------------------------------------------------------------------------------



24



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|3.3 | Articles of Amendment to Articles of Incorporation of Dynamic Health Products, Inc., filed September 1, 1998. (3)
|--- | -----------------------------------------------------------------------------------------------------------------



|3.4 | Articles of Restatement of the Articles of Incorporation of Dynamic Health Products, Inc., filed April 16, 1999. (3)
|--- | --------------------------------------------------------------------------------------------------------------------



|3.5 | Certificate of Amendment to Restated Articles of Incorporation of Dynamic Health Products, Inc., filed October 25, 2004.(4)
|--- | ---------------------------------------------------------------------------------------------------------------------------



|10.1 | Promissory Note and Security Agreement by and between Health Express Food, Inc. and Dynamic Marketing I, Inc.
|---- | -------------------------------------------------------------------------------------------------------------



|31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------



|32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

---

|(1) | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998, file number 0-23031, filed in Washington, D.C. on June 16,
1998.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998, file number 0-23031, filed in Washington, D.C. on August 14,
1998.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999, file number 0-23031, filed in Washington, D.C. on July 9,
1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Companys Current Report on Form 8-K, dated October 25, 2004, file number 0-23031, filed in Washington, D.C. on October 26, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K.



During the three month period ending June 30, 2005, the
Company filed three reports on Form 8-K.



Form 8-K/A dated
March 31, 2005, with respect to the Companys completion of the acquisition of Dynamic Marketing, Inc.



Form 8-K dated March 29, 2005, with respect to the Companys completion of the sale to Laurus Master Fund, Ltd. of a material secured convertible
note and revolving note and warrants to purchase shares of the Companys common stock.



Form 8-K/A dated March 31, 2005, with respect to the Companys completion of the acquisition of Dynamic Marketing, Inc.



25



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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 15, 2005 |  | By:                           |  | /s/ Mandeep K. Taneja                  
|                      |  |                               |  | Mandeep K. Taneja, Chief Executive     
|                      |  |                               |  | Officer and President                  
|                      |  |                              
|Date: August 15, 2005 |  | By:                           |  | /s/ Cani I. Shuman                     
|                      |  |                               |  | Cani I. Shuman, Chief Financial Officer



26